Is Tether (USDT) Being Used for Money Laundering?

Last week the startup company Tether was hacked, having $30,950,000 USDT taken from its treasury wallet. The latest high-profile hack captured headlines and even hit the main stream media.

While the $30 million theft is criminal, it now appears that something even more sinister might be at work.

Within days of the news of the incident, new information began to emerge linking the address used to past criminal activity. Unfortunately, the rabbit hole goes much deeper. Let’s investigate some of the suspicious activity surrounding Tether.

First of all, what is Tether?

Tether was originally known as Realcoin and was started by a Chinese company back in 2015. Tether converts cash into digital currency, to anchor or tether the value to the price of national currencies like the US dollar, the Euro, and the Yen. USDT is a cryptocurrency token pegged to the US dollar, which is supposed to be fully backed by assets in the company’s reserve account.

Tether must keep the equivalent amount of dollars as the Tethers they “print” in order for there to be a value correlation of 1:1.

Tether has never provided any evidence of this money existing. No one knows where they bank, or if they even have a bank. Within the last 6 months, they have created close to $600 million in Tether, $224 in the last 20 days alone.

USDT has become a popular token amongst cryptocurrency traders seeking a stable asset to hold profits in between trades. Tether also acts as a dollar substitute that can be moved between exchanges. This is important and has led to one interesting theory about Tether and Bitfinex.

An investigative article by Justin Danneman highlights some interesting theories floating around on the forums…

“The primary purpose of Tether is money laundering (more so than most cryptocurrencies). Bitfinex was cut off from the US financial system, which makes it impossible to clear USD wires. At the time, their clients had ∼$400 million USD on deposit with the exchange. Tether was their solution: a cryptocurrency that was just good as the US dollar — usable on a handful of exchanges in buying BTC and other cryptocurrencies. Bitfinex is essentially laundering money to support their exchange business.”

Danneman goes on to point out that this activity is exactly what happened in the final months of Mt. Gox. Mt Gox for those readers who don’t know, was the most infamous investor loss through a Bitcoin exchange.

In February of 2014, Mt Gox, the largest Bitcoin exchange at the time, abruptly suspended trading, filed for bankruptcy and announced 850,000 bitcoins, belonging to its customers, were missing. This crushed investors and devastated the Bitcoin market.

It seems Tether’s ties to Bitfinex run deep.

“Under scrutiny has been the unclear relationship between Tether and the troubled British Virgin Islands-based bitcoin exchange Bitfinex — and long-standing allegations the exchange has been using the asset to engage in fraud and market manipulation. Complicating matters is that the two companies are said to share a common ownership, though details remain murky as to the exact nature of the connection.” coindesk.com

Tether: It is all beginning to unravel

Even mainstream financial site Bloomberg ran a story covering the hack and Tether’s suspicious ties to Bitfinex. More and more scrutiny is being placed on Tether. Once people begin to pull on the right string, the whole thing will unravel. The Bitcoin address used could be that string.

“$30,950,010 USDT was removed from the Tether Treasury wallet on Nov. 19, 2017 and sent to an unauthorized Bitcoin address. As Tether is the issuer of the USDT managed asset, we will not redeem any of the stolen tokens, and we are in the process of attempting token recovery to prevent them from entering the broader ecosystem.” Tether

The Bitcoin address that was used in the heist: 16tg2RJuEPtZooy18Wxn2me2RhUdC94N7r

The wallet address being targeted by Tether and mentioned above is a Bitfinex wallet address. The accusation of criminal collusion between Tether and Bitfinex may be verifiable. As one user on the BTC reddit points out:

“Tethers are usually “printed” from here, sent to this address, then proceeds to feed directly into this Bitfinex address to fuel a very blatant BTC pump shortly after.”

This leaves the crypto community with a lot of unanswered questions. What is the relationship between Tether and Bitfinex? One question investors will also be asking is: Is there a Tether alternative? Tether USDT, which is pegged to the US dollar, has become very popular with traders looking for a price stable asset. If our worst fears about Tether are true, what will investors do?

BitShares & BitUSD

The BitShares platform solves this problem with Market Pegged Assets (MPA). Market Pegged Assets are freely traded digital assets whose value is meant to track that of a conventional underlying asset.

Put more simply, MPAs allow the creation of tokens which have a value pegged to another asset. This allows holders of the token to achieve the stability they need while maintaining the properties and advantages of a cryptocurrency.

BitUSD could be used as an alternative to USDT offered by Tether. However, these assets are not limited to fiat and can include commodities like gold and silver. BitAssets can provide stability by anchoring themselves to a stable asset such as the US dollar (bitUSD). They can also easily give you the means to create a diversified portfolio, with exposure to a variety of currencies and commodities.

To top it all off, these assets can be traded on the BitShares Decentralized Exchange, where the security of funds rests in the hands of the user. Not only can you use MPAs to avoid the risk of volatility, but you can also avoid the risk of leaving your funds on a centralized exchange that is vulnerable to attackers.

BitShares and the BitShares DEX were designed to create a fair trust system for the new digital economy. It seems we need BitShares now more than ever.

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