The USDT issued by Tether has always been called a time bomb in the circle. Yesterday, when domestic friends were still asleep, major negative news appeared on Tether, the issuing company of USDT, and the digital currency market also ushered in a round of plunge.

The New York Attorney General's Office claims that digital currency exchange Bitfinex lost $850 million and then secretly covered the loss using reserves from the stablecoin company Tether.

(Bitfinex and Tether belong to the same company, iFinex Inc., and the core members of both companies are a group of people.)

New York prosecutors launched a lawsuit against Tether and its parent company, directly pointing out four major issues with Bitfinex:

1. The information of the cooperative payment processor is not disclosed

2. Information on the $850 million loss of funds from Crypto Capital, a Tether payment processor

3. The US$900 million revolving credit loan reached with Tether may involve information on conflicts of interest

4. Information on the transfer of $625 million in Bitfinex funds.

Not only that, the New York prosecutors even pointed out that Bitfinex and Tether have related transactions, and DigFinex, a company that provides loan guarantees for the two companies, is actually controlled by the owners of Tether and Bitfinex.

Prosecutors stated that they have begun to investigate digital currency-related exchanges since 2018. Because Tether occupies a considerable market share, some people suspected that it did not have a considerable amount of U.S. dollar reserves, so it attracted the attention of the prosecution .

Looking back, Tether's dynamics, we can see some clues:

At the end of 2018, Tether changed the rule that USDT was strictly pegged at 1:1 to the U.S. dollar, and changed it to "the exchange rate changes with the market, and it is no longer strictly in accordance with 1:1 exchange.

In March 2019, Tether changed the description on the official website, changing the full reserve system to a partial reserve system, and changing the equivalent US dollar reserve to traditional currency and cash equivalents.

These signs all prove the fact that Tether has insufficient US dollar reserves, and now the New York prosecutor's allegations are pushing Tether to a climax of public opinion.

In the face of the prosecution's lawsuit, Tether officials also responded:

"The New York Attorney General’s court filings are dishonest and false statements, including an alleged $850 million “loss” at Crypto Capital. Instead, we are told that these funds at Crypto Capital were not lost but were actually seized and secured.

We have been actively working to enforce our rights and pursue remedial measures so that these funds can be released. Regrettably, the New York Attorney General's Office appears intent on undermining these efforts to the detriment of our clients."

The strange thing about this matter is why Tether’s $850 million was frozen. It is reported that the $850 million was frozen in banks in Portugal, Poland, the United States and other countries.

And the prosecution must have known about this, why did the prosecution choose to claim that it was insolvent when its assets were frozen.

For this matter, Bloomberg’s comment is: If the authorities find any evidence of wrongdoing in Tether, or if traders lose confidence in the company’s ability to exchange 1 Tether for 1 dollar, USDT may soon lose value. But only time will tell whether Tether's recent challenges are temporary or the start of bigger ones.

Jehan Chu, managing partner of Kenetic Capital, a blockchain investment and consulting firm, said: "Tether's stable advantage can only be sustained if it can thoroughly address public criticism of its lack of transparency.

Zhao Dong said: "From 13 years to now, I have been a loyal customer of Bitfinex. Bitfinex can be said to be just like its name Finex (Phoenix), it has been troubled by many disasters, but it has always stood firm. I have been a customer for 13 years. I just wanted to invest in Bitfinex but failed. In 2015, bfx was frozen by Wells Fargo for 140 million US dollars. As a last resort, we created USDT to successfully solve the problem of deposit and withdrawal, and then sued Wells Fargo to unfreeze the funds.

In August 2016, when hackers stole coins, Bitfinex offered a debt-to-equity swap plan. I was fortunate to become a shareholder, and everyone was happy with the result. Wall Street failed to spread rumors about USDT last year. This time, when the USDT circulation reached a new high, Wall Street played hooligans again. I believe it will be the same this time, Bitfinex will have no problem. "

I have to admit that the problem of USDT is like a thorn in the throat for people in the currency circle. Everyone knows about this, but they can’t get rid of this thorn. This time is a test for Tether, but it is also an opportunity. If If it can survive smoothly, its position in the stablecoin market will be stronger.

As one of the world's largest top exchanges, its net profit in 2018 was about 800 million US dollars, which shows its profitability. But this time, in the face of the New York prosecutor's charges, can Bitfinex provide corresponding evidence to prove itself and survive smoothly? The aftermath of this catastrophe remains to be seen.