Tether (cryptocurrency)

• 1. Introduction

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  Tether, known by its currency code USDT, is one of the largest buyers of U.S. Treasury bills in the world. If it were a country, it would rank as the 18th largest sovereign holder of American debt. The company reported a profit of $5.2 billion across the first half of 2024. More than 350 million people worldwide use the stablecoin it issues. Yet Tether has never submitted to an independent audit of its stated reserves, despite promising to do so for years. It has been linked to money laundering and billions of dollars in illicit transactions since at least 2017. How did a startup announced from Santa Monica in 2014 grow into a company that rivals sovereign nations as a buyer of U.S. government debt? And why does so much about it remain officially unverified?

• 2. Built on Bitcoin's Rails

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  In 2012, J. R. Willett published a white paper describing how new cryptocurrencies could be built on top of the bitcoin blockchain. That idea produced Mastercoin, which established a foundation to promote what it called a 'second layer' on bitcoin. The foundation later renamed itself the Omni Foundation. Craig Sellars, who became Tether's founder, served as the Mastercoin Foundation's chief technology officer. Brock Pierce, one of the Foundation's original members, became Tether's co-founder. The Mastercoin protocol itself served as the technological backbone of what would become Tether.

  The precursor was called Realcoin, announced in July 2014 by co-founders Pierce, Sellars, and Reeve Collins as a Santa Monica-based startup. The first tokens were issued on the 6th of October 2014, running on the bitcoin blockchain. Realcoin worked with banks, digital-currency exchanges, and ATM providers to build a global network of gateways for buying, trading, and redeeming the tokens. On the 20th of November 2014, CEO Reeve Collins announced the project was being renamed Tether. The company also announced a private beta phase, supporting three currency-linked tokens. One tracked U.S. dollars, one tracked euros, and one tracked Japanese yen.

  Tether Holdings Limited was incorporated in the British Virgin Islands, with offices in Switzerland. The Financial Times later reported that Giancarlo Devasini and Jan Ludovicus van der Velde had together founded Bitfinex and Tether in 2012 and 2014 respectively. Tether Limited is a fully owned subsidiary of Tether Holdings Limited. iFinex, the British Virgin Islands company that also operates Bitfinex, is Tether Holdings' parent.

• 3. Promises Without Proof

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  Tether's own published terms once promised plainly: 'Every tether is always backed 1-to-1, by traditional currency held in our reserves.' The company made this claim while repeatedly promising to prove it through a full independent audit. In January 2018, Tether announced it no longer had a relationship with its auditor. No independent audit has ever followed.

  In September 2017, a public accounting firm published a memorandum appearing to confirm that tethers were fully backed by dollars. Independent attorney Lewis Cohen noted the document's careful phrasing meant it did not actually prove that claim. The accounting firm explicitly stated the memorandum was intended 'solely to assist the management of Tether Limited.' It was not to be relied upon by any other party. A June 2018 attempt produced a report from the law firm Freeh, Sporkin and Sullivan. The firm noted it was not an accounting firm and had not applied Generally Accepted Accounting Principles. It added that its confirmation should not be read as the result of an audit. Tether's general counsel, Stuart Hoegner, acknowledged the situation, saying the large accounting firms were 'anathema to that level of risk' and that 'an audit cannot be obtained.'

  On the 25th of February 2019, Tether quietly revised its terms. The new terms dropped the one-to-one dollar pledge. They stated instead that tokens were backed by cash equivalents and potentially 'other assets and receivables from loans made by Tether to third parties.' An affidavit filed on the 30th of April 2019 conceded that minted USDT was only 74% backed by cash and cash equivalents. In May 2021, Tether published a breakdown showing that only 2.9% of its reserves were held in fiat U.S. dollars. More than 49.6% was held in commercial paper, a form of short-term corporate debt.

  In October 2022, Tether reported reducing its commercial paper holdings to zero, replacing them with U.S. Treasury bills. At the end of 2023, Tether held $63 billion of U.S. Treasuries and $3.5 billion of precious metals. It also held $2.8 billion of bitcoin, $3.8 billion of other investments, and $4.8 billion in secured loans. In January 2024, Cantor Fitzgerald CEO Howard Lutnick confirmed his firm had reviewed Tether's assets and found approximately $86 billion backing $83 billion of stablecoin.

• 4. Courts and Commissions

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  On the 25th of April 2019, New York Attorney General Letitia James filed a lawsuit against iFinex. iFinex is the parent company of both Tether Limited and the Bitfinex exchange. The central allegation was that Bitfinex had entrusted a billion dollars to a Panamanian payment processor called Crypto Capital Corp, without signing any contract. The prosecution further alleged that Crypto Capital Corp had lost or stolen up to $850 million of those funds. It also claimed that Bitfinex and Tether had worked together to cover up the shortfall.

  iFinex pushed back, arguing the funds had not been lost but seized by foreign governments. Crypto Capital Corp pointed to specific government actions. A Polish government freeze in May 2018 had locked an account holding at least $340 million of Bitfinex funds. A separate account in Portugal, holding around $150 million, had been frozen between April and July 2018. The principals of Crypto Capital Corp were later arrested. During the case, iFinex acknowledged that Bitfinex had borrowed $400 million from Tether Limited to fill the gap left by the frozen funds. Bitfinex stated it had fully repaid those loans with interest by the 5th of February 2021.

  On the 17th of February 2021, iFinex settled with the New York Attorney General's office for $18.5 million, with no admission of wrongdoing. The U.S. Commodity Futures Trading Commission had been conducting a parallel investigation, issuing subpoenas to Bitfinex and Tether on the 5th of December 2017. On the 15th of October 2021, Tether paid a separate fine of $41.6 million to the CFTC. The fine covered two failures: inaccurately claiming that minted USDT was fully backed by fiat dollars, and maintaining full reserves on only 27.6% of the days between 2016 and 2018. The CFTC also penalized Tether for failing to produce audits demonstrating sufficient reserves. In September 2022, amid an ongoing lawsuit, a New York District Court ordered Bitfinex and Tether to produce documents showing the backing of USDT.

• 5. Crime on the Ledger

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  In October 2023, The Wall Street Journal reported that Tether had been appearing with growing frequency in criminal investigations. The investigations involved money laundering, terror financing, and sanctions evasion. Research firm Elliptic disputed portions of that report. It said it had worked with the Journal to correct what it called misinterpretations of cryptocurrency fundraising by Hamas. Tether published its own response, denying inadequate due diligence and describing how it had aided governments in freezing $835 million in assets linked to theft.

  Blockchain analytics company TRM Labs reported that Tether was the most-used stablecoin for criminal activity throughout 2023, connected to $19.3 billion in illicit transactions. That figure was lower than the year before: TRM Labs linked $24.7 billion in criminal transactions to Tether in 2022. Earlier reporting by The Wall Street Journal had described a 2018 email from former Tether co-owner Stephen Moore. In it, Moore acknowledged signing fake invoices and contracts to help a major Tether trader in China circumvent the banking system. Moore added that he 'would not want to argue any of the above in a potential fraud/money laundering case.' Tether called that report 'wholly inaccurate and misleading' without citing any specific inaccuracies.

  About $31 million in USDT tokens were stolen from Tether in November 2017. Analysis of the bitcoin ledger later revealed a close connection between that theft and the January 2015 hack of the Bitstamp exchange. Tether suspended trading in response and announced it would roll out new software implementing an emergency hard fork to render the stolen tokens untradeable.

  On the 20th of November 2023, Tether and exchange OKX froze $225 million worth of cryptocurrency. The funds were linked to a human trafficking group in Southeast Asia running a global pig butchering scam. The freeze was done at the request of the U.S. Secret Service, and Tether called it the largest-ever freeze of its token. Erin West, deputy district attorney for Santa Clara County, California, told Newsweek the move represented a decision to declare 'open season on fraud proceeds.' CEO Paolo Ardoino told members of House Financial Services and Senate Banking in December 2023 that Tether had helped freeze 326 wallets. Those wallets were stated to control 435 million USDT, though they appeared to contain fewer tokens than that sum. The company reported in 2024 that it had worked with more than 140 law enforcement offices across 45 jurisdictions. In October 2024, The Wall Street Journal reported that Tether was the target of a federal criminal investigation. The probe concerned possible violations of sanctions and anti-money-laundering rules.

• 6. Dominance and Diversification

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  In 2019, Tether surpassed bitcoin to post the highest daily and monthly trading volume of any cryptocurrency on the market. By July 2021, it was tied to half of all bitcoin trades. From January 2017 to September 2018 alone, the number of tethers in circulation grew from about $10 million to about $2.8 billion. During the summer of 2018, Tether accounted for up to 80% of bitcoin's total trading volume. Tether holds 70% of the market share among stablecoins. Its nearest competitor, Circle, saw its stablecoin reach $24 billion in total value, barely more than a quarter of Tether's market capitalization. As of January 2024, Tether had been issued on fourteen separate protocols and blockchains.

  In May 2024, Tether announced it would restructure into four divisions: artificial intelligence, bitcoin mining, education, and stablecoins. Paolo Ardoino had been appointed CEO in December 2023, previously serving as the company's chief technology officer. He stated that the restructuring did not change the company's ownership. In May 2023, Tether announced plans to build a bitcoin mining operation in Uruguay using renewable energy. Uruguay sources more than 98% of its electricity from renewables, primarily wind and hydropower. In November 2023, Tether committed to invest about half a billion dollars over six months to become one of the world's top bitcoin miners. Part of that investment drew on a $610 million credit facility Tether had extended to Northern Data AG. Northern Data is a publicly traded bitcoin mining company based in Frankfurt. Tether acquired shares in the firm in September 2023. In December 2023, Lugano, Switzerland, began accepting Tether among the cryptocurrencies valid for paying taxes and fines. In January 2025, the company relocated its global headquarters to El Salvador, reporting a record profit of $13 billion for 2024. In July 2025, USDT's market capitalization surpassed $150 billion.

• 7. Market Manipulation Claims

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  Research by Griffin and Shams found that bitcoin prices tended to rise after Tether minted new USDT during market downturns. The researchers speculated this could indicate deliberate market manipulation. Tether and Bitfinex contested the findings, accusing the authors of using an incomplete dataset and cherry-picking data. Later research found additional evidence connecting stablecoin activity to cryptocurrency price movements. A 2021 study found unusually high cryptocurrency returns in the 24 hours before and after stablecoin issuances. A 2022 study found that bitcoin prices rose following public announcements on Twitter by the account Whale Alert about Tether minting USDT.

  On the 20th of November 2018, Bloomberg reported that U.S. federal prosecutors were investigating whether Tether had been used to manipulate the price of bitcoin. Bloomberg journalists found irregularities on the Kraken exchange between the 1st of May and the 22nd of June 2018. Small market orders were moving the Tether price by amounts comparable to much larger ones. New York University professor Rosa Abrantes-Metz and Federal Reserve bank examiner Mark Williams suggested the pattern pointed to wash trading by automated programs. Kraken disputed those claims, arguing that Bloomberg had misunderstood how a pegged stablecoin responds to market orders. The user behind the unusual order sizes confirmed that the specific decimal values and order amounts were randomly selected. Academic research on stablecoin stability later supported Kraken's position.

  Journalist Jon Evans stated he had found no publicly verifiable examples of a purchase of newly issued tether in the year ending August 2018. He had also found no verifiable redemptions. Tether's own terms state that new tokens can only be issued by purchase for dollars, or redeemed by exchanges and qualified corporate customers. U.S.-based customers are explicitly excluded from redemption. On the 15th of October 2018, the token's price briefly dropped to $0.88. Traders on Bitfinex were simultaneously moving out of tether and into bitcoin, which drove up bitcoin's price. More than $500 million of Tether had been issued in August 2018 alone, just weeks before that price drop.