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Tether has agreed to pay $41 million in restitution for making "misleading" claims that it was fully backed by US dollars

Tether has agreed to pay $41 million in restitution for making "misleading" claims that it was fully backed by US dollars

Tether has agreed to pay $41 million to the US Commodity Futures Trading Commission (CFTC) to settle allegations that it made false or misleading statements when claiming that its stablecoins were fully backed by fiat currencies.

Tether misled customers and the cryptocurrency markets between June 2016 and February 2019, according to the CFTC, by claiming to have "sufficient US dollar reserves" to back every token when, in fact, its reserves were not fully backed the majority of the time.

Tether also failed to disclose that its reserves included unsecured receivables and non-fiat assets, and falsely told investors that it would conduct routine audits to show it maintained 100 percent of reserves at all times, even though its reserves were not audited, according to the CFTC.

In a statement, acting CFTC chairman Rostin Behnam said, "This case highlights the expectation of honesty and transparency in the rapidly growing and developing digital assets marketplace."

The New York attorney general investigated Tether for claims about its funding, and the company filed a complaint with the agency in February. Tether is barred from doing business in New York under the terms of the settlement.

The CFTC order "found no issues relating to Tether's current operations," according to Tether, which added that issues in the order were resolved when Tether updated its terms of service in February 2019.

Tether's statement continues, "As to the Tether reserves, there is no finding that tether tokens were not fully backed at all times — simply that the reserves were not all in cash and all in a bank account titled in Tether's name at all times." "Tether has always maintained adequate reserves and has never failed to satisfy a redemption request, as it represented in the Order."

According to Tether, the CFTC investigation "arose during a markedly different time in our ecosystem" and dealt with challenges that were common in the digital currency industry at the time.

Tether is a stablecoin, a digital currency backed by a fiat currency such as the US dollar or the Euro. They're primarily used as payment instruments, and because they're backed, they're seen as more stable (hence the name) than other digital currencies.

In a concurring statement, CFTC commissioner Dawn D. Stump said she agreed with the settlement terms because "there were misrepresentations regarding the assets backing Tether, specifically that the USDt tokens were backed 1-to-1 by US dollars." The evidence shows that the assurance given to tether customers was not 100 percent accurate all of the time."

However, Stump expressed concern that the settlement would cause investor confusion, noting that the CFTC "does not regulate stablecoins" and "does not have daily insight into the businesses" involving stablecoins. "Does the CFTC's actions in reaching this settlement with the Tether respondents create a false sense of security for those investing in stablecoins?" Stump wondered.

The CFTC also announced on Friday that Bitfinex, a cryptocurrency exchange linked to Tether, was fined $1.5 million for engaging in "illegal, off-exchange retail commodity transactions in digital assets" with Americans, in violation of a 2016 CFTC order.

Tether said in a statement that the CFTC's findings about Bitfinex "relate to the timing and implementation of its ban on U.S. customers," adding that the order found no violations after December 2018.

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