Canceled Audit and Issuance of 300 Mln New Tokens: What’s Going on With Tether?

[Cordillerabit]

In January 2018, Pantera Capital chief investment officer Joey Krug expressed concerns that these rallies had led to Bitcoin rise to an all-time high in $20,000:

“This became more and more concerning, because every time the markets went down, you have seen the same thing happen. It could mean that a lot of the rally over December and January might not have been real.”

Before the subpoena from Commodity Futures Trading Commission (CFTC) - Tether’s employed Friedman LLP to conduct an audit in what they described on an ‘expedited basis.’ Tether then posted the memorandum as an attachment to that announcement on its website. They also stated that it was not an official audit or attestation engagement, but hoped to appease concerned critics:

“We hope that the community considers the attached memorandum for what it is: a good faith effort on our behalf to provide an interim analysis of our cash position and our issued and outstanding tokens, as part of ongoing efforts to further professionalize the transparency mechanisms of Tether Limited.”

While it still isn’t completely clear what led to the breakdown between Tether and Friedman LLP, Bloomberg reported that Tether wasn’t happy with the time frame given for the latest audit:

“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 timeframe.”

However, Shah founds it disconcerting that Tether had terminated the audit due to the timeframe given:

“The reason given by Tether was certainly not clear and precise, neither acceptable. An audit is to be allowed as much time as required, albeit the audit needs to be concluded before the due date. It is not a reasonable ground and I've personally not heard of such a reason in my auditing career.”

Furthermore, Shah calls any talk of an audit of a cryptocurrency exchange being too difficult due to the new technology ‘nonsensical.’

“This is a completely redundant statement. We've audited companies which handle far more complicated operations, which deal in Derivatives and Futures markets which have a lot bigger market cap, using algorithmic trading. We have, and every reputed audit firm has a separate IT department which creates a blueprint of a flowchart to aid the auditors.”

In Bitmex opinion, a hard fork carried out by Tether in the wake of a $31mln hack showed that the developers had complete control of its ledger, tokens and funds.

“(This) demonstrated that Tether is effectively in complete control of the ledger, as they can force a hard fork at will and reverse any transaction- although there may not have been any doubt about Tether’s control beforehand.”

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