• Federal prosecutors are investigating whether Tether concealed crypto-linked transactions from banks.
  • Ongoing criminal investigation from the US Department of Justice could cause broad implications for the crypto market. 
  • USDT is key to the crypto ecosystem, with a circulation of $62 billion, accounting for more than half of all Bitcoin trades.

Tether is cooperating with law enforcement agencies as Tether executives are scrutinized for bank fraud. The probe by federal agencies first started in 2018 and has now reached a peak alongside a global crackdown on stablecoins by authorities. 

Federal prosecutors sent a notice to Tether signaling that a decision will be made soon

In 2018 Federal prosecutors started circling Tether. The company's corporate structure is a tangled web of entities based in the British Virgin Islands and Hong Kong. Authorities are currently investigating Tether's conduct from years ago, when the company was in its nascent stages, following its launch. 

Tether was first issued in 2014. Since then, the stablecoin has come a long way in maintaining reserves for each stablecoin issued, performing audits, and transparently sharing audit reports with users on their website. However, the Justice Department is scrutinizing whether Tether concealed crypto-linked transactions from banks.

In 2014 when exchanges found it challenging to find banks to allow traders to add fiat in the exchange ecosystem, specifically to buy cryptocurrencies in the fiat-crypto markets, Tether acted as a solution. It is important to note that Tether needed a corporate bank account to solve the exchanges' problem. 

Tether and its affiliate Bitfinex sued Wells Fargo for blocking wire transfers sought through Taiwanese banks. Wells Fargo was one of the first banks to provide banking services to Tether. In their lawsuit against the bank, Tether claims that Wells Fargo was aware or should have been aware that the transactions were being used to obtain USD for crypto purchases. 

Though the lawsuit by Tether and Bitfinex was dropped soon, the bank or Tether have declined comment. 

Tether issued a statement on the ongoing investigation and said, 

Tether routinely has open dialogue with law enforcement agencies, including the DOJ, as part of our commitment to cooperation and transparency.

The Department of Justice has currently declined comments. The charges against Tether are not yet warranted, and senior DOJ officials are currently determining whether to bring a case against Tether and its executives soon. 

The probe into Tether has reached a peak at a time when there is a global crackdown on stablecoins and cryptocurrencies. The US Treasury Department has raised concerns that stablecoins could threaten financial stability by claiming that they are linked to transactions tied to money laundering and criminal misconduct. 

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