Tether responds to FUD rumors: no intention to engage in time-consuming and fruitless US litigation

Tether denies FUD rumors and won't engage in fruitless US litigation.

On June 16th, the New York Attorney General’s Office (NYAG) released a document about Tether to the media. The document is the first quarterly report that Tether provided to the NYAG after reaching a settlement in 2021. It contains a lot of previously unknown information such as holding some commercial bills of China Bank and having a customer relationship with Celsius Network. Therefore, shortly after its release, it caused a great stir in the market.

On the evening of the 17th, Tether officially released a long article in response to the content of the document and FUD rumors.

The following is the full text of the article:

Tether Statement

Since reaching a settlement with the New York Attorney General’s Office, we have fulfilled our quarterly reporting obligations. Tether remains committed to transparency and prioritizes the privacy and security of its customers.

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After the settlement, CoinDesk requested Tether to disclose the materials related to its first quarterly report submitted according to the Freedom of Information Law (FOIL). Tether had previously opposed such disclosure to prevent the public from spreading confidential customer data and sensitive proprietary information, which could be exploited by malicious actors. After strong protests, Tether gave up the opposition and allowed CoinDesk and other media to access these documents to prove its commitment to transparency and openness, rather than further futilely defending against various lawsuits.

Compared with two years ago, Tether’s market position has changed completely. In the biggest black swan events in 2020 and 2022, Tether has demonstrated its market leadership and shown that its reserves have high-quality liquidity that can be used to support redemptions of any size at any time. For example, in 2022, Tether processed $7 billion in redemptions within 48 hours, almost 10% of its reserves at the time. This is a good example of demonstrating strength under pressure testing.

Tether’s transparency about its loan program is clear in recent attestations. We have always been committed to transparency and there is no new information to disclose. Tether has never and will never risk compromising the integrity of its reserves. This has been demonstrated not only through its consistent and unhesitating fulfillment of redemption obligations, but also through its maximum transparency about its reserves.

Tether is committed to maintaining the highest standards as reflected in our ongoing development of risk indicators and risk measurement processes. These robust mechanisms enable our investment and finance teams to thoroughly assess any financial interactions related risks the company may face. Tether has a firm understanding of lending and regulatory environments and proactively works toward achieving and maintaining its business goals while adhering to its unwavering risk management culture.

In addition, our commercial paper has always maintained an A2 rating or higher. All of our past statements have not been altered. We are resolutely committed to pursuing accountability and upholding the highest standards.

If the information released is read and understood correctly, the public will see that Tether has demonstrated the legality of its operations and the adequacy of its reserves. However, as with many things that have happened in the past on Tether and the entire cryptographic industry, information is always deliberately isolated or distorted to attract more clicks.

Tether takes pride in being a leading stablecoin and force in the community. Tether is also proud of the liquidity, stability and health of its reserves, which have withstood many black swan events that have caused significant damage to the cryptographic industry and even the traditional financial industry. Tether will always protect its customers, employees, and communities from attack.

With the release of this information, Tether hopes to provide a factual reference about what is and is not included in the material.

The disclosed documents include Tether’s statement about the bank, showing the full existence of its banking relationships and reserves. This is as we mentioned in public disclosure and as proven by the audit provided by independent third-party organizations.

These statements show that Tether has always applied the best asset management methods: short-term investment plus diversified investment, which is clearly visible from the investment list listed in various bank bills.

Because the media previously provided only limited old data (2 years ago), these materials do not represent the current status of Tether. Tether has taken various measures, including reducing its commercial paper holdings to zero by 2022 and significantly reducing its collateral loan portfolio, and plans to reduce it to zero in the coming months.

Tether is the first company to disclose the composition of its reserves and will provide quarterly reserve certificates completed by independent accounting firms. Tether’s reserve certification evolves over time and provides a higher degree of transparency than the proof provided to the New York prosecutor’s office in the past. In fact, Tether’s latest reserve certification shows that its net profit has reached a record high of $1.48 billion, which has brought Tether’s reserve surplus to a record $2.44 billion, and has reduced bank cash deposits by more than 90%.

The reserve attestation also shows that Tether continues to be committed to reducing its secured loans to zero, which has now decreased from 8.7% to 6.5%, while Tether’s holdings of US treasury bonds have reached a record-breaking amount of $53 billion, accounting for over 64% of its total reserves.

Tether is committed to continuing to be a transparency leader in the cryptocurrency industry, demonstrating our commitment by providing information to the community and stakeholders, and showcasing full support.

In addition, Tether continues to cooperate with law enforcement agencies on a regular basis, having participated in over 150 investigations across four continents. In just the past 18 months, Tether has compliantly recovered approximately $200 million in stablecoins based on regulatory and law enforcement agency requests and returned them to their rightful owners.

Finally, whether Bloomberg, CoinDesk, or any other media outlet chooses to publish this information or not due to hasty decision-making or insufficient attention to current events (facts), we do not endorse this behavior, but our priority is our customers and our ongoing support for the greater cryptocurrency community.

Tether Q&A

Q1: What happened on June 15, 2023?

Earlier this year, Tether completed its reporting obligations to the New York Attorney General’s Office, as part of the 2021 settlement agreement. The settlement agreement requires quarterly reporting on Tether’s reserves for two years. Tether fully complied with this obligation, and there is no indication that the disclosure is incomplete or that the reserves are insufficient. We are pleased to have fulfilled our obligations under the settlement agreement. Today, Tether is stronger than ever, with a market capitalization that has reached an all-time high.

Shortly after the 2021 settlement agreement was reached, parties such as CoinDesk requested disclosure of the materials related to the first Tether quarterly report under the New York Freedom of Information Law. On June 15, 2023, the New York Attorney General’s Office provided the relevant documents to CoinDesk and others. They provided these documents because Tether decided not to oppose the FOIL request.

Q2: Why didn’t Tether/Bitfinex perfect the appeal?

Tether initially brought these suits to prevent the public dissemination of confidential customer data and to prevent sensitive business information from being exploited by malicious actors. However, our ongoing and demonstrable commitment to transparency means that we must prioritize information disclosure over further engaging in time-consuming and unproductive US litigation that would distract attention from addressing real issues in the community.

Q3: If Tether/Bitfinex planned to disclose this information, why did they wait until now to stop fighting? Why did they specifically choose this time?

At this point in the litigation, Tether must decide whether to perfect an appeal. The information disclosed today is different in terms of sensitivity from two years ago, at least with respect to Tether’s reserves. At this stage, we need to prioritize the disclosure of information over further time-consuming and unproductive US litigation that would only serve to distract from the real issues facing the community.

Q4: Does Tether/Bitfinex endorse the release of customer information to the media?

Absolutely not. Bitfinex and Tether oppose CoinDesk’s FOIL request because we want to prevent customer data from being released. We urge CoinDesk and others not to publicly share past or present customer names and to not subject anyone in the community to physical or digital risk.

Q5: Were you forced into this?

Not at all. Tether launched this litigation to prevent the public release of confidential customer data and to prevent sensitive business information from being used by malicious actors. We continue to urge CoinDesk and others not to publicly share past or present customer names and to not subject anyone in the community to physical or digital risk. We could have continued to appeal, but our continued and documented commitment to transparency means we must prioritize the disclosure of information over further time-consuming and unproductive US litigation that would only serve to distract from the real issues facing the community.

Q6: Did Tether previously claim to have no exposure to Chinese commercial paper?

That was incorrect. Tether has always refuted rumors about its investment in Evergrande. Again, this was entirely incorrect and these disclosures prove it.

Q7: Okay, but why do you have so much exposure to Chinese commercial paper?

Tether’s exposure to Chinese commercial paper is primarily in the banking sector, but all Chinese paper has good liquidity and is issued by well-known issuers in the international commercial paper market. All of these notes are issued by stable issuers, with many notes held in conservative investment portfolios by the world’s largest investment managers. These China bank-related commercial papers are rated A1 or higher.

Additionally, it is worth noting that Tether reduced its commercial paper holdings to zero last year. Tether did not lose a penny on any commercial paper, including Chinese commercial paper.

Q8: What role does Bitfinex play in reserve adequacy?

Bitfinex is a borrower of Tether’s interest-bearing loan, which was fully repaid ahead of schedule in 2019. The loan mechanism has now been closed and will not be reopened. As a regular user, Bitfinex is also the preferred choice for Tether to purchase bitcoin.

Q9: Does Tether control the collateral wallet? Who are the customers providing this collateral? How is the collateral valued?

The collateral wallet is entirely controlled by Tether. The collateral is priced at market prices and an effective margin call system is in place. Tether has previously publicly disclosed in independent, third-party attestation reports the borrowings and lending transactions with a subset of large Tether customers. These loans are over-collateralized and Tether has never lost a penny on these loans, which is different from some individuals in the traditional financial industry and other parts of the community engaged in “short loan” activities. Tether represents financial freedom and does not disclose the names of its customers to protect their privacy. We urge anyone who receives this information not to disclose wallet addresses, names, and other identifiable information that may jeopardize the security, security, and privacy interests of third parties.

Q10: Were several personal and corporate accounts closed? Should these accounts have been made public?

We regret that these names may be made public by the media, as Tether believes that customer privacy should be protected. It is worth noting that if disclosed, this information will not be disclosed by Tether, but by the New York State Attorney General’s Office and the media. We do not want to comment on any individual relationships, but each customer has passed strict compliance checks and ongoing monitoring required by Tether’s compliance policy.

Q11: Okay, if you’re so transparent, can you share the files with us?

No, we cannot. In consideration of the importance of information disclosure over continued litigation, we have given up blocking requests from CoinDesk and other media. However, this does not mean that we will proactively release this information. We still believe that the information in these disclosures may be used to publicly disclose the identity of customers, including existing and future customers. In addition, our compliance policies may be used to circumvent our controls and undermine our terms of service.

We will not put our clients in danger, nor will we disclose this information to avoid any legal claims.

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