Tether, a dollar-pegged cryptocurrency, always faced questions regarding its legitimacy, most of which revolved around the amount of money it has in its vaults. Though the company rebuked most of its critics, it was reluctant to conduct a formal audit of its books for months.
In a surprising move, Tether recently announced that it has conducted a third-party audit which confirms that is has sufficient amounts of USD to back its USDT token.
Tether enlisted the services of Washington-based law firm Freeh Sporkin & Sullivan LLP (FSS) to look over bank documents and to randomly inspect circulating Tethers and corresponding USD reserves. To the firm’s credit, the audit iwas performed by three former federal judges.
Earlier this year Tether engaged Freeh, Sporkin & Sullivan LLP to review bank account documentation & to perform an inspection of the numbers of Tethers in circulation & the corresponding currency reserves.
The report can be viewed in its entirety here: https://t.co/BeLXhQY6FV
— Tether (@Tether_to) June 20, 2018
Apart from the bank accounts, the law firm also reviewed Tether’s compliance to AML standards, paperwork relating to personnel and corporate structure, and historical records about the amount of issued and outstanding Tethers, along with a variety of other documents.
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However, this again raised eyebrows as the audit was conducted by a law firm rather than an accounting firm.
— Jackson Palmer (@ummjackson) June 15, 2018
Tether’s problem started as the firm parted its ways with its previous auditing partner Friedman LLP in late January. Even after facing a massive backlash the firm did not hire any third-party to go through its books.
Moreover, due to the firm’s ties with the cryptocurrency exchange Bitfinex, it faced many allegations of Bitcoin price manipulation. Many reports branded it as a “ticking time bomb” with allegations of not having adequate USD reserve quickly making the rounds.
On June 13, two researchers at the University of Texas at Austin published a report called “Is Bitcoin Really Un-Tethered?” in which they claimed to have found fresh evidence of Tether’s market manipulation tactics of Bitcoin and other major altcoins by flooding the market with USDT.
In a recent transparency update, Tether acknowledged the scrutiny and stated that “much of the speculation and negative reporting” was due to “misunderstandings” of the firm’s business model.
Despite all the allegations, USDT remained one of the market leaders in terms of trading volume, trailing only behind Bitcoin. Most of the exchanges including the major ones, prefer USDT because of its stability over BTC and ETH. Moreover, USDT reduces the regulatory worries the exchanges have to face by listing crypto against fiat currencies.