Tether must provide USDT backing financial records, per US court order

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By Shoaib Ajaz

The bitcoin market was said to have suffered losses of over $1 trillion because to Tether and Bitfinex.

The 2019 lawsuit that accused the cryptocurrency exchange Bitfinex and its sister business Tether of manipulating the crypto market by issuing USDT to drive up the price of Bitcoin has taken a new turn.

In order to evaluate its claims on the asset’s backing, the stablecoin issuer Tether has now been ordered by the United States District Court for the Southern District of New York to provide financial records of USDT.

Evaluating claims backed by USDT

The corporation must submit all information in the form of “general ledgers, balance sheets, income statements, cash-flow statements, and profit and loss statements,” according to the most recent order from the NY court.

Records about Tether’s cryptocurrency and stablecoin transfers, as well as the date of the trade execution, must be provided.

The presiding Judge rejected Tether’s plea to prevent the disclosure of its financial information, despite the stablecoin company’s representatives calling the entire procedure “extremely excessive” and “unduly intrusive.” Judge Katherine Polk Failla noted that the documents sought in the transaction RFPs “appears to go to one of the Plaintiffs’ core allegations: that the Defendants engaged in crypto commodities transactions using unbacked USDT, and that those transactions “were strategically timed to inflate the market.” She added that the court is in no position to deny the relevance of the documents. The Defendants were questioned by the Plaintiffs on the relevancy of these papers, but their major concern was that the demands were too wide rather than the relevance of the materials.

The Judge supported the motion and said that the documents are crucial for determining how USDT is backed by USD and for a forensic accountant to determine the stablecoin’s reserve.

Tether later described the court decision as “a regular discovery order” and said that it “in no way substantiates plaintiffs’ meritless allegations.” The company claimed to have also approved the disclosure of paperwork establishing the reserves supporting their stablecoin. It added that it looked forward to dropping the plaintiffs’ “baseless case” when the time was right.

Tether’s Changing History and Development

The market’s dependence on USDT has long been a source of controversy, and the business that backs it has been under intense criticism from authorities, investors, economists, and doubters in rising numbers. Tether and the New York Attorney General (NYAG) negotiated a sizable $18.5 million settlement in 2021, with Tether claiming that the business had misled about its reserves and referring to USDT as “a stablecoin without stability.”

That was the outcome of a closely-followed court case, which resulted in the cessation of trading operations between Tether and Bitfinex with residents of New York.

Although the algorithmic stablecoin TerraUSD (UST) crash earlier this year was disastrous for the entire crypto industry, Tether fared remarkably well. Tether has expanded quickly over the years, with nearly $70 billion in circulation, despite regulatory hiccups and the growth of several alternative stablecoins.

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