Policy & Regulation

US DOJ to investigate Tether executives over bank fraud

  • Federal prosecutors are investigating whether Tether chose to conceal from banks that transactions were linked to crypto
  • Because USDT is widely used, criminal charges could have an impact on the cryptocurrency market
  • Federal prosecutors have been investigating Tether since at least 2018

According to Bloomberg, A U.S. investigation into Tether is trying to determine whether the executives behind the digital token committed bank fraud. This potential criminal case could have major implications for the cryptocurrency market.

Criminal charges could have an impact on the crypto market

The Justice Department’s investigation focuses on conduct that occurred years ago when Tether was in its infancy. Specifically, federal prosecutors investigate whether Tether chose to conceal from banks that transactions were linked to crypto, said three people with direct knowledge of the matter, who did not want to be named because the investigation is confidential.

Since Tether’s USDT stablecoin is the most widely used stablecoin and plays an essential role in crypto trading, criminal charges could have an impact on the cryptocurrency market. It would also be one of the largest events in the U.S. government’s crackdown on virtual currencies.

The investigation is reaching a tipping point

Federal prosecutors have been investigating Tether since at least 2018. According to the Bloomberg article, they have sent letters to individuals warning them that they are targets of the investigation. One of the individuals told the news site that the notices signal that a decision on whether to proceed could be made soon, with high-ranking Justice Department officials ultimately deciding whether charges are warranted.

Due to increasing regulatory pressure in the cryptocurrency market, the investigation is reaching a tipping point. The U.S. Treasury Department and Federal Reserve are among the agencies concerned that tokens could threaten financial stability and disguise transactions linked to money laundering, for example. Criminals would be able to make payments without going through the regulated banking system. Treasury Secretary Janet Yellen said last week that regulators “need to act quickly” when considering new rules for stablecoins.

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