Tether Holdings Allegedly Used Falsified Documents to Access Banking System

Companies behind the tether stablecoin allegedly used falsified documents to access the banking system, according to a report.

In 2018, after Wells Fargo had stopped processing transactions from several accounts used by Tether Holdings during the previous year, Tether and a major cryptocurrency broker in China reportedly turned to falsified documents, shell companies and intermediaries to try to get bank accounts, the Wall Street Journal (WSJ) reported Friday (March 3).

Tether responded to these allegations with a statement on the company blog which reads, “The Wall Street Journal’s report about stale allegations from long ago is wholly inaccurate and misleading. Bitfinex and Tether have world-class compliance programs and adhere to applicable Anti-Money Laundering, Know Your Customer, and Counter-Terrorist Financing legal requirements. Bitfinex and Tether are proud partners of global law enforcement, and routinely and voluntarily assist the United States Department of Justice and other law enforcement organizations across the world in preventing money laundering, terrorism, and other crimes by bad actors.”

Per the report, among the tactics used at the time to create accounts were faking invoices and contracts that were submitted by an intermediary along with deposits and withdrawals; hiding identities behind other businesses or people; using business executives and making slight changes to their businesses’ names; and working with others to create shell companies.

Tether needs access to the banking system because the value of the tether stablecoin is pegged to the U.S. dollar, the report said.

Losing access to the banking system in 2017 was “an existential threat” to their business, Tether and its sister company, the crypto exchange Bitfinex, said in a lawsuit filed against Wells Fargo — but quickly withdrawn — when the bank stopped processing their transactions, per the report.

This news comes about three months after the WSJ reported that Tether had been lending its coins to customers.

As PYMNTS reported Dec. 1, because Tether is an anchor in the crypto system, the lending of its own tokens represents a broad, if hopefully unrealized, risk. The promise and premise of Tether is that customers will always and forever be able to redeem one coin for $1, and issuers like Tether are required to have enough liquidity to cover this.

If, as the WSJ reported at the time, Tether has been lending its own coins and not selling them instead for equivalent fiat, this adds to the risk that the company may not have enough liquid assets to weather a large redemption event.

Last month, Tether released an attestation report completed by public accounting firm BDO that said the firm had $67 billion in consolidated total assets, $66 billion in consolidated total liabilities and $960 million in excess reserves as of Dec. 31.