Digital Assets: Short Seller And Forensic Finance Research Firm Hindenburg Offers $1M Bounty On Tether

October 21, 2021 | Digital Assets, News
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Hindenburg will pay the reward for more information on financial reserves that back up the Tether stablecoin.

Shortly after the US Commodity Futures Trading Commission (CFTC) ordered Tether to pay $41 million to settle charges for maintaining inadequate dollar reserves on its stablecoin, short-seller Hindenburg Research announced a $1 million bounty for information leading to previously undisclosed details about Tether’s financial reserves. (FT)

CFTC and Tether

Tether must fully back its Tether (USDT) stablecoin with dollar reserves.

However, the CFTC found that from at least June 1, 2016, to February 25, 2019, the company misrepresented to customers and the market that it maintained sufficient U.S. dollar reserves to back every USDT in circulation with the “equivalent amount of corresponding fiat currency” held by Tether and “safely deposited” in Tether’s bank accounts.

The CFTC also alleged that Tether failed to disclose that it included unsecured receivables and non-fiat assets in its reserves. Further, the firm did not conduct professional reserves to audit the adequacy of its reserves.

Though Tether did not admit or deny liability, Hindenburg likely picked up on the CFTC order and launched its own follow-up action to ascertain the veracity of Tether’s claims.

The first salvo: a $1 million bounty for information.

Hindenburg Research

The firm said it “has doubts about the legitimacy of Tether’s backing due to the company’s sparse disclosures.”

“Tether is a key underpinning of the multi-trillion-dollar crypto market,” Hindenburg said in its bounty announcement. “Yet despite its repeated claims of transparency, its disclosures around its holdings have been opaque.”

“The company claims to hold a significant portion of its reserves in commercial paper yet has disclosed virtually nothing about its counterparties,” it added.

Hindenburg also appears to want to debunk claims by Tether that currently its coin is backed “only by a small percentage of traditional currency, and that much of its backing consists of holdings in commercial paper issued by unnamed counterparties.”

“Tether’s claims would make it one of the largest holders of commercial paper in the world. But major trading desks stated to the press that they had never worked with them or seen them in the market,” Hindenburg observes.

“We feel strongly that Tether should fully and thoroughly disclose its holdings to the public,” said Hindenburg Research founder Nathan Anderson. “In the absence of that disclosure, we are offering a $1,000,000 bounty to anyone who can provide us exclusive detail on Tether’s supposed reserves.”

Related Story: SEC Chairman Gary Gensler Is All For Regulating Cryptos

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