Tether’s New Bank Has Been Named in Two Global Bribery Cases

Hey Gang,

Here is a new piece from BreakerMag.com:

Less than a week ago, Tether, the Bitfinex-affiliated issuer of a dollar-backed cryptocurrency (USDT), announced that it was now banking with Deltec. The announcement followed Tether’s apparent October departure from Noble Bank, an increasingly unstable bank in Puerto Rico, and was the latest in a long string of troubles that have translated into withdrawal delays for Bitfinex users and, over the last month, dramatic market flight from Tether.

Tether’s new bank, though, is already having problems of its own. A U.S. investigation has reportedly found that Bahamas-based Deltec received a portion of $12 million in bribes paid to a Venezuelan official involved in looting state assets. U.S. authorities, according to Bahamian news reports, are seeking to seize the related accounts from Deltec and Ansbacher, another Bahamian bank.

Neither bank has been accused of complicity in the bribery or other corruption. However, the findings highlight what may be systemic deficiencies in Bahamian banking regulation. The Bahamas was recently added to the list of nations with deficient anti-money laundering practices maintained by the Financial Action Task Force, an international initiative anti-money laundering initiative.

And sure enough, just one day after news of the Venezuelan case, it was discovered that Deltec may have been implicated in an entirely different bribery case in court proceedings in February. According to Brazilian outlet Estadao, former Brazilian official Paulo Vieira de Souza, who is under investigation in the massive Odebrecht corporate bribery scheme, is alleged to have funneled illicit funds to Deltec.

Because of its unstable banking relationships, Tether has been unable for more than a year to provide a formal audit of its holdings. An audit would conclusively prove both that it holds sufficient U.S. dollars to redeem all of the Tether it has issued, and that it is only generating those tokens when buyers deposit dollars. Various analysis and reports have argued that Tether has been issued without backing and possibly used to prop up the price of bitcoin, creating serious systemic risk.

Tether’s attempts to prove its integrity so far have been inconclusive, and entirely unsatisfying to critics. As the new banking relationship with Deltec was announced, for instance, Tether published a letter from the bank attesting that the company’s dollar holdings were sufficient to back all Tether tokens in circulation. The letter, similar to other assessments Tether has produced, lacks the rigor of a formal audit, which Tether has failed to complete. The new reports of Deltec’s other missteps give Tether’s critics renewed reason to distrust any statements from the bank about Tether’s funds.

Whether Deltec is complicit in these cases or merely a patsy, the implications for Tether and Bitfinex are grim, giving critics a fresh load of ammunition in their persistent assault on the stablecoin.