Stablecoin platform Tether will pay $41 million after the Commodity Futures Trading Commission (CFTC) said the company misled customers and potential buyers for almost three years by claiming its digital tokens were backed by sufficient dollar reserves, the Financial Times (FT) reported.
The CTFC said Tether was being disingenuous about its stablecoins’ backing from at least June 2016 to February 2019, according to the report. Tether is responsible for about half of the stablecoins in circulation, accounting for more than $69 billion.
The findings against Tether showed that the company only had enough fiat reserves to back all the tokens in circulation for slightly more than one-quarter (27.6%) of the days from September 2016 to November 2018, the report stated.
“This case highlights the expectation of honesty and transparency in the rapidly growing and developing digital assets marketplace,” said Rostin Behnam, CFTC acting chair, in the ruling, per FT.
Tether didn’t admit or deny its liability in the settlement, according to the report. In a statement, Tether said there was “no finding that Tether tokens were not fully backed at all times — simply that the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times . . . [Tether] has always maintained adequate reserves and has never failed to satisfy a redemption request.”
Earlier this month, it was reported that Tether is facing increasing scrutiny from regulators as they try to understand its cash reserves, organizational structure and more.
Read more: Tether Faces Increased Regulatory Scrutiny
The company that issues the Tether currency, Tether Holdings, collects money from people who want to trade cryptocurrency and credits their digital wallets. People can send Tethers to cryptocurrency exchanges and use them to buy bitcoin, Dogecoin or any of the thousands of other digital coins.
The U.S. Department of Justice began investigating whether Tether executives hid the true nature of some transactions and if its banking partners had been aware that transactions had been tied to cryptocurrencies in July.