The US Department of Justice has reportedly begun an investigation into USDT issuer Tether for potential AML rules violations.
The U.S. Department of Justice (DOJ) has reportedly initiated an investigation into Tether, the issuer of the USDT stablecoin, for potential anti-money laundering violations. This news has caused USDT to lose its dollar peg, prompting a selloff across the crypto market.
DOJ Allegedly Investigating Tether
As the Wall Street Journal (WSJ) reported, U.S. officials are looking into Tether for possible breach of sanctions and anti-money laundering regulations.
The investigation is examining whether USDT may have been used by third parties to fund illegal activities such as drug trafficking, terrorism, hacking, or to launder proceeds from these activities.
The Manhattan U.S. Attorney’s office is leading the investigation. The WSJ article also mentions that the U.S. Treasury Department might impose sanctions on Tether, potentially preventing Americans from using USDT in transactions.
In response to the WSJ report, Tether CEO Paolo Ardoino said in an X post,
“WSJ is regurgitating old noise. Full stop.”
He indicated that the firm had informed WSJ that it has no knowledge of any ongoing investigation into the company.
The implications of an investigation of this scale could be substantial for the crypto market, as USDT is the largest stablecoin by market cap and widely utilized.
An official crackdown on Tether could create ripple effects throughout the market, similar to when the U.S. government filed charges against Binance and its former CEO, Changpeng “CZ” Zhao, over alleged money laundering violations.
Tether Slams WSJ’s “Irresponsible Reporting”
Tether has released a statement criticizing WSJ for what it calls “irresponsible reporting” filled with “reckless allegations.”
Tether noted that the report was based on “pure rank speculation” and that the news outlet did not include the company’s cooperation with law enforcement to combat illicit use of USDT.
Despite Tether’s denials, the news of a potential DOJ investigation has already stirred fear, uncertainty, and doubt (FUD) in the market, causing USDT to lose its dollar peg. This recent depeg is seen as a direct result of panic sparked by the report.
The market reaction has also led to a selloff, with the price of Bitcoin and other cryptocurrencies dropping in response. Bitcoin fell from $68,000 following the release of the report.
Meanwhile, Nic Carter of Castle Island Ventures suggested the investigation might be politically motivated.
In an X post, he claimed the DOJ is targeting Tether due to CEO Howard Lutnick’s political ties, noting that Lutnick is a “big Trump guy.”
He alleged that the leak to WSJ was intentional, meant to damage both Trump and the crypto sector.
This news comes shortly after Tether’s CEO Paolo Ardoino stated that the company currently has no plans for a public offering.
