Tether And Bitfinex Set To Pay $42.5m In Fines To CFTC

Tether, the stablecoin issuer and blockchain technology firm behind $USDT, has been issued an order by the Commodity Futures Trading Commission (CFTC) to pay $41 million in civil monetary penalties. iFinex, the parent company of the Bitfinex exchange, was also served with a $1.5 million fine.

The two companies are to pay these fines as part of a settlement deal. In the case of Tether, it has been alleged of violating the Commodity Exchange Act (CEA) due to its purportedly misleading statements about USDT being backed by fiat (USD) on a one-to-one ratio. Bitfinex, under iFinex, on the other hand, will pay fines for executing off-exchange retail commodity transactions for digital assets with U.S persons on its trading platform.

According to the CFTC’s official press release on the matter, Tether has failed to provide due diligence and required disclosures for its claims on a one-to-one backing for the USDT stablecoin.

“The order further finds that Tether failed to disclose that it included unsecured receivables and non-fiat assets in its reserves, and that Tether falsely represented that it would undergo routine, professional audits to demonstrate that it maintained “100% reserves at all times” even though Tether reserves were not audited.” the CFTC stated.

The CFTC further says that between 2016 and 2018, Tether had sufficient reserves that amounted to less than a third of the 26-month period during which it actively pegged USDT on the U.S. dollar. Bitfinex, on the other hand, was found to have violated a prior order issued in 2016, in that it “force-liquidated certain customer positions and acted as the counterparty to certain transactions.”

In response to the order, Tether issued a statement in which the firm said that it will fully comply with the order, closing and settling the case.

“This inquiry arose during a markedly different time in our ecosystem, and focused on the same types of challenges that many in our industry faced at the time. As many companies around the world do, Tether agreed to resolve this matter in order to move forward and focus on the future.We are grateful that the market has consistently demonstrated its trust and confidence in Tether.” Tether stated.

Tether and Bitfinex’s Chief Technology Officer, Paolo Arduino, took to Twitter to express his relief that the case is finally getting closed.

Thanks! Finally we were able to put all this behind us!
It's a good day 💪💪💪🦁🦁🦁#tether official response here:https://t.co/cnaUKBkpkk https://t.co/n7rkyRFzmB

— Paolo Ardoino (@paoloardoino) October 15, 2021

In late September this year, key claims on a class action lawsuit filed against Tether and Bitfinex were dismissed. The lawsuit alleged that the two firms violated certain clauses of the Racketeer Influenced and Corrupt Organizations Act (RICO). Earlier this year, in February, the two firms have also paid a settlement amounting to $18.5 million in response to a deal with the New York Attorney General’s Office.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.