Reports from the Central Bank of the Bahamas indicate that Tether Ltd. may have never deposited funds into the country. These findings could suggest that Tether may be holding their reserves elsewhere, or not have any reserves at all. In either case, the results could be catastrophic for the cryptocurrency markets.

Investors have become increasingly concerned about Tether’s stability. Tether underpins billions of dollars of value in the cryptocurrency markets through its widely used USDT, a cryptocurrency that is allegedly backed one-to-one by U.S. dollars.

Related: Tether’s Billion Dollar Reserves May Not Equate to ‘One-to-One Backing’ or ‘No Misconduct’

Yet, despite the importance of Tether in the cryptocurrency markets, the company has failed to undergo audits or clearly disclose its banking relationships. The refusal to conduct these actions go against the company’s previous claims.

Furthermore, based on CryptoSlate’s investigation below, there is little evidence to suggest that Tether has the U.S. dollar reserves it claims in its bank in the Bahamas. Credit to Zerononcense Blog for conducting much of the core analysis on Dec. 21st.

These concerns have culminated in a U.S. Department of Justice launching a criminal probe earlier this year. Allegedly, the DOJ is focused on potential Bitcoin price manipulation due to Tether and its related exchange, Bitfinex.

For a full primer on the controversy surrounding Tether, read: Tether’s Billion Dollar Reserves May Not Equate to ‘One-to-One Backing’ or ‘No Misconduct.’

Summary of CryptoSlate’s Analysis

Tether and its USDT underpin a large segment of the cryptocurrency markets. Currently, there is $1.9 billion USDT in circulation. In one estimate, at least 30 percent of all Bitcoin transactions that take place on exchanges use USDT.

Yet, as shown below, based on statements from the Bahamian Central Bank there is no evidence to suggest that the Bahamian banking system received any large cash or cash equivalent deposits, in either foreign deposits, native Bahamian dollars, or in foreign currency deposits held on behalf of another bank outside of the Bahamas (nostro accounts)—from Tether Ltd., or any other corporate entity.

These findings run contrary to statements from Tether Ltd., Deltec Bank & Trust Ltd., and reports from Bloomberg.

Deposits with Deltec Financial

In an attempt to clear the rumors around Tether’s dollar reserves, the company released a statement from its banking partner Deltec.

Deltec is a financial services group based in Nassau, Bahamas. Tether established its relationship with Deltec in November to replace its former Puerto Rico-based partner, Noble Bank. Tether ‘confirmed’ its relationship and cash deposits at the bank in a publicly released letter:

That said, there are some questions about the letter’s authenticity. Notably, the letter’s signature does not indicate which employee from Deltec signed the document, nor does the letter carry the printed name of anyone from Deltec. According to reports from Bloomberg, the bank has not confirmed or denied its relationship with Tether Ltd.

Background on Previous Banking Relationships

In the past, Tether has had to sever its relationship with other banking partners. Most companies do not want to offer services to cryptocurrency companies because of risks around know-your-customer (KYC) and anti-money laundering (AML) laws. It’s unclear whether banks severed ties with Tether because of its cryptocurrency-based business, or because of the company’s other practices.

Both banks and Tether Ltd. are reluctant to disclose their relationship, as this has resulted in banks losing partnerships. For example, in 2017, Wells Fargo terminated its relationship with correspondent banks in Taiwan because of the Taiwanese banks’ dealings with Tether.

Related: Tether Clears Air with New Banking Partner and Balance Sheet

Although banks are typically risk-averse, especially when dealing with cryptocurrency companies, it appears that Tether and Bitfinex have had an unusually difficult time securing a reliable banking partner. Some Tether critics have made this a point of suspicion.

Tether and Bitfinex then arranged for Puerto Rico’s Noble Bank to help connect them to customers and also used Crypto Capital Corp. as a payment processor. Tether’s relationship with Noble ended in October when the bank became unprofitable, as reported by Bloomberg.

Tether then established a relationship with Deltec Bank in the Bahamas to fulfill its custody needs.

Cross-Referencing Statements from Bloomberg

In Bloomberg’s Crypto-Mystery Clues Suggest Tether Has the Billions It Promised, by Matthew Leising, bank statements from Tether show that funds were moved from Noble bank to Deltec in July:

“The latest statement, from July 2018, shows a beginning balance of $1.9 billion on July 1 and an ending amount of $210 million on July 30. The balance dropped as the company shifted funds to Deltec Bank & Trust Ltd. in the Bahamas, according to people familiar with the matter. Attempts to reach Deltec and an attorney representing Noble weren’t returned.”

If these reports are accurate, confirming Tether’s reserves would be a matter of tracing the transfer of $1.7 billion into Bahama-based Deltec. These figures are roughly in line with the Deltec statement confirming deposits of $1.8 billion. If these statements are true, then there should be evidence of this transfer between July and November of 2018.

Central Bank Report of the Bahamas

Fortunately, figures from the Central Bank of the Bahamas could shed some light on the transfer.

According to statements from the Central Bank:

“In an effort to provide the public with more frequent information its economic surveillance activities, the Central Bank has decided to release monthly reports on economic and financial sector developments in The Bahamas.”

What’s most relevant, however, is that these reports include financial information from all financial institutions and banks on the island, including Deltec:

“The main data source from this surveillance is financial institutions’ daily reports on foreign exchange transactions and weekly balance sheet statements.”

Based on the above information, these reports should also include any transfers into and out of all banks in the Bahamas. According to a different October report from the Central Bank, the island has roughly 170 licensed banks, including Deltec Bank & Trust Ltd.

One telling feature of the Central Bank’s report is a summary of the island’s M2 assets. M2 assets, according to Investopedia, include saving deposits, money market securities, and mutual funds, in addition to M1 assets (cash).

It is important to include an analysis of M2 funds because Tether likely earns its income from lower risk securities, such as those included in the M2 money supply.

One feature to note about these reports are that they are quoted in Bahamian Dollars (BSD / B$), which is conveniently pegged one-to-one with the U.S. dollar. All foreign deposits and instruments in these reports are converted into their respective amounts in BSD.

An advantage of the Bahamas is that the island’s banking system is small enough to gain meaningful insight into Tether by scrutinizing these reports.

M2 Money Supply Does Not Show Tether’s Deposits

As stated in the Central Bank’s November report, there are roughly $6.8 billion in M2 deposits held in all Bahamian banks. Tether’s deposit should have arrived between Jul. 31st, when reports from Bloomberg suggested the account was drained, and Nov. 1st, when Deltec claimed to have an account with Tether with a balance of roughly $1.8 billion.

Figure 1.  Monthly Economic and Financial Developments, November 2018

Where these reports show concern is cross-referencing M2 money supply from JulyAugustSeptemberOctober, and November.

For the months of July through November, M2 deposits fluctuate between $6.7 and $6.8 billion. However, according to statements from Tether Ltd. on both Twitter and the company’s website, the island’s reserves should have increased by $1.7 to $1.8 billion coinciding with the alleged July transfer and the November statement from Deltec.

Perhaps other metrics could explain Tether’s deposit into the Bahamas.

Foreign Reserves

External liquid assets include cash and cash equivalents, such as bonds and money markets, denominated in foreign currencies. Since July, this value has consistently fluctuated between $1.7 and $1.9 billion.

Figure 2. Monthly Economic and Financial Developments November 2018

External reserves are reserves of foreign currency stored in nostro accounts. The Central Bank reports that excess reserves are roughly $1.3 billion, down from $1.5 billion since July. These figures indicate that it is unlikely that Tether deposited funds into an account in the Bahamas and then later transferred those deposits into a nostro account overseas during the five months between Jul. 1st and Nov. 30th.

Since July, these figures do not suggest that there was a large deposit of foreign currency—including USD—into the country. Then, perhaps, Tether converted its USD to BSD prior to transferring it into the country.

Figure 3. Monthly Economic and Financial Developments, November 2018

Yet, total BSD deposits, in native currency, do not suggest that there was an influx of deposits. These figures remained constant at roughly $6.4 and $6.5 billion since July. To further emphasize the low likelihood of a large cash transfer, the Bahamian Central Bank has strict reserve requirementsbetween foreign currencies and the BSD:

“Upon establishment, the Central Bank was given a statutory mandate to ensure that external reserves are maintained at 50% of the value of total notes and coins in circulation and demand liabilities of the Bank; and for the most part, external reserves have been maintained comfortably above this statutory minimum.”

In the last three years, external reserves during November were $0.9 billion in 2016, $1.4 billion in 2017, and $1.3 billion in 2018.

According to the Central Bank’s quarterly report, the total value of money in circulation and the demand liabilities of the bank are summarized in the M1 money supply:

Figure 4. Quarterly Economic Review, September 2018

Presumably, total money in circulation has not changed substantially since September. If that is the case, then at most half of the M1 money supply is allowable in external reserves (foreign deposits). Half of the M1 money supply would roughly equate to $1.35 billion. With external reserves already sitting at $1.3 billion, that only leaves $50 million available for additional deposits.

Based on these figures, it is unlikely that the Bahamian banking system accepted a deposit of $1.7 billion in foreign U.S. dollars, nor is there an indication that a large amount of BSD was deposited. That said, perhaps Tether is still in the process of converting its USD to BSD.

Foreign Exchange Transactions

Figure 5. Monthly Economic and Financial Developments, November 2018

Foreign exchange transactions as defined by USLegal are:

“…a type of currency transaction that involves two countries. Generally, a foreign exchange transaction involves the conversion of a currency of one country with that of another.”

As mentioned in the prior section, it’s possible that Tether is exchanging its USD for BSD to deposit into the Bahamian banking system. If that was the case, the reports should show at least a hundred million or more increase in net sales to banks or to other non-bank institutions in YTD section 4.1.a or 4.1.b.

For year-to-date (YTD) figures, the Central Bank’s net sales during the year amounted to $663 million, with $751 million of that sold to non-bank entities, netted against $88 million purchased from banks.

One could argue that when compared to 2017, the island experienced a large net influx of foreign currencies from purchases. Tether could have made BSD purchases over the year, and the data can be construed to potentially support that idea.

Related: Is Tether Quietly Exiting the Market?

Since July, net sales to other non-bank institutions gradually went from net purchases of $6 million in July to net sales of $312 in November, a change of $318 million in net currency sales.

If Tether made BSD purchases over the course of the year, which is again unlikely given the timeframe, it is possible that Tether is gradually converting its USD to BSD. That said, there is no evidence that those BSD are getting deposited elsewhere in the Bahamian banking system.

However, assuming that Deltec is classified as a ‘commercial bank’ when dealing with the Bahamian Central Bank, then the currency conversion would instead be reflected in net sales to banks in 4.1.a, which fluctuates between sales of $40 million and purchases of $18 million, not nearly enough to accommodate a $1.8 billion conversion of USD.

Total Bank Deposits

Another figure to examine is total dollar deposits residing on the Bahamas. From July to November, these figures remain at a stable $6.5 billion, demonstrating that no new cash deposits, BSD or otherwise, stayed within the Bahamian banking system from the start of a month to end of month. It’s possible (but unlikely) that Tether deposited funds briefly , and then those funds left the country before end-of-month reporting. However, there is no evidence to suggest that.

In a final glance over changes in figures in all reported categories between July and November, there is no substantial month-to-month change that would suggest that there was large deposit entering the Bahamian banking system.

Update: Evidence of a Deposit

On Dec. 25th, Twitter user Spoofy McSpoofface provided evidence that could suggest Tether deposited funds briefly in July and then withdrew those funds the following month.

Figure 6. Quarterly Statistical Digest, November 2018 [chart modified]

From June to July, the Central Banking System received an influx of $1.6 billion in foreign currency, and then over August and September foreign currency reserves decreased by roughly $1.6 billion.

These movements could suggest that Tether deposited funds in the Bahamas, and then withdrew those funds by September. If that is the case, then the letter from Deltec Bank once again comes under scrutiny. Where these funds are currently held is unknown.

Ramifications on the Market

If the above analysis is sound and exhaustive, then the whereabouts of Tether’s deposits with Deltec are left unknown. And, so long as Deltec is unwilling to confirm its relationship with Tether, it will be impossible to verify that Tether has a relationship with the bank at all.

If these funds aren’t currently held in the Bahamas, that begs the question as to where Tether’s deposits are being held.

Tether’s secrecy and unwillingness to undergo auditing is troubling. The large number of USDT outstanding have a multi-billion dollar impact on the market’s total capitalization. Furthermore, Tether’s close relationship with Bitfinex could mean that if one failed, the other would likely buckle.

A glimpse as to what could happen in that scenario is comparable to Mt. Gox’s insolvency in 2013. At the time, the exchange handled 70 percent of Bitcoin trades and was integral to the health of the cryptocurrency markets. When the company collapsed, it ushered in a more than 70 percent crash in the price of Bitcoin in the following months. Could USDT be the catalyst to the next catastrophe?

Dec. 25th, 03:00 UTC: Added potential evidence of foreign currency deposit.

Tether | USDT


$1.02 |  0.34%

Tether, currently ranked #8 by market cap, is up 0.34% over the past 24 hours. USDT has a market cap of $1.9B with a 24 hour volume of $5.23B.

Chart by CryptoCompare

This post credited to cryptoslate Image source: Cryptoslate

Major crypto exchange Bitfinex has responded to a recent media report that accused the exchange of publishing trading volume data from “a market that doesn’t exist,” in a tweet posted Oct. 23.

The controversy centers on an article from crypto media outlet CoinDesk, which had alleged that Bitfinex’s data on popular crypto statistics aggregator CoinMarketCap (CMC) was misleadingly inflated by reporting on a stablecoin Tether (USDT)-U.S. dollar trading pair, which as of press time appears to account for $33,598,474 — or 18.30 percent — of a total 24-hour traded volume of $182,742,351.

The article had argued that since the exchange does not provide a USDT/USD trading pair, this was an intentional strategy to make it appear as though a large volume of such trades were occuring on the exchange. In fact, Bifinex users are only able to deposit and withdraw both Tether and U.S. dollars through their accounts, rather than execute such trades.

A representative from CMC disclosed that the data was derived from Bitfinex’s in-house public application program interface (API), and was represented in CoinDesk’s article as being “confused” herself as to the meaning of the data point.

Bitfinex has tweeted its response to clarify its position, with a link to the original CoinDesk article, stating that: … is the sum of USDt dep/wds to/from Bitfinex. We are not ‘publishing’ fake numbers; the API method is called ‘movement_volume’ and isn’t part of our ticker API. Not pushed by us, pulled by CMC. Another not-so-brilliant example of anti Bitfinex/Tether FUD.”

The API link that was provided by both the exchange and CMC’s representative to Coindesk does not lead to a live website as of press time. On Bitfinex’s website, it is noted that some parts of the API may require authentication.

Bitfinex has not responded to Cointelegraph’s request for a live link by press time.

Bitfinex has recently been prompted to deny rumors that it was “insolvent” or facing banking issues in response to reports that its banking partner, Puerto Rico’s Noble Bank International, was seeking a buyer and had lost both Bitfinex and affiliated firm Tether as clients.

The following week, the platform temporarily suspended all fiat wire deposits without providing a specific reason, although it had acknowledged in its prior statement that “complications continue to exist” for Bitfinex “in the domain of fiat transactions.”

The exchange’s circuitous history of banking relationships dates back to April 2017, when U.S. bank Wells Fargo & Co. allegedly refused to continue operating as a correspondent bank. Bitfinex then filed a lawsuit against the bank that was quickly dropped.

Tether, for its part, has faced repeated criticisms of inadequate transparency over its claims to be backed one-to-one by the U.S. dollar, with some going so far as to accuse the firm of covering up an alleged fiat reserve deficit in complicity with Bitfinex.

The rumors intensified when Tether allegedly dissolved its relationship with a third-party auditor this January. However, an unofficial audit in June reported that Tether did have the appropriate amount of dollar reserves held in an unnamed bank.

Crypto investor and entrepreneur Michael Novogratz recently remarked on the Tether transparency controversy just as the stalwart coin had briefly lost its U.S. dollar peg, at one point trading as low as $0.91, amid reports of investors’ “loss of faith” in the asset.


This post credited to Cointelegraph  Image source: Cointelegraph

Hong Kong-based crypto exchange Bitfinex has hit back against claims it is insolvent and disclosed wallet addresses appearing to show it holds over $1.5 billion in crypto assets.

The company, which shares management with Tether, the venture behind the U.S dollar-pegged crypto USDT, stated in a blog post on Sunday that it is not insolvent, and “a constant stream of Medium articles claiming otherwise is not going to change this.”

Bitfinex called out such allegations as “a targeted campaign based on nothing but fiction.”

The firm further revealed cold wallet addresses holding bitcoin, ethereum and EOS, as claimed proof of the amount of the respective assets it currently holds. It added that the wallets’ contents represents a “small” fraction of its total assets, which also include undisclosed fiat holdings.

Based on the provided addresses, Bitfinex holds at least 148,467 bitcoin, 1.7 million ether, and over 35 million EOS. These cryptocurrencies are worth around $1.5 billion, based on data from CoinDesk’s price index and CoinMarketCap.

Bitfinex’s rebuttal follows a recent article on Medium published on Saturday that claimed the exchange is no longer solvent and urged users to withdraw their assets.

The author, who goes by the title “ProofofResearch” alleged that Bitfinex made “a concerted effort” to censor a number of posts on a sub-reddit that it moderates in which users reported issues with fund withdrawals for at least a month.

However, in its response, Bitfinex claims that “both fiat and cryptocurrency withdrawals are functioning as normal,” adding:

“Verified Bitfinex users can freely withdraw Euros, Japanese Yen, Pounds Sterling and U.S. Dollars. Complications continue to exist for us in the domain of fiat transactions, as they do for most cryptocurrency-related organizations.”

The Medium article also referred to a Bloomberg report last Tuesday as supporting evidence that the Puerto Rican Noble Bank is now mulling a sale and has stopped offering its banking services to both Bitfinex and Tether.

On that front, the exchange said information and accusations surrounding Noble Bank has “no impact” on its “operations, survivability, or solvency.”

The news comes as the latest controversy surrounding Bitfinex as one of the longest-running crypto exchanges. In January, both Bitfinex and Tether were reportedly subpoenaed by the U.S. Commodity Futures Trading Commission.

Months later, amid complaints over lack of transparency, the company published a report – via a law firm, instead of an auditing firm – which claimed the company had $2.55 billion in U.S. dollar reserves to back $2.54 billion-worth of USDT that were circulating on June 1.

However, as CoinDesk pointed out after reviewing the document, it only covered one point in time and did not provide proof of its level of collateralization for other periods.

This post credited to coindesk image source:Shutterstock

On Oct. 6, Larry Cermak, former editor at Diar and head analyst at The Block, reported that leading crypto exchange Bitfinex obtained a banking partner in HSBC, a $133 billion banking giant based in London.

“Bitfinex is now banking with HSBC through a private account of Global Trading Solutions. Very good fit if you ask me. It’s also worth mentioning that all EUR, JPY and GBP deposits are paused but Bitfinex ‘expects the situation to normalize within a week’” Cermak said.

Why is HSBC Accommodating Bitfinex?

As one of the oldest cryptocurrency exchanges, Bitfinex has experienced some of the most difficult challenges an exchange could face, particularly before major cryptocurrency markets like Japan, South Korea, and the US offered clarity on cryptocurrency regulation.

The exchange’s conflict with Taiwanese banks is well-documented, and in April 2017, Bitfinex initiated a lawsuit against Wells Fargo, a US-based banking giant, for blocking deposits to the banking account of Bitfinex and disrupting operations of the business.

“The decision to initiate legal action is because we cannot allow precedents in this industry where clearing houses can disrupt businesses that are by all metrics complying with the rules in place. If we allow them to simply flip a switch and disrupt business, then there becomes a precedent in the bitcoin industry beyond just Bitfinex, so we believe it is the appropriate time to take action,” Bitfinex said at the time.

Since then, Bitfinex has moved out of Taiwan and relocated to the Caribbean and in May, Bloomberg reportedthat the exchange partnered with Noble Bank to process transactions sent by its clients.

However, Noble Bank has announced to file for bankruptcy following an in-principle deal to restructure debt in January and with that, the only banking partner of Bitfinex vanished.

bitfinex cryptocurrency exchange bitcoin

HSBC is really the first proper banking partner Bitfinex has obtained since Wells Fargo in 2017. If the deal between Bitfinex and HSBC can be sustained throughout the long-term, it will bring a level of stability to the operations of Bitfinex which the exchange failed to secure in the past four years.

Speaking to The Block, Kasper Rasmussen, director of communications at Bitfinex said that the firm cannot comment on the nature of the partnership between the exchange and HSBC.

“Bitfinex does not, and has never, commented on actual or potential business relationships and this is not subject to change now,” Rasmussen stated.

Given the the $200 million dollar daily trading volume of Bitfinex and the amount of fiat deposits the exchange receives from its international customers, it is not possible for the exchange to unilaterally announce its dependence on HSBC as a banking partner through a private banking account.

It is highly probable that the exchange, with strict Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements, obtained the banking service of HSBC through a strictly regulated channel.

Positive Impact on the Industry

Already, most exchanges in major markets like Japan and South Korea have obtained banking services by large financial institutions and commercial banks in their respective countries. If Bitfinex can sustain its partnership with HSBC, it will have a positive impact on the stability of the crypto market.

This post credited to ccn Images from Shutterstock

Major crypto exchange Bitfinex has responded to a recent swathe of online rumors, denying that the firm is “insolvent” or facing banking issues, in an official blog post published October 7.

Bitfinex’s rebuttal comes in the wake of last week’s reports that the exchange’s banking partner, Puerto Rico’s Noble Bank International, is seeking a buyer and had lost both Bitfinex and affiliated firm Tether — who share a CEO, Jan Ludovicus van der Velde — as clients. In addition to Noble’s apparent woes, online bloggers were claiming that Bitfinex itself was insolvent, citing unverified reports of difficulties processing fiat withdrawals on the platform.

Bitfinex has today stated that “Bitfinex is not insolvent, and a constant stream of Medium articles claiming otherwise is not going to change this.” Castigating its accusers for failing to substantiate their claims, the exchange posted links to three accounts it says “represent  a small fraction of Bitfinex cryptocurrency holdings,” noting that these “do not take into account fiat holdings of any kind”: Bitcoin cold wallet 1Ethereum cold wallet 1 and EOS cold wallet 1.

The first link indicates that Bitfinex holds 148,467.26 Bitcoin (BTC) – down from circa 226,000 BTC on Sept. 9 2018 – worth $978,758,494 at press time. The second shows Ethereum (ETH) holdings worth around $382,071,909, while the third EOS (EOS) account is valued at $203,406,110 at press time.

Bitfinex’s disclosures are noteworthy given the controversial backstory of U.S. dollar-backed stablecoin Tether (USDT) and concerns over a lack of transparency regarding its dollar reserves: the firm broke ties with its third-party auditor in Jan. 2018, and only issued an unofficial audit in June to prove that the coin is indeed backed 1:1 by the appropriate amount of fiat holdings.

Hinting at past contentions, Bitfinex wrote yesterday that these most recent accusations of insolvency are “once again, perhaps indicative of a targeted campaign based on nothing but fiction,” adding that both fiat and crypto withdrawals are “functioning as normal” for Euros, Japanese Yen, Pounds Sterling and U.S. Dollars.

The firm did however acknowledge that “complications continue to exist” for Bitfinex “in the domain of fiat transactions,” but claimed this is something prevalent among “most” crypto-related organizations.

In response to the Noble Bank reports, some in the crypto space have suggested that Bitfinex has now shifted to banking with HSBC via a private account registered under the name ‘Global Trading Solutions.’ The exchange did not respond to these claims in its post yesterday, although it did say that all Noble-related allegations “have no impact” on Bitfinex’s operations, survivability, or solvency.

Bitfinex is currently the 12th largest exchange globally by daily trade volumes, posting $169.5 million in trades over the past 24 hours to press time.

As previously reported, Bitfinex’s troubled history of banking relationships began in April 2017, when U.S. Wells Fargo & Co. allegedly refused to continue operating as a correspondent bank. Bitfinex then filed a lawsuit against the bank that was quickly dropped.

Both the exchange and Tether both received subpoenas from U.S. regulators last December for undisclosed reasons. Vocal critic and crypto blogger Bitfinex’d has repeatedly voiced concerns about the transparency of their banking systems.

This post credited to cointelegraph Image source: Cointelegraph