Court asks Tether to Produce Documents Supporting USDT Backing

Key Takeaways:

  • Tether asked to produce “undoubtedly important” documents relating to the assessment of USDT’s backing with US dollars. 
  • Tether is also ordered to share details about the accounts it holds at Bitfinex, Poloniex, and Bittrex.
  • Court argues documents are necessary to substantiate Tether’s claims of maintaining a treasury that fully backs its stablecoin.

Stablecoin issuer Tether has been ordered by US Judge in New York to submit financial records relating to the backing of USDT.

The latest development is part of a lawsuit that claims that Tether manipulated the crypto market, harming traders and benefiting themselves.

Judge Katharine Polk Failla has asked Tether to produce “undoubtedly important” documents relating to the assessment of USDT’s backing with US dollars.

The court states that the evidence is necessary to substantiate Tether’s claims of maintaining a treasury that fully backs its stablecoin.

“The documents sought in the transactions RFPs appear to go to one of the Plaintiffs’ core allegations: that the Defendants engaged in crypto commodities transactions using unbacked USDT, and that those transactions “were strategically timed to inflate the market,” Judge Katharine stated.

The latest order mandates Tether to produce “general ledgers, balance sheets, income statements, cash-flow statements, and profit and loss statements“, and records of any trades or transfers of cryptocurrency or other stablecoins by Tether, including information about the timing of the trades.

Tether is also ordered to share details about its accounts at Bitfinex, Poloniex, and Bittrex.

One striking fact about Tether is that the specific makeup of the firm’s commercial paper holdings has never been revealed via a complete financial audit.

Tether’s legal representative Elliott Greenfield of Debevoise & Plimpton had requested the court to deny the “untimely and unreasonable” request, adding that the plaintiffs have “shown no good cause” to ask for documents.

As per Greenfield, the “overbroad” requests were burdensome as they related to all crypto transactions associated with Poloniex and Bittrex. 

The lawsuit was started in 2021 by several crypto traders who allege that the company tried to increase the price of Bitcoin by purchasing large quantities of it with unbacked USDT tokens. 

This followed a June 2018 report that highlighted one large player on the Bitfinex exchange that used Tether tokens to “purchase Bitcoin when prices are falling,” resulting in the price of Bitcoin rebounding.

The class-action lawsuit alleged that the company’s practices were “immoral, unethical, oppressive, and unscrupulous”.

In February 2021, New York Attorney General Letitia James ordered Tether and crypto exchange Bitfinex, to stop trading in New York and pay $18.5 million after state investigations concluded that Tether didn’t have sufficient reserves to back the number of Tether USDT tokens in circulation.

Saniya Raahath
Saniya Raahath

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