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.

Compound's Governance Token COMP Is Now Down Over 40% From Its All-Time High

Francisco Memoria

Compound’s governance token COMP has been trading for about two weeks, and is now down over 40% from its all-time high close to the $400 mark. Its market cap is still of over $500 million.

According to CryptoCompare data, Compound’s COMP token is currently trading at $220 after dropping from a $385 all-time high seen earlier this month. The price of the token started trading on centralized exchanges at about $130.

In the last 24-hour period, the token has lost over 6% of its value, as those who are receiving it are likely selling it on the market right away.

COMP price change 24 hoursSource: CryptoCompare

As CryptoGlobe reported, the COMP token was launched this month. It’s a governance token, which means that token holders have a right to vote on important decisions affecting the Compound protocol, ranging from technical upgrades to decisions on adding new cryptoassets.

Compound is a decentralized finance (DeFi) protocol l launched in 2017 by Robert Leshner and Geoff Hayes. It lets users borrow and lend cryptocurrencies in peer-to-peer transactions. Those who borrow need collateral to do so and must repay the funds with interest, while those who lend receive interest on their holdings.

The COMP token is distributed to Compound users who interact with the protocol, creating an incentive for users to both borrow and lend cryptoassets on it. This saw the rise of yield farming, where users borrow and lend as much as possible to “farm” COMP tokens. This led to a significant rise in the total value of assets locked on Compound, which surpassed $1 billion this week.

Despite the milestone, various analysts believe COMP tokens are overvalued while they are above the $200 mark. Multicoin Capital’s Tony Sheng, for example, has warned that even Compound’s own team believes the tokens are overvalued, arguing in a blog post that the way COMP tokens are being distributed is leading to added selling pressure.

Sheng further pointed out that 46% of all COMP tokens are held by Compound’s team. He added:

Just as investors lost their shirts buying into the outlandish promises of the ICO era, so too will investors in the DeFi era lose their shirts under-appreciating the risks of illiquid markets and corruptible oracles.

Since it was launched, the COMP token has been listed on numerous cryptoassets exchanges, the latest one being OKEx. This is adding liquidity to the cryptocurrency and making it easier for those who receive tokens interacting with the protocol to dump them on the market.

OKEx has added spot trading pairs for COMP against Tether’s USDt stablecoin and against BTC.  The listing comes months after it expanded its derivatives portfolio with ETH/USD options, with plans of adding EOS/USD options being announced as well.

As reported, OKEx added back in April a new featured allowing users to convert small balances held on the bitcoin exchange into its own OKB token.

Featured image via Pixabay.