To maintain its access to the global banking system, the companies behind Singapore-based USDT stablecoin issuer Tether allegedly used fraudulent documents, hidden identities and shell companies, according to a new article from The Wall Street Journal.
The value of USDT is pegged to the US dollar and backed at a 1:1 ratio by US dollar/cash equivalents. USDT is the largest stablecoin by market capitalization, with $71.124 billion in tokens currently in circulation.
Tether’s trading volumes are generally around those of Bitcoin and Ethereum combined. According to CoinMarketCap, USDT saw $37.239 billion in trading volumes in the past 24 hours, compared to $25.65 billion for Bitcoin and $9.7 billion for Ether.
Tether and its backers are using unconventional means to maintain access to the banking system
According to the WSJ, Tether’s reliance on unconventional methods to maintain its access to the global banking system began in 2017, when Wells Fargo & Co halted processing transactions from several Taiwanese bank accounts of the crypto firm. Tether then said in a lawsuit against the bank that it was an “existential threat to their business”.
Documents cited by the Wall Street Journal reveal that the companies behind Tether opened new accounts in Taiwan that were held in trust by Chrise Leeframe of Hylab Technology Ltdalthough the accounts were opened under the name of Hylab Holdings Ltd. At the same time, a separate account was opened in Turkey under the name of Deniz Royal Dis Ticaretan account that has since been accused by the US Department of Justice of being used to launder money for a terrorist group.
Bitfinexa sister company of Tether, also reportedly transferred more than $1 billion to a now bankrupt Panama-based company called Crypto Capital Corp., which was known for setting up front companies whose purpose was to open bank accounts for crypto businesses. Bitfinex today claims it was the victim of a scam by Crypto Capital Corp, which resulted in the seizure of approximately $850 million of its assets for suspected bank fraud and money laundering.
The documents also reveal that Tether and its backers allegedly used similar schemes to expand access to the US banking system with the Signature Bank from New York. In 2018, Signature had already closed two accounts related to Tether and its associated businesses, and rejected an account application for Bitfinex.
Subsequently, the aviation fuel broker AML Global approached Signature Bank about opening an account, claiming to use it for cryptocurrency trading on the US exchange kraken to hedge its exposure to global currencies. The documents relating to this application to open an account do not mention that Christopher Harbournethe owner of AML Global, also owns around 12% of Tether and Bitfinex, but under a different name, Chakrit Sakunkrit.
Chakrit Sakunkrit’s name is blacklisted by Signature Bank as suspected of evading anti-money laundering measures. AML Global’s account was tentatively granted, but quickly closed after Signature Bank executives noticed that the account activity was related to Bitfinex, not Kraken, as AML Global had claimed.
Decline in crypto markets
The prices of major cryptocurrencies have fallen following the publication of this article, which will give Tether critics additional arguments to create more confusion. Some argue that USDT is not backed 1:1 by US dollars or equivalents, as Tether claims. Bitcoin was trading at the end of the day around $22,300, down around 4.8% in the past 24 hours, while Ethereum was trading around $1,560, down around 5% in the past 24 hours. over the past 24 hours. The two major cryptocurrencies in the market fell around 1% after the article was published.
If Tether were to suffer a bank run on a large scale, as happened in FTX, this could be catastrophic, at least in the short term, for the crypto industry, hence the market plunge in the wake of the article’s publication. USDT is a key source of inbound liquidity in the crypto space.
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