SCOOP: Tether minted most USDT to just 2 firms — Alameda and Cumberland

Over two-thirds of all Tether minted across multiple years went to just two crypto companies — Alameda Research and Cumberland Global — sources familiar with the matter exclusively told Protos.

In that time, Hong Kong-headquartered Tether issued billions of dollars worth of its controversial stablecoin USDT, and with these numbers we can reveal the true size of the Tether clique.

Crypto exchange FTX parent Alameda Research, founded by 29-year-old crypto billionaire Sam Bankman-Fried, accounted for nearly a third of all Tether minted.

Liquidity provider Cumberland Global, owned by Chicago-based trading firm DRW, had even more Tether minted to its name. 

Tether directly sold USDT to many other companies and individuals. None came close to the numbers Alameda Research and Cumberland put up. 

Protos understands the nearest competitor minted a mere few hundred million USDT.

Cumberland is crypto’s liquidity

Cumberland Global — a name well-known within elite crypto circles — is likely unfamiliar to most retail traders. That’s on purpose. 

The company is a subsidiary of DRW, a trading firm founded in 1992 by its chief exec Donald R. Wilson.

To outsiders, DRW’s main claim to fame is its successful defeat of the Commodities Futures Trading Commission (CFTC) in a five-year lawsuit over alleged market manipulation, which ended in 2018.

DRW is considered one of finance’s biggest traders. The Financial Times described the firm as “an important source of volume on the world’s largest futures exchanges.”

Wilson’s DRW is huge but quiet, employing over 1,200 people worldwide. “DRW launched Cumberland in 2014, which has become one of the world’s leading crypto liquidity providers,” reads its website.

Based on the information Protos has gathered, Cumberland is apparently the number one liquidity provider in crypto, period — thanks to Tether.

8/ The CFTC's argument went something like this:

– DRW intended its bids to influence the contract price;
– That factor alone caused the price to be artificial; so
– DRW’s bids were inherently manipulative.

DRW took the position of course that its trading strategy was lawful.

— Katherine Wu (@katherineykwu) December 5, 2018

Exact details of DRW’s role in crypto-related markets are scarce. Cumberland’s website declares it specializes in onboarding “financial institutions and high net worth individuals.”

One example of its influence came in 2019, when the SEC paid DRW a visit to specifically discuss cryptocurrency and the circumstances surrounding the listing of VanEck’s SolidX Bitcoin Trust on Cboe exchanges.

The Bitcoin Trust was allowed to be offered to institutional investors with the help of over-the-counter desks like the ones DRW operates.

Whatever Cumberland is doing, it seems to require more Tether than anyone else.

Alameda is Tether’s second biggest donor

On the flip side of the proverbial Tether coin is Alameda Research. The “multistage crypto and fintech investment firm” is closely associated with chief exec Bankman-Fried’s other venture, crypto exchange FTX.

Alameda Research started in 2017, specifically adopting the moniker “Research” to avoid banking problems, Bankman-Fried admitted earlier this year.

Protos understands Alameda Research appears to have ramped up the amount of USDT bought directly from Tether in the wake of FTX’s inception.

Tether mints only increased exponentially after Bankman-Fried founded FTX in 2018.

It’s likely Alameda Research utilizes the bulk of its USDT in similar ways to Cumberland: providing liquidity to the many markets in which it’s involved — including those at its subsidiary FTX.

Alameda Research also acts as a venture capitalist in the crypto space; no doubt funding crypto-native projects with USDT would be relatively frictionless compared to fiat currencies.

Protos reached out to Cumberland and Alameda Research to learn more about how they utilize Tether. At press time, we’re yet to receive any response.

Tether minted far outweighs redeemed

Tether advertises that every USDT minted is redeemable for a US dollar. 

Over $60 billion worth of USDT now circulates through the crypto ecosystem. Analysts have voiced concerns over whether Tether has enough cash on hand to facilitate sudden influxes of redemptions.

Hypothetically, if the company doesn’t have enough liquid assets to process those redemptions, a bank run could occur.

This would negatively impact crypto markets in substantial — but largely unknown — ways.

[Read more: Tether’s latest disclosure wasn’t pie charts — so we made our own]

So, it’s worth noting both Cumberland and Alameda Research redeemed inconsequential sums of USDT compared to the volumes Tether sold them.

According to sources, other entities have cashed in far more USDT.

Regardless, Protos understands Tether has historically never faced a large amount of redemptions. Issuances have outpaced redemptions by more than 20:1.

Find us on Twitter for more breaking crypto news.