Tether investigation reveals use of fake documents and hidden identities to open bank accounts
Amid the battle to maintain access to the global banking system, the companies behind Singapore-based USDT stablecoin issuer Tether used a mix of fraudulent documents, hidden identities and shell companies, according to a bombshell new report from the Wall Street Journal.
USDT’s value is pegged to the US dollar and backed 1:1 with US dollars/liquid equivalents, Tether claims. USDT is the largest stablecoin by market capitalization, with $71.124 billion tokens currently in circulation.
Tether’s trading volume is usually in the region of Bitcoin and Ether combined. According to CoinMarketCap, USDT saw $37.239 billion in trading volume in the last 24 hours, compared to Bitcoin’s $25.65 billion and Ether’s $9.7 billion.
Tether and its supporters use unconventional tactics to maintain bank access
According to the WSJ, Tether’s use of unconventional tactics to maintain access to the global banking system began in 2017, when Wells Fargo & Co stopped processing transactions from several of the crypto firm’s Taiwanese bank accounts. Tether said in a lawsuit against the bank at the time that this was “an existential threat to their business”.
The documents cited by the Wall Street Journal revealed that the companies behind Tether opened new accounts in Taiwan held in trust by Hylab Technology Ltd. CEO Chrise Lee, although the accounts were opened under the name Hylab Holdings Ltd. Meanwhile, a separate account was opened in Turkey under a company called Deniz Royal Dis Ticaret, an account that has since been accused by the US Department of Justice of being used to launder money for a terrorist group.
Bitfinex, a sister company of Tether, also reportedly moved over $1 billion to a now-bankrupt Panama-based company called Crypto Capital Corp, which was known for opening shell companies to open bank accounts for crypto firms. Bitfinex now claims it had been defrauded by Crypto Capital Corp, which saw around $850 million of its assets seized due to alleged bank fraud and money laundering.
The documents also reveal fraudulent tactics used by Tether and its backers to expand US banking access with New York’s Signature Bank. In 2018, Signature had already closed two accounts linked to Tether and its affiliates, while also rejecting an account application from Bitfinex.
However, jet fuel broker AML Global soon approached Signature Bank for an account, claiming it wanted to use the account to trade cryptocurrency on US-based crypto exchange Kraken to secure its global currency exposure. Allegedly, the account application did not disclose that Christopher Harbourne, the owner of AML Global, also owns around 12% of Tether and Bitfinex, but under a different name, Chakrit Sakunkrit.
The name Chakrit Sakunkrit had previously been blacklisted as some believed Signature Bank was trying to evade anti-money laundering measures when Tether and related companies’ previous accounts had been closed. The AML Global account was provisionally granted, but soon closed after executives at Signature Bank noticed that account activity was linked to Bitfinex, not Kraken, as AML Global had claimed.
Dip in crypto markets
Major cryptocurrency prices fell on the latest WSJ report, which will give critics of Tether additional ammunition to ramp up FUD. Some argue that USDT is not backed 1:1 by the US dollar or its equivalent, as Tether claims. Bitcoin last traded around $22,300, down around 4.8% in the last 24 hours, while Ether was last around $1,560, down around 5.0% in the last 24 hours, with both down around 1% since the report’s release.
If Tether were to experience a large-scale bank run, as happened with FTX, this could be disastrous, at least in the short term, for crypto markets, hence the decline in the wake of the latest report. USDT is a key source of incoming liquidity in the crypto space.
