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CFTC Fines Bitfinex And Tether $42.5 Million

The Commodity Futures Trading Commission, or CFTC, fined twin cryptocurrency businesses Tether and Bitfinex a sum of $41 million and $1.5 million, correspondingly, on Oct. 15, citing breaches of the Commodity Exchange Act, or CEA, as well as an earlier CFTC ruling.

In the 26 months between 2016 and 2018, the commission discovered that Tether, the company behind a named stablecoin, only had enough fiat holdings to support the dollar-pegged commodity for 27.6 percent of the time. Tether, according to the agency, breached the law by storing a portion of its holdings in non-fiat financial products and by combining its working and reserve monies in the same account.

At the same time, the commodity futures regulator settled with Bitfinex, which was accused of conducting “illegal, off-exchange retail commodity exchanges in digital assets with United States participants” on its platform, as well as of acting “as a futures commission merchant, or FCM, without being properly registered.”

Commission Convener Dawn Stump, in a concurring assertion, voiced support for the intervention while also voicing concern that the resolution could “start providing users of stablecoins a false sense of safety,” as users may incorrectly believe that the CFTC governs stablecoins and supervises their financial institutions.

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Stablecoins are classified as commodities under the Commodity Futures Trading Commission’s definition of a “commodity” in the current case, but Stump asserted that the CFTC is not responsible for regulating this investment vehicle or having “daily understanding into the enterprises of those who issue” stablecoins.

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After receiving the criticism, Tether countered by asserting that it “kept appropriate reserves” at all times. It defended its decision to settle by expressing its willingness to “address this situation to progress forward and concentrate on the future.”

Tether Responds To Claims It Is Investing Reserves And Issuing Crypto-Backed Loans

In response to a Bloomberg report on its reserve assets, Tether (USDT) has denied the details. Tether’s CFO Giancarlo Devasini allegedly utilized the company’s reserves to make investments, contradicting Tether’s public assertion that the assets were fully guaranteed at all times, according to Bloomberg journalist Zeke Faux. Faux also claims Tether has invested in Chinese companies and granted crypto-backed loans raking in billions. According to the article, he could only confirm one Bahamas bank directly worked with Tether.

“Tether hasn’t revealed where its capital is,” Faux claimed. “Even a 1% yield on Tether’s total holdings would provide Devasini and his associates a $690 million yearly dividend. If only a small proportion of those loans fail, one Tether will be valued less than $1.” Tether termed the report an “exhausted attempt” to discredit it with “innuendo and downright lies.” To undermine Giancarlo Devasini and Tether’s management, the stablecoin issuer contested Faux’s sources’ legitimacy, using its quarterly assurance statements.

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As part of a deal with the New York Attorney General’s Office, Tether and Bitfinex are obligated to give $18.5 million in restitution and furnish thorough financial disclosures to the state in February. Authorities alleged Tether overstated the amount of currency collateral backing its USDT tokens.


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Shelly Melancon (Switzerland)

Shelly is a cryptocurrency enthusiast from Switzerland, she bought her first crypto in 2015 when it was way less popular then it is today and since 2017 she has been writing about cryptocurrency for online news portals. Shelly is the newest addition to the Tokenhell team, she writes mostly news and reviews related articles , stay tuned to her posts to stay up to date with the crypto world.

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