A U.S. judge has ordered the issuer to produce financial records related to USDT backing as the lawsuit accusing Tether (USDT) and cryptocurrency exchange Bitfinex of conspiring to issue its stablecoin in order to boost the price of Bitcoin (BTC) continues.
According to a court memo dated September 19, Judge Katherine Polk Failla of the United States District Court for the Southern District of New York granted the plaintiffs' request that Tether produce all financial documents, which the defendants described as "baseless," "unduly burdensome," and "overbroad."
What kinds of documents are included?
Tether will be required to provide "general ledgers, balance sheets, income statements, cash-flow statements, and profit and loss statements, (...) as they relate to the backing of USDT (financial records RFPs [requests for proposal]) and cryptocommodities transactions (transactions RFPs)," according to the order.
Furthermore, Tether is required to produce any records of trades or transfers of cryptocurrency or other stablecoins by Tether, as well as data about the timeline of the trades and any details about the accounts it holds at cryptocurrency exchanges Bitfinex, Bittrex, and Poloniex.
The Judge explained her decision by saying:
“Plaintiffs plainly explain why they need this information: to asses the backing of USDT with US dollars. (…) The documents sought in the transactions RFPs appear to go to one of Plaintiffs’ core allegations: that the B/T Defendants engaged in cyptocommodities transactions using unbacked USDT, and that those transactions “were strategically timed to inflate the market.’”
Tether's legal issues
Tether filed another motion in May 2022 to prevent the public release of financial records explaining the composition of Tether's reserves over the last few years, claiming that it was "fully backed."
This request was also denied by the Supreme Court of the State of New York in a separate lawsuit involving the release of documents obtained during its investigation into Tether's reserves.
Notably, University of Texas researchers concluded in a 2018 study that USDT appears to have been used to stabilize and manipulate the price of Bitcoin, but Bitfinex executives denied the claims in January 2021, according to MKT57.
Finally, USDT was created by Reeve Collins, Craig Sellars, and Brock Pierce, a 2020 U.S. presidential election candidate, who described it as a successful experiment in putting fiat currency on a blockchain as a stablecoin pegged to the US dollar and used as a digital dollar to facilitate transactions between cryptocurrencies.
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