In Brief:
- CFTC fined Tether and Bitfinex $42.5 Million for misleading statements and illegal transactions.
- Tether and Bitfinex failed to follow Commodity Exchange Act and orders from regulatory
- Tether condemned this action by quoting “maintained adequate reserves”
Yesterday, Commodity Futures Trading Commission (CFTC) charged sister companies Tether and Bitfinex for more than $42 million for making misleading statements and illegal transactions.
Tether will have to pay $41 million over its false claim that Tether Stablecoin was fully backed by US Dollars. Meanwhile, Bitfinex will have to pay $1.5 million for illegal transactions and for violating Commodity Exchange Act (CEA) as well as failing to follow CFTC order.
The regulatory authorities claim that Tether’s Stablecoin has failed to hold its 1:1 ratio with USD. It was backed by reserves for only one-quarter of the time in 26-months between 2016 to 2018.
Moreover, Tether had commingled its reserves with Bitfinex’s operational and reserve funds, and also it had invested reserve funds in unregulated entities and non-fiat financial instruments.
“At various times, Tether maintained some of the Tether Reserves in bank accounts other than the Tether Bank Accounts. Tether represents that, at times, it also included receivables and non-fiat assets among its counted reserves; and further represents that Tether has not failed to satisfy a redemption request for tether tokens,” an order attached to the release said.
Furthermore, CFTC also took action over Bitfinex for facilitating “illegal, off-exchange retail commodity transactions in digital assets with U.S persons” on its platform, in addition to operating “as a futures commission merchant, or FCM, without registering as required.”
CFTC commissioner Dawn Stump supported this action, but with a concern that the settlement could “provide users of stablecoins with a false sense of comfort” as they may falsely make the perception of CFTC that it regulates stablecoins and oversees their issuers.
Also Read: CFTC Charges 14 Crypto Companies for Registration non-compliance
Tether had also taken a stand for its stablecoin by condemning CFTC in a statement “maintained adequate reserves” at all times. The firm explained its decision to settle by its willingness to “resolve this matter in order to move forward and focus on the future.”
CTFC acting chairman Rostin Behna said: “The CFTC will continue to take decisive action to bring to light untrue or misleading statements that impact CFTC jurisdictional markets.”
