Consumer advocacy group Consumer’s Research has warned stablecoin issuer Tether, citing concerns about transparency. In a report released on September 12, the group alleges that Tether has failed to provide adequate information regarding the USD reserves meant to back its USDT stablecoin. The report also highlights a history of unfulfilled promises regarding full audits from reputable accounting firms.
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Tether’s History of Audit Failures and Legal Troubles
The report from Consumer’s Research draws a parallel between Tether’s current lack of transparency and the collapse of cryptocurrency exchange FTX and its affiliate, Alameda Research. Tether has given many assurances of full audits of its reserve, going back as far as 2017. The report also notes, however, that these promises remain unfulfilled.
However, in 2018, instead of the accounting firm, Tether offered a report from a law firm that the USD reserves fully backed USDT. This action generated a probe by the U. S. Department of Justice. A year later, the State of New York found that Tether caused the loss of $850 million in customer funds through unlawful money transfers. The court imposed an injunction preventing Tether from operating and a fine of $18.5 million in 2021 and Tether agreed to the charges relating to manipulating its reserve balances.
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In the following year, 2022, the U. S. Securities and Exchange Commission sued the law firm that conducted the previous audit for engaging in fraudulent accounting methods. However, these legal problems have not prevented Tether from releasing an official audit report to support its assertions that the U.S. dollar fully backs USDT.
Concerns Over Illicit Use and Lack of Accountability
Despite the transparency problems noted by Consumer’s Research, Tether conducts its business with “bad actors” and does not stop the illicit use of USDT for cross-border transactions. The latter statement brings into question the straps of Tether regarding its willingness to follow the regulations and maintain the financial platform’s credibility.
In conclusion, the recent report by Consumer’s Research underscores growing concerns about Tether’s lack of transparency and accountability. The absence of a credible audit report continues to cast doubt on the stability of USDT, despite repeated promises to clarify its reserves.
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Maxwell Mutuma
Maxwell is a crypto-economic analyst and Blockchain enthusiast, passionate about helping people understand the potential of decentralized technology. I write extensively on topics such as blockchain, cryptocurrency, tokens, and more for many publications. My goal is to spread knowledge about this revolutionary technology and its implications for economic freedom and social good.