Crypto Firms Accused Of Using Shell Entities To Secure Banking Service

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Towards the end of 2018, the organizations behind the world’s most extensively traded cryptocurrency, Thether, encountered challenges in retaining their access to the global banking network.

As per records, a few of their supporters resorted to dubious intermediaries, forged documentation, and sham corporations to regain entry.

Notably, one such intermediary, a significant tether dealer in China, attempted to evade the banking system by submitting counterfeit sales invoices and agreements for every transaction.

This information was disclosed by Stephen Moore, who is one of the proprietors of Tether Holdings Ltd. According to a recent report, Mr. Moore has advised his colleagues against continuing to employ fake sales invoices to regain entry to the global banking network.

The risk of potential fraud or money laundering charges, coupled with the increased regulatory scrutiny on the crypto industry, makes it an ill-advised approach.

Tetheris the most extensively traded cryptocurrency globally, and Bitfinex, a sister company, is one of the most significant crypto exchanges worldwide. The firms argued in a legal suit that losing access to the banking system would pose an existential threat to their businesses.

Regulatory Pressures Continue to Grow

The crypto industry has been facing a heightened level of regulatory pressure, and illicit activities such as money laundering and fraud have been major concerns.

Hence, Mr. Moore’s decision to abandon the use of forged documents was a necessary and commendable move toward maintaining the integrity of the crypto industry.

A collection of documents has revealed a persistent attempt by crypto companies to maintain their links with the global financial system. These firms frequently obscured their identities by using other businesses or individuals as fronts.

However, this practice was not without its challenges, and it led to the seizure of assets worth hundreds of millions of Dollars and links to a designated terrorist organization.

Recently, Tether issued a statement refuting the findings against it, which they described as misleading. They added that Tether and Bitfinex have world-class compliance programs and abide by all legal requirements.

Nonetheless, the reports of seized assets and associations with a designated terrorist organization are significant issues that require prompt and thorough investigation.

A Subject of Strict Investigation

Tether is currently the subject of an investigation by the U.S. Justice Department. The probe is reportedly being led by the Manhattan U.S. attorney’s office. It is worth keeping in mind that there is little public disclosure regarding the scope of the investigation.

Interestingly, this development comes on the heels of the recent indictment of Sam Bankman-Fried, the former CEO of bankrupt crypto exchange FTX.

Bankman-Fried was charged with conspiracy to commit bank fraud for opening a U.S. bank account in the name of an apparently unrelated business, among other counts.

He has denied any wrongdoing and pleaded not guilty to earlier charges brought against him. These legal actions highlight the growing scrutiny that the crypto industry is facing from regulatory and law enforcement agencies.

While the industry has seen tremendous growth in recent years, it has also been marred by concerns of fraud and other illicit activities.

Despite reports of an ongoing investigation by the U.S. Justice Department into Tether, the U.S. Attorney’s office has declined to comment on the matter.

Last year, Tether stated that it had regular communication with law enforcement agencies. At that time, it appeared that the Justice Department was not actively investigating Tether.

It is unclear if the investigators are specifically scrutinizing Tether’s efforts to open bank accounts in 2018 or if the investigation has a broader scope. However, plenty of reputable reports indicate that there may be some substance to the claims.

Final Thoughts

Tether’s role as a stablecoin that is pegged to the U.S. dollar has made access to the banking system critical to its operations.

Many investors view Tether as a money-market account at a brokerage, making it an essential gateway for crypto investment and a significant source of liquidity in the crypto economy.

Currently, the future of this stablecoin remains uncertain because of the allegations against it and it would be interesting to see how things pan out.

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