Both Tether and Bitfinex have come under heavy scrutiny, with many investors suspecting that Tether does not possess the funds required to back its supply of the stablecoin up. After months of attempting to convince investors that it does have the funds, lawyers have confirmed that Tether only has enough cash and short-term securities to back up 74% of the total supply – confirming the suspicions of investors.
Zoe Phillips, of law firm Morgan Lewis, which is representing Tether, confirmed that the documents showed that Tether did not have the funds to back all of its supply. Phillips said,
In fact, Tether’s reserves of cash and cash equivalents alone (without the line of credit) would cover approximately 74 percent of the outstanding amount of Tether.
Bitfinex and Tether, both of which have vowed to fight the legal case, has challenged the claims made by the New York Attorney General’s office. Phillips went on to say,
The funds are invested. The markets clearly remain confident in tether, as it currently trades just shy of $1 dollar per U.S. Dollar tether — even after the Attorney General’s highly inflammatory and misleading public application. Any suggestion that tether holders face liquidity risk is unsupported speculation.
Bitfinex and Tether have been under investigation since last year, with the AG’s office claiming that Bitfinex was trying to cover up roughly $850 million in losses using illicit funds.