CFTC orders Bitfinex and Tether to pay civil penalties totaling $42.5 million

The U.S. Commodity Futures Trading Commission (CFTC) settled claims against Tether and Bitfinex, ordering the companies to pay civil penalties totaling $42.5 million. The regulator said this on its site.

Under the order, Tether was fined $41 million for “false or misleading statements” about full backing of the stablecoin USDT. The company is also required to refrain from further violations of the Commodity Exchange Act and CFTC rules.

The penalty for Bitfinex for offering futures contracts on the platform without registration and for conducting off-exchange trades with U.S. residents amounted to $1.5 million. The CFTC demanded that the firm implement additional safeguards to prevent illicit transactions.

“As today’s actions against Tether and Bitfinex show, the CFTC remains committed to fulfilling its legally mandated duties to promote market integrity and protect customers in the United States,” said Acting Director of Enforcement Vincent McGonagle.

The attorney representing the company, Stuart Hoegner, explained that the CFTC did not find a lack of backing for USDT, and the regulator’s conclusions were based on the 2016–2019 period.

The CFTC only credits backing in bank accounts in the name of #Tether . The CFTC did _not_ find that tether tokens were not fully backed at all times — simply that the reserves were not all in cash and all in a bank account titled in Tether’s name at all times. 5/8

— Stuart Hoegner (@bitcoinlawyer) October 15, 2021

According to him, at the time Tether sometimes relied on other entities to hold funds due to banking issues. Consequently, the backing of USDT was not entirely concentrated in cash or in bank accounts in the name of the company.

#Tether is fully backed, as our assurance attestations prove definitively. Tether has never refused a redemption to a customer. And Tether is now moving forward with audited financials, which for a long period were not available to us. 7/8

— Stuart Hoegner (@bitcoinlawyer) October 15, 2021

Hoegner added that USDT is fully backed, and Tether has never refused customers redemption.

Earlier, the parent company of the bitcoin exchange and the stablecoin issuer — iFinex — filed a petition in the New York Supreme Court seeking to bar the media and other entities from requesting data on the status and structure of USDT reserves over the past several years.

In February 2021, the companies entered into an agreement with the New York Attorney General regarding the company’s financial operations tied to the loss of $850 million.

This was aided by the repayment of a loan Bitfinex had taken from Tether totaling $750 million, which prompted the regulator’s actions.

In August, Bloomberg reported on a possible investigation of Tether by the U.S. Department of Justice. Company representatives called the news clickbait.

In late September, the court dismissed half of the claims against Tether and Bitfinex in the $1.4 trillion class action.

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