Tether lawyers confirm lack of fiat backing
The USDT stablecoin is definitely no longer pegged to the US dollar
Reports started to surface earlier this year that the USDT stablecoin, also known as Tether, was no longer pegged to the US dollar as had been asserted since its creation. A recent lawsuit involving the cryptocurrency exchange Bitfinex, which shares management personnel with Tether, has brought the subject back to the surface and the company’s own lawyers have now confirmed in court that Tether does not have the one-to-one backing that it has claimed. In fact, it only has about 74% of the supply in reserves.
Bitfinex came under fire for reportedly trying to cover up an $850-million loss with Tether and then cooking the books to hide everything. The company, along with Tether, is being sued by the New York Attorney General and, in a court filing, one of the law firms representing Bitfinex, Morgan Lewis, reported, “… Tether’s reserves of cash and cash equivalents alone (without the line of credit) would cover approximately 74 percent of the outstanding amount of tether.”
Morgan Lewis attorney Zoe Phillips believes that nothing shady is going on. She added, “This sort of ‘fractional’ reserving arrangement is similar to how commercial banks work. No bank holds in liquid cash more than a small percentage of depositors’ money. The funds are invested. The markets clearly remain confident in tether, as it currently trades just shy of $1 dollar per U.S. Dollar tether—even after the Attorney General’s highly inflammatory and misleading public application. Any suggestion that tether holders face liquidity risk is unsupported speculation.”
That may be the truth; however, if a bank says it has one-to-one reserves and an audit proves otherwise, it will definitely be held accountable. Tether, if the revelation is true, should definitely be held accountable and investors need to start pulling out now before it’s too late.