Washington-based law firm Freeh, Sporkin & Sullivan LLP, co-founded by former FBI director Louis J. Freeh, has released a report attesting that cryptocurrency firm Tether indeed has enough USD reserves to back each individual USDT token in circulation.
Tether has often been criticized by cryptocurrency market participants, and concerns have been repeatedly raised speculating that Tether was not fully backed by USD as the firm claimed. This lead Tether to hire Freeh, Sporkin & Sullivan LLP in an attempt to clear its name of any wrongdoing.
To be clear, the report from Freeh, Sporkin & Sullivan is not a full audit of Tether, but rather the law firm has received notarized statements from two banks associated with holding the USD funds reserved to back Tether tokens. The report says:
“As part of the Engagement, FSS was able to confirm the U.S. Dollar (“USD”) balances in accounts owned or controlled by Tether at its banks, including selecting the appropriate confirmation dates, and reporting to Tether as to the results of such inquiries. As per the letter of engagement, FSS selected the dates for balance confirmations without prior notice to or consultation with Tether.”
The report continues, asserting that Tether’s claim to be backed 1-to-1 by USD is valid:
“FSS is confident that Tether’s unencumbered assets exceed the balance of fully-backed USD Tethers in circulation as of June 1st, 2018.”
Tether themselves have since released a “transparency update” highlighting the FSS report. The statement reads:
“To address allegations head on, we wish to make a few things clear: All Tethers in circulation are fully backed by USD reserves. Full stop. Memoranda, consulting reports, industry leaders, cryptocurrency pioneers, and competitors have all confirmed this. Reserves have always, and will always, match the number of Tethers in circulation.”
Tether has also confirmed that FSS also requested and received:
- Tether’s anti-money laundering (“AML”), Bank Secrecy Act, and Office of Foreign Assets Control Program;
- Tether’s AML/Anti-Terrorist Financing Risk Advisory Report from 2018;
- Extensive documentation on Tether’s account registration process and procedures and its AML system and compliance policies;
- An unredacted consulting report issued by a professional services firm retained by Tether;
- Complete account opening paperwork and materials concerning Tether’s accounts with its banks;
- Tether’s banking policy, banking access policy, and internal controls, including as they relate to the issuance of new Tethers;
- Financial information related to Tether;
- Tether’s registration as a money services business with and under the Financial Crimes Enforcement Network;
- Documentation and materials with respect to Tether’s personnel and its corporate structure; and
- Materials concerning the number of issued and outstanding Tethers, both historically and currently.
Tether, and even critics of the “stablecoin” cryptocurrency hope the reports finally puts unease about Tether to rest.
The report from FSS comes one week after researchers from the University of Texas claimed Bitcoin’s meteoric rise in Q4 2017 was artificially inflated by Tether.