Tether, a prominent crypto company, is currently under investigation by U.S. federal authorities for potential violations related to sanctions and anti-money laundering regulations. The investigation, led by the Manhattan U.S. Attorney’s Office, is examining whether Tether’s digital currency, USDT, has facilitated unlawful transactions by third parties. This includes allegations of financing illicit activities such as drug trafficking, terrorism, hacking, and money laundering.
Additionally, the Treasury Department is considering sanctions against Tether due to concerns about its widespread use by individuals and organizations subject to U.S. sanctions, including Hamas and Russian arms dealers. If sanctioned, U.S. citizens and entities would be prohibited from transacting with the crypto company.
USDT, Tether’s stablecoin, has come under increasing regulatory scrutiny in recent years. Unlike volatile cryptocurrencies, USDT’s value is tied to the U.S. dollar, making it potentially attractive in areas where the use of American currency is restricted. With daily trading volumes of up to $190 billion, USDT is reportedly a key financing tool for high-priority national security concerns. Alleged illicit operations financed with USDT include North Korea’s nuclear weapons program, Mexican drug cartels, Russian arms manufacturers, Middle Eastern terrorist groups, and Chinese chemical producers involved in fentanyl production.
Tether has been engaged with regulators and law enforcement for several years. Initially, the Justice Department’s investigation focused on potential bank fraud, examining whether USDT’s backers falsified documents to secure access to global banking services.
Tether denies facing an expanded investigation and vehemently denies aiding criminal actors or bypassing sanctions. The company claims to actively collaborate with U.S. and international law enforcement agencies to combat illicit activities. Tether has implemented controls to prevent its digital currency from being used illegally, highlighting the transparency of blockchain, which records USDT transfers on a public ledger to enable authorities to trace and seize funds if necessary.
The ongoing probe into Tether may have implications for its partners, such as brokerage firm Cantor Fitzgerald, which manages the majority of Tether’s reserve assets, including approximately $80 billion in U.S. Treasury securities. The CEO of Cantor Fitzgerald, Howard Lutnick, who is also a Trump ally, holds a prominent role in the Trump-Vance transition team. However, the Trump campaign has not addressed the investigation.
Tether has recently taken action by freezing 1,850 crypto wallets and recovering an estimated $114 million in assets. The company has partnered with analytics firms Chainalysis and TRM Labs to enhance monitoring and has expanded its lobbying team with a former PayPal executive experienced in digital currency regulation. Nevertheless, the legal scrutiny surrounding Tether appears to be far from over.