Tether Limited, the eponymous stablecoin controlled by Bitfinex owners, has agreed to pay $41 million to settle allegations by the US Commodity Futures Trading Commission (CFTC) that it made false or misleading statements when it claimed that its stablecoins were fully backed by fiat currencies. According to the Arab portal for technical news.
The CFTC said in a statement that between June 2016 and February 2019, Tether Limited misled clients and the cryptocurrency market by saying it had sufficient US dollar reserves to support each token when, in fact, its reserves were not fully backed most of the time.
In addition, the CFTC said, the company failed to disclose that it included unsecured receivables and non-paper assets as part of its reserves, and erroneously informed investors that it conducts routine audits to show that it maintains 100% of reserves at all times, despite that its reserves have not been audited.
“This case highlights the expectations of honesty and transparency in the rapidly growing and evolving digital asset market,” Rustin Behnam, acting chair of the CFTC, said in a statement.
The company was investigated by the New York Attorney General in conjunction with the CFTC in February.
Under the terms of that settlement, the company is prohibited from doing business in the state of New York.
The company said that the CFTC order found no problems with the company’s current operations. The issues were resolved in the agency’s request when the company updated its terms of service in February 2019.
“In terms of reserves, there is no indication that the tokens were not fully backed up at all times, the reserves were not all in cash and all in a bank account at all times, we always kept adequate reserves and never failed to meet the redemption request,” she added.
Tether is known as a stable digital currency, usually backed by a fiat currency such as the US dollar or the euro, and is used primarily as a payment method. It is seen as more stable than other digital currencies because it is backed.
The CFTC also announced that Bitfinex, a cryptocurrency platform, has been fined $1.5 million for illegal over-the-counter retail commodity transactions in digital assets with Americans. This is in violation of the terms of the 2016 order of the CFTC.