US Court Orders Tether to Provide USDT Backing Financial Records

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The law­suit filed in 2019, which claims cryp­to exchange Bitfinex and its sis­ter com­pa­ny Teth­er manip­u­lat­ed the cryp­to mar­ket to issue USDT to inflate Bitcoin’s price, has tak­en a new turn.

Unit­ed States Dis­trict Court for the South­ern Dis­trict of New York has now ordered sta­ble­coin issuer Teth­er to pro­duce finan­cial records of USDT to assess its claims regard­ing the asset’s backing.

Assessing USDT Backing Claims

As per the lat­est order, the NY court has asked the com­pa­ny to pro­vide all infor­ma­tion in the form of “gen­er­al ledgers, bal­ance sheets, income state­ments, cash-flow state­ments, and prof­it and loss statements.”

Records with regards to cryp­to and sta­ble­coin trans­fers by Teth­er with the tim­ing of the trade exe­cu­tion will also need to be furnished.

Tether’s motion to block the release of its finan­cial records was dis­missed by the pre­sid­ing Judge even as the attor­neys rep­re­sent­ing the sta­ble­coin firm cit­ed the entire process to be “incred­i­bly over­board” and “undu­ly bur­den­some.” While fur­ther stat­ing that the court is in no posi­tion to deny the rel­e­vance of the doc­u­ments, Judge Kather­ine Polk Fail­la noted,

“The doc­u­ments sought in the trans­ac­tions RFPs appear 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.” Plain­tiffs raised the rel­e­vance of these doc­u­ments to the Defen­dants and the Defen­dants’ main objec­tion was not the doc­u­ments’ rel­e­vance, but instead that the requests were overbroad.”

While back­ing the request, the Judge also stat­ed that the records are impor­tant to assess the back­ing of USDT with USD and to allow a foren­sic accoun­tant to assess the stablecoin’s reserve.

Tether’s Turbulent Past and Growth

The market’s reliance on USDT has been a bone of con­tention for years, and the com­pa­ny behind it has faced height­ened pres­sure from reg­u­la­tors, investors, econ­o­mists, and grow­ing legions of skep­tics. In 2021, Teth­er reached a hefty set­tle­ment of $18.5 mil­lion with the New York Attor­ney Gen­er­al (NYAG), stat­ing that the com­pa­ny lied about its reserves and fur­ther call­ing USDT “a sta­ble­coin with­out stability.”

That was the con­clu­sion of a close­ly-watched legal dis­pute that end­ed with the ter­mi­na­tion of trad­ing activ­i­ty of both Teth­er and Bitfinex with New Yorkers.

The crash of algo­rith­mic sta­ble­coin Ter­raUSD (UST) ear­li­er this year was cat­a­stroph­ic for the entire cryp­to indus­try, but Teth­er man­aged to weath­er the cri­sis rather flaw­less­ly. Despite the reg­u­la­to­ry hic­cups, as well as the growth of sev­er­al alter­nate sta­ble­coins, Teth­er has grown rapid­ly over the years, with near­ly $70 bil­lion in circulation.

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