Tether and Bitfinex were fined $42.5 million by the CFTC for making claims that were "untrue or misleading."

On allegations that the USDT stablecoin was not fully backed at all times and that Bitfinex breached a previous agency order, the Commodity Futures Trading Commission (CFTC) fined Bitfinex and Tether more than $42 million.

On Friday, the federal commodities regulator reached an agreement with the crypto businesses' siblings, prohibiting both from "any additional violations of the Commodity Exchange Act (CEA) and CFTC regulations."

Tether's stablecoin was only completely backed by reserves for one-quarter of the time between 2016 and 2018, according to a CFTC press release. Tether's reserve funds were also mixed up with the company's corporate money, and reserves were maintained in non-cash products.

"At different times, Tether kept some of the Tether Reserves in bank accounts other than the Tether Bank Accounts." Tether claims that it has never failed to fulfil a tether token redemption request, and that it has included receivables and non-fiat assets among its counted reserves at times," according to an order attached to the release.

In a settlement investigation into Tether and Bitfinex earlier this year, the New York Attorney General's office reported similar findings.

"The ruling further finds that, rather than maintaining all USDT token reserves in US dollars as stated, Tether relied on unregulated businesses and select third-parties to store funds comprising the reserves," according to the press release.

Tether and Bitfinex spokespersons did not respond to requests for comment right away.

The firm disputed the charges in a statement issued immediately after the CFTC announcement.

"There is no conclusion that the Tether tokens were not completely supported at all times - merely that the reserves were not all in cash and all in a bank account titled in Tether's name at all times." Tether has always kept appropriate reserves and has never failed to satisfy a redemption request, as it stated in the Order," Tether wrote.

In a simultaneous action, the CFTC said it settled commodities allegations against Bitfinex.

"The judgement alleges Bitfinex engaged in illegal, off-exchange retail commodities transactions in digital assets with US citizens on the Bitfinex trading platform and operated as a futures commission merchant (FCM) without registering as required," a press release said.

Bitfinex will pay $1.5 million and implement "additional measures" to ensure that it does not facilitate illegal commodities transactions in the future, the press release said.

In a concurring statement, CFTC Commissioner Dawn Stump stated that she agreed with the agency's findings but expressed concern about the CFTC's role in specifically regulating stablecoins.

"We should make it plain to the public that we do not regulate stablecoins and have no daily insight into the operations of those who issue them," Stump said. "However, by investigating and addressing this matter, should we give consumers of stablecoins the false sense of security that we are overseeing persons who issue and sell these coins and protecting them from wrongdoing?"

Stump questioned whether the Commodity Futures Trading Commission was broadening its jurisdiction versus protecting investors.

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