Stablecoin issuer Tether has received a court order to produce financial records proving its backing of USDT. Judge Kathryn Polk Filea of the Northern District Court of New York issued the order order Pursuant to a request to prove the plaintiff’s reserve for Tether on Tuesday. The latest order for Tether comes as part of this a case A group of traders filed a lawsuit in 2019 against iFinex, the parent company of Tether and Bitfinex exchanges.
The case involves a 2018 research report from the University of Texas. Experts found that Tether’s sister company Bitfinex deliberately bought Bitcoin with unbacked USDTs to pump up the BTC price. And that resulted in over 1 trillion crashes in the market.
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After a 22-month long investigation, the case ended with a settlement of $18.5 million. The New York Attorney General (NYAG) stopped investigating Bitfinex and Tether in February 2021, with the companies agreeing to reduce their services to New Yorkers.
Additionally, the Attorney General found that iFinex had commingled the company’s and users’ funds causing it to suffer $850 million in damages. Due to a case against his partner Payment Channel Crypto Capital Corporation
Understandably, this indicates that Tether’s USDT was not backed with 100% reserves for the time-space around November 2018, NYAG said. Although the company claims its stablecoin, USDT, is always backed 1:1 with the US dollar. Therefore, as part of the settlement Tether is obligated to publish a quarterly report on its backing assets.
Tether wants to keep the details of its reserves private
Tether though By attaching documents to its website While revealing its reserves, the report does not provide an in-depth picture of its backing assets.
Because of this, the judge has now ordered the defendant company to disclose information on its “general ledger, balance sheet, income statement, cash-flow statement, and profit and loss statement (…) as they relate to the support of the USDT (Financial Records RFPs).” . [requests for proposal]) and crypto product transactions (transaction RFPs).”
The court order required the firm to provide details of its accounts on Poloniex, Bitifinex and Bittrex.
Lawyers representing Tether sought to overturn the judge’s order, calling it “unduly burdensome.” Additionally, they claimed that disclosing the composition of its reserves would be detrimental to its business.
During the court’s ruling the defendants added;
Plaintiffs offer no rationale for such an extraordinary request, saying only that they must assess whether the transactions were strategically timed to inflate the market.
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But Failla noted that the documents the plaintiffs are seeking are undoubtedly important in determining the USDT’s support for the U.S. dollar. Accordingly, the judge affirmed his decision by adding:
Plaintiffs clearly explain why they need this information: to assess USDT’s support against the US dollar. (…) The documents sought in the RFP appear to address one of the plaintiffs’ main allegations: that the B/T defendants engaged in crypto commodity transactions using on-backed USDT.
Featured image from Pixabay and chart from TradingView.com