Tether got a new Bahamian banker, Binance bid buh-bye to BUSD, and Justin Sun’s stablecoin fueled this week’s BTC price pump.
On Tuesday, Bloomberg reported that Tether had partnered with yet another Bahamian bank—Britannia Bank & Trust—to which customers looking to purchase Tether’s USDT stablecoin were being instructed to send their cash. Customers reported receiving these instructions for a couple of months now, but it’s unclear when Tether’s relationship with Britannia officially began.
More on Britannia in a moment, but the new partnership is a vivid illustration of the troubles that Tether has had maintaining connections with the U.S. banking system to permit its customers to (allegedly) purchase USDT with U.S. dollars.
In July, the U.S. Department of Justice (DOJ) unsealed orders authorizing the seizure of $105 million from the New York-based Mitsubishi UFJ Trust and Banking Corporation (MUFJ). MUFJ was allegedly obfuscating the fact that it was handling dollar transactions on behalf of Bahamas-based Deltec Bank & Trust, Tether’s primary banking partner.
Deltec is notorious for also working with Sam Bankman-Fried’s FTX exchange and market-maker Alameda Research, both of which filed for bankruptcy last November after fraudulently misappropriating their customers’ cash.
Years before that, Deltec provided the first ever ‘assurance’ that Tether was storing sufficient fiat reserves to support USDT (although the document was signed with an illegible scrawl with no printed name identifying the signer).
Tether also makes use of Bahamas-based Capital Union Bank, as revealed in April following the failure of New York’s ‘crypto-friendly’ Signature Bank. Tether had advised U.S. customers to send dollars to Capital Union via Signet, Signature’s 24/7 digital asset settlement mechanism, despite Signature previously shutting accounts associated with Tether and its sister company Bitfinex based on suspicions of bank fraud and terrorist financing.
Patrick Tan, general counsel of blockchain analytics firm ChainArgos, told Bloomberg that “the secrecy surrounding Tether’s banking relationships continues to be a major impediment … discouraging traditional asset managers with little tolerance for regulatory risk from more active participation in this space.”
One has to wonder how comfortable Britannia’s U.S. correspondent banks will be with the inevitable extra scrutiny that association with Tether invariably brings. Particularly given recent guidance from the U.S. Federal Reserve that its member banks are playing with fire when they hitch their wagons to stablecoin operations.
Fool Britannia
Britannia Bank & Trust is part of the London-based Britannia Financial Group, which is led by a family with an unhealthy fixation on its “more than fives [sic] centuries of history.”
Tether, with over $80 billion of USDT is now relying on a private Bahamian bank (headquartered in the UK) for $ off-ramps that based on its last financial filings has a GBP 191 million balance sheet. That’s not Tether resiliency. That’s desperation as that’s a flea sized bank. pic.twitter.com/cnbWnG3Wck
— Novacula Occami (@OccamiCrypto) August 30, 2023
History aside, filings indicate that Britannia’s Bahamian offshoot has a relatively puny balance sheet. It speaks volumes about Tether’s toxic brand that they’ve been reduced to partnering with such fiscal minnows, but there are other aspects in which Tether and Britannia likely find commonality.
For instance, Britannia founder Julio Martin Herrera Velutini stepped down as director last year after pleading not guilty to U.S. federal charges of bribing the former governor of Puerto Rico. Velutini, a dual Venezuelan-Italian citizen, was trying to convince the governor to dismiss the investigator, probing whether Velutini’s local operations had violated the Bank Secrecy Act.
Velutini’s exit led to his 26-year-old son Julio Cesar Herrera assuming control over Britannia. A fawning press release masquerading as a media profile painted Junior as “a shining example of how hard work and dedication can lead to incredible success,” leaving out the obvious advantages of being born the son of a billionaire.
Interestingly, Britannia once fired BDO in the middle of an audit the bean-counters had been hired by Britannia to conduct. The Italian branch of BDO was hired by Tether to provide its most recent ‘attestations’ of the fiscal reserves (allegedly) backing the $83 billion worth of USDT currently circulating.
Tether infamously fired its auditors Friedman LLP in January 2018 because Friedman’s “excruciatingly detailed procedures” were taking longer—and likely revealing more—than Tether was prepared to tolerate….
Read More: Tether gets new banker, Binance boots BUSD, Justin Sun pumps BTC