Mashinsky claims that USDT has been coined for crypto and that a $1 million prize has been given to unpick reserves.

Hindenburg Research is offering a $1 million reward for information on Tether’s reserves, claiming that Tether has yet to reveal nearly anything “regarding its counterparties.

A $1 million reward has been offered to anyone who can shed light on the precise backing of Tether’s reserves.

That support has recently become a little murkier, with Celsius Network CEO Alex Mashinsky allegedly saying that Tether mints fresh USDT in return for crypto assets, which appears to contradict Tether’s own terms and conditions.

Hindenburg Research, a “forensic financial research” business, tweeted to its 171K followers on Oct. 20 that it had doubts about the validity of Tether, and offered a reward of up to $1 million for crucial data on Tether’s reserves that it says may represent a “systemic” risk to investors.

Tether is a critical pillar of the multi-trillion-dollar cryptocurrency economy.  Nonetheless, despite its repeated pledges of openness, its holdings disclosures have been opaque.”

“The business claims to keep a large percentage of its reserves in the commercial paper but has revealed almost nothing about its counterparties, Hindenburg Research noted.

However, as many commentators pointed out, $1 million isn’t a lot of money to dish the dirt on a coin with a market worth of $70 billion.

Tether has been under severe investigation, with regulators taking action against the company on several occasions due to the makeup of its reserves. Tether issued a vague reserve breakdown in May, revealing a huge quantity of unidentified commercial paper and very little cash or bank deposits.

Tether and its sister firm Bitfinex struck an agreement on Oct. 15 to pay $42.5 million to the Commodity Futures Trading Commission, which claimed Tether lacked appropriate cash reserves for two-thirds of the time between 2016 and 2018.

Tether settled, but rejected the accusations, stating that there was no conclusion that Tether tokens were not fully backed at all timesmerely that the reserves were not all in cash and all in a bank account named in Tether’s name at all times.

As Tether indicated in the Order, it has always kept appropriate reserves and has never failed to meet a redemption request, it continued.

Mashinsky later told the Financial Times in an interview on Oct. 19 that as part of a loan deal, Tether issued additional USDT tokens in return for digital assets:

If you provide them enough liquid collateral, Bitcoin, Ethereum, and so on… they will mint Tether against it.

New USDT is issued for such loans, he continued, adding that the new USDT is later destroyed when the loan is concluded to avoid permanently increasing USDT in circulation.