Embattled “stable coin” issuer Tether has finally gotten a chief compliance officer.
The British Virgin Island-based company announced on Thursday that Leonardo Real will be responsible for making sure Tether is following regulations. Real was previously quality control manager at Bank of Montreal’s anti-money laundering office.
Tether, along with its sister company, Bitfinex, were subpoenaed by the Commodity Futures Trading Commission in December 2017.
Real is an interesting choice for Tether. A middle manager at BMO, he was an occasional contributor to ACAMS Today. For those not in the know (which is probably most people), it’s the magazine for the Association of Certified Anti-Money Laundering Specialists.
With two more senior BMO employees (including Peter Warrack, who subsequently became Bitfinex’s chief compliance officer), Real wrote, “When Two Worlds Collide,” a 2016 piece about how cryptocurrencies are used by drug and arms dealers to hide their money from law enforcement. Last year, after two ACAMS events, he wrote in an article titled, “The Blocktrain Has Left the Station”:
“Although it is true that the owners of cryptocurrency wallets are not publicly known, many blockchains offer a complete public record of all transactions that have ever occurred and this information can be leveraged for investigative purposes.”
He also highlighted companies such as Chainalysis, noting that:
“Such software gives exchanges some of the tools necessary to conduct AML investigations. It also gives exchanges the ability to present data from an independent source that verifies their client’s activity. Such reports can be useful in growing or improving relationships with financial institutions, regulators and law enforcement.”
A frequent criticism of Tether is its connection to Bitfinex, the world’s largest bitcoin exchange. Both companies share many of the same founders and senior managers and a study by University of Texas professors John Griffin and Amin Shams suggested that Bitfinex was using Tether to manipulate the price of bitcoin.
Tether markets itself as being fully backed, 1-to-1, by U.S. dollar deposits. In April 2017, Tether lost its banking relationship with Wells Fargo. Shortly thereafter, it began issuing tether tokens at breakneck speeds, going from 50 million outstanding to 2.7 billion today, coinciding with the skyrocketing price of bitcoin and other cryptocurrencies. The company shows a balance sheet on its site but those numbers haven’t been audited. At the end of January, Tether no longer had an auditor, Friedman LLP. The reasons for the dissolution of that relationship have yet to be revealed.
Four weeks ago, Tether published a report from Freeh, Sporkin & Sullivan LLP (former FBI director Louis Freeh’s firm) stating that there were more than enough dollars backing up tether balances. However, Tether’s own general counsel, Stuart Hoegner, said to Bloomberg’s Matthew Leising “an audit cannot be obtained.”
Perhaps the company’s new compliance officer will know why soon enough.