Tether ‘token’ fined $41 mln

NEW YORK, Oct 17, (Agencies): The company behind a digital token called Tether has agreed to pay $41 million to settle charges that it misled investors by claiming the token was fully backed at all times by U.S. dollars and other fiat currencies.

The Commodity Futures Trading Commission said Friday it charged Tether Holdings Limited with making untrue or misleading statements and omissions in relation to its claims. Specifically, the U.S. regulator found that since launching the token in 2014, Tether Holdings represented that its was a “stablecoin” with its value pegged to fiat currency, including U.S. dollars and euros.

A stablecoin is a digital currency backed by real-world assets such as national currencies or other commodities. Unlike Bitcoin and other cryptocurrencies, stablecoins are designed to not fluctuate wildly in value.

However, the CFTC determined that at least from June 1, 2016 through Feb. 25, 2019, Tether misrepresented to customers and the market that it maintained sufficient U.S. dollar reserves to back every Tether token in circulation with the equivalent amount of “corresponding fiat currency.”

The agency also found that Tether failed to disclose that it included unsecured receivables and non-fiat assets in its reserves, and that the company falsely represented it would undergo regular audits to prove it was maintaining the fiat currency reserves it needed to back Tether tokens.

In a statement, Tether, which is headquartered Hong Kong and maintains an office in Santa Monica, California, said the CFTC’s findings pertained to certain disclosures about the company’s reserves that were “fully resolved” in February 2019, when the company updated its terms of service.

“As to the Tether reserves, there is 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,” the company said, noting that it has “always maintained adequate reserves .”