CFTC settled charges against Tether and Bitfinex, ordering them to pay fines $42.5M

Today, the leading stablecoin issuer Tether and the crypto companies Bitfinex were hit with a $41 million fine by the Commodity Futures Trading Commission (CFTC). The agency is ordering the sister companies to pay fines totaling $42.5 million, including $1.5 million, citing violations of the Commodity Exchange Act, or CEA, and a prior CFTC order.

Tether settles with CFTC for $42.5M

The CFTC’s announcement said Tether made untrue or misleading statements and omission of material fact related to its stablecoin, USDT. The firm behind an eponymous stablecoin falsely claimed that USDT was fully backed by U.S. dollars, according to the CFTC. The order requires the firm to pay a penalty of $41 million.

Furthermore, Tether held only enough fiat reserves to support the dollar-pegged asset for the 26 months under review from 2016 to 2018. The agency also stated that the firm behind an eponymous stablecoin violated the law by holding part of the reserves in non-fiat financial instruments, as well as by creating operating funds and reserves.

“The order further finds that Tether failed to disclose that it included unsecured receivables and non-fiat assets in its reserves and that Tether falsely represented that it would undergo routine, professional audits to demonstrate that it maintained “100% reserves at all times” even though they reserves were not audited,” Tether also did not perform professional audits during the time as mentioned above sample.

In a concurrent action, the commodity futures watchdog has settled fees with Bitfinex for facilitating illegal retail commodity trades, foreign exchange using digital assets with Americans on its platform, in addition to acting as a futures commissioner, or FCM, without the required registration.

The CFTC also simultaneously slapped iFinex, the parent company of the Bitfinex exchange, with a $1.5 million fine for performing off-exchange retail commodity transactions.

“The CFTC’s Order found no issues relating to Tether’s current operations. The Order related to certain disclosures about the reserves from more than two and a half years ago. As the Order recognizes, these issues were fully resolved when the terms of service were updated in February 2019”, in its official statement, Tether says that the CFTC has found no issues with the company’s current operations.

Tether issued a rebuttal statement, emphasizing that it always maintains adequate reserves. The company explained its decision to settle because it was willing to resolve this issue to move forward and focus on the future.

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