In an explosive thread on X, Cyber Capital founder Justin Bons accused Tether of being the largest fraud in crypto history. He believes that the stablecoin issuer’s alleged scandal has surpassed the scandals of both FTX and Bernie Madoff. Bons warned that Tether’s lack of transparency and failure to conduct a proper audit make it a significant threat to the crypto market.
Justin Bons Calls Tether A Scam
“Tether is a $118 billion scam, bigger than FTX & Bernie Madoff combined!” Bons declared. Moreover, he called attention to the stablecoin issuer’s alleged fraudulent practices, including its failure to provide proof of reserves or submit to an independent audit. Despite promises to conduct an audit since 2015, Bons noted that “no audit has ever been done,” leading him to label USDT as “counterfeit money.”
Warning Against USDT
With USDT remaining one of the most widely used stablecoins in the crypto market, Bons urged the crypto community to stop using it, warning of the potential for catastrophic collapse. “Wean off USDT before it drags us all down!” he urged.
In addition, Bons likened the potential collapse of Tether to the disastrous failure of Terra Luna that collapsed in 2022. He warned that USDT issuer’s failure could have even greater consequences. This is because the company is responsible for billions in circulating USDT tokens, which are assumed to be backed by equivalent dollar reserves without independent verification.
He said, “We have to trust they hold $118 billion in collateral without proof!” Tether has faced regulatory scrutiny before, including a $41 million fine by the U.S. Commodity Futures Trading Commission (CFTC) in 2021 for misleading claims about its reserves. Despite this, Bons pointed out that no real audit of firm’s financial standing has taken place.
Financial Audit Issues
According to the Cyber Capital founder, an auditor in 2018 was allegedly fired for being “too thorough.” Thereafter, in 2021, the stablecoin firm partnered with accounting firm BDO to release a report on its reserves. However, Bons criticized this as misleading.
He explained that the report was not a formal audit but an “accountant’s report,” which does not offer the same level of scrutiny. He claimed, “Tether has never submitted its alleged reserves to a real unrestricted, third-party audit!”
Bons also raised concerns about the company’s governance structure. He spotlighted that Tether Holdings’ board consists of just two members, which he argues leaves the company vulnerable to mismanagement. “The board of Tether Holdings only has 2 members… implying the USDT reserves are still not segregated,” he added.
Ponzi Scheme Allegations
Bons also linked the firm’s to past criminal activities, referencing its alleged ties to Crypto Capital, a Panama-based bank that was shut down by authorities for laundering money for Colombian drug cartels. He also suggested that the company’s operations have historically involved questionable connections.
These include relationships with disgraced bankers and individuals involved in Ponzi schemes. “Its founders are made up of former Ponzi scheme artists, gambling cheaters & disgraced bankers,” he said.
Tether’s Legal Troubles & FTX Saga
Moreover, Bons’ allegations come as the USDT issuer continues to face legal challenges. On August 9, 2024, Celsius Network Ltd. filed a lawsuit against the stablecoin firm. The bankrupt crypto lender accusing Tether of engaging in fraudulent and preferential transfers of Bitcoin worth over $3.5 billion.
The plaintiffs noted that this move worsened Celsius’ financial troubles prior to its collapse. However, Tether CEO Paolo Ardoino has denied these allegations, calling the lawsuit a “shake down.”
Meanwhile, Sam Bankman-Fried, the former CEO of FTX, has filed a 102-page appeal requesting a retrial on September 13. SBF alleged that Judge Lewis Kaplan made several biased rulings that hindered his ability to mount a proper defense.
Furthermore, his attorney, Alexandra Shapiro, argued that Kaplan’s decisions, including the requirement for Bankman-Fried to undergo a pre-testimony deposition outside the jury’s presence, undermined the defense. He also alleged that the judge’s comments may have influenced the jury’s perception.
On the other hand, Tether, along with Circle and other stablecoin issuers recently blacklisted accounts linked to North Korean hacker group Lazarus. This reflected the USDT issuer’s commitment combat illicit activity despite mounting criticism surrounding transparency and legal troubles.
The post Tether Is A Bigger Scam Than FTX, Says Cyber Capital Founder appeared first on CoinGape.
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