Department of Justice investigating Tether execs in bank fraud probe

Bloomberg reports the DOJ is looking into whether the company concealed transactions linked to crypto from banks in the company’s early days. Tether has since grown into the largest stablecoin, a digital token designed to bypass the market fluctuations in crypto, which is often used to buy and sell more unpredictable cryptos. Currently, the stablecoin is tied to half of all Bitcoin trades.

In a statement, the company strenuously objected to the report.

“Today, Bloomberg published an article based on unnamed sources and years-old allegations, patently designed to generate clicks,” it said. “This article follows a pattern of repackaging stale claims as ‘news.’ The continued efforts to discredit Tether will not change our determination to remain leaders in the community. Tether routinely has open dialogue with law enforcement agencies, including the U.S. Department of Justice, as part of our commitment to cooperation, transparency, and accountability. We are proud of our role as industry leaders in promoting cooperation between industry and government authorities in the U.S. And around the world. We remain committed to our customers and the industry-leading technology and transparency that has led to our growth.  It is business as usual at Tether, and we remain focused on how to best serve the needs of our customers.”

Tether is currently the third largest cryptocurrency by market cap, which currently stands at $64 billion, according to CoinDesk.

Federal officials have been looking into the allegations since 2018, but seemingly have stepped up the investigation, reportedly sending letters to individuals alerting them that they are the targets of the investigation. The move comes as government officials have shown increased interest in crypto regulation. Treasury Secretary Janet Yellen has warned cryptocurrency poses a terrorism risk and said in February that the token is an “extremely inefficient way of conducting transactions,” which sent prices tumbling.

The company told CNBC last week that an audit was underway and would be completed within months, though the company has been promising one for years.

In June, the company disclosed that a sizable chunk of its reserves are in commercial paper. (Commercial paper is the short-term debt companies issue to secure cash for expenses like inventories or payroll.) That brought about a warning from Federal Reserve Chairman Jerome Powell, who noted liquidity for commercial paper has historically become a major concern.

The investigation isn’t the first time Tether has been a regulatory target. In February, several Tether affiliates reached an $18.5 million settlement with New York’s Attorney General to settle allegations those firms hid losses and lied that each token was supported by one U.S. Dollar.