Tether Faces Fraud Allegations, Potentially Risking Market Collapse, Warns Analyst

• Justin Bons claims Tether’s $118B reserves lack formal audits, raising transparency and fraud concerns.
• Allegations link Tether to market manipulation and criminal ties, further casting doubt on its legitimacy.
• Bons urges the crypto community to shift from Tether to other stablecoins, warning of potential collapse and market disruption.

Crypto analyst Justin Bons has raised alarm over the legitimacy of Tether (USDT), claiming it to be a $118 billion scam. According to Bons, the stablecoin giant lacks proof of reserves and has never undergone a formal audit. 

He warns that Tether could be a greater risk to the crypto market than the Terra Luna collapse, due to its unchecked practices and history of alleged dishonesty. His concerns center around unverified claims about the company’s assets, as well as the questionable figures managing its operations. As scrutiny mounts, questions remain about the future stability of USDT.

Lack of Audits and Regulatory Actions

Bons highlights the absence of a formal audit of Tether, which has been a key issue since 2015. While Tether released an “auditor’s report” in 2021, it was not a comprehensive audit. This raises concerns about the transparency of its reserves, with investors reliant on Tether’s own claims. 

The U.S. Commodity Futures Trading Commission (CFTC) fined Tether in 2021 for misrepresenting its reserves, further deepening mistrust. The CFTC’s investigation stemmed from Tether’s alleged loss of $850 million, leading to suspicions about how fully backed USDT really is. This situation leaves the market with lingering doubts about Tether’s financial practices.

Allegations of Market Manipulation and Criminal Ties

The structure of Tether’s leadership also raises concerns. Bons claims that Tether’s governance is concentrated in the hands of two individuals, with no external oversight. Furthermore, links between Tether and Bitfinex, another crypto platform, have sparked allegations of financial misconduct. 

The two companies share management ties to Crypto Capital, a Panama-based bank shut down for laundering billions in drug money for Colombian cartels. This historical context has led to allegations of market manipulation, suggesting that USDT’s dominance in the market may be artificially inflated. These connections cast a shadow on Tether’s true financial standing.

Calls for a Shift to Other Stablecoins

Bons urges the crypto community to reconsider its reliance on USDT, suggesting that its potential collapse could have far-reaching consequences. He points to the dominance of USDT in trading volumes, warning that Tether’s control could severely disrupt the market.

The cryptocurrency industry, which was founded on decentralization and transparency, now faces a contradiction as one of its largest players operates under a veil of secrecy. As alternatives like USD Coin and other stablecoins gain traction, there is increasing pressure to shift away from USDT before further damage is done.