Is Tether the Next FTX? Investor Fears Grow Over $118B Stablecoins Transparency Issues
Tether, a $118 billion stablecoin giant, has been under pressure for not going through third-party audits, which is fuelling fears of a liquidity crisis similar to the collapse of FTX. A Cyber Capital founder, Justin Bons, recently stirred controversy by calling Tether a monumental scam that eclipsed both FTX and Bernie Madoff in scale.
His accusations highlight one unnerving absence of due process and accountability: while pledges go back as far as 2015, Tether has never been subject to a proper, independent audit.
In 2021, the company settled with the CFTC over misleading reserve disclosures and mismanagement of $850 million in client and corporate funds. The settlement forced the company to attest its reserves, which came as mostly commercial papers of dubious quality and origin. That was miles away from a full, unrestricted audit, so Tethers reserves remained uncertain.
2021 CFTC Settlement Reveals Tethers Reserve Issues
Tethers claims of transparency have never been supported by real, solid independent verification. The so-called auditors report, published in cooperation with BDO back in 2021, was not an audit at all but an accountants report; hence, a new series of questions appeared concerning the reliability of the accounting statements of the company. The attempt to do a comprehensive audit in 2018 reportedly encountered obstacles when auditors were dismissed for being too diligent.
According to Bons, compounding the problem, the companys governance is not transparent. Recent revelations about Tethers board consisting of Giancarlo and Ludovicos-indicate that controls on USDT reserves are highly centralized and unregulated. This engendered concentration of power, particularly regarding the stability of the USDT in case of a financial run that would set off a severe market disruption.
Also, there is concern over Tethers history, with associations being made with questionable financial practices right from its founders. Associations that include Bitfinex and Crypto Capital reportedly raise credibility questions for Tether, bringing financial scandals to mind.
However, the questionable financial practices of USDT, the biggest stablecoins by market capitalization and trading volume, coupled with an absence of proper oversight, hint at deeper systemic problems in the world of digital currencies.
Related Reading | XRP Whale Sparks Fear: Massive 100 Million Moved, 19.7 Million to Bitso
Read more: https://www.tronweekly.com/is-tether-next-ftx-investor-fears-transparency/
Text source: TronWeekly
