U.S. Regulators Subpoena Crypto Exchange Bitfinex, Tether

 U.S. regulators are scrutinizing one of the world’s largest  cryptocurrency exchanges as questions mount over a digital token linked  to its backers

The  U.S. Commodity Futures Trading Commission sent subpoenas on Dec. 6  to virtual-currency venue Bitfinex and Tether, a company that issues a  widely traded coin and claims it’s pegged to the dollar, according to a  person familiar with the matter, who asked not to be identified  discussing private information. The firms share the same chief executive  officer

Tether’s  coins have become a popular substitute for dollars on cryptocurrency  exchanges worldwide, with about $2.3 billion of the tokens outstanding  as of Tuesday. While Tether has said all of its coins are backed by U.S.  dollars held in reserve, the company has yet to provide conclusive  evidence of its holdings to the public or have its accounts audited.  Skeptics have questioned whether the money is really there

“We routinely receive legal process from law enforcement  agents and regulators conducting investigations,” Bitfinex and Tether  said Tuesday in an emailed statement. “It is our policy not to comment  on any such requests.”

Erica Richardson, a CFTC spokeswoman, declined to comment.Bitcoin,  the biggest cryptocurrency by market value, tumbled 10 percent on  Tuesday. It fell another 3.2 percent to $9,766.41 as of 9:19 a.m. in  Hong Kong, according to composite pricing on Bloomberg. The virtual  currency hasn’t closed below $10,000 since November

While Tether and Bitfinex don’t disclose on their websites or in  public documents where they’re located or who’s in charge, Ronn  Torossian, a spokesman for the firms, said in a Dec. 3 email that Jan  Ludovicus van der Velde is the CEO of both. Phil Potter is a Tether  director, according to documents 

 dubbed the Paradise Papers recently leaked by the International Consortium of Investigative  Journalists. He’s also the chief strategy officer at Bitfinex. Last year, Wells Fargo & Co.  ended its role as a correspondent bank through which customers in the  U.S. could send money to bank accounts held by Bitfinex and Tether in  Taiwan. The firms sued the lender, but later withdrew the complaint.  Torossian previously declined to identify the banks used by Bitfinex  unless a non-disclosure agreement was signed, which Bloomberg News  refused

No Audit

While little public information exists  about how tethers are created, market pricing suggests traders believe  that each coin is worth $1. Trading the token for Bitcoin at Bitfinex  has helped drive up Bitcoin prices, Barry Leybovich, a product manager  at IPC Systems Inc. who creates risk and compliance products for  financial institutions interested in blockchain applications, said last  month.A document  on Tether’s website, compiled by accounting firm Friedman LLP, shows it  had $443 million and 1,590 euros ($1,970) in bank accounts as of Sept.  15. Tether tokens were valued at $420 million  that day, according to Coinmarketcap.com. Tether hasn’t identified the  banks where that money was held, and their names were blacked out in the  document.Friedman said in its report that it didn’t investigate  the reliability of Tether’s records. The accounting firm and Tether have  recently cut ties, Tether said in a separate statement Monday.“Given  the excruciatingly detailed procedures Friedman was undertaking for the  relatively simple balance sheet of Tether, it became clear that an  audit would be unattainable in a reasonable timeframe,” Tether said

https://www.bloomberg.com/news/articles/2018-01-30/crypto-exchange-bitfinex-tether-said-to-get-subpoenaed-by-cftc