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Tether and Bitfinex Are Fined $42.5 Million by CFTC for “Untrue or Misleading” Claims

The Commodity Futures Trading Commission (CFTC) has fined Tether and Bitfinex more than $42 million under “untrue or misleading” claims. The allegations are that the USDT stablecoin wasn’t backed fully constantly and that Bitfinex was in violation of a previous agency order.

The charges came on Friday, and both companies were barred from “any further violations of the Commodity Exchange Act (CEA) and CFTC regulations.”

CFTC claims that the stablecoin of Tether was backed fully by reserves for just one-quarter of the time between 2016 and 2018.

“At various times, Tether maintained some of the Tether Reserves in bank accounts other than the Tether Bank Accounts. Tether represents that, at times, it also included receivables and non-fiat assets among its counted reserves; and further represents that Tether has not failed to satisfy a redemption request for tether tokens.”

The press release also added:

“The order also finds that, instead of holding all USDT token reserves in U.S. dollars as represented, Tether relied upon unregulated entities and certain third-parties to hold funds comprising the reserves.”

Tether replied by saying:

“As to the Tether reserves, there is no finding that tether tokens were not fully backed at all times – simply that the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times. As Tether represented in the Order, it has always maintained adequate reserves and has never failed to satisfy a redemption request.”

The CFTC also declared that it settled commodities charges against Bitfinex in another action.

“The order finds Bitfinex engaged in illegal, off-exchange retail commodity transactions in digital assets with U.S persons on the Bitfinex trading platform and operated as a futures commission merchant (FCM) without registering as required.”

Dawn Stump, CFTC Commissioner, commented:

“We should seek to ensure the public understands that we do not regulate stablecoins and we do not have daily insight into the businesses of those who issue such,” Stump said. “But in pursuing and settling this matter, do we provide users of stablecoins with a false sense of comfort that we are overseeing those who issue and sell these coins such that they are protected from wrongdoing?”
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