The Commodity Futures Trading Commission (CFTC) ordered Tether to pay a civil monetary penalty of $41 million for making false or misleading statements and removing material facts about its U.S. dollar tether token (USDT) stablecoin.
In its order, the CFTC alleged that Tether violated the Commodity Exchange Act (CEA) and the Commission’s regulations from at least June 2016 to February 2019 (the Relevant Period).
The Commission noted that since its launching in 2014, Tether claimed that its USDT stablecoin is fully backed by corresponding fiat assets including U.S. dollars and euros. However, during the Relevant Period, the company failed to maintain sufficient fiat currency reserves in its bank accounts to support every tether token in circulation.
Additionally, the CFTC found that the company failed to disclose that its reserves included unsecured receivables, commercial papers, and funds held by third parties, and other non-fiat assets.
Furthermore, the Commission alleged that the company lied that it will undergo routine, professional auditing to prove that it has “100% reserves at all times.” In reality, Tether reserves were not routinely audited during the relevant period.
