Tether Faces Scrutiny Over Alleged Links to Criminal Activities and U.S. Sanctions Breaches
Cryptocurrency giant Tether is under federal investigation by U.S. authorities for potential violations of sanctions and anti-money laundering laws, according to sources familiar with the matter. The probe, led by the Manhattan U.S. Attorney’s office, is examining whether Tether’s cryptocurrency has been used by third parties to facilitate illegal activities such as drug trafficking, terrorism financing, and hacking. Investigators are also looking into whether illicit proceeds from these activities have been laundered through Tether’s platform.
The U.S. Department of the Treasury is reportedly considering sanctions against Tether due to its widespread use by sanctioned individuals and organizations. Among those potentially linked to Tether are entities such as Hamas, Russian arms dealers, and others blacklisted by the U.S. government. Should sanctions be imposed, American citizens and businesses would be prohibited from engaging in transactions with Tether.
Tether’s Role in Global Concerns
Tether, the world’s most traded cryptocurrency, moves up to $190 billion daily, making it an essential tool in both legitimate and illegal transactions. Unlike other cryptocurrencies, tether is pegged to the U.S. dollar, making it particularly appealing in regions where the U.S. currency is restricted by sanctions. Its use has raised concerns among federal regulators, especially given its alleged connections to issues of national security.
The platform has been linked to critical security threats, including North Korea’s nuclear weapons program, Mexican drug cartels, Russian arms trading, and chemical manufacturers in China who supply fentanyl precursors. The U.S. Justice Department’s investigation into Tether began several years ago, initially focusing on whether some of the firm’s backers committed bank fraud using falsified documents to gain access to the global banking system.
Tether has denied any wrongdoing, stating, “To suggest that Tether is somehow involved in aiding criminal actors or sidestepping sanctions is outrageous. We work actively with U.S. and international law enforcement to combat illicit activity, as we’ve publicly demonstrated many times.”
Escalating Scrutiny and Legal Challenges
Tether has faced regulatory challenges before. Several years ago, the company settled investigations by the state of New York and the Commodity Futures Trading Commission (CFTC) for $61 million after it was found to have misrepresented the assets backing its cryptocurrency. Now, the current investigation has reignited concerns over the company’s role in enabling illicit activity.
The potential for criminal charges against Tether could also have wider implications for its partners, such as Cantor Fitzgerald, a brokerage firm managing most of Tether’s reserve assets, including $80 billion in U.S. Treasuries. Howard Lutnick, Cantor Fitzgerald’s CEO and a key ally of Donald Trump, has also been thrust into the spotlight, though the Trump campaign has not commented directly on the investigation. They praised Lutnick as a “renowned business leader and philanthropist” and confirmed his role as co-chair of the Trump-Vance transition team.
Tether’s Efforts to Combat Illicit Use
In response to these mounting investigations, Tether has ramped up efforts to control how its cryptocurrency is used. Tether executives have claimed that the transparent nature of blockchain technology allows authorities to track and seize illicit funds more easily. “The public nature of the ledgers used to track many tether transfers makes it unsuitable for criminality,” the company asserted, pointing to its ongoing collaborations with law enforcement.
To further improve oversight, Tether has frozen approximately 1,850 cryptocurrency wallets and recovered $114 million in assets. It has also formed partnerships with analytics firms such as Chainalysis and TRM Labs to enhance its transaction monitoring capabilities. Additionally, the company has expanded its government affairs team by hiring a former PayPal executive with expertise in digital currency regulation.
As federal authorities continue to tighten their scrutiny on the cryptocurrency industry, Tether’s future remains uncertain. The outcome of this investigation could set a precedent for how digital currency platforms are regulated and how they manage their role in global financial networks.