Tether Faces US Probe Over Alleged Criminal Activity, Crypto Market See Price Drops

Tether, the largest stablecoin by market cap, is under investigation by federal prosecutors in Manhattan for potential money laundering and sanction violations. Tether denounced the report as unverified speculation. However, the crypto market data indicates that rumors regarding the probe against the stablecoin have heavily impacted the entire crypto market. Here is what you should know.

federal prosecutors in Manhattan are investigating Tether, the world’s largest stablecoin by market cap, over potential money laundering and sanction violations, a US media report said on Friday, citing people familiar with the matter.

The prosecutors are examining whether Tether was used in illicit activities, such as drug trafficking and terrorism, the report in the Wall Street Journal said, adding that the stablecoin’s executives have been questioned by the government as part of the probe.

Tether quickly dismissed the report, saying that it was based on “unverified claims” and that the company had not been contacted by any law enforcement agency regarding the investigation.

“Tether has always maintained that it proactively cooperates with law enforcement to prevent the misuse of its stablecoin,” a Tether spokesperson said in a statement to CoinDesk.

Tether, which is supposed to be fully backed by reserves like cash and equivalents, has faced several legal challenges in the past.

In 2021, the Office of the New York Attorney General fined Tether and its parent company, iFinex, $18.5 million for operating illegally in the state, and the Commodity Futures Trading Commission (CFTC) fined the stablecoin issuer a massive $41 million for engaging in illegal transactions.

The latest report may pose further challenges to Tether’s reputation and regulatory standing.

With a market cap of over $120 billion, Tether is the largest stablecoin. As a stablecoin pegged to the U.S. dollar, it serves as a vital cog in crypto trading and a hedge against volatility, especially in regions with limited access to the dollar.

Crypto market sees price drops after report

The entire crypto market appeared to feel the heat of the report on Tether, with the cryptocurrency market showing a decline of 3.5% in the last 24 hours.

Nearly all the top ten cryptocurrencies recorded a drop in the said period, with Bitcoin and Ethereum showing a decrease of 1.3% and 1.6%, respectively.

The total market cap of altcoins, excluding the top ten, sharply fell from 9.76% to 9.33% on October 25.

Meanwhile, the meme coin market showed a drop of 5.3% in the last 24 hours.

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