NY Judge Orders Tether To Produce Documents Proving USDT Backing

Stablecoin issuer Tether must disclose financial documents to verify that it's backed by the U.S. dollar, New York Judge Katherine Polk Failla says.

The company is currently in a lawsuit due to allegations that it manipulated the crypto markets.

In addition to details concerning the timing of trades, Tether has been asked to produce "general ledgers, balance sheets, income statements, cash-flow statements, and profit and loss statements."

Tether, which is also owned by the same company as the crypto exchange Bitfinex, must also divulge information regarding its Bitfinex, Poloniex, and Bittrex accounts.

Lawyers for Tether called the judge's order "unduly burdensome," and that disclosing the make-up of its reserves would be detrimental to the company's operations since it is commercially sensitive.

The judge maintains that the "documents Plaintiffs seek are undoubtedly important" in order to evaluate USDT's backing with U.S. dollars.

Several cryptocurrency traders filed the complaint last year, alleging that the business attempted to support the price of Bitcoin BTC/USD by buying significant amounts of it using unbacked USDT tokens.

The complaints were made on the back of a study published by the University of Texas at Austin academics in June 2018, which revealed how a large trader on the Bitfinex exchange utilized Tether tokens to buy Bitcoin when prices were falling, pumping up prices of the world’s largest digital currency.

Follow-up research conducted by a University of Queensland professor, however, revealed that the effect of these possibly well-timed issuances was not "statistically significant."

State investigations last year found that Tether did not retain enough U.S. dollars to back the quantity of USDT tokens in circulation, and the New York Attorney General shut down Bitfinex in New York and forced it to pay $18.5 million, raising questions about Tether's financial stability.

The Commodity Futures Trading Commission conducted further research and discovered that Tether only had sufficient dollar reserves for one-fourth of the period between 2016 and 2018.

In an effort to reassure token holders of its liquidity, Tether recently came out with its most recent attestation, carried out by the auditing company BDO Italia.

With a market worth of $68 billion, Tether is the third-largest cryptocurrency by market capitalization after Bitcoin and Ethereum.

Tether Provides Financial Docs

Meanwhile, Tether agreed to produce court-requested documents to establish the reserves backing USDT.

Tether described the order as a routine discovery order which in no way substantiates the plaintiffs’ “meritless” claims.

“We had already agreed to produce documents sufficient to establish the reserves backing USDT, and this dispute merely concerned the scope of documents to be produced," Tether stated. "As always, we look forward to dispensing with plaintiffs’ baseless lawsuit in due course.”

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