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Tether and Bitfinex to Pay $42.5M for Violating CTFC Rules

| Updated
by Babafemi Adebajo · 3 min read
Tether and Bitfinex to Pay $42.5M for Violating CTFC Rules
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The Acting Chairman of CTFC noted that the case showed just how desperately the digital asset marketplaces need honesty and transparency.

The Commodity Futures Trading Commission (CFTC) has fined both Tether and Bitfinex for about $42.5 million. While it found no issues relating to Tether’s current operations, the commission found Tether guilty of making “true or misleading statements and omission of material fact” about its stable coin USDT.

According to the CFTC,  there were periods when the stable coin was not fully backed by reserves.  This finding was contrary to the company’s claims. The commission found that Tether only had enough dollar reserves for its tether tokens for 27.6% of the days during a 26-month sample between 2016 and 2018.

Based on these findings, the commission fined Tether to a tune of $41 million as a civil monetary penalty. The company was also warned to be careful of any further violations of the Commodity Exchange Act (CEA) and CFTC regulations.

Likewise, the commission found Bitfinex guilty of misdeeds in its operations. The crypto exchange was found to have engaged in illegal, off-exchange retail commodity transactions in crypto assets with US citizens. Also, Bitfinex was found guilty of operating as a futures commission merchant (FCM) despite not registering as such.

As a result, Bitfinex was fined $1.5 million as a civil monetary penalty.  Additionally, the crypto exchange will be required to design systems to prevent illegal retail commodity transactions.

Bitfinex Case: CFTC Wants to Maintain Market Integrity

Previously, Bitfinex and Tether were fined $18.5 million in February to settle a case between the companies and the New York Attorney General’s Office (NYAG). The New York Attorney General Letitia James stated the companies of “recklessly and unlawfully covered up massive financial losses to keep their scheme going and protect their bottom lines.”

With the new findings, Acting Director of Enforcement Vincent McGonagle noted the judgment was a demonstration of the commission’s commitment to its charge. Also, he said:

“As demonstrated by today’s actions against Tether and Bitfinex, the CFTC is committed to carrying out its statutory charge to promote market integrity and protect US customers.”

In his statement, McGonagle added that “the CFTC will use its strong anti-fraud enforcement authority over commodities, including digital assets, when necessary.”

The Acting Chairman of CTFC also expressed a similar opinion. He noted that the case showed just how much the digital asset marketplaces needed honesty and transparency. “The CFTC will continue to take decisive action to bring to light untrue or misleading statements that impact CFTC jurisdictional markets,” he asserted.

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Babafemi Adebajo

An experienced writer and Fintech enthusiast, passionate about helping people take charge of, scale and secure their finances. Has ample experience creating content across a host of niche. When not writing, he spends his time reading, researching or teaching.

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