Justin Bons Accuses Tether of Massive Fraud and Lack of Transparency

Key Insights:

• Justin Bons warns Tether’s lack of audits may pose risks to the entire crypto market.
• Tether faces scrutiny over missing audits, possible mismanagement, and alleged criminal associations, says Justin Bons.
• Bons urges crypto users to reconsider reliance on USDT, citing risks of a catastrophic market collapse.

Justin Bons, the founder of Cyber Capital, has accused Tether, the issuer of the popular USDT stablecoin, of being a large-scale fraud. He raised concerns about the company’s lack of transparency, claiming it poses a risk to the broader cryptocurrency market. Bons’ warnings, shared in a series of posts on social media platform X, suggest that Tether could be a bigger scandal than both FTX and Bernie Madoff’s Ponzi scheme.

Bons expressed deep concerns about Tether’s failure to provide verifiable proof of its reserves. According to him, despite the company’s promise to conduct audits since 2015, Tether has never completed an independent, unrestricted audit to confirm its financial backing. 

The Cyber Capital founder claimed that USDT tokens, which are widely used in the cryptocurrency market, are backed by reserves that have never been properly verified. He suggested that this lack of accountability could result in catastrophic consequences for the market.

Tether has faced regulatory scrutiny over the years, including a $41 million fine from the U.S. Commodity Futures Trading Commission (CFTC) in 2021. The penalty was imposed for misleading statements about its reserves. Despite this, Bons argued that the stablecoin issuer has still not provided clear evidence of its financial standing, calling USDT “counterfeit money.”

Potential Collapse Compared to Terra Luna

Bons also drew a parallel between Tether and the collapse of Terra Luna in 2022. He warned that if Tether were to fail, the effects could be even more disastrous due to the scale of USDT’s circulation. With approximately $118 billion worth of USDT tokens in circulation, Bons emphasized the risk of assuming these tokens are fully backed by dollar reserves without any formal proof. He urged users of the stablecoin to “wean off” USDT before it potentially brings down the broader crypto market.

The potential for a collapse of this magnitude is concerning for the crypto community. Tether’s central role in cryptocurrency trading makes any instability within the company a matter of concern for the wider market. Bons stressed the importance of transparency and the need for independent verification of Tether’s reserves to prevent a market crash similar to what was seen with Terra Luna.

Governance and Alleged Ties to Criminal Activity

Beyond the audit issues, Bons also questioned Tether’s governance structure, pointing out that the board of Tether Holdings consists of only two members. According to him, this creates risks of mismanagement and raises concerns about the security of the reserves backing USDT. Bons implied that the lack of a robust governance framework at Tether Holdings might leave the company exposed to operational risks.

Additionally, Bons referenced Tether’s alleged connections to past criminal activities. He pointed to reported ties with Crypto Capital, a Panama-based bank that was shut down for laundering money for Colombian drug cartels. He also mentioned links between Tether’s founders and individuals involved in Ponzi schemes and other criminal enterprises. These associations, Bons argued, cast further doubt on Tether’s credibility and trustworthiness.

Legal Troubles and Ongoing Scrutiny

Tether has been embroiled in legal challenges in recent years. Most recently, Celsius Network Ltd., a bankrupt crypto lender, filed a lawsuit against Tether in August 2024. The lawsuit accuses Tether of fraudulent transfers of Bitcoin worth over $3.5 billion, worsening Celsius’ financial situation before its collapse. Tether’s CEO, Paolo Ardoino, denied the allegations and dismissed the lawsuit as a “shake down.”

Despite the ongoing legal challenges, Tether has taken some steps to combat illicit activity. The company, alongside other stablecoin issuers like Circle, recently blacklisted accounts linked to the North Korean hacker group Lazarus. This move was part of Tether’s broader efforts to address concerns surrounding its role in facilitating illegal transactions.

However, Bons’ accusations, coupled with the legal troubles, have added to the scrutiny Tether faces. The company’s failure to provide full transparency about its reserves continues to raise questions about the stability and safety of the USDT stablecoin. As the crypto community monitors these developments, the future of Tether remains uncertain.