Tether has yet to complete an independent audit of its USD reserves since 2017.
Consumers’ Research claimed that Tether is risky because of its financial transparency.
Tether also received several investigations and penalties regarding its reserve claims and operations.
The consumer advocacy group Consumers’ Research has recently sounded the alarm on Tether, issuer of the USDT stablecoin. This warning is due to the lack of transparency in Tether and the inability of the company to perform an audit of its USD backing.
The group indicated that ut to date, Tether has consistently had been issuing promises of an audit since 2017 but had not delivered a credible one. Tether, despite being one of the biggest stablecoins, still has not been able to provide evidence that USDT is fully backed by USD.
History of Unfulfilled Promises and Legal Scrutiny
The given report outlines a concerning tendency of Tether’s inability to prove the existence of USD backing through the independent audit. In 2018, Tether offered a report by a law firm, not an accounting firm, in which it stated that each of its USDT were fully backed by USD. This drew investigations by the U.S. Department of Justice towards ascertaining whether Tether and Bitfinex manipulated the cryptocurrency market.
Still, in the year 2019 the State of New York discovered that Tether operated and transferred its funds to hide a loss of $850 million. Crimes like these led to a settlement in 2021 where Tether compensated New York $18.5 million and shut down its operation. In 2022, the SEC disclosed that Tether’s auditor had misused its accounting. This worsened the situation. The SEC argued that Tether’s claims about its USD reserves were misleading.
Consumers’ Research found that Tether still works with bad actors. They help facilitate international crimes using USDT. This has been made as a result of the investigations being made to ascertain whether Tether allows investors to breach sanctions.
Concerns Over Lack of Audit
The company has failed to provide a full audit despite their many assurances to do so. Its chief executive officer indicated in August 2022 that a full audit would be conducted “months away.” In September 2024, there is no sign of a full audit ever being carried out. The watchdog group went further and equated Tether’s opacity to the FTX and Alameda Research situation before their crash.
The consumer protection group warns that with Tether consistently not undergoing an independent audit, could pose a great risk to consumers. They argue that stablecoins like Tether, which claim to have reserves in real-world assets, require an audit by a trusted third party. The group says that Tether’s problems will worry regulators and the crypto market if the company does not cooperate.
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