Lawyers state that Tether is only 74% backed by fiat currency

30 Apr, 2019 | Updated: 30 Apr, 2019
by Richard Allen
Update
Lawyers state that Tether is only 74% backed by fiat currency

The company behind the USD stablecoin Tether (USDT) only has enough cash to support around 74% of its increasing supply, according to documents published by its lawyers.

According to an affidavit written by Tether Limited’s General Counsel, Stuart Hoegner, the company holds around $2.1 billion in cash and short-term securities. Hoegner also serves as general counsel for cryptocurrency exchange Bitfinex, which shares executives and owners with Tether.

The two companies are in the spotlight after allegations were made against them by the New York Attorney General who has accused Bitfinex of borrowing over $600 million from Tether to cover up a loss of up to $850 million.

Under the subheading titled “Tether Holders Are Not At Risk,” Hoegner confirms that USDT is no longer 100% backed by cash or liquid assets, stating:

“As of the date [April 30] I am signing this affidavit, Tether has cash and cash equivalents (short term securities) on hand totaling approximately $2.1 billion, representing approximately 74 percent of the current outstanding tethers.”

Another Attorney General representing Tether, Zoe Philips of the law firm Morgan Lewis wrote in a memorandum of law in support of the defendants’ order to show cause that Tether doesn’t need to hold $1 for every USDT issued, CoinDesk reports.

She wrote:

“According to the Attorney General, the line of credit needed to be frozen because it improperly impairs the reserves Tether would use for redemptions. The Attorney General appears to believe that Tether must hold $1 in cash fiat currency for every dollar of tether. These allegations are wrong on multiple levels.”

Philips added that the terms of Tether and Bitfinex’s credit agreement were “negotiated on an arm’s length basis on commercially reasonable terms,” and noted that each of the companies was represented by independent counsel.

However, as Bitfinex critic Bitfinex’ed noted on Twitter, Giancarlo Devasini signed both Tether and Bitfinex’s agreements.

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