Tether rebuts Bloomberg's "rehashing old news": Profiting from unverified information, is this what you call news?

Bloomberg reported on the evening of the 26th that the United States is investigating whether senior executives of Tether, the company behind USDT issuance, are involved in bank fraud, and that this case may have a wide-ranging impact on the cryptocurrency market. Tether has refuted this report, stating that Bloomberg is spreading unfounded rumors.

Bloomberg Reports: Tether Allegedly Concealed Bank Relationships Related to Crypto Transactions

Bloomberg reported that three anonymous sources revealed the ongoing investigation by the U.S. Department of Justice into Tether's past illegal activities, involving concealing bank relationships related to crypto transactions.

One source stated, "Federal prosecutors have been in discussions with Tether since 2018, and in recent months have sent letters to individuals alerting them that they are targets of the investigation. This indicates that a decision on whether to bring charges could be made soon."

Earlier on July 19, during the President's Working Group on Financial Markets meeting, a regulatory meeting was held regarding stablecoins. Treasury Secretary Yellen stated, "Regulators must act quickly to consider new rules for stablecoins." Federal Reserve Chairman Powell also mentioned, "We think stablecoins may be an important part of the payment system of the future, rather than cryptocurrencies, so we need an appropriate regulatory framework, but we don’t have one yet." The increased regulatory attention on stablecoins has further fueled the investigation.

Tether's Response: Sensationalized News for Clicks

Tether responded by refuting Bloomberg's article, stating that the information was based on anonymous sources and old allegations, aimed at garnering clicks by repackaging past statements. They emphasized that Tether frequently engages in open dialogue with law enforcement and maintains a good relationship with regulatory authorities.

Multiple Allegations Against Tether

Despite reaching a settlement with the New York Attorney General's office, paying $18.5 million, Tether and Bitfinex still face numerous allegations of illegality and lack of trustworthiness:

• Evidence presented by the critic of Tether and Bitfinex, known as Bitfinex’ed, revealed that senior executive Phil Potter engaged in a cat-and-mouse game with banks.
• Tether's involvement with the now-defunct shadow bank Crypto Capital.
• Questioning the 100% reserve backing, with concerns about redemption risks. Related article: Tether releases audit report claiming over-collateralization, where are the issues?

Dan Burstein, legal counsel for Paxos Standard, criticized that USDT and USDC actually expose user assets to risks, and apart from the name, they have no real connection to being "stable." Their reserves are supported by illiquid, high-risk debts, raising the question:

"The value of regulation lies in ensuring reserves are composed of real, liquid, accessible dollars. If USDC and Tether cannot fulfill these promises, can they truly be considered stablecoins backed by the dollar?"

Independent Writer's Commentary: Revisiting Past Issues

Independent writer James Chiu commented on this, stating, "The key point of the Bloomberg article is just this sentence below, the rest is revisiting past issues: 'Specifically, federal prosecutors are scrutinizing whether Tether concealed from banks that transactions were linked to crypto.' Looking back at past news, Wells Fargo froze $180 million of Tether's funds in April 2017, coinciding with the time when countries began to frown upon Bitcoin, leading banks to avoid dealing with exchanges."

He added, "From the news at that time, it seems Wells Fargo should have known that Tether's fund flows were related to users purchasing Bitcoin, as freezing $180 million would have caused a legal dispute, even though Tether later withdrew the lawsuit. There might be new evidence, such as transactions that were not just users buying Bitcoin, or certain transactions Tether intentionally concealed, but I think it's more likely due to Yellen's recent announcement to start regulating stablecoins."

James Chiu believes that Tether "should" have always maintained a 100% reserve, and the incident where it was only 74% was due to some "assets equivalent to cash" being replaced with Bitfinex's promissory notes, but he doesn't understand why people have since believed it didn't have a 100% reserve. In reality, it still remains at 100%, just that the assets equivalent to cash were exchanged for poor-quality assets. He also pointed out that the widely favored USDC actually only holds slightly over 60% in cash assets, and when reserve assets plummet, it could pose risks for redemptions.