Tether faces fraud allegations, raising fears of crypto market collapse

Cyber ​​Capital founder and CIO Justin Bons has leveled serious allegations against Tether. In a series of X-messages, he alleged that USDT is involved in a $118 billion fraud and criticized the company for failing to provide proof of its reserves and for not undergoing a formal audit since its inception.

While USDT continues to claim to have a large asset base, there has never been an audit to confirm this. This lack of transparency is problematic for the crypto industry, as market participants rely on Tether’s claims of holding $118 billion in collateral, which has not been independently confirmed.

The Looming Risk of Tether

The analyst notes that this is a higher risk than the Terra Luna crash, which points to a potential systemic failure. He noted that if something goes wrong with USDT, the consequences could be disastrous and impact the entire cryptocurrency industry.

Bons also pointed to Tether’s past misconduct in handling financial matters. As of 2021, the Commodity Futures Trading Commission (CFTC) accused USDT of making false reports on its reserves, but the latter has not yet been audited. However, as he pointed out, Tether did issue an “auditor’s report” with BDO, but this does not equate to the full, unconditional audit the company has been promising since 2015.

Other issues with USDT’s governance structure also make it suspicious. New information has surfaced that only two board members control USDT Holdings, which has raised concerns about the security and independence of the company’s reserves. This level of centralization means that a few individuals can have or exert control over the entire operation, which poses a threat to investors.

Tether’s Controversial Connections

He also raises concerns about Tether’s ties to shady banking practices. Tether also has ties to Bitfinex, an exchange run by some of the same people involved with USDT, and the company’s dealings with Crypto Capital, a Panama-based bank accused of laundering money for drug cartels, have also sparked controversy. In 2019, Crypto Capital’s assets were seized, leaving both Bitfinex and Tether in a very vulnerable position, raising questions about their operations.

Nevertheless, Bons warns that with the growing USDT market cap, USDT poses a threat to the cryptocurrency market. He wants investors to move their assets to more secure and transparent stablecoins and also be cautious and safe from a potential market crash.

While Tether remains the dominant player in the stablecoin market, more and more people in the crypto space are calling for transparency. The recent allegations have further raised concerns about Tether’s activities, with many wondering how stable the market will be in the coming days.