Tether: Lawyers admit that the stablecoin is only backed by 74% cash, $1 for every Tether issued not important
Tether, the world’s most popular stablecoin, has come under fire with New York’s Attorney General office (NYAG) about potential fraud. In the latest development, Lawyer’s of stablecoin confirm that the stablecoin is not completely backed by the US dollar but rather 74% backed by USD.
In an affidavit filed by Stuart Hoegner, the general counsel of BitFinex, on Tuesday claims that the company holds about $2.1 billion in cash and short-term securities. Omni block explorer (the protocol on which Tether is made) on the other hand reveals 2.82 billion Tether tokens issued.
According to NYAG, Bitfinex borrowed more than $600 million from Tether after losing as much as $850 million to a currency converter. Investors weren’t notified of this “borrowing” and Tether tried to cover up by showing that the token was backed 1:1.
Last week, NYAG has ordered Tether and BitFinex to produce certain documents related to finances which have to be produced by May 3rd. As part of the documents, the affidavit was filed.
Stuart Hoegner, as part of affidavit, writes under the section “Tether Holders Are Not At Risk”,
“As of the date [April 30] I am signing this affidavit, Tether has cash and cash equivalents (short term securities) on hand totaling approximately $2.1 billion, representing approximately 74 percent of the current outstanding tethers.”
Zoe Phillips of law firm Morgan Lewis, another lawyer representing Tether, wrote in a memorandum of law in support of Tether, stating Tether does not need to hold $1 for every Tether issued.
“According to the Attorney General, the line of credit needed to be frozen because it improperly impairs the reserves Tether would use for redemptions. The Attorney General appears to believe that Tether must hold $1 in cash fiat currency for every dollar of Tether. These allegations are wrong on multiple levels.”
According to the affidavit, the entire line of credit and lending agreements were made because “for the protection of the virtual currency market”. The entire affidavit can be read here.
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