Tether has brought in a law firm to assure traders and investors that every single token is backed by reserves of the U.S. dollar. A Washington-based legal services provider has attested that the digital currency firm has enough American Greenback to back its virtual currencies that are in circulation as of June 1. Incidentally, the law firm is co-founded by none other than the former FBI director, Louis Freeh. As the scams and looting have started increasing, there are also growing concerns about whether there are sufficient reserves to support the coins.
Manipulation of Bitcoin Price
The legal service provider, Sporkin & Sullivan LLP, a report came amidst reports of a research paper from the University of Texas that alleged Tether’s digital coin for price manipulation of bitcoin. The research paper charged that there was every possibility of Tether token being instrumental in bitcoin’s meteoric rise in price last year, Reuters reported. It was a phenomenal year for the cryptocurrencies in 2017 since every digital coin gained four or five digit percentage.
During the last one year or so, critics of Tether have been raising concerns about reserves to back every token that it issued. The company issued digital coin or token at $1 per coin. The report of Freeh could not be considered as a complete audit of the virtual currency firm. On the other hand, the legal services provider indicated that it received notarized statements and sworn from two banks of Tether. The banks disclosed to the law firm that the company’s accounts as of June 1 showed a balance of about $2.55 billion.
The report indicated that FSS is confident about the digital coin firm’s unencumbered assets exceeding those in circulation as of June 1. This meant that those tokens that were backed by the American Greenback. The law firm pointed out the examination date was selected by it and that it engaged itself in comprehensive examinations of key personnel of Tether. This included telephone interviews apart from banks.
However, the report failed to provide the bank’s name. Similarly, the law firm indicated that it had not reached any conclusions that Tether has complied with requisite laws of the jurisdiction. The report also disclosed that Eugene Sullivan is one of Tether’s bank’s advisory board members. He is also a co-founder of FSS and a former federal judge.
Bitfinex’s general counsel, Stuart Hoegner, reacted to the allegations of manipulation and termed it as misplaced one. He said that the company has hired the law firm three months ago and is also having a discussion with auditors for a complete audit. In December, a subpoena was sent to Bitfinex and Tether by Commodities Futures Trading Commission (CFTC).
Hoegner also did not want to say anything in respect of the investigation of Bitfinex or Tether by the Department of Justice or the CFTC. He was also not ready to share subpoena contents. The issue came to light after reports suggested that the two were investigating allegations of bitcoin price manipulation.