Tether Releases Ex-FBI Director’s Law Firm Report on Its Reserves, Stops Short of an Audit

  • Tether has revealed a law firm looked into its financial situation, and claims it has money in the bank to back its USDT tokens.
  • The firm, however, just looked at the company's funds, and stopped short of an official audit.

Tether Ltd, the company behind controversial cryptocurrency Tether (USDT), that’s supposed to be pegged to the US dollar 1:1, has recently revealed it hired a law firm co-founded by former FBI director Louis Freeh to analyze its financial situation. While the firm reported Tether has enough funds to back its USDT tokens, it didn’t conduct an official audit.

According to the report, Freeh Sporkin & Sullivan LLP (FSS), the hired law firm, was given full online access to Tether’s bank accounts and financial statements, as well as to employees at the two banks in which the company allegedly has its funds.

The report reads:

Earlier this year Tether engaged Freeh, Sporkin & Sullivan LLP (FSS) to review bank account documentation and to perform a randomized inspection of the numbers of Tethers in circulation and the corresponding currency reserves

FSS report

Per the document, FSS chose June 1 to look into Tether’s financial situation. It found that in one of the banks the company has over $1.9 billion, and $576 million on the other one. In total, it reveals the company has $2.545 billion in the banks, an amount that surpassed Tether’s then circulating supply of $2.538 billion. At press time, Tether’s market cap is of $2.61 billion, according to CryptoCompare data.

Various concerned users and speculators have in the past claimed USDT tokens were backed by dollars that weren’t actually there, and that they were being created out of thin air so cryptocurrency exchange Bitfinex – a company associated with Tether – could use them to pump bitcoin’s price.

Notably this isn’t Tether’s first unofficial audit, as last year accounting firm Friedman LLP analyzed its financial situation – but didn’t calm critics down. These concerns escalated, to the point the US Commodity Futures Trading Commission (CFTC) subpoenaed both companies in December, when bitcoin hit its all-time high, to investigate the situation.

Stuart Hoegner, Tether’s general counsel, told Bloomberg News:

The bottom line is an audit cannot be obtained… The big four firms are anathema to that level of risk… We’ve gone for what we think is the next best thing.

Stuart Hoegner

While FSS claims it is “confident that Tether’s unencumbered assets exceed the balance of fully-backed USD Tether in circulations as of June 1st, 2018,” it refused to name the banks the company is banking with due to privacy concerns as “banking relationships are private.”

The report follows a study conducted by University of Texas professor John Griffin, which suggests the stablecurrency has been used to manipulate bitcoin’s price last year. The study’s authors claim to have found a pattern between USDT issuance and the flagship cryptocurrency’s price performance.

Bitfinex’s chief executive officer, JL van der Velde, commented on the study stating:

Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation. Issuances cannot be used to prop up the price of Bitcoin or any other coin/token on Bitfinex.

JL van der Velde

FSS’s report includes several caveats to its findings. It notes that it isn’t an accounting firm and that it didn’t “perform the above review and confirmation using Generally Accepted Accounting Principles.” Moreover, it adds that it assumed “without further inquiry” that the bank personnel who supplied it confirmation was authorized to do so, and that said confirmation was correct.

There are other stablecoins out there, although their supplies are significantly smaller than that of Tether’s. True USD’s (TUSD) supply, for example, is only of $62.8 million. Notably, the coin is traded on top exchanges like Bittrex and Binance.

Block.one to Start Voting for EOS Block Producers With 9.5% of Circulating Tokens

Francisco Memoria

Block.one, the firm that developed the EOS.IO software, has announced it’s going to start voting on EOS block producers (BPs) using its less than 9.5% share of the circulating tokens.

According to an announcement published by the firm, it’ll start leveraging its “small, but significant” EOS token share to vote on those who maintain the EOS network, the 21 block producers who are elected by holders.

Block.one notes in its announcement its share of the total circulating supply of EOS is going to keep on dropping as new tokens are created through inflation and used to reward block producers. It added it has been observing the network’s operations and governance to learn and understand “how to maximize performance, alignment, and reliability.”

The firm added that it now feels ready to “begin playing our proportional role, with the focus of continuing to support healthy upgrades of the EOS network.” As such, Block.one wrote:

Block.one will participate publicly in the conversation and share and comment on ideas and proposals that we believe positively improve the governance, performance, and overall competitiveness of the EOS network.

The firm added its goal is to “highlight improvements and features” it believes will “uphold the integrity of the network” and push it to new heights. The network is said to be able to process 5,000 transactions per second and ensure a half-second block time.

The EOS network is based on a delegated proof-of-stake (DPoS) consensus algorithm where 21 block producers are elected to run the network’s nodes, and Block.one doubled down on its positives claiming proof-of-work blockchain are “often governed and controlled by a small number of mining organizations and can be environmentally abrasive with high electricity requirements.”

This month, the EOS network faced “degraded performance” over an increase in traffic caused by the EIDOS token airdrop. This saw the price of CPU on the network increased over 100,000% as Coinbase admitted only “addresses with significant CPU resources staked are able to have their transactions processed in a reasonable amount of time.”

Featured image by Arnaud Jaegers on Unsplash