Something’s Fishy: Tether, Auditor “Dissolve Relationship” According to Rumors
23107 Total views
385 Total shares
News
Reports surfaced Saturday night that Tether and their auditor, Friedman LLP, had dissolved their relationship. Due to the weekend, independent confirmation has not been received. Calls to Friedman LLP have gone to voicemail.
It does seem unusual for either company to take such an action without issuing a formal statement, particularly since this would create a firestorm. Many in the crypto community have had concerns about whether Tether truly maintains adequate reserves to redeem all the outstanding tether tokens. The company had hired Friedman LLP to conduct an audit in an effort to resolve the community’s concern.
So much for transparency
Tether has been the source of much controversy for the past year, and the company has struggled to respond to critics. The company, which shares some of the same owners as Bitfinex, a major cryptocurrency exchange,
wrote last fall:
“Friedman LLP has been engaged to perform historical balance sheet audit procedures for Tether Limited. However, as the amount of Tethers in circulation has increased substantially in recent months, we have also asked Friedman to analyze our bank balances and our issued and outstanding token balance on an interim basis. Friedman agreed to perform consulting services for us in an effort to provide management with useful information concerning Tether’s cash position and Tether tokens issued and outstanding as of an interim date. Friedman was able to provide consulting services for us on an expedited basis, using a procedures date of September 15, 2017. These consulting services do not constitute an audit or attestation engagement, which would include a significantly expanded scope of procedures and take substantially more time to complete.”
Any “dissolution” of the relationship between Tether and Friedman LLP would invite great suspicion from the community, as this would seem to run contrary to Tether’s desire for greater transparency.
What is it?
Tether (the company) claims to receive deposits of US dollars from investors, following which they create an equivalent number of tethers (the currency) and give those tethers to the depositor.
Tether claims to have $2.2 bln on deposit in its bank accounts to back every tether token in existence on a 1:1 basis. Without an audit, though, it cannot be proven that Tether in fact has those reserves, or that they are not being used for something besides the backing of tether tokens.
Suspicion and legal threats
Some in the digital currency community have expressed deep skepticism over the issuance of tether tokens. It is not uncommon for the company to release massive amounts of tether, 50-100 mln at a time, which leaves many wondering who the investors are that deposit those funds. Since the disruption of Bitfinex’s banking relationships early last year, the exchange has become heavily dependent on its sister company’s tokens to move funds in and out of the exchange.
Some have speculated that Tether may be operating a fractional reserve, issuing more tokens than they have backing for, and sending them to Bitfinex. The exchange then uses those tokens as collateral to create leveraged long or short positions in the Bitcoin market.
Charlie Lee, the founder of Litecoin, has commented:
In early December,
Bitfinex threatened to “pursue legal action” against the anonymous blogger “Bitfinex’ed” based on his claims of wrongdoing on the part of Bitfinex and Tether.
This story will be updated as more information becomes available.
Comments (4)
Hottest Bitcoin News Daily
For updates and exclusive offers, enter your e-mail below.
All in all that's not high risks against the reward.
