Controversial stablecoin Tether is only 74 percent backed by cash (and other assets)

Tether’s lawyer has now admitted that the stablecoin is only 74 percent backed by cash and equivalents, according to an affidavit filed on Tuesday.

In the filing, Stuart Hoegner, the company’s general counsel, said Tether held approximately $2.1 billion in cash and short-term securities.

“As of the date [April 30] I am signing this affidavit, Tether has cash and cash equivalents (short term securities) on hand totalling approximately $2.1 billion, representing approximately 74 percent of the current outstanding tethers,” said Hoegner.

The lawyer also acts as the general counsel for cryptocurrency exchange Bitfinex, which alongside Tether, is facing allegations by the New York Attorney General (NYAG). Both companies have common shareholders and management.

The NYAG claims Bitfinex took out a $600 million loan from Tether after it lost some $850 million of customer and corporate funds to Crypto Capital Corp., a currency converter.

It seems the funds taken from Tether’s reserves were used to make up for the shortfall, but the company failed to communicate this to its customers.

Tether has made headlines in the past. One particular report claimed the stablecoin had been subject to automated bot trading on cryptocurrency exchange Kraken.

It’s also tried to leverage faux audits to shake off allegations of financial instability, but ceased the relationship with auditors before any findings were actually reported.

The situation is still unfolding, but the NYAG is expected to submit a response to New York Supreme Court Justice Joel on May 6.

In its response, NYAG is expected to demonstrate to the court why an initial Ex Parte Order shouldn’t be cancelled, or at least changed, to allow Bitfinex and Tether’s workers to access a credit line offered by latter.

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