If there’s any obvious winner among the top 10 crypto assets following Donald Trump’s secured his resounding election victory, it appears to be bitcoin. The price of the world’s largest crypto asset rallied at key moments on Tuesday, coinciding with developments in electoral predictions. 

As the Associated Press, NBC, Fox, and other news sources progressively called battleground states in Trump’s favor, traders watched bitcoin rally to a series of all-time highs. The tether between bitcoin and Trump was evident on real-time charts and displayed for the entire world to see.

Bitcoin’s swell also raised the tide across thousands of altcoins with leaderboards like CoinMarketCap turning green almost without exception. Ether, Solana, BNB, XRP, and Dogecoin are all decidedly higher now than 24 hours ago.

However, another top 10 digital asset didn’t rally at all — despite securing a massive victory. Tether (USDT), the world’s largest stablecoin, was trading at $1 yesterday and is at $1 today.

Despite its unchanged price, careful market observers were in no doubt it had scored a significant victory.

Why Tether won as well as Trump

By some estimates, Tether is one of the most profitable companies per employee in the world. Earning interest, dividends, and capital appreciation on its self-professed asset base in excess of $120 billion, Tether could be earning tens if not hundreds of millions of dollars in profit per employee.

Comfortably operating one of the most lucrative enterprises in the world, Tether’s biggest risk is governmental intervention. Because its source of assets is opaque and it has refused to audit its capital inflows, governments around the world have often threatened to investigate the company for failure to register, disclose, and comply with information-sharing requirements.

Carefully managing its governmental relations to avoid any shutdown has been Tether’s delicate dance since its inception a decade ago.

To help with managing this effort, Tether has gained a prominent ally in the largest government in the world today: Howard Lutnick, CEO of Cantor Fitzgerald.

Read more: Bitcoin Policy Institute pitches US strategic bitcoin reserve

Lutnick is Co-Chair of Trump’s transition team

Endorsed by Trump and co-chairing his presidential transition committee, Lutnick has expansive powers to help Tether manage its US government relations for years to come. As co-chair of Trump’s transition team, Lutnick is uniquely able to suggest a list of appointments to various government posts at departments like the US Treasury. 

Lutnick has personally vouched for Tether in the past because, in his view, his role at Cantor Fitzgerald granted him unique visibility into Tether’s asset base. He publicly assured skeptics about Tether’s reserves backing its stablecoin on several occasions, noting “I manage many, many of their assets.” Lest there be any doubt, he continued, “they have the money they say they have.”

Cantor Fitzgerald manages billions of dollars worth of the assets backing USDT, including interest-earning US Treasury bonds.

Lutnick is also a top contender for a presidential Cabinet position or even Secretary of the US Treasury.

In addition to Lutnick and his upcoming recommendations for presidential appointments of government workers who could be sympathetic to Tether, he is also friendly with the pro-stablecoin Bitcoin Policy Institute. As a leading think tank that will shape Trump’s policies for regulatory oversight of Tether, the Bitcoin Policy Institute has published lengthy policy recommendations that would favor Tether for years to come.

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On Friday, the Wall Street Journal broke news of another US government investigation into Tether. Anonymous sources familiar with the Manhattan US attorney’s office say that senior law enforcement officials are “looking at whether the cryptocurrency has been used by third parties to fund illegal activities.”

This announcement is yet another chapter in Tether’s legal saga. As early as 2012, lawsuits began against Bitcoinica — whose source code was used by Tether’s sister company, Bitfinex.

Legal issues would affect Tether every year since.

As the world’s largest stablecoin, tether (USDT) attracts criminals who find its properties of pseudonymity, chargeback resistance, and widespread acceptance to be useful. Although most uses of USDT are innocuous, its illegitimate uses are pernicious. 

To track Tether’s run-ins with the US government across time, Protos has created a chart of some major US government actions involving the stablecoin giant. Note that this chart includes only US governmental actions and excludes numerous civil lawsuits and criminal investigations around the world.

Read more: FBI details how USDT is laundered through Binance

US government actions involving Tether

• September 18, 2015
  • Bitfinex comments on its Commodity Futures Trading Commission (CFTC) probe.
  • USDT market cap: $451,000.
• June 2, 2016
  • Bitfinex settles a CFTC allegation that it illegally traded customers’ bitcoin.
  • USDT market cap: $2.9 million.
• July 21, 2016
  • Trendon Shavers, operator of a Ponzi scheme promoted by Bitfinex founder Raphael Nicolle, receives a prison sentence.
  • USDT market cap: $6.9 million.
• September 14, 2017
  • Tether admits to the New York State Attorney General (NYAG) that since April 2017, it has not had a bank account with more than $61.5 million in cash.
  • USDT market cap: $418 million.
• May 24, 2018
  • The Department of Justice (DoJ) and CFTC open a criminal probe into USDT-based bitcoin price manipulation.
  • USDT market cap: $2.5 billion.
• April 25, 2019
  • NYAG demands documents from Tether.
  • USDT market cap: $2 billion.
• May 1, 2019
  • Arizona US Attorney charges ‘shadow banker’ Reginald Fowler for fraudulently moving Tether’s funds.
  • USDT market cap: $2 billion.
• May 5, 2019
  • The Southern District of New York (SDNY) US Attorney charges Fowler and Ravid Yosef for criminally misappropriating Tether’s reserves.
  • USDT market cap: $2 billion.
• October 25, 2019
  • Ivan Manuel Molina Lee is arrested on charges of laundering money through Bitfinex.
  • USDT market cap: $4.2 billion.
• September 24, 2020
  • US attorneys file charges against cartel members for using USDT in bribes.
  • USDT market cap: $15.2 billion.
• February 23, 2021
  • Bitfinex pays $18.5 million to settle NYAG claims that it covered up major financial losses.
  • USDT market cap: $34.7 billion.
• July 26, 2021
  • DoJ probes alleged bank fraud committed by Tether executives.
  • USDT market cap: $62 billion.
• July 27, 2021
  • US President’s Working Group on Financial Markets discusses Tether.
  • USDT market cap: $62.2 billion.
• October 15, 2021
  • CFTC fines Tether $41 million for false claims about USD reserves.
  • USDT market cap: $70 billion.
• December 8, 2021
  • A US Senator chastises Tether executives for not attending a Senate hearing.
  • USDT market cap: $77 billion.
• February 8, 2022
  • Ilya Lichtenstein and Heather Morgan arrested for stealing money from Bitfinex.
  • USDT market cap: $78 billion.
• August 3, 2022
  • A Boston US Attorney seizes 73,586 USDT proceeds of crime.
  • USDT market cap: $66 billion.
• December 15, 2023
  • Tether admits it has complied with information requests from DoJ, IRS, and Secret Service.
  • USDT market cap: $90.8 billion.
• October 25, 2024
  • A Manhattan US Attorney is investigating Tether.
  • USDT market cap: $120 billion.

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Tether has announced the launch of a new asset called Alloy, a smart contract-issued over-collateralized asset backed by Tether Gold. 

Currently, the documentation for this product states that if the value of Alloy tokens you mint exceeds 75% of the value of the collateral deposited, then the smart contract will liquidate the position. 

Tether Gold is an older gold-backed asset issued by the company that is pegged to the value of gold and is supposedly backed by gold held in Switzerland.

The normal USDT pegged to the value of the US dollar are also backed by gold owned by Tether, with its most recent attestation noting over $3.6 billion in ‘precious metals,’ which is described as ‘physical gold bars owned by the Tether International Limited.’

The value of the gold bars backing USDT is approximately seven times larger than the total amount of gold held for Tether Gold at the time of the last attestation.

Read more: A decade without an audit, Tether says it’s a new business

In some sense, Tether has consolidated its reserves across multiple stablecoins, including its Mexican Peso stablecoin, its offshore Yuan stablecoin, and its Euro stablecoins. This means they are also backed by this gold and Tether Alloy is the sixth gold-backed asset issued by the firm.

Tether further claims that Alloy will be “an open platform that” will allow the creation of assets backed by a variety of other assets, “including yield-bearing products.”

Tether chief exec Paolo Ardoino has already taken to X to warn users that it’s not doing an airdrop, following the emergence of a number of impostor websites.

Currently, the website for Alloy says the market capitalization is less than $4 and has 0.00 kilograms of gold backing it. 

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Tether chief exec Paolo Ardoino has taken to X (formerly Twitter) to tease that Tether is prepared to “unveil its new class of digital assets” next week. 

It’s not clear exactly what digital assets will be announced next week, but we do know that they will be the latest in a long line of digital assets launched by the stablecoin giant, many of which have now been largely forgotten.

The most popular asset Tether has created is, of course, USDT, which is ‘tethered’ to the value of the US dollar. However, it also has assets tied to other currencies like the Euro, Offshore Yuan, and the Mexican Peso. 

Perhaps the most interesting of these assets is the Offshore Yuan Tether, which was launched in collaboration with Zhao Dong. Dong was once one of the most prominent over-the-counter traders in China and had previously disclosed that he was a Tether shareholder.

After the announcement of this product, he was arrested and eventually convicted of charges equivalent to money laundering in China. The last time any of this asset left the Tether Treasury on Ethereum was 2019 and the most recent time assets went back to the Treasury was January 2023. On Tron Offshore Yuan Tether has only left the Treasury once, also in January 2023.

Read more: China’s crypto king pleads guilty to laundering $480M for online casinos, report

The Euro version of Tether has less than €32 million in circulation, largely on the Omni Layer, an implementation that Tether announced last year it was discontinuing support for. The last transaction from the issuer address for Euro tether on the Omni layer was in 2019 to revoke 1,000 tokens, a quantity well under the $100,000 USD minimum redemption size that Tether advertises.

The story is barely any better on Ethereum, where the last time tokens left the Tether Treasury was in July of 2022. 

The Mexican Peso version of Tether is a newer asset launched in 2022 and there are approximately Mex$20 million in circulation. No assets have left the Tether Treasury for this asset since June of 2022. 

Furthermore, Tether has never shared an audit or attestation for any of these assets. 

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Unlike banks, which require know-your-customer (KYC) information prior to opening an account, a significant number of crypto exchanges offer tether (USDT) bonuses for submitting KYC information like name, address, ID card, and contact information.

To be clear, these KYC bonuses are not account opening bonuses. In many cases, crypto exchanges allow customers to open small accounts and trade without submitting any KYC information. Moreover, the tether bonus doesn’t require any bank-like task, such as signing up for direct deposit or holding a large initial balance. Rather, this tether bonus is simply for submitting a valid ID card.

Therefore, although it’s commonplace for banks to offer an account opening bonus for customers who complete significant banking tasks, US banks typically do not pay anything for simply opening an account and submitting an ID card.

Moreover, a US bank may not open an account without an ID card; KYC documentation is federally mandated. Similarly, money transmitters like MoneyGram, PayPal, Venmo, and CashApp require KYC documentation prior to sending money, and they don’t pay anything for completing KYC.

Nevertheless, crypto exchanges are happy to pay customers KYC bonuses.

• Binance is paying some customers three USDT to pass KYC.
• BTCC is paying 20 USDT and specifically targets US residents.
• MEXC is paying 20 USDT.

USDT bonuses for submitting an ID

USDT payouts are curious for two reasons. First, exchanges consistently denominate payouts in tether more than any other stablecoin, which raises questions about whether the stablecoin’s issuer, market-makers trading USDT, or some other entities are somehow involved in the promotions.

Unfortunately, this type of skepticism is warranted, as crypto exchange operators have a long history of trading against their own customers — especially on USDT trading pairs.

If the bonus is simply a way to attract new customers to trade USDT and slowly give it all back (and often more) to sophisticated quants or market-makers, paying up to 20 USDT for a steady stream of new losers is a rational economic decision.

Second, it’s concerning that many crypto exchanges, which almost always must register as a money transmitter, don’t mandate KYC in the first place. Banks and registered money transmitters don’t pay customers for KYC; they simply require it.

Notice to crypto exchanges about their registration requirements for money transmission is frequent and obvious. Last month, the US Department of Justice indicted the cofounders of Samourai Wallet, repeatedly admonishing them for ignoring the obvious notices from the Finance Crimes Enforcement Network (FinCEN), Financial Action Task Force (FATF), the Federal Bureau of Investigation (FBI), and a variety of other government agencies. Similar indictments have charged criminals for ignoring the laws of money transmission for decades.

Read more: The history of crypto exchanges trading against their own customers

Money transmission businesses must KYC their customers

Specifically, it is a crime to operate an unlicensed money-transmitting service serving US customers per Federal statute 18 U.S.C. § 1960. This statute defines money transmitting as ‘transferring funds on behalf of the public by any and all means.’

The Bank Secrecy Act (BSA) 31 U.S.C § 5330 defines a money transmitting service as ‘accepting currency, funds, or value that substitutes for currency and transmitting the currency, funds, or value that substitutes for currency by any means.’ Section 5330 also clarifies that a money transmitting service includes ‘any person who engages as a business in an informal money transfer system or any network of people who engage as a business in facilitating the transfer of money domestically or internationally outside of the conventional financial institutions system.’

(All statutes above provide some exceptions to Network Access Service Providers like telecoms and couriers that indiscriminately facilitate access to a broad network.)

If anyone is in the business of accepting and transmitting money on behalf of US residents, they probably have to register as a money transmitter. In other words, this isn’t something that a business owner should give customers the option to complete with a USDT bonus. On the contrary, it’s a requirement before allowing any customer to transmit money.

However, many crypto exchanges claim to not be money transmitters because, for example, public blockchains like Ethereum are broad networks and, they say, the crypto exchange merely facilitates access as a network access service provider. This is one of their arguments, at least.

In this view, because they are simply facilitating customers’ access to a broad network, they don’t need to register as a money transmitter and, therefore, don’t need to complete KYC checks prior to customers initiating payments.

Read more: Sources confirm Binance helps users avoid KYC/AML

KYC bonuses for compliance

Perhaps, a final option might be that the crypto exchange is simply whitewashing its efforts at compliance. Many of these USDT bonuses for KYC are hidden in foreign languages, time-sensitive offer webpages, geofenced advertisements, or ephemeral social media posts. These giveaways might simply increase the number of KYC checks during key periods, such as the end of a fiscal year, for a crypto exchange looking to boost its compliance numbers during annual reports, or occasional surveillance check-ins with law enforcement. 

In the end, it’s impossible to know exactly why crypto exchanges are paying for the basic task of KYC. Not only is it a requirement of US money transmission services (if crypto exchanges are, indeed, money transmitters), but it’s never a compensated task by traditional financial companies like banks, PayPal, Zelle, MoneyGram, or Venmo. For some reason, crypto exchanges are willing to pay customers up to 20 USDT to submit their ID. It’s certainly suspicious.

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Police in China have announced the dismantling of a large underground banking gang accused of facilitating illegal transactions with almost $2 billion worth of tether (USDT).

Sichuan and Chongqing authorities said on Tuesday that 193 suspects across 26 Chinese provinces have been arrested as a result of the operation. 

According to local media, the gang allegedly used USDT to evade China’s foreign exchange regulations and provide a means for criminals to send their funds overseas, transacting 13.8 billion yuan ($1.9 billion).

Read more: How Triad-linked gang used crypto and casinos to launder $10B

Two ‘dens’ in Fujian and Hunan belonging to the gang were reportedly destroyed by authorities in 2023 and 149 million yuan ($20.6 million) of funds linked to the gang were frozen as part of the case. 

The gang’s illegal foreign exchange reportedly committed “financial fraud, job-related crimes, obstruction of drug management, smuggling of goods prohibited by the state…. obstruction of credit card management, defrauding export tax refunds and other criminal activities.”

USDT has also been used to pay gold smugglers in Nepal shifting 33kg of the precious metal into the country before returning to Tibet with sacks of cash, musk, and medicinal caterpillar fungus called yarsagumba.

Additionally, the United Nations claims that USDT is at the heart of a ‘parallel banking system’ created by organized crime in Southeast Asia. It said in a report, “Online gambling platforms, and especially those that are operating illegally, have emerged as among the most popular vehicles for cryptocurrency-based money launderers, particularly for those using Tether or USDT on the TRON25 blockchain.”

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The US Justice Department (DoJ) has indicted and arrested an heir to the Cartier jewelry empire with conspiring to launder the proceeds of drug trafficking using tether (USDT).

In Miami, law enforcement arrested Maximilien de Hoop Cartier, a direct descendant of Louis Cartier, the founder of the luxury watch, necklace, and bracelet maker, where he was allegedly coordinating with a Colombian drug cartel.

Alongside five Colombian nationals, Cartier tried to import 100 kilos of cocaine and launder hundreds of millions of dollars, mostly through over-the-counter (OTC) USDT trades. They actually succeeded at laundering 14.5 million USDT before their arrests.

Cartier is currently in a Miami detention center while his co-conspirators are in Colombian jails.

To carry out his scheme, Cartier controlled shell companies and misrepresented to financial institutions that they were in the business of software and technology. He then used the companies’ accounts, according to the indictment, as unlicensed money transmitters.

Using USDT, dollars, pesos, and other currencies, Cartier laundered hundreds of millions of dollars worth of criminal proceeds.

Read more: Russian founder of sanctioned exchange Garantex starts Tether desk

Cartier jewelry heir loved tether

Cartier has spent most of his life in France, although his citizenship is Argentine. He faces four counts of criminal misconduct: money laundering and conspiracy to commit money laundering, transacting in property derived from specified unlawful activity, and operating an unlicensed money remitter.

Jeweler Louis Francis Cartier founded the luxury brand in Paris in 1847. Maximilien Cartier, his descendant, also owned a wine, beer, and bottled water company, Patagonia.

USDT is uniquely suited to money laundering. It substitutes directly for dollars yet, unlike bank transfers, may be sent permissionlessly to anyone using 16 blockchains within seconds. For drug cartels accustomed to risky cash deliveries and unreliable bank wires, USDT’s nearly instant and irreversible settlement is a welcome upgrade.

Read more: Tether: Ten years, 100,000,000,000 USDT, and still no audit

For its part, Tether’s parent company publishes repeated assurances that it is working to reduce criminal use of USDT.

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After nearly a decade of promising financial and security audits for users and critics to look over, Tether has once again failed to put its money where its mouth is, instead choosing to announce a complete change of its business model.

The rebrand is in line with many of the statements the company has been making over the past several years, around plans to get into the bitcoin mining business, the data industry, and blockchain education.

The news comes on the back of new reporting from the Wall Street Journal that Tether has been extremely useful for Russia in its bid to acquire weapons to defeat Ukraine and numerous damning statements from Janet Yellen regarding stablecoins.

Since US regulators and politicians started to pay closer attention to stablecoins, Tether has taken to calling itself ‘the largest company in the digital asset industry’ instead of the ‘largest stablecoin,’ and is clearly trying to put a positive spin on the work that it does.

Read more: Tether implicated in Russian weapons sales, completes security audit

Tether says there’s more to it than a $110 billion stablecoin

While Tether is almost exclusively known for being the owner and operator of the stablecoin (USDT) with the highest market cap and most volume, the new PR campaign is clearly an attempt to suggest there’s far more to the company.

In an advertisement released at the same time as its press release, Tether says it’s “transcended [its] beginnings to redefine what’s possible beyond finance.”

Indeed, according to its hiring page, Tether is looking for managers for its education program and engineers for its AI mission.

One position it isn’t hiring for? An auditor willing to trudge through almost a decade of unaudited financial statements, hacks, scams, and giant missteps.

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Tether announced on April Fool’s Day that it had completed an audit — unfortunately, it was a security audit, not a financial audit, the results were not shared publicly, and the positive news came on the heels of a WSJ article implicating the stablecoin in the Russian acquisition of weapons for its ongoing war in Ukraine.

A press release states that Tether, which has taken to proclaiming itself “the largest company in the cryptocurrency industry” over the past month, has completed an audit “ensuring that Tether had robust IT control measures in place to make sure their systems were safe.”

It did not bother to explain how over $30 million worth of USDT was somehow hacked and moved in 2017.

Tether audit comes with good and really bad news

While any audit that Tether can complete is undoubtedly good news, the security audit was announced shortly after a highly critical WSJ article that detailed the use of USDT by Vladimir Putin’s regime to purchase weapons and ammunition. A Russian gun smuggler, Andrey Zverev, used USDT and Garantex (a Russian crypto exchange) to purchase guns and ammo for the Russian military.

Read more: UK crypto firm Copper sent 1,700 ETH to Russian arms dealer, report

If the WSJ article is accurate then the security audit and the fact that Tether is now the largest company in the crypto industry hold little water compared to the possible ramifications of being Putin’s cryptocurrency of choice.

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A dual probe by US and UK investigators is investigating the movement of 20 billion tether (USDT) through crypto exchange Garantex after both countries instituted sanctions against the exchange.

According to Bloomberg sources, the transactions involved in the probe may constitute one of the biggest breaches of wartime sanctions since Russia began its invasion of Ukraine.

The investigation into the possible violation of wartime sanctions doesn’t necessarily indicate wrongdoing by Tether Holdings or its affiliated companies. A Tether Holdings spokesperson reiterated that the firm remains committed to working with law enforcement to catch and prevent criminal misconduct.

According to an Estonian newspaper, Garantex has ties to a convicted gang member, a violent debt collection agency, and a state-backed oil company in Russia. With support from the International Consortium of Investigative Journalists (ICIJ), that newspaper published details of the misbehavior of people connected to Garantex.

Read more: Russian founder of sanctioned exchange Garantex starts Tether desk

According to the US Treasury, Garantex has willfully disregarded anti-money laundering (AML) and countering the financing of terrorism (CFT) obligations and has allowed its systems to be abused by illicit actors. Crypto wallets controlled by Garantex are listed on the Office of Foreign Assets Control’s Specially Designated Nationals List.

In December 2023, Russian bank InDeFi Bank launched a tether trading project in collaboration with Russian company Exved. An executive at that bank is the founder of Garantex.

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