There have been several allegations against Tether and its sister company, Bitfinex, that the stablecoin is not actually backed with equivalent volume of USD, contrary to the impression that the company has created among investors. The latest is that Tether mints more USDT stablecoins out of thin air.
A recent lawsuit filed against Tether and Bitfinex by the New York Attorney General’s Office was settled out of court after the company was fined some $41 million. The controversy around the stablecoin doesn’t seem to be going away as the company was alleged to have minted 3 billion USDT in the past 2 weeks. This brought the volume of Tether in circulation to $76 billion. The latest $1 billion USDT that was minted on December 4 had critics of the stablecoin talking.
There has been allegations that the stablecoin has been a tool for market manipulation, while many critics allege that USDT has been instrumental in propping up the value of the coin market.
In a statement, New York Attorney General Leticia James declared:
Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines. Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie. These companies obscured the true risk investors faced and were operated by unlicensed and unregulated individuals and entities dealing in the darkest corners of the financial system.
The latest minting of the stablecoin is coming at a time that many observers feel that there are already too many of USDT that have been minted. Despite the assertion by Tether that every stablecoin minted is backed by the USD, there are still concerns regarding the effect of random minting of a stablecoin that plays a stabilizing role for traders in the coin market.
Despite the company’s claims and the out-of-court settlement with the state of New York, there has been reports that less than 3% of all are actually backed by the USD, even though a third-party audit seems to have put the controversy at rest in the meantime.
