Muhammed AKAN / Shutterstock
- Tether was fined $41 million by the CFTC for "untrue" statements when it came to its fiat currency backing.
- The agency found Tether only held sufficient fiat reserves to back USDT tokens for only 27.6% of the days during a sample period.
- CFTC also discovered Tether relied on unregulated entities and third parties to hold their funds.
- Sign up here for our daily newsletter, 10 Things Before the Opening Bell.
Tether on Friday was slapped with a $41 million fine by the US Commodity Futures Trading Commission for "untrue or misleading statements" when it came to the fiat currency backing of its stablecoins.
The companies behind the famous stablecoin misrepresented the truth to its customers from June 1, 2016, to February 25, 2019, by saying it had sufficient US dollar reserves to back every Tether or USDT token when, in fact, it had not, the agency said in a statement Friday.
Instead, the CFTC discovered that the companies only held sufficient fiat reserves in their accounts to back USDT tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018.
Additionally, Tether relied on unregulated entities and third parties to hold the funds comprising the USDT token reserves, according to the CFTC.
That includes combining reserve funds with Bitfinex, a crypto exchange affiliated with Tether. On Friday, CFTC also announced a separate $1.5 million fine on Bitfinex for allowing illegal transactions with ineligible American retail investors from March 1, 2016, through at least December 31, 2018.
Tether in response said, "CFTC's order found no issues relating to Tether's current operations," pointing to the timeframe of the investigation. And regarding Bitfinex, Tether maintained CFTC "makes no finding of a violation after December 2018."
It also said the company updated its terms in February 2019 when it revised its pledge from a one-to-one US dollar backing to a broader reserve backing, "which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties."
Tether added in a statement on its website: "There is no finding that tether tokens were not fully backed at all times-simply that the reserves were not all in cash and all in a bank account titled in Tether's name, at all times."