Bloomberg launched a scathing attack on the stablecoin issuer in a BusinessWeek article on Oct. 7 titled “Anyone Seen Tether’s Billions?”
In it, the financial news giant stated that the stablecoin is essentially a fraud because it does not have the assets to back it. At the time of writing, there were 69 billion USDT tokens in circulation, according to Tether’s own transparency report.
“Tether Holdings doesn’t have enough assets to maintain the 1-to-1 exchange rate, meaning its coin is essentially a fraud.”
As if to run salt in the wounds, Bloomberg followed up with another article on Oct. 8 highlighting the key points from the previous one.
It claims that part of Tether’s reserves includes “billions of dollars of short-term loans to large Chinese companies.” It added that some loans are crypto-backed, but Tether has already confirmed this.
Bloomberg pointed at Tether Chief Financial Officer Giancarlo Devasini, citing former chief executive officer of Noble Bank, John Betts. He alleges Devasini invested some of the reserves “to earn potentially hundreds of millions of dollars of profit for himself.”
It also reiterated older reports that Tether executives were targets of a criminal bank fraud investigation by the U.S. Department of Justice.
Tether Bites Back
Tether posted a response to the scathing reports on Oct. 7, stating it was:
“A one-act play the industry has seen many times before, taking snippets of old news from various places and dubious sources, and making it fit a pre-packaged and pre-determined narrative.”
Tether dismisses Bloomberg story as old news with dubious sources ⬇️https://t.co/7R6ezwpBwp
— Tether (@Tether_to) October 7, 2021
The company added that Bloomberg “refuses to let the facts get in the way of the story” and relied on John Betts, whom Tether fired as its banker. Tether fingered Betts in return, adding that:
“Betts has also been accused of engaging in egregious and wasteful self-dealing and seeking to enrich himself at Noble’s expense.”
Tether maintains that all of its tokens are “fully backed” but has yet to submit a complete and full audit of its reserves. According to a court filing in May, USDT reserves are heavily dollar-weighted but also include cash equivalents, bonds, secured loans, crypto assets, and other investments.
In late July, Tether general counsel Stuart Hoegner stated that the firm hopes to be the first to conduct a full audit which will be coming in months, not years.
U.S. regulators meanwhile continue to put the squeeze on stablecoins with the same tired claims that they threaten the traditional financial system. In essence, this was their purpose, as Tether attests in its rebuttal.
“While this may threaten the establishment of traditional financial systems, we will continue to work for the underrepresented.”