A bounty of up to $ 1 million has been offered to anyone who can provide guidance on the exact support for Tether’s reserves.
That support was just a little scandalous after Alex Mashinsky, CEO of Celsius Network, reported that Tether mined new USDT in exchange for crypto assets – which apparently goes against terms and conditions.
The “forensic” financial research firm Hindenburg Research tweeted to its 171,000 followers on October 20 that it had “doubts about the legitimacy of Tether” and offered a reward of up to $ 1 million for important details about Tether’s reserves from which they claim pose a threat to investors on a “systemic” scale.
“Tether is the mainstay of the trillion dollar crypto market. Despite his ongoing claims to transparency, the disclosures about his holdings remain unclear. “
“The company claims to hold a significant portion of its reserves in commercial paper, but has disclosed almost nothing about its counterparties,” added Hindenburg Research.
However, as many observers have noted, $ 1 million is not a huge amount to wipe out a token with a market cap of $ 70 billion.
Tether will be happy to pay you this 10x in Tethers to keep your mouth shut, I bet https://t.co/CSgei3yWIx
– Cas “Slightly interesting” Piancey (@CasPiancey) October 19, 2021
Tether has been the subject of scrutiny, with regulators taking multiple cracks against the company over the composition of its reserves. In May, Tether released a breakdown of May’s liquid reserves, showing an unspecified amount of commercial paper along with cash or minimum bank deposits.
On October 15, Tether and sister company Bitfinex agreed to pay $ 42.5 million to the Commodity Futures Trading Commission, which claimed Tether did not have adequate cash reserves as of February 2. 3 periods from 2016 to 2018.
Tether paid, but they dismissed the claims, stating that “it is undetectable that Tether tokens are not fully secured at all times – just not reserve everything in cash.” And everything in a bank account called Tether, all the time. “
It goes on to say: “As Tether’s representative in the Order, it always maintains sufficient reserves and has never failed to meet the take-back requirements.”
Related: Cryptocurrency lending company C Network raises $ 400 million
Meanwhile, Celsius CEO Alex Mashinsky is facing his own legal troubles after the New York attorney general began investigating his company and another stablecoin lending platform this week.
In a later interview, Mashinsky told the Financial Times on October 19 that Tether minted new USDT tokens in exchange for digital assets as part of the loan deal:
“If you give them enough collateral, liquid collateral, Bitcoin, Ethereum, etc.” they will carve Tether against it. “
“A new USDT will be issued on such loans,” he added, adding that the new USDT will then be canceled after the loan is completed so as not to “permanently increase USDT circulation.”
In relation to such a credit structure, it appears to be a violation of Tether’s Terms of Service that:
“Tether does not issue Tether tokens in return, including digital tokens (e.g. Bitcoin); Only coins are accepted for issuance. “