US Consumer Protection Organization Warns Tether: Still unaudited, could be the next FTX

The non-profit organization Consumers’ Research in the United States recently released a report on the stablecoin issuer Tether USDT, pointing out that despite its commitment to conducting financial audits since its establishment, it has yet to fulfill this promise. Stablecoin issuer Tether claims that its USDT is pegged to the US dollar at a 1:1 ratio. Although stablecoin technology has value in the market, without a third-party auditing firm confirming the asset backing behind USDT, consumers face significant risks. It also mentioned that Tether's issues are similar to the situation before the collapse of FTX.

Key point: Audit and attestation are not the same. Audits provide the highest level of endorsement as they cover a wide range and are comprehensive, while attestation provides a lower level of endorsement, mainly focusing on specific matters or statements. Therefore, accountants have more confidence in the conclusions of audits.

Preventing Crypto Scams while Focusing on Tether, State Governments Take the Lead Tether

Consumers’ Research quoted a report from several U.S. state attorneys general on July 10th of this year, expressing opposition to the U.S. Securities and Exchange Commission (SEC) deliberately bypassing state consumer protection laws to self-regulate dissent in the cryptocurrency realm, highlighting potential fraud issues in the cryptocurrency field. They referenced a similar report indicating a 45% increase in related fraud cases over the past year. State attorneys argue that protecting citizens from potential crypto scams is the responsibility of state governments, based on existing consumer protection laws within each state. Consumers’ Research believes that states must closely monitor the threats posed by Tether.

The lack of regulatory support from Taiwan's Financial Supervisory Commission has drawn criticism from a group of prosecutors: providing guidance to specific industry players while neglecting secondary operators and currency traders.

Tether Claims Audit in Progress, Yet to Deliver

Consumers’ Research points out that Tether has not undergone an audit, a clear warning sign for USDT. Tether has repeatedly promised audits since 2017, with the CEO still claiming as of August 2022 that the audit will be completed "within a few months," showing a dismissive attitude and failing to deliver.

• 2017: Tether promises a full audit.
• 2018: Tether releases a report written by a law firm instead of an accounting firm, claiming USDT is fully pegged to the U.S. dollar.
  The U.S. Department of Justice initiates action to investigate whether traders are manipulating the cryptocurrency market using Tether and Bitfinex.
• 2019: The New York State Attorney General discovers Tether moving hundreds of millions of dollars to cover $850 million in customer fund losses.
• 2021: Tether is forced to cease trading activities in New York and pay a $18.5 million fine.
• 2022: Tether reaches a settlement with the U.S. Commodity Futures Trading Commission (CFTC), dropping false statement charges regarding USDT support.
  The SEC fines the law firm claiming USDT is backed by the U.S. dollar for improper financial operations.
• 2024: Tether has yet to complete the audit.

The world's top four accounting firms are hesitant to audit Tether; the CEO of Tether states they are actively working to establish relationships.

Interview with Tether CEO: It is sad to see Binance revel in misfortune; Tether is trying to undergo a full audit.

Questioning the Relationship Between Tether and Criminals

Consumers’ Research points out that besides asset collateral issues, Tether also has close cooperation with criminals, raising doubts about Tether's adequate risk management capabilities.

U.S. and UK authorities are investigating $20 billion in transactions involving Tether on the Russian cryptocurrency exchange Garantex, sanctioned by the U.S. Treasury's IRS. As of July 2024, Tether is still processing transactions from the cryptocurrency exchange BitPapa. The exchange was sanctioned in March 2024 for assisting Russia during the Russo-Ukrainian War. According to a report, Tether has helped establish a parallel economy outside U.S. legal norms, weakening U.S. efforts to combat illegal weapons trading and fraud.

Controversy Surrounding Tether's Collaboration with Tron, UN Warns of USDT Risks

The report states that in March 2023, the U.S. Securities and Exchange Commission (SEC) charged blockchain company Tron and its founder. In November of the same year, reports indicated Tron had become the preferred choice for terrorist organization fund transfers. Despite long-standing accusations of fraud and illegal transactions, Tether continues to operate on the platform.

Additional note: However, in early September this year, Tether appeared more determined to prove its commitment to combating crime, launching the T3 FCU Alliance; however, Tether's collaboration with the Telegram blockchain Ton may also be tainted due to Telegram's assistance in criminal activities such as drug trafficking and terrorism financing.

Tether, TRON, and TRM Labs join forces to combat financial crimes; T3 FCU fights cryptocurrency crime.

In January 2024, the United Nations Office on Drugs and Crime (UNODC) stated that USDT is closely linked to underground gambling, money laundering, and transnational criminal activities in East and Southeast Asia. USDT on the Tron blockchain has become the preferred tool for online fraud and money laundering due to its stability, anonymity, and low transaction fees.

In April 2024, USDT has become "indispensable" in helping Russia and North Korea evade international sanctions.

Learning from the Collapse of FTX and Celsius, Urging State Governments to Protect Vigorously

Consumers’ Research states that providing necessary information to American consumers continuously is the goal to make informed decisions and avoid financial illegality. They also mention that Tether's issues are similar to the situations before the collapse of FTX and Celsius, where these companies used deceptive and misleading marketing tactics, causing global investors to suffer billions of dollars in losses. They urge state governments to supervise Tether's operations within their jurisdiction and take appropriate measures to protect consumers from financial losses.

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