Over the last weekend reports surfaced that Bitfinex-owned Tether is breaking ties with its auditor Friedman LLP. It seems that the two companies have finally parted ways and ‘dissolved’ their relationship in a very unusual manner without any formal announcements.
“We confirm that the relationship with Friedman is dissolved. 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 time frame. As Tether is the first company in the space to undergo this process and pursue this level of transparency, there is no precedent set to guide the process nor any benchmark against which to measure its success.“
A company spokesperson in a detailed statement said:
In recent times, concerns over Tether’s operations have grown, and analysts have raised serious doubts about the company. Moreover, Tether’s continued silence on the allegations fuels further suspicion.
Tether issues USDT tokens and pegs them to the U.S. Dollar. This means one USDT token holds the same value as one U.S. Dollar at any given time. Investors deposit their U.S. Dollars with Tether and, in return, receive an equivalent amount of USDT tokens. Tether recently claimed it holds $2.2 billion in its bank accounts to back every USDT token on a 1:1 basis.
However, many analysts have recently argued against Tether’s claims. A popular blogger going with the name Bitfinex’ed has released a series of blog posts, tweets and videos on YouTube outlining the presence of suspicious activities by Tether, and has also accused the company of creating Tether tokens “out of thin air”.
Analyst Report Adds Fuel to Controversy
Moreover, a recently released report by an anonymous analyst with the title “Quantifying the Effect of Tether”, concludes that it was “highly unlikely that tether is growing through any organic business process, rather that they are printing in response to market conditions. Tether printing moves the market appreciably.”
The report further accuses Tether of creating a fictional reserve for Bitfinex and issuing more tokens than it actually backs with U.S. dollars. It also claims that Bitfinex used these tokens to manipulate Bitcoin’s price for its own benefit.
The report states: “48.8 per cent of BTC’s price rise in the period studied occurred in the two-hour periods following the arrival of 91 different tether grants to the Bitfinex wallet.” It further adds that “Bitfinex withdrawal/deposit statistics are unusual and would give rise to further scrutiny in a typical accounting environment. The author believes that if questionable activity occurs, it could lead to a 30–80 percent drop in BTC price.“
All these accusation and allegations coming from different ends put serious doubts on Tether’s operations and everyone is waiting for the company to come clean on this matter. However, if the accusations prove true, some analysts believe this could trigger one of the biggest ‘bloodbaths’ in the crypto markets.