The United States federal government is investigating stablecoin issuer Tether, The Wall Street Journal reported in an “exclusive” article on Oct. 25, citing “people familiar with the matter.” Tether CEO Paolo Ardoino called the story “old noise,” but it sent a shudder through the cryptocurrency market.
Justice, Treasury Departments looking at Tether?
According to the newspaper, the US Attorney’s Office for the Southern District of New York, that is, the Justice Department, is carrying out a criminal investigation of the use of Tether (USDT) by third parties to fund illicit activities or launder money generated by those activities. That investigation has been going on for “several years.”
Simultaneously, the Treasury Department is considering sanctioning Tether because of its “widespread use by individuals and groups sanctioned by the US, including the terrorist group Hamas and Russian arms dealers,” the newspaper continued.
The Wall Street Journal calculated that up to $190 billion in USDT is traded daily.
The newspaper quoted a response from Tether that, “To suggest that Tether is somehow involved in aiding criminal actors or sidestepping sanctions is outrageous.” Tether further stated on its website:
“It is wildly irresponsible for WSJ to write articles with reckless allegations with such certainty when no authorities have gone on the record to confirm these rumors, and no sources are named.”
“The article also carelessly glosses over Tether’s well-documented and extensive dealings with law enforcement to crack down on bad actors seeking to misuse tether and other cryptocurrencies,” Tether’s statement continued.
Tether CEO Paolo Ardoino was also dismissive of the claims. He said in an X post:
“As we told to WSJ there is no indication that Tether is under investigation. WSJ is regurgitating old noise. Full stop.”
Source: Paolo Ardoino
Related: Tether’s USDT hits record $120B market cap, flashing ‘Uptober’ signal
What the record shows
Tether is the target of regular criticism from sources ranging from the United Nations to a nonprofit consumer protection organization. Given current US government policies, the claim that Tether is under investigation is not hard to believe.
Source: Jacob Silverman
Tether and the affiliated cryptocurrency exchange Bitfinex were fined a combined $42.5 million by the Commodity Futures Trading Commission (CFTC) in October 2021 for violations of the Commodity Exchange Act and a prior CFTC order.
Ripple CEO Brad Garlinghouse commented during a podcast in May, “The US government is going after Tether, that is clear to me.” He did not elaborate on the source of his insight.
Tether has a documented record of collaboration with law enforcement. It claimed in August that it had helped over 145 law enforcement agencies recover more than $108.8 million in USDT linked to illegal activities since its launch in 2014.
The crypto market reacts
News of the investigation seems to have rattled the broader crypto markets.
Bitcoin (BTC) fell from $67,367 to $66,016 and has also only partially recovered at the time of writing. Ether (ETH) fell from $2,505 to $2,461. BNB (BNB), Solana (SOL), XRP (XRP) and other major cryptocurrencies showed similar behavior.
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