Investigation into Tether Raises Concerns Over Money Laundering and Sanctions Violations
The U.S. government’s legal battle against the crypto industry has been intense over the past two years, but one company has managed to avoid charges so far: Tether. Tether is the firm behind the popular stablecoin pegged to the U.S. dollar, which has become a staple currency for many blockchain transactions.
However, Tether’s luck may be running out as federal prosecutors in Manhattan are now investigating whether the company violated money laundering and sanctions laws by being used by global criminal networks for activities such as drug trafficking, terrorism, and hacking. Tether has vehemently denied these allegations, calling them reckless and unsubstantiated.
With a market cap of $120 billion, Tether plays a crucial role in the crypto industry as a settlement currency for trading and a hedge against volatility in countries where access to the U.S. dollar is limited. Despite its importance, questions about Tether’s backing and its potential use for criminal activities have persisted.
Tether has faced previous investigations and fines, including a hefty penalty from the New York Attorney General’s office and the Commodity Futures Trading Commission. The latest probe is reportedly an expansion of a Department of Justice investigation into potential bank fraud committed by Tether’s backers.
The rise of Tether began in 2014 when it was founded by Bitcoin enthusiasts and later acquired by Bitfinex. Its usage surged during the 2021 bull market, driven by the need for a stable settlement currency in the volatile crypto market. Tether’s offshore operations also made it attractive to users in countries without access to the U.S. dollar.
Despite its growth, Tether has faced scrutiny over its management and backing. Questions about the stability of its reserves and its ties to criminal networks have raised concerns. The company has taken steps to address these issues, including partnering with blockchain analytics firms to combat illicit usage.
The ongoing scrutiny of Tether could have significant implications for the company and the broader crypto sector. Similar to the fallout from the collapse of the FTX exchange in 2022, potential charges against Tether could disrupt the global crypto economy. The company’s importance in the industry makes it a key player to watch as the investigation unfolds.
