The Commodity Futures Trading Commission (CFTC) fined Bitfinex and Tether more than $42 million on allegations that the USDT stablecoin was not fully backed at all times and that Bitfinex violated a previous agency order.
The federal commodities regulator settled charges with the sibling crypto companies on Friday, barring both firms from “any further violations of the Commodity Exchange Act (CEA) and CFTC regulations.”
According to a press release, Tether’s stablecoin was fully backed by reserves for only one-quarter of the time over a 26-month period between 2016 and 2018. Further, Tether comingled reserve funds with the company’s corporate funds and held reserves in non-cash products.
The New York Attorney General’s office reported similar findings in an investigation into Tether and Bitfinex which was settled earlier this year.
“The order also finds that, instead of holding all USDT token reserves in U.S. dollars as represented, Tether relied upon unregulated entities and certain third-parties to hold funds comprising the reserves,” the press release said.
Spokespeople for Tether and Bitfinex did not immediately return a request for comment.
The CFTC said it also settled commodities charges against Bitfinex in a simultaneous action.
“The order finds Bitfinex engaged in illegal, off-exchange retail commodity transactions in digital assets with U.S persons on the Bitfinex trading platform and operated as a futures commission merchant (FCM) without registering as required,” a press release said.
Bitfinex will pay $1.5 million and institute “additional systems” to ensure it does not facilitate unlawful commodities transactions again, the press release said.
This is a developing story and will be updated.
UPDATE (Oct. 15, 15:18 UTC): Adds context.
