It’s also going along with a number of other law enforcement seizure requests.
Regardless of whether the decision to comply with sanctions was voluntary or by decree, it might be a step in a positive direction.
Of Tether’s 161 freezes, only 11 wallets held a non-negligible quantity of USDT. It claimed that freezing the 150 OFAC-sanctioned wallets with negligible balances served as “additional precautionary measures.”
Bloomberg exposé of USDT human trafficking operation
Some attribute Tether’s recent interest in complying with law enforcement requests to Zeke Faux’s unexpectedly best-selling book, Number Go Up, which a US prosecutor even introduced as evidence in a criminal trial. In the book, Bloomberg investigative journalist Faux visits several human trafficking and enslavement operations that depend on USDT.
Faux chronicled Tether executives’ negligence in these human atrocities while ignoring law enforcement requests. He described seeing enslaved Cambodians working in office tower prisons running USDT-based romance scams.
As Faux’s book tour shed light on Tether executives’ misbehavior at a global scale, they have seemingly paid attention. Newly-appointed CEO Paolo Ardoino led this quarter’s unprecedented number of wallet freezes.
Volunteer blockchain analysts were quick to look into Tether’s recently frozen USDT wallets. ZachXBT found that one now-frozen address holding 3.4 million USDT might be linked to the hack of a betting platform called Stake. He said it was likely connected to North Korea.
Tether’s selective sanctions compliance and freezes
Tether’s ability to freeze USDT dates back to November 2017, when it forced Omni to introduce a hard-fork allowing it to freeze USDT on its blockchain. It said hackers had stolen nearly $31 million from its treasury. Thereafter, aside from self-serving freezes, Tether mostly ignored USDT freeze requests for years.
Nowadays, it brags about its remote control of USDT wallets. Incredibly, Tether says that, for a price, it can help with the recovery of stolen or mistakenly sent USDT. It offers this service to people who attest that they have mistakenly sent more than $1,000 in tokens to the wrong address.
Tether and its sister company, Bitfinex, have previously taken a lax attitude toward USDT sanctions compliance. It previously said it would only sanction Tornado Cash-related addresses if OFAC specifically requested it. This approach contrasted the approach of USDC backer Circle, which promptly blacklisted Ethereum addresses associated with Tornado Cash.
Tether’s history includes settlements with the CFTC, the New York Attorney General, and the Department of Justice. Offenses included failure to register with the CFTC, false claims that USDT is fully backed by US dollars, covering up financial losses, and alleged bank fraud. Tether and Bitfinex have always had trouble keeping USD bank accounts open for any substantial length of time.
For years, Tether ignored requests to freeze USDT addresses from law enforcement. Within the past few weeks, however, Tether executives have suddenly taken notice of their deteriorating brand and are taking an interest in cleaning up their reputation.