The US Commodity Futures Trading Commission today filed and settled charges against Bitfinex and sister company Tether. The two firms are required to pay fines totaling almost $43 million.
CFTC claimed that the Tether (USDT) stablecoin was not completely backed by reserves most of the time and Bitfinex breached the derivatives regulator’s previous directive, according to a press release on Friday. In particular, the release notes that USDT was only backed 1:1 by US dollars for only one-quarter of the 26-month period starting from 2016 to 2018. While also failing to conduct audits, Tether also combined reserve funds with the firm’s corporate funds and non-cash reserves.
“The order further finds that Tether failed to disclose that it included unsecured receivables and non-fiat assets in its reserves, and that Tether falsely represented that it would undergo routine, professional audits to demonstrate that it maintained “100% reserves at all times” even though Tether reserves were not audited.”
Simultaneously, the CFTC also settled charges against Bitfinex’s parent company iFinex. iFinex will pay a fine of $1.5 million for participating in “illegal, off-exchange retail commodity transactions” in crypto assets with investors in the U.S.
With the settlement, the firms are precluded from additional violations of the Commodity Exchange Act (CEA) and CFTC regulations. CFTC’s Acting Director of Enforcement Vincent McGonagle observed that the enforcement action is evidence of the agency’s commitment to protecting users and promoting integrity in the markets.
Tether & Bitfinex’s Worst Days Now Behind
Tether issued an official statement in response to the CTFC settlement. In the statement, the company insisted that there were adequate findings to support the claim that USDT tokens were not fully backed at all times. Moreover, Tether has supposedly maintained enough reserves and never failed to fulfill a redemption request.
Tether also asserts that CFTC has not identified any issues with its present operations. “The CFTC’s Order found no issues relating to Tether’s current operations. In fact, the Order related to certain disclosures about the reserves from more than two and a half years ago. As the Order recognizes, these issues were fully resolved when the terms of service were updated in February 2019,” the rebuttal statement said.
Paolo Ardoino, CTO of both Tether and Bitfinex, expressed his optimism about the settlement with the CFTC, observing that the firms can now put behind the long-standing legal battle.
Tether and Bitfinex settled with the New York Attorney General’s office in February this year by paying a whopping $18.5 million in fine.
Meanwhile, acting CFTC chairman Rostin Behnam says the agency will continue to take action “to bring to light untrue or misleading statements that impact CFTC jurisdictional markets.”