New court documents show that Tether has 74 percent of its token value held in reserves
This is contrary to their claims of being 100 percent token-backed
Tether and Bitfinex are currently under investigation for covering up losses from investors
For a good amount of time now, Tether has been under suspicion from the crypto community for not being completely transparent about its inner workings and dealings. First, there were suspicions over the reserves that they claimed to have, which were temporarily calmed by their releasing of evidence of funds in a bank. Then, there was the issue of them being accused of being simply a manipulation tool for the price of bitcoin, which is another claim that was denied by Tether.
Recently, their reputation took even more of a hit after it was revealed that they had colluded with Bitfinex to cover up losses of hundreds of millions of dollars without informing investors or the general public after an investigation from the New York Attorney General’s office.
Just when it seems that their fortunes could not get any worse, it has been revealed through the ongoing process with Attorney General’s office that Tether only has 74 percent of their reserves in dollars and equivalent backing. The documents in question were released on April 30, 2019.
Falling Below Expectations
For a long time, Tether’s biggest selling point was their claim that all their tokens were backed up by a US dollar for every Tether token and this was something they had repeatedly enforced, even going as far as releasing a bank statement to that effect. But as the recent document show, it falls significantly short of this as only 74 percent of their tokens are backed by fiat currency as Zoe Phillips of the law firm Morgan Lewis stated in official court documents.
“In fact, Tether’s reserves of cash and cash equivalents alone (without the line of credit) would cover approximately 74 percent of the outstanding amount of tether,” Phillips wrote.
This case has been very telling about the inner workings of not just Tether by Bitfinex as well as it is now claimed that the two companies and the process of refuting and this brings into doubt Tether’s status as a supposedly valid stablecoin and also brings into question their claims of running a better business model than traditional banking. As Phillips added, their current reserve arrangement is similar to the way commercial banks holding very little of their depositors’ funds in liquid cash.