Why Tether Declined FTX’s Assist Request Before Its Bankruptcy Declaration – Report
The world of cryptocurrency and blockchain technology has been a source of remarkable success stories and painful crises in recent months. Although the industry has made tremendous strides in advancing financial technology, its volatile nature has also caused disruption and uncertainty for many investors.
Nearly two months after the crypto exchange FTX filed for Chapter 11 bankruptcy, reactions continue to trail the collapse of the leading crypto exchange. According to a Forbes report, USDT issuers, Tether received a call from FTX CEO Sam Bankman-Fried just before the filing.
SBF sought to contact all possible sources to prevent the FTX vessel from sinking. However, following initial aid, even Binance withdrew its backing within a day. When this incident occurred, the most obvious choice for FTX was to turn to Tether for help. Indeed, Tether has a track record of helping other exchanges in need.
But in this instance, Tether’s Chief Technology Officer, Paolo Ardoino, refused to give his support.
Why Did Tether Decline To Lend Support To FTX?
In an interview with Forbes, Tether CTO Ardoino remarked that it was “obvious” something was amiss with the demand, making it an “easy judgment” to reject it. “He abruptly solicited something he had never requested. His manner of speaking indicated a massive problem. His demand was for billions of dollars,” he added.
Meanwhile, Tether has been the subject of many controversies, especially regarding issues with its reserves. Nevertheless, Tether has been resilient in the face of the ongoing crypto winter and has managed to sustain itself through the 2022 crypto market downturn.
Amidst the FTX and Terra LUNA collapses, Tether encountered $19 billion in redemptions from anxious investors. Despite the challenges, the USDT issuer took care of its crisis persistently. The defunct Crypto exchange was one of the leading associates of Tether.
Yet, unlike SBF’s role in backroom deals and political alliances, Tether has been able to avoid regulatory issues. Yet, crypto investors continue to ask why the stablecoin issuer isn’t ready to release its USDT reserves report.
It is also worth noting that the FTX margin call incident occurred when the crypto markets were already in turmoil. Thus, Tether may have wanted to avoid further exposing itself to undue and avoidable risk.
In any case, it is clear that Tether is not in the business of lending money, and, as such, its refusal to help FTX was not surprising.
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