US court orders Tether to provide financial records on USDT collateral

A lawsuit filed in 2019 alleging that crypto exchange Bitfinex and its sister company Tether manipulated the crypto market to issue USDT to inflate the price of Bitcoin has taken a new turn.

The United States District Court for the Southern District of New York has now ordered stablecoin issuer Tether to produce financial records regarding USDT in order to assess its claims regarding asset collateralization.

Assessing USDT collateral claims

According to the latest order, the New York court asked the company to provide all information in the form of "general ledgers, balance sheets, income statements, cash flow statements, and profit and loss statements."

Records will also need to be provided regarding cryptocurrency and stablecoin transfers via Tether, with the timing of the transaction.

Tether’s motion to block the release of its financial records was denied by the presiding judge, even though lawyers representing the stablecoin firm said the entire process was “incredibly lengthy and unduly burdensome.” Judge Katherine Polk Failla went on to say that the court cannot deny the relevance of the documents, noting:

„Dokumenty požadované v RFP transakcích se zdají být v souladu s jedním z hlavních obvinění žalobců: že se Obžalovaní podíleli na transakcích s krypto komoditami pomocí nekrytých USDT a že tyto transakce „byly strategicky načasovány tak, aby nafoukly trh. Žalobci upozorňovali na relevanci těchto dokumentů vůči žalovaným a hlavní námitkou žalovaných nebyla relevance dokumentů, ale naopak to, že žádosti byly příliš přehnané.“

In supporting the judge's request, he also stated that the records are important for assessing the USDT collateral and for allowing a forensic accountant to assess the stablecoin reserve.

Tether's Turbulent Past and Growth

The market’s reliance on USDT has been a bone of contention for years, and the company behind it has faced increased pressure from regulators, investors, economists, and a growing body of skeptics. In 2021, Tether reached a massive $18.5 million settlement with the New York Attorney General (NYAG), alleging that the company lied about its reserves and went on to call USDT a “stablecoin without stability.”

The collapse of the algorithmic stablecoin TerraUSD (UST) earlier this year was disastrous for the entire cryptocurrency industry, but Tether managed to weather the crisis relatively flawlessly. Despite regulatory hiccups, as well as the rise of several alternative stablecoins, Tether has grown rapidly over the years, with nearly $70 billion in circulation.

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