One week ago, cryptos tumbled when a new iteration of a well-known allegation of bitcoin manipulation reemerged: a research paper claimed to have found a pattern whereby tethers were being spent to prop up bitcoin at key moments, which to the authors suggested manipulation.
As the research reported published by John Griffin, a University of Texas professor known for flagging suspicious activity in the VIX benchmark, "Tether seems to be used both to stabilize and manipulate Bitcoin prices."
To be sure, as we have noted repeated and as Bloomberg wrote last week, questions about Tether and Bitfinex had dogged the cryptocurrency world since last year, when Bitfinex lost banking relationships yet continued to operate. The CFTC eventually subpoenaed both firms in December, seeking proof that Tether is backed by a reserve of U.S. dollars, as it claims.
Last week's allegations prompted the following response from Bitfinex Chief Executive Officer JL van der Velde: “Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation. Tether issuances cannot be used to prop up the price of Bitcoin or any other coin/token on Bitfinex."
A bigger question was whether every tether - a so-called "stablecoin" that depends on full USD backing to maintain its peg to $1. - actually has said dollar backing.
And in what should come as good news to the crypto community, on Wednesday morning Tether said its bank deposits of $2.55 billion were confirmed by the law firm co-founded by FBI director Louis Freeh as the company seeks to reassure investors that its cryptocurrency is backed by U.S. dollars. According to the Tether release, Freeh Sporkin & Sullivan, LLP (FSS), confirmed that all Tethers (USDT) in circulation are sufficiently backed by U.S. dollar (USD) reserves.
The FSS report, based on a random date balance inspection and a full review of relevant bank account documentation, confirms that all Tethers in circulation as of June 1, 2018 are fully backed by existing USD reserves.
Quoted by Bloomberg, Tether CEO Jan Ludovicus van der Velde said that "despite speculation, we have consistently stated that Tether is backed by USD reserves at or exceeding the Tethers in circulation at a given moment, and we’re glad to have independent verification of this to answer some of the questions posed by the public."
“We are by no means done with our efforts to promote increased transparency at Tether. We are planning to build on this report moving forward and, despite the challenges of applying current accounting and assurance standards to cryptocurrency clients, we continue discuss these issues with potential audit partners.”
While Freeh Sporkin & Sullivan LLP didn’t conduct an official audit, they had access to Tether’s accounts at two banks for weeks and released data on how much money the company held on a single day, June 1, Tether’s general counsel said in an interview. That amount is nearly...