Short seller Hindenburg sets a $1 million bounty for details about Tether’s reserves

Short seller Hindenburg Research has set its sights on Tether, launching a $1 million “bounty” program for information about the stablecoin company at the center of the global cryptocurrency market.

Hindenburg's announcement comes less than a week after the U.S. Commodities Regulatory Commission fined Tether over allegations it misrepresented that its namesake digital tokens were fully backed by dollars.

Tether's increasing scrutiny comes at a time when an increasing number of mainstream investors are looking to tap into the fast-growing digital asset market. The group is the largest issuer of stablecoins, assets that help connect traditional markets with the digital asset sector, with around $70 billion in tokens in circulation.

Tether's coins are widely used in cryptocurrency trading, but the group only provides general information about the types of assets the tokens support, rather than a detailed breakdown of its portfolio.

“We strongly believe that Tether should fully and thoroughly disclose its holdings to the public,” said Hindenburg founder Nathan Anderson. “In the absence of this disclosure, we are offering a $1 million bounty to anyone who can provide us with exclusive details about Tether’s alleged reserves.”

Hindenburg said in its announcement that it does not hold positions betting on falling or rising Tether, Bitcoin or other cryptocurrencies.

Tether did not respond to a request for comment on Hindenburg's announcement.

The letter marks Hindenburg's first offer of a bounty for information. The short seller group is known for taking some of the most popular companies public via special acquisition vehicles, including electric truck start-up Nikola and sports betting company DraftKings.

Before becoming a well-known short seller, Anderson specialized in researching and exposing fraudulent investment schemes, honing his skills under the tutelage of Harry Markopolos, the investigator known for flagging Bernard Madoff's Ponzi scheme.

Tether agreed last week to pay a $41 million penalty to the Commodity Futures Trading Commission for making misleading statements about having sufficient dollar reserves to cover each of its circulating stablecoins from at least June 2016 to February 2019. Tether did not admit or deny liability. Its practices related to the creation of new coins have also come into focus after Celsius Network, a major customer, said that Tether is issuing new stablecoins in exchange for collateral in the form of cryptocurrencies such as Bitcoin as part of its lending program.

The practice contrasts with Tether's commitment to issuing units of the world's largest stablecoin only against hard currency.

Regulators are also paying attention to developments in the stablecoin industry in general, warning of the potential impact on both customers and overall financial stability, as well as risks such as money laundering and market manipulation.

In September, Securities and Exchange Commission Chairman Gary Gensler compared stablecoins to “poker chips.” This month, global regulators laid out potential plans to regulate stablecoins in line with payment systems, calling for “little or no credit or liquidity risk.”

Tether has repeatedly said in the past that its tokens are “fully backed by assets sufficient to cover the amount of Tether in circulation.”