Is LEO token manipulating Tether’s balance sheet?

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Rumors of unusual trading activity by Unus Sed Leo (LEO), a token connected to Tether (USDT), are recirculating. Odd price movements and repetitive trades have led to speculation that traders with an interest in Tether might be manipulating LEO’s price to protect the stablecoin’s balance sheet.

Protos has been unable to verify claims of illegitimate trades in LEO markets. Similarly, USDT’s managers have not indicated that they back USDT with assets exposed to LEO’s price. LEO’s market capitalization is $3.8 billion.

Approximately 97% of the LEO issued on Ethereum is held on the Bitfinex exchange, which also clears over one-third of LEO’s worldwide spot trades. Just 10 wallets hold 99.8% of LEO’s supply. Of course, some of these wallets are exchanges’ omnibus wallets that hold LEO on behalf of their customers.

What is the $3.8 billion Unus Sed Leo token?

Far less popular than Tether, Unus Sed Leo nevertheless has close ties with the world’s largest stablecoin. LEO provided indispensable funds for the 2019 cash-strapped Bitfinex, the sister exchange that shared executives with Tether.

The token’s name is derived from The Lioness fable by Aesop and its adaptations. Unus Sed Leo, translated from Latin, means “One, but a lion.”

Bitfinex’s parent company, iFinex, launched LEO in May 2019 in an effort to raise money when US authorities seized funds from drug cartel-linked Crypto Capital Corp.

iFinex raised $1 billion by selling LEO in an IEO with the promise that it would use 27% of the consolidated gross revenues of iFinex to burn LEO. Bitfinex also promised to use 95% of any net funds it recovered from Crypto Capital Corp and 80% of any net funds it recovered from a 2016 hack to burn LEO.

As of October 24, 2022, iFinex has repurchased and burned 66.3 million LEO. In the more than three years since its ICO, that’s just 7% burned of its 933 million supply.

Price manipulation in exchange tokens

Although Protos was not able to confirm that any of Tether’s assets are affected by LEO’s price, there are other crypto companies that directly hold their own tokens on their own balance sheet. Binance holds BNB; Huobi holds HT; Tron holds TRX; FTX holds FTT; Crypto.com holds CRO; KuCoin holds KCS, etc.

Indeed, Celsius once held a significant amount of CEL tokens and former Celsius director of financial crimes compliance Timothy Cradle affirmed suspicions that Celsius was manipulating the price of its own token.

Cradle accused Celsius of using customer funds to prop up CEL, claiming that it actively traded its own token to manipulate the price.

Other onlookers accuse traders connected to Tether of propping up the price of LEO for the benefit of USDT. No executives affiliated with Tether nor iFinex have commented on the chatter.

Sporadically, investors will allege that Tether was used to manipulate bitcoin’s price in various class-action lawsuits that Tether usually calls “meritless.” Tether and Bitfinex previously settled a lawsuit with similar allegations.

More than three years after its issuance, LEO maintains its status as a tightly held, illiquid token associated with an exchange with declining trading volumes — and therefore low repurchases and burns. With the passage of years, the full recovery of funds from Crypto Capital Corp seems increasingly unlikely. Revenues continue their multi-year decline at iFinex, which also makes the burn mechanism of LEO less appealing.

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