Tether, the stablecoin issuer, and its former banking partner, Deltec, have been hit with a lawsuit alleging that they were involved in a $1 billion fraud scheme. The lawsuit, filed on behalf of a group of investors, alleges that Tether and Deltec were involved in a scheme to defraud investors by misrepresenting the backing of Tether’s stablecoin, USDT.
According to the lawsuit, Tether and Deltec represented that each USDT was backed by one US dollar held in reserve. However, the plaintiffs allege that Tether and Deltec never had sufficient reserves to back the USDT in circulation, and that they engaged in a scheme to manipulate the market for USDT by issuing unbacked USDT and using it to purchase other cryptocurrencies.
The lawsuit also alleges that Deltec, which served as Tether’s banking partner, assisted in the scheme by allowing Tether to make large deposits without conducting proper due diligence or verifying the source of the funds.
Tether and Deltec have not yet responded to the lawsuit. However, Tether has previously denied allegations that it does not have sufficient reserves to back USDT, and has stated that it is “committed to transparency.”
The lawsuit is the latest in a series of legal challenges faced by Tether and the wider cryptocurrency industry. It highlights the need for greater transparency and oversight in the sector, and raises questions about the stability of stablecoins like USDT.
The allegations made in the lawsuit are serious and could have far-reaching consequences for Tether, Deltec, and the wider cryptocurrency industry. It remains to be seen how the case will play out, but it is clear that the issue of stablecoin backing is a key concern for investors and regulators alike.