Report on Tether’s US Dollar-pegged Tokens Provokes Doubts Within Crypto Community
by Darya Rudz · 4 min read
To get rid of allegations over Tether not having the funds to back their tokens, Freeh Sporkin & Sullivan LLP, a law firm, released a report which confirmed Tether’s bank deposits and assured investors that its cryptocurrency is backed by USD.
Earlier this year Tether engaged Freeh, Sporkin & Sullivan LLP to review bank account documentation & to perform an inspection of the numbers of Tethers in circulation & the corresponding currency reserves.
Tether is a token backed by actual fiat currency assets. One Tether equals one underlying unit of the currency backing it, and is backed 100% by actual assets in the Tether platform’s reserve account. Being anchored or “tethered” to real world currency, Tether provides protection from the volatility of cryptocurrencies. Tether enables businesses – including exchanges, wallets, payment processors, financial services and ATMs – to easily use fiat-backed tokens on blockchains. By leveraging Blockchain technology, Tether allows you to store, send and receive digital tokens person-to-person, globally, instantly, and securely for a fraction of the cost of alternatives.
For months, Tether has been accused of falsely issuing tokens without actually having the dollar reserves to back them. To come clean on the case, U.S Regulator CFTC sent subpoenas to Tether and Bitfinex Exchange. The company had also partnered with an audit firm Friedman LLP to undergo a full inspection, but that working relationship was dissolved back in early January. In March, Tether contacted Freeh Sporkin & Sullivan to review its balances.
On a randomly-selected date, chosen without Tether’s knowledge or involvement, FSS collected sworn statements from Tether executives, interviewed bank personnel and examined the company’s bank records. Freeh Sporkin & Sullivan LLP didn’t conduct an official audit but had access to Tether’s accounts at two banks for weeks and released data on how much money the company held on a single day, June 1.
“Despite speculation, we have consistently stated that Tether is backed by USD reserves at or exceeding the Tethers in circulation at a given moment, and we’re glad to have independent verification of this to answer some of the questions posed by the public,” said Tether CEO Jan Ludovicus van der Velde.
The Report confirms that Tether’s bank balances exceed $2.54B, which exceeds the 2.53B Tethers circulating as of June 1, 2018. However, there are some gaps to be filled. Bitfinexed, a well-known critic of the company, said that the report can not be regarded as an audit.
Like Tethers, the so-called report is not worth the paper it's not printed on. We were not born yesterday. pic.twitter.com/guPrrt8Znw
The report itself emphasizes that it “should not be construed as an audit,” and FSS is not an auditing firm. “FSS is not an accounting firm and did not perform the above review and confirmations using Generally Accepted Accounting Principles,” the report reads. “FSS has not performed any procedures or made any conclusions for activity prior to or subsequent to June 1st, 2018, Close of Business.”
“The bottom line is an audit cannot be obtained,” Stuart Hoegner, Tether’s general counsel, said. “We’ve gone for what we think is the next best thing.”
Audits are generally held to a greater degree of accountability and integrity than legal reviews, which is what many are saying needs to be done for claims of Tether’s reliability to be even remotely affirmed. But there are still those who see this legal review as a reason to keep on using Tether’s token.
"the law firm said, Tether had more money in the bank than tokens in circulation (specifically, $2.55 billion of U.S. dollar reserves to cover $2.54 billion USDT)"https://t.co/lZbngUVW8K#crypto#bitcoin
Nonetheless, the report may put an end to long speculation that Bitcoin prices may have been artificially inflated. A recent academic study, which found traction in the mainstream media, attributed much of Bitcoin’s price rise to purchases with the Tether token.
Darya is a crypto enthusiast who strongly believes in the future of blockchain. Being a hospitality professional, she is interested in finding the ways blockchain can change different industries and bring our life to a different level.