Tether’s Legal Proceedings Receive FOIL Request

February 4, 2022 1:52 pm Comments

The attorneys for the parent company of Tether, the most popular stable coin by transaction volume today, have recently pushed back against the involvement of Coindesk in the case between Tether and the New York Attorney General office (NYAG).

As of today, Tether has more than $78 billion worth of digital assets that is circulating within the digital economy right now and is frequently the token of choice on many crypto exchanges.

The parent company of Tether also runs the popular crypto exchange Bitfinex which had recently been involved in a case where the exchange was accused of having a loss of $850 million due to issues with payment processing and attempting to cover up that loss.

By the fact that Bitfinex is the sister company of Tether, naturally the reputation and reliability of the stable coin was put into question as many speculated whether the company actually had the assets to back up the value of each Tether token.

Yahoo reports:

The company settled a case with the NYAG for $18.5 million a year ago stemming from its part in its sister company Bitfinex’s attempts to cover up an $850 million hole after problems with its payment processor Crypto Capital Corp.

“Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines,” said Attorney General Letitia James in a release when the case was settled.

Besides paying a fine, Tether and Bitfinex are also required to submit quarterly statements showing the stablecoin issuer’s assets.

After Tether submitted its balance sheet to the NYAG, CoinDesk made a Freedom of Information Law (FOIL) request for information about the reserves.

That request was initially rejected but CoinDesk subsequently appealed; an appeals officer agreed and reversed the decision but Tether challenged the NYAG’s office in August, saying that releasing the details of its balance sheet would “would tilt the competing playing field against Tether.”

The Freedom of Information Law (FOIL) request submitted by Coindesk would essentially require Tether to disclose private information about its assets that which it had to submit to NYAG.

Tether is now responding to this FOIL request by stating that this would be a conflict of interest for Coindesk because investors of the independent news organization are mainly invested into USDC which is Tether’s top competitor in the stable coin space.

As a result, a petition has been submitted from the company in order to block the request.

TheBlockCrypto reports:

The Block had filed FOIL requests similar to CoinDesk’s, to which a FOIL officer responded that the requests could be exempt from the disclosure allowances based on a law that allows an agency to deny access to information disclosed to a public agency if that information contains “trade secrets.”

Tether contends that the requested information would compromise its investment strategy, which it considers a trade secret. Additionally, it claims information in the documents could compromise partner relationships.

For its part, CoinDesk has said that it is only interested in the documents detailing the breakdown of Tether’s reserves, which wouldn’t compromise the trade secrets or relationships Tether is referencing. Additionally, Tether has already committed to making the reserve breakdown public, argues CoinDesk.

The results of the company’s petition to block the foil request are still unknown at this time.

Besides Tether and USDC, a few additional stable coins have been making headway in the industry these days including TerraUSD, DAI, and TrueUSD.

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