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An investigation to determine whether Tether executives committed bank fraud during the stablecoin issuer’s early days has been reassigned.
According to several reports, a new team with the US Attorney’s Office for the Southern District of New York will now be handling the investigation.
A New Team After Months Of Getting Nowhere
According to reports, an investigation into whether Tether representatives committed bank fraud has been reassigned by the Justice Department. The reassignment comes after months of stagnation, with the investigation in limbo. The probe into Tether will now be led by US Attorney Damian Williams from the Southern District of New York, according to sources familiar with recent developments.
Federal prosecutors had been investigating Tether and whether it hid its crypto-related transactions from banks, it had worked with during its early days. The prosecutors had warned Tether officials that they could be charged with misleading banks when moving funds. The transfer comes after months of legal wrangling.
An Unusual Move
The office of US Attorney Damian Williams is known to be one of the most aggressive when it comes to crimes associated with cryptocurrencies. Recently, the office secured a guilty plea from a person associated with one of the company’s payments processors. The decision to reassign the case is being seen as an unusual move, especially after it had reached such an advanced stage.
However, it also highlights the legal uncertainty when it comes to digital currencies, according to several former federal prosecutors. The Southern District, with its vast experience in tracking money flows in banking and crypto, could have a decisive edge in gathering evidence and information. According to a partner at Davis Wright Tremaine, Robertson Park, cases are transferred only under exceptional circumstances. He stated,
“Transferring cases “doesn’t happen often, and there’s going to be pretty individual, unique circumstances each time. There’s a steep learning curve for folks who get involved in these investigations and probably a fairly limited number of people who have real experience and understanding.”
The Tether Investigation
Reports around the probe into Tether emerged last year, with the company calling the reports as “old allegations.” At the time, Tether had stated,
“Tether routinely has open dialogue with law enforcement agencies, including the US Department of Justice, as part of our commitment to cooperation, transparency and accountability. “We are proud of our role as industry leaders in promoting cooperation between industry and government authorities in the US and around the world.”
Tether is the third-largest cryptocurrency, behind only Bitcoin and Ethereum, acting as a digital stand-in for the USD. Tether allows exchanges to offer traders stable prices, helping them avoid the volatility associated with cryptocurrencies like Bitcoin. Tether has stated that each USDT is backed by a US Dollar, held in cash or through other means such as US Treasuries.
Initial Struggles
Initially, Tether struggled to connect with the global financial markets, with several banks and financial institutions refusing to open accounts for crypto exchanges due to regulatory concerns. Tether’s initial interactions with the banks came into the public domain after Wells Fargo & Co blocked wire transfers to Tether through Taiwanese banks. Tether sued Wells Fargo, stating that the bank knew the transactions were being used to obtain USD to enable clients to purchase digital tokens.
On its part, Wells Fargo stated that it was under no obligation to complete the transfers arranged through other banks. As a result, prosecutors in Washington began examining if Tether opened bank accounts using false statements or pretenses, such as hiding the fact that the funds were associated with cryptocurrency.
