Tether Reports Relationship With Bahamas-Based Bank

But something still doesn’t seem right.

  • In a November 1 blog post, stablecoin issuer Tether Limited announced it had established a relationship with a Bahamas-based bank and even provided a letter purportedly from the bank in an attempt to prove this relationship.

    In October, Tether raised eyebrows when the price of the coin that is supposedly backed 1:1 by the US dollar dipped to under $0.92 before rebounding. Rumors swirled that Tether was having issues maintaining a solid relationship with a bank.

    The lack of transparency surrounding Tether has also been a point of concern for many investors. In January of this year, Tether claimed it had procured the auditing services of Friedman LLP to “provide an interim analysis of [Tether’s] cash position and our issued and outstanding tokens, as part of ongoing efforts to further professionalize the transparency mechanisms of Tether Limited.”

    However, this audit was canceled due to claims by Tether that the auditing firm was taking too long, and that its process was too invasive and detailed.

    In June of this year, the embattled stablecoin provider attempted to once again entice investors by releasing a transparency report submitted by Washington, DC-based law firm Freeh Sporkin & Sullivan LLP (FSS). But because FSS did not use auditing standards, the report did little to assure skeptics that Tether had the financial reserves to back up its coin.

    Tether’s latest attempt to prove its liquidity and entice investors comes in the form of a blog post that states: “Tether Limited is pleased to confirm that it has established a banking relationship with Deltec Bank & Trust Limited (‘Deltec’), a 72-year-old financial institution with headquarters in the Commonwealth of The Bahamas.”

    The post continues:

    “The acceptance of Tether Limited as a client of Deltec came after their due diligence review of our company. This included, notably, an analysis of our compliance processes, policies and procedures; a full background check of the shareholders, ultimate beneficiaries and officers of our company; and assessments of our ability to maintain the USD-peg at any moment and our treasury management policies.”

    To provide further proof that Tether does, in fact, have the financial reserves to back up its stablecoin, Tether provided a link to a letter ostensibly written by the bank. But the letter itself is rasing some questions.

    The letter is addressed to Tether Limited and has a Delta Bank and Trust Limited stamp at the bottom. The letter states that at the close of business on October 31 the value of Tether’s bank account was $1,831,322,828. That number is roughly equivalent to the token’s market cap around that time.

    The signature at the bottom of the letter is nothing more than an illegible squiggle with no printed name underneath. It may not be enough to erase skepticism surrounding the company, especially because Deltec has thus far declined to confirm a relationship with Tether.

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