- “Tether actually did invest in instruments… including bitcoin, they bought bitcoin,” Miller admits in court.
- There have been claims of Tether misusing its reserves.
Tether’s struggle to prove that it is indeed fully backed continues to be dealt blows in the ongoing court case against the company and Bitfinex exchange. Previously, the issue of the stablecoin said that Tether is not 100% backed by the US dollar reserves.
While in court, the attorney representing Bitfinex admitted that some of Tether’s backing funds have been invested in Bitcoin and “other assets.” The admission was discovered in the court documents that had been submitted by The Block. The attorney David Miller:
“Prior to the April 24th order … Tether actually did invest in instruments beyond cash and cash equivalents, including bitcoin, they bought bitcoin.”
The view of the attorney is that Tether has the mandate to keep funds in assets more than just cash. And that the court has no jurisdiction to dictate that Tether should only invest in cash. However, the users of Tether do not feel safe with all the investment of Tether not being in cash as it risks the stablecoin’s stability. The New York Supreme Court Judge Joel M. Cohen argued:
“Tether sounded to me like sort of the calm in the storm of cryptocurrency trading.”
“And so if Tether is backed by bitcoin, how is that consistent? If some of your assets are in a volatile currency that Tether is supposed to somehow modulate, that seems like it’s playing into what they are saying.”
This admission says a lot about both Tether and Bitfinex as well as their relationship which had been kept out of scrutiny for the longest time. There have been claims of Tether misusing its reserves and the recent discovery of an $850 cover up to pay for withdrawals on Bitfinex seems to be just the tip of the iceberg. It is clear that the case is building against the two companies and time will tell the direction it will take.