The general counsel of the USDT Stabilizing Coin stated that as of April 30, only about 74% of the USDT stable currency was supported by statutory equivalents.
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USDT's general counsel, Stuart Hoegner, wrote in an affidavit on Tuesday that USDT's parent company, Tether, holds about $2.1 billion in cash and short-term securities. Hoegner is also the general counsel of Bitfinex, and Bitfinex is a crypto exchange with the same executives and overlapping owners as Tether.
The two companies have recently become accused of the Office of the Attorney General of New York. The New York Inspector General said that Bitfinex borrowed more than $600 million from Tether after the company lost $850 million because of a problem with a cooperating currency exchange company.
The written testimony submitted by Hoegner was intended to support an "Order to Show Cause" aimed at revoking or modifying the unilateral orders submitted by NYAG last week. NYAG's unilateral order will force Bitfinex and Tether to submit certain documents by May 3.
In fact, in the section “Tether holders are not at risk” in this testimony, Hoegner confirmed that USDT is no longer 100% supported by cash or liquid assets, he said:
" As of [August 30th], I signed the affidavit, Tether's cash and cash equivalents (short-term securities) totaled about $2.1 billion, accounting for about 74% of the current unpaid Tether. "
According to the Omni browser, Tether has issued 2.8 billion USDTs at the time of publication.
USDT is not fully supported by statutory reserves
Another representative of Tether, from Morgan Lewis law firm Zoe Phillips, wrote in a legal memo supporting the defendant that Tether does not need to hold $1 for each USDT.
"According to the Attorney General of New York, the credit line needs to be frozen because it improperly burdens Tether's legal reserves, which are used for redemption. The Attorney General seems to think that Tether must be held for each USDT. There is a legal currency of $1 in cash. These allegations are wrong on multiple levels."
She added that the terms of the Tether and Bitfinex credit agreements are “negotiated on the basis of reasonable commercial terms and on the basis of a certain distance between the parties”. She said that both companies have independent lawyer representatives.
However, as Bitfinex's critics Bitfinex 'ed pointed out on Twitter, the same person, Giancarlo Devasini, signed the agreement on behalf of Tether and Bitfinex.
Hoegner agrees with Phillips that these agreements were negotiated independently. He added that Tether had previously stated on its website that its stable currency is no longer supported by 100% reserves and cited media coverage of this strategic shift.
Hoegner wrote in his affidavit that Bitfinex and Tether's lending agreement was “to protect the virtual currency market”, which may highlight the concern that the two companies constitute an important component of the encryption market infrastructure. section.
When he talked about the possible benefits of this agreement, he wrote:
“The holders of Tether and Tether are very keen to ensure that one of Tether's main trading platforms (Bitfinex) has sufficient liquidity for normal operations.”
He added that any disruption to the Bitfinex business could damage Tether.
Phillips added that during the period from December 2018 to April 29, 2019, the USDT average redemption amounted to $566,066, and the maximum redemption amount during this period was $24.2 million.
Hogner did not immediately respond to the request for comment.