Tether has been the largest stablecoin in the crypto ecosystem. But its large stature is plagued by even larger controversy- the stablecoin is not backed by real dollars. While Tether has tried to clear the air around this controversy several times, the truth is finally out that the stablecoin is only 74% backed by Cash and Equivalents.
Tether Holds about USD 2.1 billion in Cash and Securities
Well, it seems the controversy around Tether is about to end and it’s going to have an ugly ending for Bitfinex and Tether. The company behind USDT, Tether seems to be holding only about $2.1 billion in cash and short-term securities which accounts to only 74% of the total Tether in supply. This fact was put forward by Tether’s general counsel Stuart Hoegner in an affidavit which was presented in response on Tuesday with the Supreme Court of State of New York which was seeking to vacate or modify an injunction filed against them by the New York Attorney General last week in an effort to prevent disruptions to its business.
“The order effectively freezes a line-of-credit transaction among the respondents indefinitely and orders them to produce huge volumes of documents by this Friday,” according to the filing, made on behalf of Hong Kong-based IFinex Inc. and other affiliated companies.
This affidavit filing comes after the April 25 statement given New York Attorney General Letitia James who was quoted saying that the companies behind Tether and Bitfinex engaged in a cover-up to hide the “apparent loss” of $850 million of the co-mingled client and corporate funds.
The same report stated that it seemed that executives allegedly cooked up a series of “conflicted corporate transactions” in which Bitfinex gave itself access to up to $900 million of Tether’s cash reserves, which Tether repeatedly told investors fully backed its coin one-to-one, the attorney general said.
While the official confirmation from Bitfinex or Tether is yet to arrive, the news has jolted the crypto community. Many believe a loss of faith in the stablecoin would be a major blow to traders who rely on it for liquidity on many of the world’s lightly regulated crypto exchanges. This would also impact the investor sentiment in cryptos and drive away investment from crypto markets.
Although this news was significant, the markets dint show much to it and continued its green. The same was quoted by Ran Neuner in his tweet.
While news like this can erode overall market sentiments, it is surely not great news for Tether. If Tether doesn’t give a reasonable reply to this it could be the endgame for the largest stablecoin.