The U.S. Commodity Futures Trading Commission (CFTC) sent subpoenas on December 6 to virtual currency venue Bitfinex and Tether, according to Bloomberg, citing a source familiar to the matter.
Bitfinex is among the highly popular cryptocurrency exchanges that supports trading of bitcoins and many alt-coins. Tether is a company has its own coin which the company claims is pegged to the dollar.
Tether grew in popularity due its stable USD price and a substitute for dollars on cryptocurrency exchanges. Tether currently sits a market cap of approximately $2.2 billion with nearly all its total volume circulating, according to CoinMarketCap.
Tether told its users that its coins are backed by the U.S. dollar held in reserve, but the company’s claim has raised concern because it has yet to provide evidence of its holdings, which has led users to question whether the money is really there.
Tether and Bitfinex both do not disclose publicly their location and their executive board, but an email sent out on December 3 by spokesman Ronn Torossian for both firms said that Jan Ludovicus van der Velde is the CEO of both companies.
Bitfinex does not list Tether as one the main coins when you log onto its website and the two did not mention any shared ownership previously.
Over the weekend, it was uncovered that Tether’s relationship with audit firm Friedman LLP had dissolved, Tether confirmed to Coindesk. Tether emailed a statement saying: “Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable time frame.”
A document, compiled by Friedman, on Tether’s website showed that firm had $443 million and 1,590 euros ($1,970) in bank accounts as of September 15. Tether has not identified the bank where the money was being held and names that were blacked out in the document.
Bitfinex and Tether’s ambiguity has caused skepticism, which ultimately led to the subpoenas, but Bitfinex and Tether try to reassure investors that this happens normally.
“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.”
One of the most controversial allegations is that Tether coins are created solely to purchase bitcoins on Bitfinex, driving bitcoin prices up and drawing business to Bitfinex exchange.
Something that once began unregulated and decentralized has now turned into a scene where the government has gotten heavily involved. Due to the growing number of scams and transparent virtual currency related companies, government agencies, such as the CFTC, have stepped in to prosecute frauds.