Tether Issues ‘Transparency Update’ Assessed by Former BBI Director’s Law Firm
Tether, a controversial cryptocurrency startup has issued a “transparency update” demonstrating that its dollar-pegged USDT token, which registered a $2.55 billion market cap as of June 1, is completely supported by physical dollars deposited in two different banks.
The announcement which was made on Wednesday was a product of Freeh, Sporkin & Sullivan LLP (FSS), a legal firm established by three former federal judges, including an ex FBI director.
Even though it is not a formal audit, FSS noted it was given full online access to Tether’s bank accounts and statements, including to employees at the two anonymous banks holding Tether assets. One of these firms is said to be the Puerto Rico-based Nobel Bank, but both parties are yet to confirm this publicly.
FSS explained that it carried out the review of Tether’s bank accounts on June 1, without any advance warning, and discovered that the assets in Tether’s bank accounts go above USDT’s distinguished market cap by an estimated $7 million, indicating that the token is fully supported by physical dollars.
“As part of the Engagement, FSS was able to confirm the U.S. Dollar (“USD”) balances in accounts owned or controlled by Tether at its banks, including selecting the appropriate confirmation dates and reporting to Tether as to the results of such inquiries. As per the letter of engagement, FSS selected the dates for balance confirmations without prior notice to or consultation with Tether,” the firm wrote, adding:
“FSS is confident that Tether’s unencumbered assets exceed the balance of fully-backed USD Tethers in circulation as of June 1st, 2018.”
The announcement of the report came shortly after a researcher at the University of Texas released an explosive article signifying that USDT has been used as a tool to influence the bitcoin price during 2017’s bull run and that the asset could, sometimes, not be fully supported by USD.
Yet, in a report released in line with the FSS report, Tether denied those claims and went ahead to offer to improve transparency into its operations moving forward.
“To address allegations head-on, we wish to make a few things clear: All Tethers in circulation are fully backed by USD reserves. Full stop. Memoranda, consulting reports, industry leaders, cryptocurrency pioneers, and competitors have all confirmed this. Reserves have always, and will always, match the number of Tethers in circulation.”
But unfortunately, this increased transparency might not include a formal audit. According to the company, the reason it has not gone through a full-scale audit is because leading accounting firms do want to go through the risk of conducting this service for a cryptocurrency firm.
“The bottom line is an audit cannot be obtained,” Stuart Hoegner, Tether’s general counsel, told Bloomberg. “The big four firms are anathema to that level of risk,” he said. “We’ve gone for what we think is the next best thing.”
