In a significant development, Tether and Bitfinex have decided to cease their opposition to a Freedom of Information Law (FOIL) request. This decision marks a turning point in the ongoing legal saga involving these two major players in the cryptocurrency market.
Tether, the issuer of the world’s largest stablecoin by market capitalization, and Bitfinex, a popular cryptocurrency exchange, had previously sought to block the FOIL request made by news websites. However, New York Supreme Court Justice Laurence Love denied and dismissed their petition.
The FOIL Request Seeks to Reveal Tether’s Banking and Reserve Details
The FOIL request aimed to shed light on Tether’s banking relationships and the reserves backing its USDT token. Documents obtained through the FOIL request revealed that Tether kept its funds in four banks, two investment management firms, two gold depositories, a gold broker, and its sister company Bitfinex.
The current Freedom of Information Law (FOIL) request is connected to a settlement reached between Tether, Bitfinex, and the New York Attorney General (NYAG) in February 2021. This settlement, which was initially covered by CNBC, involved the payment of a fine amounting to $18.5 million. This was to resolve a legal conflict that had been ongoing for two years, revolving around allegations of the improper mixing of $850 million in client and corporate funds.
Furthermore, the documents disclosed that Tether had funds in commercial paper and other securities issued by various entities, including several Chinese banks and financial institutions. The extent of Tether’s reliance on commercial paper, a type of short-term debt instrument, was not previously known.
Back in March 2021, Tether claimed it had more than $35.5 billion in U.S. dollar equivalents at these institutions. This information provides a rare but limited window into the reserves behind USDT. This development follows a series of legal challenges faced by Tether and Bitfinex.
In 2021, the Commodity Futures Trading Commission (CFTC) fined both companies more than $42 million on allegations that the USDT stablecoin was not fully backed at all times. The decision by Tether and Bitfinex to drop their opposition to the FOIL request could be seen as a move towards greater transparency. It remains to be seen how this will impact the broader cryptocurrency market and regulatory landscape.
