In a recent report, the Wall Street Journal accused Tether, the company behind the world’s largest stablecoin, to have accessed bank accounts by way of falsified documents and intermediaries.
The journal published a report accusing Tether of using bank accounts in the names of executives of various companies, slightly tweaking those companies’ names, to maintain its access to the global financial system in 2018.
According to the report, Crypto Capital Corp., a “shadow bank” held Tether funds before being shut down by authorities in 2018. It also alleged its sister company Bitfinex and Tether “were able to open at least nine new bank accounts for shell companies in Asia” in October 2018.
However, Paolo Ardoino, the chief technology officer (CTO) of Tether, took to Twitter to opine that the WSJ report contained a “ton of misinformation and inaccuracies,” without giving specifics. He also said that he heard “clown honks” while on stage during a conference and attributed that event to the Wall Street Journal presumably meaning that the article’s publication led to audience heckling.
The company added that it maintains ongoing compliance programs and works with various enforcement agencies, including the U.S. Department of Justice (DOJ). It said that it would continue to provide its stablecoin services despite “unfair attacks.”
Additionally, the Journal’s report stated that Stephen Moore, co-owner of Tether Holdings pushed back against the use of fake sales invoices. In an email seen by the Journal, Moore referred to an intermediary that traded USDT in China and said that “I would not want to argue any of the above in a potential fraud/money laundering case.”
The report also added a reference to the recording of a call with former Tether executive Phil Potter posted on YouTube in 2017 by Bitfinexed. Potter can be heard saying:
We’ve had banking hiccups in the past, we’ve just – we’ve always been able to route around it or deal with it, open up new accounts or what have you. There have been lots of sort of cat-and-mouse tricks that everyone in the bitcoin industry has to avail themselves of.
Crypto companies have traditionally had difficulties securing banking access. Tether in particular has had a number of bank accounts over the past few years, with some banks shutting down the stablecoin issuer’s accounts.
The Journal’s report came the day after crypto-friendly bank Silvergate came under intense scrutiny for announcing it had to restate financials and would not meet a deadline to file its annual report. Major clients have suspended their ties with Silvergate, and its stock price cratered.
In recent months, federal regulators have been warning banks that their relationships with crypto may invite risk. In February, the Federal Deposit Insurance Corporation (FDIC), stated that about 136 banks were already involved or are planning to be involved in various crypto-related initiatives. This data from the FDIC was published in a report by the US Office of Inspector General (OIG). The OIG report highlighted that in the absence of clear regulations, banking firms are mostly involved with third-party entities to explore the digital currency space.