Investors Warn That Tethers 118B Reserves Could Be Subject to Audit and Liquidity Challenges

Tether’s lack of third-party audits is raising investor concerns about a potential FTX-like liquidity crisis from the $118 billion stablecoin giant.
Investor concerns are mounting around Tether, the issuer of the world’s largest stablecoin USD₮ (
USDT
).
Cyber Capital founder Justin Bons, who shared his concerns about Tether being a potentially bigger scam than FTX, catalyzed the latest wave of concerns.
Bons
wrote
in a Sept. 14 X post:
In 2021, the United States Commodities and Futures Trading Commission (CFTC)
fined
Tether a $41 million civil monetary penalty for lying about USDT being fully backed by reserves.
Concerns over the stablecoin giant’s influence over the crypto space grew louder recently after data revealed that
Tether’s market share surpassed 75%
of the entire stablecoin market after a 20% increase over the past two years.
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A hypothetical Tether implosion would be banking-driven, unlike the FTX collapse
Part of the concerns are fueled by one of the industry’s most notorious black swan events, the
collapse of the FTX exchange
, which led to $8.9 billion in lost user funds.
While FTX’s collapse was due to its inability to honor mass customer withdrawals of $6 billion within three days, a hypothetical Tether implosion would be related to its banking partners, according to Sean Lee, the co-founder of IDA Finance.
Lee told Cointelegraph:
In May 2022, Tether honored over $16.7 billion worth of USDT customer withdrawals within 10 days without any issues.
In contrast, Washington Mutual Bank could not honor $16.5
billion
worth of withdrawals within 10 days, which led to what became known as the biggest banking failure in the US in September 2008.


Largest US bank failures. Source: Pew Research Center
Others believe that Tether is too big to fail. Notably, Anndy Lian, author and intergovernmental blockchain expert, doesn’t expect Tether to face issues but warned that generally, large centralized entities could pose a risk for the cryptocurrency space:
Cointelegraph has approached Tether for comment.
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Tether’s business structure and transparency raise concerns
On Sept. 8,
Tether invested $100 million
in Adecoagro, acquiring a 9.8% stake in the Latin American agricultural giant.
This latest investment gave us the first disclosure into Tether’s governance structure, according to Cyber Capital’s Bons, who wrote:
IDA Finance’s co-founder, Lee, was also concerned about Tether’s lack of transparency. He wrote:


X post about the Tether audit. Source:
Justin Bons
Despite Tether boasting over $118 billion worth of reserves in its second quarter “independent attestations conducted by BDO,” Cyber Capital’s Bons claims that Tether has yet to submit its reserves for a third-party audit:
Magazine:
Bitcoin ETFs may face hacker threats, Ellison seeks no prison time, and more: Hodler’s Digest, Sept. 8 – 14