Tether (often called by its symbol USDT) is a stablecoin cryptocurrency that is hosted on the Ethereum and Bitcoin blockchains, among others. Its tokens are issued by the Hong Kong company Tether Limited,[1] which in turn is controlled by the owners of Bitfinex.[2][3] Tether is called a stablecoin because it was originally designed to always be worth US$1.00, maintaining $1.00 in reserves for each tether issued.[4]
While, according to its 2021 settlement with the New York Attorney General Letitia James, "Tether represents to users that any holder of tethers can redeem them from Tether the company at the rate of one tether for one U.S. dollar",[5] Tether Limited as of 2017 stated that owners of tethers have no contractual right, other legal claims, or guarantee that tethers will or can be redeemed or exchanged for dollars.[6] On 30 April 2019, Tether Limited's lawyer claimed that each tether was backed by $0.74 in cash and cash equivalents.[7][8] In May 2021, Tether published a report showing that only 2.9% of Tether was backed by cash, with over 49.6% backed by commercial paper.[9][10][11]
In February 2021, Tether settled their legal dispute with the New York Attorney General's Office. Bitfinex and Tether did not admit any wrongdoing but paid an $18.5 million fine.[12] The OAG's findings in the 17 February 2021 settlement stated, "[f]rom its inception in 2014 until late February 2019, Tether represented that every outstanding tether was 'backed' by, and thus should be valued at, one U.S. dollar", but on 14 March 2019, changed the backing to include loans to affiliate companies (i.e. iFinex).[5][6] The settlement ended a public lawsuit alleging Bitfinex had used Tether's funds to cover up $850 million missing since mid-2018[13][14] and the OAG found that iFinex – the operator of Bitfinex and Tether – had made false statements about the backing of the Tether and about the movement of hundreds of millions of dollars between the two companies to conceal Bitfinex's losses. However, iFinex and Tether did not admit or deny the OAG's findings in the settlement. According to AG James, "Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie".[5]