Tether deactivated accounts of MoonPay, BlockFi and CMS Holdings by 2021

Stablecoin issuer Tether deactivated accounts of multiple well-known crypto companies by 2021, according to documents released this week by the New York Attorney General that relate to a legal settlement.

The list of deactivated accounts include crypto trading platform MoonPay, crypto lending firm BlockFi, crypto investment firm CMS Holdings and crypto hedge fund Galois Capital. BlockFi is currently going through bankruptcy proceedings, while Galois Capital has shut down.

The list includes companies and individuals who were terminated for various reasons, according to a source with knowledge of the situation. While the NYAG investigation finished in February 2021, some of the documents are dated up until June 2021.

"We do not want to comment on any individual relationship, but everyone did pass the strict compliance checks at onboarding and ongoing monitoring required by Tether’s compliance policies," Tether said in a statement earlier today.

BK Offshore Fund was also on the list of deactivated accounts. In February 2023, it was sued by the U.S. Securities and Exchange Commission under allegations that it was a fraudulent scheme, commingled investor funds and made $3.6 million of Ponzi-like payments to investors before collapsing in 2022.

The list of deactivated accounts includes a total of 29 accounts that have been deactivated. User codes for each account have been redacted, and the list doesn't contain any other information.

The NYAG's investigation into Tether

The documents were gathered by the NYAG in its investigation into Tether, which resulted in a February 2021 settlement and an $18.5 million fine. They were released after a freedom of information request made by crypto publication CoinDesk, and the Attorney General's office made them available to The Block. 

The documents provide further information into Tether's banking setup, its bitcoin lending operations and information about its commercial paper holdings at the time. The documents also show that Tether did partially back its stablecoin with Chinese commercial paper, something the company did not publicly acknowledge at the time — despite strong rumors and articles suggesting it was the case. The company no longer has any commercial paper backing its stablecoin.

Tether initially opposed the NYAG releasing these documents but dropped its opposition.

"After fiercely defending this, Tether dropped its opposition, allowing CoinDesk and other media access to these documents to prove its commitment to transparency and openness over further, unproductive U.S. litigation," the company said.

The Block has reached out to each company mentioned for comment. It’s unclear whether any of the companies have other accounts with Tether or have since set up new accounts.