Tether In The Hot Seat: US Federal Inquiry Into Potential Sanctions And AML Violations

Cryptocurrency company Tether is currently under federal investigation for possible sanctions and anti-money laundering (AML) violations, according to the Wall Street Journal. 

The criminal inquiry, led by prosecutors from the Manhattan US Attorney’s Office, is examining whether Tether’s stablecoin USDT has been utilized by third parties to fund illicit activities, including drug trafficking, terrorism, and hacking, or to launder proceeds from such activities.

Alleged Connections To Terrorism And Arms Dealing

Per the report, the US Treasury Department is also considering imposing sanctions on Tether due to its cryptocurrency’s widespread use among individuals and groups that are already sanctioned by the US government. 

These include alleged links to terrorist organizations such as Hamas and Russian arms dealers, which have led to increased scrutiny of the stablecoin issuer by authorities around the world.

The report notes that if sanctions were imposed, Tether would be barred from doing business with US companies, which would have a significant impact on its operations.

Tether Responds To Investigation Claims

The Justice Department’s investigation into Tether is not new; it began several years ago, initially focusing on allegations that some of Tether’s backers may have committed bank fraud by reportedly using falsified documentation to gain access to the global banking system.

In response to the investigation, Tether has stated that it has no indication of facing a broader inquiry, labeling the allegations of aiding criminal actors or circumventing sanctions as “outrageous.” 

In previous statements, the company has repeatedly stated that it actively cooperates with US and international law enforcement agencies to combat illegal activities, a commitment that it believes is demonstrated by its operations.

For example, the company has partnered with analytics firms such as Chainalysis and TRM Labs to enhance transaction monitoring, and has successfully frozen wallets identified as belonging to criminals in various criminal organizations in cooperation with governments around the world.

Commenting on the report, the company’s CEO Paolo Ardoino took to social media site X (formerly Twitter) and said:

As we told to WSJ there is no indication that Tether is under investigation. WSJ is regurgitating old noise. Full stop.

Featured image from DALL-E, chart from TradingView.com