The U.S. Commodity Futures Trading Commission sent subpoenas on December 6th to Bitfinex (an exchange) and Tether, a company that issues USDT (a coin) and claims it’s pegged to the dollar.
Tether’s coins have become a popular substitute for dollars on cryptocurrency exchanges worldwide, with about $2.3 billion of the tokens outstanding as of Tuesday. While Tether has said all of its coins are backed by U.S. dollars held in reserve, the company has yet to provide conclusive evidence of its holdings to the public or have its accounts audited. Skeptics have questioned whether the money is really there.
“We routinely receive legal process from law enforcement agents and regulators conducting investigations,” Bitfinex and Tether said Tuesday in an emailed statement. “It is our policy not to comment on any such requests.”
This might be the event that breaks the camel's back. Many investors have speculated that the coin market is in a bubble and is unsustainable. Last year a research group concluded that a single entity (Mt. Gox) may have pumped the price of BTC from $150 to $1000 using bots (dubbed Markus and Willy) using shady practices.
“In the end, we have concluded that Markus did not actually pay for the bitcoins he acquired; rather, his account was fraudulently credited with claimed bitcoins that almost certainly were not backed by real coins,” states the report. “Furthermore, because transactions were duplicated, no legitimate Mt. Gox customer received the fiat currency Markus supposedly paid to acquire the coins.”
Aside from that, many have written about suspicious activity with "printing" Tether, a coin fixed by USD at 1:1 ratio. This is despite the company saying they have reserves to match the coins in existence.
Bitcoin and other coins certainly have been resilient with many other mishaps and shady practices. We shall see how this chapter plays out with the regulators pursuing a probe.