Bitfinex general counsel Stuart Hoegner has dismissed the notion that only 74% of the tether stablecoin in circulation is fully backed. Hoegner insists the stablecoin is fully backed by assets that include cash, cash equivalents as well as bitcoin. However, both Hoegner and the companyâ€™s CTO Paolo Ardoino, are pushing back against the narrative that Bitfinex is engaged in a conspiracy to pump the price of bitcoin.
The Loan to Bitfinex
In an interview with Peter McCormack, the Bitfinex general counsel claims the misconception that USDT is not fully backed stem from a sworn affidavit which he says has been taken out of context. The contents of the affidavit, which Hoegner submitted on April 30, 2020, as part of the â€œNew York litigation with Attorney Generalâ€, became public knowledge when the USDTâ€™s market capitalization was only $2.1 billion.
According to that affidavit, about 74% of tether backing was in the form of â€œcash and cash equivalents on hand.â€ On the other hand, the remaining 26% was in the form of a $550 million loan to the company which it â€œis fully servicing.â€ The general counsel explains that since the stablecoinâ€™s total market capitalization has gone up from $2.1 billion to the current $22 billion, the loanâ€™s share of the USDT reserves shrunk to 2.5%.
In the meantime, both Hoegner and Ardoino have confirmed that bitcoins are part of the reserves assets that Bitfinex uses to back the stablecoin. Nevertheless, both men still refuse to divulge the exact makeup of assets in reserves. However, Ardoino does reveal the only time Bitfinex acquired the bitcoins which now form part of tetherâ€™s reserves: The CTO says:
The CTO also dismisses the idea that Bitfinex is actually issuing tethers just to buy bitcoins. He says this narrative does not make sense especially when the company can simply buy the BTC using the fiat money which it has.
The Lack of an Independent Audit
Meanwhile, when asked why the company is not hiring outside auditors to conduct a full audit, an evasive Hoegner says some steps have been taken in this direction as a show of â€œgood faith.â€ Such steps include consulting reports produced by one accounting firm, and a law firm as well as a report from Bitfinex bankers. Nevertheless, the general counsel reveals Bitfinex is continuously â€œlooking for ways to share information with the community, to be more open and to be transparent.â€
With respect to the court injunction, which has since been â€œsubstantially narrowedâ€, Hoegner confirms that this is set to expire on January 15. However, even after the injunctionâ€™s expiration, the two companies and the AG will continue engaging in â€œconstructive talks.â€
Hoegner then closes by clarifying that the AG has not filed a lawsuit against Bitfinex and Tether and that the action against the two entities does not amount to a â€œcriminal investigation.â€
Do you agree that Bitfinex is not issuing tethers to pump the price of BTC? Tell us what you think in the comments section below.