Tether is a stablecoin specifically designed to build the necessary bridge between fiat currencies and cryptocurrencies and offer stability, transparency and minimal transaction charges to users, maintaining a 1-to-1 ratio with the U.S. dollar in terms of value. However, there is no guarantee provided by Tether Ltd. The controversy around Tether started it was claimed that each token was backed by one USD, until Bitfinex Exchange was accused by the New York Attorney General of using Tether to cover $850 million missing funds.
On the 9th of July 2020, the New York Court unleashed the state’s attorney general to investigate a number of businesses behind the Tether cryptocurrency, with no formal accusations of fraud or other wrongdoing. The news comes at an awkward time the Tether creator, Brock Pierce, who recently announced that he was running for President of the United States, as an independent.
The questions around Tether started in 2018, regarding whether or not the cryptocurrency was actually backed dollar-for-dollar started so the previous state attorney general of New York, Letitia James, officially began the investigation. After turning up some promising leads however, Tether and Bitfinex filed an appeal resulting in a temporary halt of the investigation. With the opinion order dated 09/07/2020,the investigation can now resume. Is unclear yet how the investigation will impact the Tether owners, or how the $10 billion market value will be affected.
Today's decision validates our office's ability to use its broad and comprehensive investigative powers to protect New Yorkers. Not even virtual currencies are above the law. We are pleased with the court's decision, and will continue to protect the interests of investors in the marketplace. - Letitia James
Officially, the case involves Bitfinex operators, BFXNA Inc. and BFXWW Inc. and Tether Holdings Limited. Though Pierce is not mentioned in the opinion, he not only founded Tether in 2014, but is the co-founder of Block.One, behind the 11th largest cryptocurrency, EOS, valued at $900 million, and Blockchain Capital, one of the most influential venture capital firms in the crypto-ecosystem. The result of the investigation may shake the whole crypto market and may have a devastating result on Brock Pierce, and his newly announced political career.
The 2018 investigation made Tether wording change from "each token is backed by one USD" to “backed by Tether Holding’s reserves", however, no currency, cash equivalents, or other assets are specified.
Since the stay was issued in September 2019, the Tether’s market cap surged from $4.1 billion to $10 billion today, evolving despite the controversy. The Tether success inspired the creation of other stablecoins such as Binance USD, USDC by Coinbase, and Dai.
The result of the investigation will affect the market, and in case of any proven fraud or wrongdoing, the crypto-ecosystem will receive a huge blow, giving gossip subjects to those doubting cryptocurrencies. A loss to Tether will certanly mean a win for all competitor stablecoins, and will reduce Broke Pierce's credibility to zero.
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