//Tether Audit by Friedman LLP has Ended Abruptly

Tether Audit by Friedman LLP has Ended Abruptly

Over the weekend it appears that Friedman LLP has ended it’s audit of Tether without any formal statement thus far.

Friedman had been working on an audit of Tether, which has close ties to the cryptocurrency exchange Bitfinex. Critics of the two companies, most prominently the blogger who goes by the handle Bitfinex’d, have claimed that Tether had been printing tokens out of thin air to drive up the price of bitcoin on the exchange.

Reports surfaced Saturday night that Tether and their auditor, Friedman LLP, had dissolved their relationship. Due to the weekend, independent confirmation has not been received. Calls to Friedman LLP have gone to voicemail.

It does seem unusual for either company to take such an action without issuing a formal statement, particularly since this would create a lot of concern. Many in the crypto community have had concerns about whether Tether truly maintains adequate reserves to redeem all the outstanding tether tokens. The company had hired Friedman LLP to conduct an audit in an effort to resolve the community’s concern.

In a Tether spokesperson’s email to CoinDesk the statement reads:

“We confirm that the relationship with Friedman is dissolved.  Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable time frame. As Tether is the first company in the space to undergo this process and pursue this level of transparency, there is no precedent set to guide the process nor any benchmark against which to measure its success.”

The company remains “committed to the process,” the Tether spokesperson added.

The market has not responded well to this, and, overnight, seems to be pricing tethers at rather less than a dollar. BTC is about $400 lower on GDAX/Coinbase than Bitfinex for once, because GDAX deals in actual dollars and Bitfinex in tokens that the market doesn’t quite so strongly believe are dollars any more — so traders are selling their not-USD on Bitfinex and buying BTC, which they can take elsewhere to sell for USD. This raises the “price” on Bitfinex and lowers it on the other exchange.

Cryptocurrency enthusiasts on Twitter had raised doubts about the status of the relationship last week, noting that Friedman had dropped Bitfinex’s name from the list of clients on the audit firm’s website.

Tether has been the source of much controversy for the past year, and the company has struggled to respond to critics. The company, which shares some of the same owners as Bitfinex, a major cryptocurrency exchange, issued the following statement last year:

“Friedman LLP has been engaged to perform historical balance sheet audit procedures for Tether Limited. However, as the amount of Tethers in circulation has increased substantially in recent months, we have also asked Friedman to analyze our bank balances and our issued and outstanding token balance on an interim basis. Friedman agreed to perform consulting services for us in an effort to provide management with useful information concerning Tether’s cash position and Tether tokens issued and outstanding as of an interim date. Friedman was able to provide consulting services for us on an expedited basis, using a procedures date of September 15, 2017. These consulting services do not constitute an audit or attestation engagement, which would include a significantly expanded scope of procedures and take substantially more time to complete.”

Any “dissolution” of the relationship between Tether and Friedman LLP would invite great suspicion from the community, as this would seem to run contrary to Tether’s desire for greater transparency.

The cryptocurrency community has expressed deep skepticism over the issuance of tether tokens for quite some time now. It is not uncommon for the company to release massive amounts of tether, $50 to $100 million at a time, which leaves many wondering who and what is behind those funds. Since the disruption of Bitfinex’s banking relationships early last year, the exchange has become heavily dependent on its sister company’s tokens to move funds in and out of the exchange. Some have speculated that Tether may be operating a fractional reserve, issuing more tokens than they have backing for, and sending them to Bitfinex. The exchange then uses those tokens as collateral to create leveraged long or short positions in the Bitcoin market.

David Gerard, wrote on twitter:

The Twitter commentator Bitfinex’ed who is a regular commentator on Tether had this to say on the latest developments:

In a preliminary report released in September, Friedman said Tether had $442.9 million of cash on reserve, matching the outstanding issuance of USDT – but that assessment was not a full audit and contained numerous caveats.

What is Tether?



Tether (USDT) is a dollar-substitute token, that you can move around more easily than an actual US dollar. It’s popular with exchanges that can’t or don’t want to deal in USD.

Tether, Inc. — which was set up by the people from the large crypto exchange Bitfinex, and remains closely associated — issue these as tokens running over other blockchains. They state that every USDT is backed by a US dollar on deposit. So far, the market has treated USDT as if they are indeed pegged to USD.

However, there have been a lot of questions about this, mainly because Tether has been issuing new USDT, coinciding with dips in the price of a bitcoin. This accelerated recently and over half a billion dollars’ worth of tethers have been issued just this month of January.

Tether maintain that all of these new USDT are backed by USD on deposit — that this isn’t just fictional reserve banking — but there has never been a proper audit of all of this and now the official auditors have left in a highly unusual manner the doubts are increasing.


There is literally one USDT/USD trading pair that you can cash out of tethers in, on Kraken. Now people are trying to use this very small gateway to get real dollars out.

Tether has dropped in value before, when 1 USDT went 0.91 USD in mid-April 2017, just before the present massive crypto increase in value was starting and it’s peaked at 1.07 USD in recent times. However the spread over the weekend between USD and USDT exchanges, does look a little worrying.

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