Tether, the stablecoin issuer, once again finds itself on the wrong end of a legal battle. The issuer has been accused of the false representation of its stablecoin backing. This is the second time that Tether is facing legal action in 2021. The previous class-action lawsuit against it accused it of unscrupulous, oppressive, unethical, and immoral practices.
For a long time, the stablecoin issuer has claimed a 1:1 dollar reserve backing, i.e., every 1 USDT is backed by $1 in Tether’s reserve. The latest lawsuit was filed in the district court of South New York by Shawn Dolika and Mathew Anderson. According to the lawsuit, Tether doesn’t even maintain 4% in cash reserves. Other allegations included the company’s vague public account disclosures and the lack of professional audits. These allegations have dealt yet another blow to Tether, which has constantly reassured consumers of its transparency.
This latest development comes close on the heels of USDT being mandated by the Myanmar military rule as the official currency of the country for domestic purposes. The military government took the decision to speed up payments, trade, and services.
Tether responded to the lawsuit by terming it ‘copycat’ and ‘nonsense’. The company stated that the lawsuit’s purpose was to get money based on claims that don’t have much merit. The firm is set to initiate legal action in response to the lawsuit in the near future.
Auditor Moore Cayman had prepared an assurance report on behalf of Tether, which claimed that half of Tether’s reserves are in certificates of deposits and commercial paper. The report also stated that Tether maintains 10% as bank and cash deposits.