2021-10-18 17:29 |
The Commodity Futures Trading Commission (CFTC) has fined stablecoin issuer Tether and its sister company, Bitfinex, $42.5 million (£30.92 million) for violating commodities regulations.
A press release unveiled this news on October 15, noting the CFTC held Tether responsible for making false or misleading claims and omissions of material fact regarding the backing of Tether (USDT/USD).
According to the news release, the federal commodities watchdog imposed a $41 million (£29.83 million) monetary penalty on Tether and warned the company to avoid violating the Commodity Exchange Act (CEA) and CFTC regulations further. With the fine and the warning, the regulator settled its case with Tether.
In a separate order, the CFTC charged Bitfinex with engaging in illegal, off-exchange crypto-based retail commodity transactions with US residents. Additionally, the regulator alleged that Bitfinex acted as an unregistered Futures Commission Merchant (FCM) and violated a previous CFTC order issued on June 2, 2016.
To settle the case with Bitfinex, the CFTC directed the company to pay a $1.5 million (£1.09 million) fine and warned the firm against violating CEA rules again. On top of this, the commission directed Bitfinex to implement and maintain systems that would help prevent illicit retail commodity transactions.
Tether says it has always maintained adequate reservesCommenting on the settlement with Tether and Bitfinex, CFTC’s Acting Chairman, Rostin Behnam, said,
This case highlights the expectation of honesty and transparency in the rapidly growing and developing digital assets marketplace. The CFTC will continue to take decisive action to bring to light untrue or misleading statements that impact CFTC jurisdictional markets.
In its case against Tether, the CFTC pointed out that USDT was only backed for approximately 27.6% of the time between 2016 and 2018. On top of this, the regulator said the company did not hold all USDT reserves in USDT as represented and instead depended on unregulated organizations and third parties to hold the funds.
The CFTC further noted that Tether combined reserve funds with Bitfinex’s operational and customer funds. Additionally, the stablecoin issuer also held USDT’s reserves in non-fiat financial products.
Following the CFTC press release, Tether issued a statement, saying the regulator has no findings that indicate USDT tokens were not fully backed at all times, only that the reserves were not all in fiats. Tether further noted that it has always maintained adequate reserves and has never failed to satisfy any customer’s redemption request.
This news comes after Tether and Bitfinex settled similar charges with the New York Attorney General’s (NYAG) office earlier this year. The settlement saw the companies pay an $18.5 million (£13.46 million) fine and cease trading with New York residents.
The post CFTC penalizes Tether and Bitfinex for making misleading allegations appeared first on Invezz.
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