Tether, the operator of USDT, is reportedly being scrutinized by U.S. federal investigators over possible violations of sanctions and anti-money-laundering laws.
Tether CEO Paolo Ardoino immediately denied WSJ report, describing the article as recycling “old noise.”
U.S. Investigates Tether’s Role in Sanctions and Anti-Money-Laundering Breaches
Prosecutors from the U.S. attorney’s office in Manhattan are leading the probe, examining whether Tether was used by third parties to support illegal activities, including drug trafficking, terrorism, and cybercrime, or to launder money from these operations.
The Treasury Department is also contemplating sanctions against Tether, citing its use by sanctioned groups, such as Russian arms dealers. Should sanctions be applied, U.S. citizens would be prohibited from doing business with Tether.
Tether is the world’s most traded cryptocurrency, with daily transactions averaging $190 billion. Tether’s value is tied to the U.S. dollar. This stability makes it appealing in regions where U.S. dollar transactions are restricted.
The stablecoin is increasingly scrutinized due to its reported ties to activities involving national security concerns, such as North Korea’s nuclear program and Mexican drug cartels.
The Department of Justice’s investigation, which began several years ago, initially probed whether Tether’s financial backers engaged in bank fraud by submitting falsified documents to gain access to global financial systems.
The company responded to allegations in a statement, calling suggestions that it supports criminal activities “outrageous.” Tether noted its longstanding cooperation with U.S. and international law enforcement to curb illicit activities, emphasizing that the public transparency of blockchain ledgers enhances surveillance.
To bolster compliance, Tether recently froze 1,850 wallets, reclaiming $114 million in assets, and increased its monitoring capabilities by partnering with analytics firms Chainalysis and TRM Labs. It has also expanded its regulatory team, hiring a former PayPal digital currency expert to lead government relations.
Tether CEO Responds to WSJ Report Amid Investigation
In response to the WSJ report regarding the federal investigation, Tether CEO Paolo Ardoino firmly stated there was “no indication that Tether is under investigation,” labeling the article as mere “old noise.”
In September, analysts from Consumers’ Research raised alarms about Tether, noting that the issuer of USDT has yet to complete an audit of its reserves despite promises made since 2017.
S&P Global gave the stablecoin a concerning “4 out of 5” stability rating, indicating risks.
A letter addressed to all U.S. state governors highlighted Tether’s lack of transparency, drawing parallels between Tether and the circumstances that led to the collapses of FTX and Celsius.
Consumers’ Research accused Tether of using deceptive marketing practices that could cost consumers billions.
Since June, Consumers’ Research has been actively investigating Tether, alleging connections to Russian and Chinese authorities, as well as terrorist organizations and drug cartels.
Tether is accused of enabling users in countries like Venezuela and Russia to circumvent sanctions, with reports suggesting that state-owned companies and criminals alike are using USDT.
Additionally, a WSJ report emphasized Tether’s rise as an “incognito dollar,” allowing substantial capital movement without regulation, with trading volumes surpassing Visa’s.
Tether’s impressive profits of $6.2 billion in 2023, achieved with a small workforce, have further raised concerns about its impact on the financial system and national security.
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