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Tether is a controversial cryptocurrency token claimed by its creators to be backed by one dollar for each token issued,[1] though Tether Limited has not issued a promised audit of their currency reserves.[2][3] Subpoenas from the U.S. Commodity Futures Trading Commission were sent to Tether and a related firm, Bitfinex, on December 6, 2017.[4] Tether's former auditor, Friedman LLP, has also be issued a subpoena.[5] Research suggests that a price manipulation scheme involving tether accounted for about half of the price increase in bitcoin in late 2017.[6]

A spokesperson for Bitfinex and Tether has said that the CEO of both firms is Jan Ludovicus van der Velde.[4][7]

Tether was issued on the Bitcoin blockchain through the Omni Layer Protocol.[8][9] Tether says that each unit of Tether is backed by one United States dollar held in reserve by Tether Limited,[8] though they may not necessarily be redeemed through the Tether Platform.[10] The primary objective is to facilitate transactions between cryptocurrency exchanges with a rate fixed to the United States dollar[10] allowing traders to take advantage of arbitrage opportunities without resorting to bank wires.[11] As of February 2018, Tether is ranked around the 15th highest market cap cryptocurrency in the world, with a market cap around $2 billion United States dollars as of 5 February 2018.[12] In June 2018, tether was announced as tenth largest crypto currency.[13]

Tether tokens are issued by Tether Limited.[3]


The precursor to Tether, originally named "Realcoin", was announced in July 2014 by Realcoin cofounder Brock Pierce as a Santa Monica based startup.[14][15] Tether CEO Reeve Collins announced the project was being renamed to "Tether" in November 2014.[16] The company's website states that it is incorporated in Hong Kong with offices in Switzerland, without giving details.[17][18] While representatives from Tether and Bitfinex say that the two are separate, the Paradise Papers leaks in November 2017 named Bitfinex officials Philip Potter and Giancarlo Devasini as responsible for setting up Tether Holdings Limited in the British Virgin Islands in 2014.[19] According to Tether's website, the Hong Kong based Tether Limited is a fully owned subsidiary of Tether Holdings Limited.[20] Bitfinex is one of the largest Bitcoin exchanges by volume in the world.[21]

Alleged price manipulation[edit]

Research by John M. Griffin and Amin Shams in 2018 suggests that trading associated with increases in the amount of tether and associated trading at the Bitfinex exchange account for about half of the price increase in bitcoin in late 2017.[22][23][6]

Reporters from Bloomberg, checking out accusations that tether pricing was manipulated on the Kraken exchange, found evidence that these prices were also manipulated. Red flags included small orders moving the price as much as larger orders, and "oddly specific order sizes—many going out to five decimal points, with some repeating frequently." These oddly sized orders might have been used to signal wash trades in automated trading programs, according to New York University Professor Rosa Abrantes-Metz and former Federal Reserve bank examiner Mark Williams.[24]

Security and liquidity[edit]

Tether claims that it intends to hold all United States dollars in reserve so that it can meet customer withdrawals upon demand, though it was unable to meet all withdrawal requests in 2017.[25] Tether purports to make reserve account holdings transparent via external audit; however, no such audits exist.[26] In January 2018 Tether announced that they no longer had a relationship with their auditor.[27]

About $31 million of USDT tokens were stolen from Tether in November 2017.[28] In response to the theft, Tether suspended trading, and stated it would roll out new software to implement an emergency "hard fork" in order to render untradable all of the tokens that Tether identified as stolen in the heist.[29] Tether has stated that as of 19 December 2017, it has re-enabled limited wallet services and has begun processing the backlog of pending trades.[30]

Questions about dollar reserves[edit]

A blockchain critic[31][32] has raised questions about the relationship between Bitfinex and Tether, [19][28][33] accusing Bitfinex of creating "magic Tethers out of thin air". In September 2017, Tether published a memorandum from a public accounting firm that Tether Limited then said showed that tethers were fully backed by US dollars[34]; however, according to the New York Times, independent attorney Lewis Cohen stated the document, because of the careful way it was phrased, does not prove that the Tether coins are backed by dollars".[19] The documents also fail to ascertain whether the balances in question are otherwise encumbered."[25] . The accounting firm specifically stated that

This information is intended solely to assist the management of Tether Limited ... and is not intended to be, and should not be, used or relied upon by any other party.[34]

Tether has repeatedly claimed that they would present audits showing that the amount of tethers outstanding are backed one-to-one by U.S. dollars on deposit.[35] They have failed to do so. A June 2018 attempt at an audit was posted on their website in June 2018 which showed a report by the law firm Freeh, Sporkin & Sullivan LLP (FSS) which appeared to confirm that the issued tethers were fully backed by dollars. However, FSS stated "FSS is not an accounting firm and did not perform the above review and confirmations using Generally Accepted Accounting Principles," and "The above confirmation of bank and tether balances should not be construed as the results of an audit and were not conducted in accordance with Generally Accepted Auditing Standards."[36][37]

Stuart Hoegner, Tether’s general counsel said "the bottom line is an audit cannot be obtained. The big four firms are anathema to that level of risk. We’ve gone for what we think is the next best thing."[38]

Following a price manipulation investigation by the U.S. Commodity Futures Trading Commission and the United States Department of Justice, Phil Potter, Chief Strategy Officer of Bitfinex and an executive of Tether Limited, departed Bitfinex in 2018.[37]

Legal status[edit]

Tether Limited states that tether is not a financial instrument.[39] They further state that owners of tethers have no contractual rights, other legal claims, or guarantees against losses.[10]


  1. ^ "Tether (Official website)". Archived from the original on February 7, 2018. 
  2. ^ Lee, Timothy B. (February 5, 2018). "Funny Money — Why experts are worried about Tether, a dollar-pegged cryptocurrency". Ars Technica. Retrieved February 10, 2018. 
  3. ^ a b Markovich, Sarit. "Commentary: The Overlooked Actor That Could Crash Bitcoin". Fortune. Archived from the original on 5 December 2017. Retrieved 5 December 2017. 
  4. ^ a b Leising, Matthew (January 30, 2018). "U.S. Regulators Subpoena Crypto Exchange Bitfinex, Tether". Bloomberg. Retrieved February 24, 2018. 
  5. ^ Leising, Matthew; Katz, Lily; Rivera, Yalixa (24 May 2018). "One of the Biggest Crypto Exchanges Is Heading to the Caribbean". Bloomberg. Retrieved 3 July 2018. 
  6. ^ a b Rooney, Kate (13 June 2018). "Much of bitcoin's 2017 boom was market manipulation, research says". CNBC. Retrieved 13 June 2018. 
  7. ^ "Bitfinex — Team". Retrieved 2018-02-25. 
  8. ^ a b Torpey, Kyle (30 September 2017). "This U.S. Dollar-Backed Token Issued On Bitcoin And Ethereum Is A Ticking Time Bomb". Forbes. Archived from the original on 30 October 2017. Retrieved 24 October 2017. 
  9. ^ "Tether (USDT): Cryptography as Digital Crisis Currency and US Dollar Replacement? – what is behind the token". IT Times. 21 September 2017. Archived from the original on 8 December 2017. Retrieved 24 October 2017. 
  10. ^ a b c Kaminska, Izabella (15 September 2017). "Crypto tethers as the new eurodollars". The Financial Times. Archived from the original on 1 October 2017. Retrieved 24 October 2017. 
  11. ^ White. "Tether Website". 
  12. ^ "Cryptocurrency Market Capitalizations". CoinMarketCap. Archived from the original on 27 January 2018. Retrieved 5 February 2018. 
  13. ^ "Controversial 'Stablecoin' Tether Is Now the 10th-Largest Cryptocurrency". CCN. 2018-06-26. Retrieved 2018-06-27. 
  14. ^ Nermin Hajdarbegovic (9 Jul 2014). "Brock Pierce Announces Dollar-backed Cryptocurrency 'Realcoin'". Coindesk. Retrieved 10 Mar 2018. 
  15. ^ Michael J. Casey (8 Jul 2014). "Dollar-Backed Digital Currency Aims to Fix Bitcoin's Volatility Dilemma". Wall Street Journal. Retrieved 10 Mar 2018. 
  16. ^ Rizzo, Pete. "Realcoin Rebrands as 'Tether' to Avoid Altcoin Association". coindesk. Retrieved 25 February 2018. 
  17. ^ "Contact Us". Tether. Archived from the original on 21 November 2017. Retrieved 24 October 2017. 
  18. ^ Casey, Michael (8 July 2014). "Dollar-Backed Digital Currency Aims to Fix Bitcoin's Volatility Dilemma". The Wall Street Journal. Archived from the original on 28 September 2017. Retrieved 24 October 2017. 
  19. ^ a b c Popper, Nathaniel (21 November 2017). "Warning Signs About Another Giant Bitcoin Exchange". The New York Times. Archived from the original on 22 November 2017. Retrieved 23 November 2017. nothing has drawn more criticism than the operation of Tether, a virtual currency that is supposed to be tied — or tethered — to the value of a dollar. … Tether and Bitfinex have insisted that the two operations are separate. But leaked documents known as the Paradise Papers, which were made public this month, show that Appleby, an offshore law firm, helped Mr. Potter and Mr. Devasini, the Bitfinex operators, set up Tether in the British Virgin Islands in late 2014. One persistent online critic, going by the screen name Bitfinex’ed, has written several very detailed essays on Medium arguing that Bitfinex appears to be creating Tether coins out of thin air and then using them to buy Bitcoin and push the price up. 
  20. ^ "Tether White Paper" (PDF). 
  21. ^ "Bitcoin trading volume". 12 February 2017. Retrieved 12 February 2017. 
  22. ^ Griffin, John M.; Shams, Amin (13 June 2018). "Is Bitcoin Really Un-Tethered?". Social Sciences Research Network. Retrieved 13 June 2018. 
  23. ^ Popper, Nathaniel (13 June 2018). "Bitcoin's Price Was Artificially Inflated Last Year, Researchers Say". New York Times. Retrieved 13 June 2018. 
  24. ^ Leising, Matthew; Rojanasakul, Mira; Pogkas, Demetrios; Kochkodin, Brandon (29 June 2018). "Crypto Coin Tether Defies Logic on Kraken's Market, Raising Red Flags". Bloomberg. Retrieved 29 June 2018. 
  25. ^ a b Kaminska, Izabella (2 October 2017). "Tether's "transparency update" is out". The Financial Times. Archived from the original on 7 December 2017. Retrieved 24 October 2017. 
  26. ^ "Update on security incident". Tether. Archived from the original on 12 December 2017. Retrieved 21 December 2017. 
  27. ^ "Tether Confirms Its Relationship With Auditor Has 'Dissolved' – CoinDesk". 27 January 2018. Archived from the original on 28 January 2018. 
  28. ^ a b "Crypto-currency company reports $31m raid". BBC News. 21 November 2017. Archived from the original on 22 November 2017. Retrieved 23 November 2017. 
  29. ^ "Tether Claims $30 Million in US Dollar Token Stolen". CoinDesk. 21 November 2017. Archived from the original on 23 December 2017. Retrieved 24 December 2017. 
  30. ^ "Wallet Service and Platform Update". (official Tether website). Archived from the original on 21 December 2017. Retrieved 24 December 2017. 
  31. ^
  32. ^
  33. ^ "Tether Theft Isn't the First Controversy for Cryptocurrency Firm". 21 November 2017. Archived from the original on 22 November 2017. Retrieved 23 November 2017. 
  34. ^ a b Memorandum posted by Tether
  35. ^ "Tether". Retrieved 23 June 2018. Our reserve holdings are published daily and subject to frequent professional audits. 
  36. ^ "Thether website under "Proof of Funds"" (PDF). Retrieved 23 June 2018. 
  37. ^ a b Irrera, Anna (22 June 2018). "Bitfinex chief strategy officer departs". Reuters. Retrieved 23 June 2018. 
  38. ^ Leising, Matthew (20 June 2018). "Tether Hired Former FBI Director's Law Firm to Vet Finances". Bloomberg. Retrieved 25 June 2018. 
  39. ^ "FAQs". Tether. 24 October 2017. Archived from the original on 21 November 2017. Retrieved 24 October 2017. 

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