- Tether is backed up by fiat only by 74%.
- The companies provided customers with misleading information.
The general counsel of Tether Limited confirmed in his written evidence that only 74% of stablecoin USDT was backed by fiat reserves, while the customers had not been notified of that fact.
According to Affidavit dated April 30, Stuart Hoegner emphasised that all existing commercial banks carry out a policy of partial reserves which means that only a tiny share of customers’ deposits is backed up by monetary funds.
It is worth noting, that on February 27, Tether Limited stealthily adjusted its USDT collateral policy to include other assets and future receivables from the third parties in the reserves along with cash and cash equivalents.
Also, on February 21, the representatives from the Attorney General of the State of New York office met with Bitfinex и Tether Ltd management, where Tether issuer confirmed the intent to provide a credit line to the cryptocurrency exchange. They also admitted that it was not the first time when the fiat reserves behind the token were reduced.
At that time, the Attorney General requested the complete set of documents related to the upcoming deal and the details of how the exchange was going to settle the liabilities in the amount of $400 million taken over from August to October 2018.
However, the companies failed to provide the requested details, saying that they need more time to process and prepare all the required information.
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