Tether, amid controversy, has recently released an internal memorandum regarding consulting services. Tether issues USDT, which is a cryptocurrency that is backed by real dollars at parity. In the recent months, the company has issued a huge number of tokens and has since been extensively scrutinized as to whether these tokens are actually backed by real currency.
The accusations against Tether further intensify as the company is facing severe banking issues. The Taiwanese bank that used to deal with the company has blocked its transactions. Regardless of this development, the number of USDT tokens in circulation has increased by almost 500% since the announcement of banking issues.
The memorandum was written by Friedman LLP (FLLP) and details the company’s cash and token balances as of 15th September 2017. At that time, Tether’s total market capitalization was around $437 million USD.
Bitcrypto’ed, who is a famous critic of Tether, has scrutinized the memo. In an article published on Medium, the critic criticizes the memo by using the company's own words, as the memo “does not constitute an audit or attestation engagement”. The memo states that the information provide within it are not intended for use by any other party except for the management team of Tether Ltd.
Bitcrypto’ed provided further evidence and stated that the company states in the memo:
“FLLP did not evaluate the terms of the above bank accounts and makes no representations about the client’s ability to access funds from the accounts or whether the funds are committed for purposes other than tether token redemptions.”
Bitcrypto’ed observes that, unlike the memo released in March, this memo does not provide the names of the financial institutions with whom the company is dealing with. The author also noticed the repeated use of “for the benefit of Tether Limited,” which leads to speculation that the company is holding millions of dollars under another name or a trust as it cannot directly receive any banking services. By concealing the identity of their financial partners, Tether limits the ability of its customers to sue or file a law suit.
Tether lost its partnership with their Taiwanese bank on April 18, 2017, and it is unclear whether it has resolved these issues. Bitcrypto’ed speculates that the banking problem faced by Tether would make it excessively difficult for the company to maintain the parity of Tether with the dollar. The company may be using a fractional reserve system in order inflate the supply of tokens.