Consumers' Research, a consumer protection group, published a Sept. 12 report warning about stablecoin issuer Tether. It called the company out for a lack of transparency surrounding its US dollar reserves.
The consumer protection group claimed that Tether has yet to produce a full audit of the dollar reserves purportedly backing the USDT (USDT) stablecoin from a reputable accounting firm, despite numerous promises by the stablecoin issuer to audit its reserves.
This lack of transparency is similar to the situation that precipitated the collapse of FTX and Alameda Research, the authors of the Consumers' Research report argued.
A table of some of the allegations from Consumers’ Research. Source: Consumers’ Research
Accompanying the group's claims was an open letter sent to every state governor within the United States drawing attention to the perceived lack of transparency at Tether, radio advertisements from the consumer watchdog, and a dedicated website elaborating on the claims.
The watchdog group concluded its report by accusing Tether of doing "business with bad actors" and failing to prevent the facilitation of illicit entities using USDT to skirt international sanctions.
Page 1 of Consumers’ Research letter to state governors. Source: Consumers’ Research
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The other side of the story
In January, Howard Lutnick, CEO of Cantor Fitzgerald—which manages Tether's US securities portfolio—reassured the public about the stablecoin issuer's cash reserves. At the time, Lutnick claimed: “From what we’ve seen, and we did a lot of work, they have the money they say they have.”
To bolster transparency, Tether hired former Chainalysis chief economist Philip Gradwell in July to produce USDT usage reports. These reports will be made available to US regulators and investors, and help to shed light on how the stablecoin is used.
Later, in August, Tether CEO Paolo Ardoino announced the firm managed to aid over 145 law enforcement agencies in recovering $108.8 million in USDT connected to illicit activities since 2014.
During the first half of September, Tether also announced a collaboration with Tron to launch a financial crime unit. The new "T3 Financial Crime Unit" will help to identify and freeze illicit USDT transactions on the Tron network—which is the largest blockchain network for USDT trading.
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