In the Matter of Tether Holdings Ltd.

Tether Holdings Ltd. and related entities (collectively, Tether) (defendants) sold a virtual currency known as USDt. According to Tether, USDt was a so-called stablecoin whose value was linked (or tethered) to the value of United States (U.S.) dollars. Per Tether, one USDt token thus would always be worth one U.S. dollar. Between June 1, 2016, and February 25, 2019 (relevant period), Tether represented on its website, in a white paper, and elsewhere that each Tether token was backed on a one-to-one basis by fiat currency that Tether held in its reserve bank account. For example, Tether’s website proclaimed that Tether’s reserves would always match the number of USDt tokens in circulation. Tether’s pronouncements were untrue. USDt tokens were backed by a corresponding amount of U.S. dollars in Tether’s reserves for only 27.6 percent of the days during the 791-day relevant period. Instead, Tether maintained reserves in other accounts, including in (1) an account in the name of Tether’s general counsel, (2) accounts with Bitfinex (an online platform for exchanging and trading virtual currencies), (3) Tether’s account with an unauthorized Panamanian money-transmitting business, and (4) commercial paper and other instruments that were less liquid than fiat currency. Tether also represented that its reserves would be subjected to regular professional audits. This, too, was untrue. Tether had an accounting firm review its fiat-currency reserves on a preselected date, but immediately before this review, Bitfinex transferred approximately $382 million to Tether to shore up Tether’s reserves. On June 1, 2018, a law firm compared Tether’s fiat-currency reserves with the USDt tokens in circulation on June 1, but the firm did not conduct an audit. The Commodity Futures Trading Commission (CFTC) instituted an administrative proceeding regarding Tether’s compliance with the Commodity Exchange Act and the CFTC’s regulations, which Tether offered to settle. The CFTC made certain factual and legal findings in connection with its acceptance of Tether’s settlement offer.