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.
A company spokesperson in a detailed statement to CoinDesk said: “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.”
In the recent past, there have been growing concerns over Tether’s operational functions and analysts have raised some serious doubts over the company. Moreover, what keeps the suspicion growing is Tether’s continued silence over the allegations being made on it.
Tether is the issuer of USDT tokens that is tied to the U.S Dollar. This means that the value of one USDT token is same as the value of U.S Dollar at any given point in time. Investors give their U.S Dollar deposits to Tether, in turn, they receive equivalent USDT tokens. Tether has recently claimed that it has $2.2 billion worth funds in its bank accounts which can back every Tether token on 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”.
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.”
There's a fear going on that the recent price rise was helped by printing of USDT (Tether) that is not backed by USD in a bank account.
— Charlie Lee [LTC] (@SatoshiLite) November 30, 2017
The report further accused Tether of creating a fictional reserve for Bitfinex and issuing more tokens than those that are actually backed by the U.S Dollar. The Bitfinex exchange is further alleged to have used this tokens to manipulate the price of Bitcoin to its 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. If there is questionable activity, the author believes a 30-80 per cent reduction in BTC price could be forecast.”
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 at all the accusations are proved to be true, some analysts say that this could trigger one of the biggest “bloodbath” in the crypto markets.