- Tether and its executives have been accused of misappropriation of funds with investments in Chinese commercial paper and issuance of loans
- The company has fired back, noting that this is an attempt to defame it.
Steablecoin issuer Tether is once again at the center of controversy over the use of its USDT tokens. On Thursday, October 7, a Bloomberg report made major claims against Tether and its chief financial officer Giancarlo Devasini for improper use of the funds.
The report alleged that Tether has been making some investments in Chinese commercial paper. This is in contradiction to Tether’s public positions which states that all of Tether’s $69 billion worth of USDT holdings are fully backed at all times.
Citing the document obtained Businessweek, Bloomberg notes that Tether has given short-term loans to Chinese companies. Furthermore, the documents accessed by BusinessWeek show that one bank in the Bahamas has been working directly with Tether.
The allegations go further to note that Tether has made billions of dollars through crypto-backed loans. Some of these loans have the volatile asset Bitcoin as collateral. Tether has offered one such loan to the giant quasi bank – Celcius Network Limited.
Tether accused of putting reserves at risk
John Betts, former chief executive officer of Noble Bank International LLC in Puerto Rico has also accused Tether CFO Giancarlo Devasini of putting the reserves at risk. “It’s not a stablecoin, it’s a high-risk offshore hedge fund,” said Betts. The Bloomberg report notes:
Tether has denied holding any Evergrande debt, but its lawyer declines to say whether Tether had other Chinese commercial paper. He says the vast majority of its commercial paper has high grades from credit rating firms.
Tether still hasn’t disclosed where it’s keeping its money. If Devasini is taking enough risk to earn even a 1% return on Tether’s entire reserves, that would give him and his partners a $690 million annual profit. But if those loans fail, even a small percentage of them, one Tether would become worth less than $1.
The stablecoin issuer fires back
Tether has fired back at the recent allegations calling the Bloomberg Businessweek’s report a “tired attempt” to defame the company based on“innuendo and misinformation”. The stablecoin issuer noted:
The Bloomberg BusinessWeek piece published today is a one-act play the industry has seen many times before, taking snippets of old news from various places and dubious sources, and making it fit a pre-packaged and pre-determined narrative. It’s another tired attempt to undermine a market leader whose track record of innovation, liquidity, and success speaks for itself.
Citing its quarterly assurance reports, Tether noted that its USDT stablecoins are fully backed by USD. This is not the first time that Tether is facing such allegations. Reports regarding Tether’s involvement with its parent company Bitfinex have surfaced multiple times in the past. However, there has been no concrete evidence of Tether’s wrongdoing so far.