Stablecoin Tether Faces DOJ Probe

Tether, Probe, Bank, Fraud, DoJ

The U.S. Department of Justice (DOJ) is doing a deep dive into Tether to ascertain whether the bosses behind the stablecoin held back information from banks that transactions were connected to cryptocurrency, Bloomberg reported on Monday (July 26), citing sources.

The possible criminal conduct in question, which allegedly happened years ago, could have wider repercussions across the crypto market, according to the report. Since its introduction in 2014, Tether has taken on an important position in the virtual currency landscape. It is used in over 50 percent of bitcoin trades. Each Tether token is backed by one U.S. dollar.

“Tether routinely has open dialogue with law enforcement agencies, including the DOJ, as part of our commitment to cooperation and transparency,” the company said in a statement. 

For the past three years, federal regulators have eyed Tether, and recently sent letters to people informing them of a probe, a source told Bloomberg. Both the U.S. Treasury Department and Federal Reserve have expressed concerns that Tether could jeopardize financial security and be used to cover up money laundering and other crimes. 

If criminal charges unfold, it would be among the biggest moves in the government’s crackdown on cryptocurrencies. Of all stablecoins, Tether is the most widely used, with a circulated worth in the neighborhood of $62 billion, per the report. 

The DOJ has already looked into how traders used Tether and whether it was used to kick up bitcoin prices during a 2017 rally. 

Bitfinex and other Tether affiliates paid over $18.5 million in February to settle a lawsuit launched by New York Attorney General Letitia James on charges that the company concealed losses and lied about the one-to-one Tether to dollar valueg.

President of the Federal Reserve Bank of Boston Eric Rosengren said last month that Tether was connected to financial instability, calling it a disruptor in the short-term credit market and a factor the industry needed to examine more closely.