Hindenburg Research Offers $1M Bounty for Tether Reserve Info, Celsius CEO Says Tether Mints USDT in Exchange for Crypto

A bounty of up to $1 million will be offered to anyone who can definitively reveal the backing of Tether's reserves.

The backing of Tether’s reserves became a bit murky after Celsius Network CEO Alex Mashinsky reportedly stated that Tether minted new USDT in exchange for crypto assets — which appeared to conflict with Tether’s own terms and regulations.

On October 20, financial research firm Hindenburg Research (Hindenburg Research) told its 171,000 followers on Twitter that it was "skeptical about the legitimacy of Tether" and provided important details about Tether's reserves of up to 1 million. US dollar rewards, which the company claims could pose a "systemic" threat to investors. .

“Tether is a key underpinning of the multi-trillion dollar crypto market. Yet, despite its repeated claims of transparency, disclosures about its holdings have been opaque.”

Hindenburg Research added, "The company claims a significant portion of its reserves are in commercial paper, but discloses little about its counterparties."

But, as some observers have pointed out, $1 million to expose its shortcomings is not a lot of money for a coin with a market cap of $70 billion.

I bet Tether would gladly pay you ten times as much to shut you up

— Cas “Mildly Interesting” Piancey (@CasPiancey) October 19, 2021

Tether has been the subject of intense scrutiny, with regulators repeatedly taking action against the company over the composition of its reserves. In May, Tether published a breakdown of its reserves showing a large unspecified amount of commercial paper and very little cash or bank deposits.

On Oct. 15, Tether and its sister company Bitfinex reached a settlement, paying the U.S. Commodity Futures Trading Commission (CFTC) $42.5 million. For two-thirds of the period between 2016 and 2018, Tether did not have sufficient cash reserves, the CFTC said.

Tether reached a settlement, but it denied the claims, noting that it “did not find a time when Tether tokens were not fully backed — it’s just that the reserves were not all in the form of cash, and not all were held in Tether’s name. bank account established, at all times."

It went on to say: "Tether has always maintained sufficient reserves and has never failed to meet redemption requests."

Meanwhile, Celsius CEO Alex Mashinsky is facing regulatory issues of his own after the New York Attorney General’s Office began investigating Celsius and another stablecoin lending platform this week.

In a subsequent interview, Mashinsky told the Financial Times on Oct. 19 that Tether minted new USDT tokens in exchange for the digital asset as part of the lending agreement:

"If you give them enough collateral, liquid collateral, bitcoin, ethereum, whatever...they'll mint Tether against that."

“New USDT is issued for such loans,” he added, adding that in order to “not permanently increase the USDT in circulation,” the new USDT is then destroyed after the loan ends.

On the face of it, such a lending structure would appear to violate Tether’s terms of service, whose terms state:

“Tether will not issue Tether Tokens consisting of digital tokens such as Bitcoin; only currency will be accepted for issuance.”

Cointelegraph Chinese is a blockchain news information platform, and the information provided only represents the author's personal opinion, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. Readers are requested to establish correct currency concepts and investment concepts, and earnestly raise risk awareness.