Will Tether become the new FTX? Crypto market on the verge of disaster

Tether, the issuer of the top stablecoinA cryptocurrency whose market value is tied to the value of a certain real asset, such as the US dollar. USDT, has been at the center of numerous scandals and investigations over the years due to its non-transparent operations. The main concern of regulators and investors is the lack of a full independent financial audit of the company. Although Tether writes about transparency on its website and assures that at least 80% of the value is secured by the US dollar, there have been no third-party audits since its launch (which is 2014).

Despite repeated promises to conduct an audit to confirm that USDT is backed by US dollars, Tether has not yet done so. Consumers’ Research has once again drawn attention to this.

In addition, The Wall Street Journal recently concluded that Tether provides fraudsters and other participants in the shadow financial market with tools to conduct illegal transactions and circumvent sanctions.

Tether’s opacity

• 2017 Tether has promised to conduct a full independent audit of its reserves to confirm that USDT is backed by US dollars.
• 2018 The company published a report drawn up by a law firm, not an accounting firm, which claimed that the USDT was fully backed by US dollars.
• 2018. The US Department of Justice has launched an investigation into possible manipulation of the cryptocurrency market with the participation of Tether and Bitfinex.
• 2019 The state of New York found that Tether moved hundreds of millions of dollars to hide the loss of $850 million in customer funds.
• 2021 Tether was forced to cease its trading activities in New York State and paid an $18.5 million fine.
• 2022. Tether has settled charges related to allegedly false statements about USDT’s collateralization with US dollars brought by the Commodity Futures Trading Commission.
• 2022The U.S. Securities and Exchange Commission (SEC) has fined a law firm that claimed USDT was backed by dollars for misreporting.
• 2024 Tether never conducted an independent audit of its financial reserves.

It is worth noting that BDO Global, the fifth largest international association of audit and consulting firms in the world, is responsible for Tether’s audits. The results of the audits are available on the website of the stablecoin issuer, the latter — was held in June 2024. It is not known what exactly Consumers’ Research does not like about BDO —.

Although several times companies from the BDO Global group have been involved in scandals.

For example, in 2020, a Spanish court found that BDO knew about the falsification of Pescanova’s financial statements, and the firm’s partner who approved these documents received a prison sentence.

And in July this year, BDO Botswana auditors received a claim for 82 million pula (the national currency of Botswana) from the liquidator of Bluthorn, which was caught up in a scandal involving misappropriation of funds.

Consumers’ Research warns of a major disaster

1. Tether (USDT) has repeatedly refused to conduct an independent audit of its reserves. This raises suspicions as to whether the company really has enough assets to cover the value of the tokens in circulation.
2. If the regulators do not take appropriate measures, there is a risk that unscrupulous players in the market will be able to continue their activities, which could lead to catastrophic consequences for the entire crypto market.
3. The authors of the report compared the current situation around Tether to the FTX collapse. In March 2024, Sam Benkman-Fried, the founder of FTX, was sentenced to 25 years in prison for fraud.

Is Tether repeating FTX’s mistakes?

If this news has passed you by, we’d like to remind you that at the end of 2022, one of the world’s largest cryptocurrency exchanges, FTX, will launch, went bankrupt, dragging down the cryptocurrency market. The founder of the exchange, Sam Bankman-Fried, was charged with fraud and conspiracy related to the improper use of client funds and their transfer to other companies associated with FTX.

It all started with a massive withdrawal of funds by clients after information about the financial problems of FTX and its related company Alameda Research was made public. It soon became clear that FTX held a significant portion of its assets in its own FTT token, which did not have sufficient liquidity to cover its obligations to customers. This led to a market panic, a collapse in the value of the FTT token, and the subsequent bankruptcy of FTX.

Therefore, both companies lacked transparency and there may be problems with asset collateral. In addition, both FTX and Tether made statements that later turned out to be false. In the case of Tether, the company claimed that USDT was fully backed by dollars.

What happens in case of Tether’s failure?

We remind you that USDT is in the first position among all altcoins by market capitalization, which currently stands at $118.32 billion. It is followed by USDC with $35.43 billion, DAI with $5.3 billion, and FDUSD with $2.5 billion.

At the same time, Tether (USDT) has a 71.48% share of the stablecoin market. USD Coin (USDC) is in second place with 21.38% of the market, while MakerDAO’s DAI accounts for 3.08%.

In addition, the potential collapse of Tether will cast a heavy shadow on other stablecoins and the crypto market in general. This may signal to regulators that the cryptocurrency market requires immediate and strict control.

Source: Tether, CoinMarketCap, CoinGecko, Consumers’ Research