An investigation into the Tether stable currency is presently underway following a request granted by an appeals court to the New York Attorney General’s office.
Tether Is Under Fire
This presents a major problem for Tether developer Brock Pierce, one of the top dogs in the world of digital assets. The 39-year-old recently announced his plan to run for president as an independent (with only four months left to go before the election) and is opening his campaign with several unique promises such as faster unemployment and stimulus checks and using technology to “help others.”
One can’t help but assume that something like this will present problems for his political aspirations.
At the time of writing, there have been no accusations of fraud or other wrongdoing. However, an appeals court is giving the New York Attorney General’s office an opportunity to examine several businesses that work with the cryptocurrency or that have pledged support for it.
Tether was allegedly built in 2014. It is the third-largest cryptocurrency by market cap behind bitcoin (number one) and Ethereum (number two). As a stable coin, it is allegedly backed by the U.S. dollar, though its status has led to heavy controversy over the years, with many analysts claiming it was used to manipulate bitcoin’s price in 2017.
The accusation came by way of finance professor John Griffin at the University of Texas, who alleges that during the stated time, many Tether owners used their stashes to purchase bitcoin any time it showed hints of bearish activity. If the currency fell by even the smallest margin, Tether was used to purchase BTC units. This ultimately tied BTC to USD, which may, in turn, have led to the massive pump that saw the currency reach its all-time high of nearly $20K by the time the year was out.
This method of manipulation had serious consequences, however, as 2018 saw the world’s primary cryptocurrency fall to new lows and lose more than 70 percent of its value after it dropped to the mid-$3,000 range prior to the Thanksgiving holiday.
Letitia James – the state Attorney General of New York – issued a statement explaining that she is satisfied with the ruling. She mentioned:
Today’s decision validates our office’s ability to use its broad and comprehensive investigative powers to protect New Yorkers. Not even virtual currencies are above the law. We are pleased with the court’s decision and will continue to protect the interests of investors in the marketplace.
Taking a Closer Look
The appeals court judge presiding over the case explained the decision to allow the investigation to move forward:
Respondents argue that Tether does not qualify as a security or commodity as those terms are defined in the Martin Act, and that the motion court thus lacked subject matter jurisdiction over them. I disagree.