Tether Companies Under Scrutiny For Fraudulent Banking Documents

According to a Wall Street Journal (WSJ) report published on March 3, Tether, the company behind the stablecoin USDT, allegedly used fake documents, shell companies, and shady intermediaries to open bank accounts in 2018. Tether’s then-banking partner, Wells Fargo, had halted services for several of Tether’s Taiwanese accounts.


Forged Documentation

The report claims that Tether and a major Chinese crypto broker used forged documents to create shell entities and that companies behind Tether routinely hid their identities behind individuals and shell companies. The report further alleges that Tether accounts were linked to terror organizations and that Tether and its crypto exchange partner Bitfinex opened accounts in Turkey under Deniz Royal Dis Ticaret Ltd.

Tether has dismissed the WSJ’s report, calling it “wholly inaccurate and misleading.” However, the report cites several internal documents and emails, which detail how companies behind Tether allegedly created new shell entities by tweaking existing businesses’ names and used them to open bank accounts. Tether allegedly used a Hylab Technology executive to hold several accounts in trust, which it had opened under the name Hylab Holdings Ltd. Using third parties caused the stablecoin problems on a few occasions. Authorities in Europe and the United States seized more than $850 million worth of Tether’s funds as they investigated claims of bank fraud and money laundering against the company.

Money Laundering Concerns

Bitfinex, which shares elements of ownership with Tether, parked more than $1 billion in a now-defunct Panamanian payment company, Crypto Capital. The company had a reputation for using shell companies to create a network of bank accounts to transmit funds to crypto companies illegally. The WSJ report indicated that in 2018, Tether-linked entities used shell companies to open as many as nine new bank accounts in Asia over nine days. Afterward, Bitfinex announced to its customers that it had acquired a new “distributed banking solution” and urged them to keep the details to themselves lest they damage the “entire digital token ecosystem.”


Terror Financing Investigation

The US Justice Department cited Tether accounts in a 2020 terror financing investigation. According to the Justice Department, a Middle East terror group allegedly used the Deniz Royal Dis Ticaret account to launder funds passed through an illegal money-transmitting service. As of now, Tether’s future remains unclear, with critics expressing doubts about the company’s transparency and whether its USDT stablecoin is indeed backed by the US dollar on a one-to-one basis.