Bitcoin Falls as Tether CEO Calls Crime Investigation Report “Old Noise” – DL News

Tether CEO Paolo Ardoino denied on social media a report that the company was facing criminal investigation over allegations that its cryptocurrency was popular with drug traffickers and terrorists.

“Like we said [Wall Street Journal] There is no indication that Tether is under investigation,” he wrote on X on Friday afternoon. “WSJ is reviving old noise. Point.”

Federal prosecutors in Manhattan are investigating the use of Tether’s stablecoin of the same name to finance drug trafficking, terrorism and hacker attacks. The Wall Street Journal reported on Friday.

At the same time, the US Treasury Department is considering sanctioning the company over the use of its cryptocurrency by sanctioned entities, the report said.

Crypto prices plummeted on the news. As of 3 p.m. New York time, Bitcoin, Ethereum and Solana were down 2.7%, 3.5% and 4.5%, respectively, from their Friday highs.

In the moment that followed, Tether fluctuated sharply the diary released its report, which initially fell to a low of 99.3 cents before rising back to $1.01, according to CoinGecko.

According to DefiLlama data, Tether is the world’s largest stablecoin with nearly $120 billion in circulation as of Friday.

This accounts for almost 70% of the supply of all stablecoins. Its nearest competitor, Circle’s USD Coin, had a market cap of $34 billion as of Friday.

Stablecoins are cryptocurrencies that are pegged to other assets, usually US dollars. They are intended to provide crypto investors and traders with protection from the volatility of the sector while allowing them to keep their assets on the blockchain.

Across all major cryptocurrency exchanges, Tether is the most traded cryptocurrency compared to Bitcoin, Ethereum, and Solana.

Stablecoins are also touted as a safe investment in economies with high inflation and as a cheaper and faster way to transfer money between borders.

Due to its dominant position in the stablecoin market, Tether has long been under intense scrutiny.

In 2021, the company paid nearly $60 million in fines after settling with the New York Attorney General’s Office and the Commodity Futures Trading Commission. Both claimed that Tether’s stablecoin is not fully backed by cash or cash equivalents. Tether did not admit any wrongdoing in connection with the former and stated in the latter case that it always had sufficient reserves – just not necessarily in cash.

Tether has also failed to conduct audits that could reassure users who fear its stablecoin is not fully or securely collateralized. A lack of adequate collateral could leave some Tether holders empty-handed if too many cash out at the same time – a fear that has yet to materialize.

In an interview with DL News In April, Ardoino said that the big four accounting firms – Deloitte, PwC, EY and KPMG – were afraid to work with Tether because they fear it could damage their reputation.

This fear is partly due to Tether’s controversial role in the global economy.

When the US imposed a new round of sanctions on Venezuela’s state-owned oil producer in April, the company turned to the stablecoin Tether.

Tether quickly announced that it would freeze the wallets of any companies that tried to evade the sanctions.

TRM Labs, a crypto investigative firm, called USDT the “currency of choice” for terrorist financing. And a Chainalysis report showed that stablecoins, including Tether, account for about 60% of illegal crypto transactions.

Tether, in turn, has been proactive in freezing wallets related to criminal activity.

In September, over $6 million linked to a Southeast Asian crypto trust scheme was seized.

Aleks Gilbert is a DeFi correspondent based in New York. He can be reached at aleks@dlnews.com.