Executives from Tether are potentially facing a criminal probe into bank fraud
Currently, the US is investigating Tether for whether company executives engaged in bank fraud. If there are illegal findings, this will have a major impact on the crypto market, according to Bloomberg.
USDT is by far the most popular stablecoin
If the US has criminal charges against Tether, it will be a crypto crackdown. As Tether is by far the most popular stablecoin, the circulating supply is worth around $62 billion, and they form the basis for more than half of all Bitcoin transactions.
Tether, which goes by the symbol USDT, is the most popular stablecoin. Tether is a tokenized version of the US dollar, meaning it is pegged in a 1:1 ratio with the US dollar. It is this relationship to the US dollar that keeps the value of this coin stable. That has triggered concerns that if lots of traders sold stable coins all at once, there could be a run on assets backstopping the tokens.
The operating structure of Tether is as follows. Banks are reluctant to open accounts for crypto exchanges because they fear touching funds related to drug trafficking, cyberattacks, and terrorism. If they accept Tether, exchanges can provide traders with a way to use their balances without being affected by Bitcoin price fluctuations. And funds can be transferred instantly from one exchange to another.
It is on the side of the banks. And Tether still needs banks to hold money and process customer transactions. However, then relations soured with Wells Fargo & Co. In 2017, Tether affiliates and Bitfinex sued Wells Fargo for blocking wire transfers sought through Taiwanese banks.
Tether CEO facing criminal bank fraud charges
Reportedly, the Justice Department’s investigation focuses on behavior that occurred many years ago, when Tether was in its infancy. Specifically, through three unnamed individuals with direct knowledge of the matter, federal prosecutors are looking into whether Tether concealed from banks that transactions were linked to cryptocurrency or not.
Federal prosecutors have been tracking Tether since at least 2018. In recent months, they have sent letters to individuals warning that they were the target of the investigation. In it, the notices signal that they are in the process of deciding whether it can soon be considered a case, with senior Justice Department officials ultimately determining whether charges are warranted.
“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. Its corporate structure consists of a tangled web of entities based in the British Virgin Islands and Hong Kong.
During a multi-year investigation, the Department of Justice examined whether traders used USDT to illegally raise Bitcoin during an epic rally for the cryptocurrency in 2017. While it is not clear whether Tether was the target of the previous review, the current focus on bank fraud suggests that prosecutors may have moved from pursuing a case involving market manipulation.
The U.S. Treasury Department and Federal Reserve are among agencies concerned that the tokens could threaten financial stability, and are obscuring transactions tied to money laundering and other misconduct because they allow criminals to make payments without going through the regulated banking system. Treasury Secretary Janet Yellen said last week that watchdogs must act quickly in considering new rules for stablecoins.
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