The DOJ is reportedly investigating the crypto company Tether for possible bank fraud

0
219

A smartphone displays the tether market value on the via The Crypto app.

Guillaume Payen | SOPA Pictures | LightRakete | Getty Images

The Justice Department is investigating possible bank fraud by Tether Ltd. executives due to actions in the early days of its stablecoin cryptocurrency, according to Bloomberg News.

The probe has an impact on the crypto market. Tether’s stablecoin is the third largest digital asset by market cap at $ 62.3 billion, according to CoinGecko, and traders often use it instead of dollars or other fiat money to buy bitcoin and other cryptocurrencies. Tether gives users the ability to move funds quickly between exchanges and offers some protection from the price volatility of other cryptocurrencies.

The DOJ’s investigation focuses on activities from the early days of Tether and examines whether the company misled banks by hiding the fact that transactions were related to cryptocurrencies, Bloomberg reported on Monday, citing three people with direct Knowledge of the matter asking not to be named because the probe is confidential. In the past few months, the federal prosecutor’s office has sent letters to people advising them that they are the target of the investigation and that a decision on the investigation could soon be made, according to the news agency.

The Justice Department declined a CNBC request for comment.

Tether rejected the report in an email statement, saying it was “business as usual” at the company and it was determined to “remain a community leader”.

It continues: ‚ÄúTether has a regular open dialogue with law enforcement agencies, including the US Department of Justice, as part of our commitment to collaboration, transparency and accountability. We pride ourselves on our role as an industry leader in promoting industrial-business collaboration between government agencies in the US and around the world. We remain committed to our customers and the industry-leading technology and transparency that have driven our growth. “

Depending on the outcome of the investigation, according to Jesse Proudman, co-founder of the crypto-robo-advisor Makara Digital, this could lead to stricter supervision of stablecoins by the regulatory authorities and to more transparency in the securing, settlement and trading of digital assets.

Tether was created in 2014 in response to one of the biggest challenges facing crypto startups at the time: reducing risk for banks. Most of the companies that deal with cryptocurrencies have struggled to maintain banking relationships as the highly regulated financial institutions feared doing business with companies that could potentially be linked to illegal activity.

Tether has long been controversial, largely over concerns that it may not always have enough reserves to justify its peg to the US dollar.

Stablecoins, digital currencies that are more stable than cryptocurrencies because they peg their market value to an external asset like the US dollar, are on the regulatory hot seat as they become increasingly popular. Last week, Treasury Secretary Janet Yellen and the President’s Working Group on Financial Markets discussed the potential role of stablecoins in the financial system.

In February, Tether also agreed to pay a $ 18.5 million fine to end a New York investigation into allegations that the company moved hundreds of millions of dollars to cover losses of $ 850 million. Dollar cover.