Highlights:
- The U.S. government is investigating Tether for potential sanctions violations and money laundering.
- Tether denies ongoing investigations, calling the WSJ report “pure rank speculation.”
- USDT has a $120 billion market cap and has faced significant regulatory scrutiny.
The United States federal government has launched an investigation into the USDT stablecoin issuer Tether for the potential for possible violations of sanctions and anti-money laundering rules, the Wall Street Journal (WSJ) reported in an “exclusive” article on October 25, citing people familiar with the matter. The criminal investigation is also looking into whether third parties have used USDT to fund crimes like terrorism, hacking, drug trade, and money laundering.
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According to the newspaper, the Manhattan US Attorney’s office is leading this investigation. Meanwhile, the US Treasury Department is considering potential sanctions and penalties against the stablecoin issuer for dealings with individuals and groups on the U.S. sanctions list. Sanctions from the U.S. Treasury could prevent Americans from using USDT for transactions.
According WSJ, U.S. investigators are conducting a criminal investigation into Tether, exploring whether third parties have used Tether for illicit activities such as terrorism and hacking. This investigation is being led by the Manhattan U.S. Attorney’s Office. Additionally, the…
— Wu Blockchain (@WuBlockchain) October 25, 2024
Tether Denies Probe from US Federal Investigators
In response to these serious allegations, Tether issued a statement criticizing the WSJ’s reporting. The company called the article “wildly irresponsible,” stating it was wrong for the WSJ to publish such claims without verified sources or confirmation from authorities. The stablecoin issuer emphasized it has no knowledge of any ongoing investigations.
It described the report as based on “pure rank speculation.” Tether noted that the news platform “carelessly” ignored the company’s extensive, documented cooperation with law enforcement. The firm emphasized its efforts to target bad actors who are misusing USDT and other crypto assets.
Tether’s CEO, Paolo Ardoino, addressed the issue on X (formerly Twitter), stating, “As we told to WSJ, there is no indication that Tether is under investigation. WSJ is regurgitating old noise. Full stop.” This response highlights the company’s commitment to transparency amid these allegations. Tether has faced growing scrutiny in recent years, not only from U.S. authorities but also from news outlets like the WSJ.
As we told to WSJ there is no indication that Tether is under investigation. WSJ is regurgitating old noise. Full stop.
— Paolo Ardoino 🤖🍐 (@paoloardoino) October 25, 2024
Tether’s USDT Dominance and Controversy in the Crypto Market
Tether mints USDT, the third-largest crypto in the market after Bitcoin and Ethereum and the largest stablecoin. Stablecoins are cryptocurrencies whose value is linked to another asset, usually the U.S. dollar. According to CoinGecko data, USDT has an impressive market cap of $120 billion and is the most-traded cryptocurrency, with a 24-hour trading volume of $52 billion.
Tether has faced significant scrutiny regarding USDT in recent years. The U.S. Commodity Futures Trading Commission (CFTC) previously claimed that Tether made “untrue or misleading statements and omitted material facts” about the stablecoin. In 2021, the CFTC fined Tether $42.5 million for falsely stating that USDT was fully backed by the U.S. dollar.
That same year, Tether and its sister company, Bitfinex, agreed to stop all trading activities in New York as part of a settlement with Attorney General Letitia James. The two companies also accepted an $18.5 million fine to conclude New York’s multi-month investigation into their activities.
Crypto Market Reaction to WSJ Report
After the WSJ’s report, crypto prices declined. Bitcoin (BTC) fell from $67,367 to $66,016, only partially recovering by the time of writing, trading at $66,858. Ether (ETH) dropped from $2,505 to $2,461, currently priced at $2,455. Other major cryptocurrencies, including BNB (BNB), Solana (SOL), and XRP (XRP), exhibited similar trends.
Castle Island Ventures’ Nic Carter suggested the investigation into Tether is politically motivated. In an X post, he claimed the DOJ is targeting Tether because Howard Lutnick, CEO of Cantor Fitzgerald, is a “big Trump guy.” Cantor Fitzgerald manages some of Tether’s reserve assets. Carter also stated that the DOJ leak to the WSJ was intentional, aiming to harm Trump and the crypto industry.
They’re coming for Tether because Lutnick is a big Trump guy.
— nic carter (@nic__carter) October 25, 2024
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