Issues with stablecoins, especially Tether, have been surfacing in financial circles for quite some time. Are they really stable? Do they have the backing they claim to? Some have raised questions about Tether as a potential and systemic risk to the crypto ecosystem.
On August 9, Tether reassured holders of the biggest stablecoin by market cap of its stability and backing. Were they convinced? Not really, it emerged. Subsequently, Tether execs were gripped by a series of controversies.
New lawsuit alleges deceptive practices
Now, Tether has been hit with a new class action lawsuit, cryptocurrency news outlet AMB Crypto reported. Plaintiffs Shawn Dolifka and Matthew Anderson filed a lawsuit in the United States District Court for the Southern District of New York. They dispute Tether’s claim that its tokens have one-to-one backing in sufficient USD reserves. The lawsuit states:
Two regulatory agencies, the New York State Attorney General and the Commodities Futures Trading Commission found that Defendants had misrepresented the backing of Tether tokens and in fact, Defendants did not maintain the same amount of reserves as Tether tokens in circulation. At times, Defendants had no reserves whatsoever.
Suppressed information about routine audits
The accusations just keep coming. The plaintiffs allege that Tether continues with “unlawful and deceptive” practices. It has suppressed information about not undergoing standard and regular audits. It is lying about the stablecoin being backed by sufficient dollar reserves in a one-to-one ratio.
Damage claims
In sum, the plaintiffs claim that all of this indicates a ‘breach of contract’, which is why they are entitled to “compensatory and consequential damages.” The trial will determine the exact amount.
Tether: ‘nonsense’ lawsuit
Tether is in disagreement, needless to say. The stablecoin issuer called the lawsuit “nonsense, copycat” and pledged to litigate its meritless claims aggressively. They posted this official response on Twitter.
Tether’s long list of settlements and fines
As everyone knows, this has happened before. Tether and New York Attorney General Letitia James reached a $18.5 million settlement over an undisclosed loan. Just this October, Tether paid the CFTC a $41 million fine following allegations that it had made ‘misleading’ statements about the premiere USDT stablecoin.
Magnified concerns
If that weren’t enough, Bloomberg recently published a scandalous piece on “shady deals” done by large Chinese companies, which served to exacerbate concerns surrounding the largest stablecoin. It may be just the beginning of Tether’s troubles.
