US lawmakers press Commerce Secretary nominee Howard Lutnick on Tether and illicit finance concerns

U.S. Commerce Secretary nominee Howard Lutnick faced questions about his firm's involvement in Tether amid concerns over its reserves and allegations that the stablecoin is being used in illicit finance.

During a Senate Commerce Committee hearing to consider his nomination on Wednesday, Ranking Democrat Sen. Maria Cantwell asked a series of question about Lutnick and his firm Cantor Fitzgerald's relationship with Tether. Cantor Fitzgerald has been a custodian for Tether since late 2021 and USDT is the largest stablecoin by market capitalization and is used globally. 

Tether has faced scrutiny, including from regulators , over its reserves with some questioning the one-to-one dollar backing for USDT. Tether has consistently pushed back on those allegations.

The U.S. Commodity Futures Trading Commission said in 2021 that Tether "falsely represented that it would undergo routine, professional audits to demonstrate that it maintained '100% reserves at all times' even though Tether reserves were not audited." The firm paid a $41 million civil penalty and agreed to "cease and desist from any further violations of the Commodity Exchange Act."

Tether and its sister exchange Bitfinex also agree to pay a $18.5 million fine to end a probe led by New York Attorney General Letitia James’ office, which alleged the companies misled clients about liquidity issues particularly following the 2016 Bitfinex hack.

Tether has released attestation reports over the years, but has faced criticism over its legitimacy when compared to audits. Lutnick was asked about his approach to audits on Wednesday. 

"I believe stablecoins, U.S. dollar stablecoins should be audited, should be completely backed by U.S. Treasuries, 100%," Lutnick said on Wednesday when asked about auditing.  

Cantwell then asked if Lutnick believed in a "robust audit process" that is more open than it exists today. 

"For sure," Lutnick said.

Illicit finance

Trump tapped Lutnick, to lead the Commerce Department in November following the election. Lutnick has reportedly agreed to step down from leading the brokerage and investment firm and divest his interests upon his confirmation. As Secretary of Commerce, Lutnick would work on creating jobs and bolstering the economy, while encouraging innovation, according to the department's mission statement . Lutnick will also have a role in a newly created crypto working group tasked with submitting a set of recommendations for regulating digital assets.

During Wednesday's hearing, Cantwell also brought up illicit finance concerns involving Tether's use by criminals in North Korea and Russia. Lutnick pushed back and said criminals often used the dollar and the euro.

"It's like blaming Apple because criminals use Apple phones," Lutnick said. 

Lutnick was also asked whether he advised Trump or his administration on his memecoin. Trump, who has been favorable to the crypto industry over the past year, launched a TRUMP memecoin over the weekend with his wife, Melania Trump , following suit with one of her own, both with billions of dollars in market cap. 

"I did not," Lutnick said in response.

Warren's letter 

Ahead of Wednesday's hearing, crypto critic Sen. Elizabeth Warren sent a letter to Lutnick regarding his ties to Tether. In the letter, Warren asked for financial information regarding Tether as well as conversations he has had with the Trump administration about Tether. The Massachusetts Democrat also had concerns over reports that Lutnick's son would be taking over one of his firms. His son was listed as CEO of Cantor Equity Partners I Inc., according to reporting from Bloomberg in December. 

If confirmed, Warren noted that Lutnick will have "extraordinary access to President Trump" and have influence over Tether and the cryptocurrency industry.

"Your record of support for and financial involvement with Tether, and that company’s ongoing connections to illicit finance and criminal activity, raise significant questions about your own personal judgment and the conflicts of interest that you will have if you are confirmed as Commerce Secretary," Warren added.

Warren has voiced concerns several times about Tether's involvement with bad actors and specifically with sanctions evasion. Tether has pushed back, saying they work with law enforcement to go after criminals and have said there was no evidence that Tether violated sanctions laws or the Bank Secrecy Act.

Republicans have also gotten into the foray. Sen. Cynthia Lummis and Rep. French Hill sent a letter to the Justice Department in 2023 asking about the extent to which both Binance and Tether might be supporting terrorism funding. 

Later in 2024, The Wall Street Journal reported that U.S. investigators were probing Tether over potentially breaking anti-money laundering laws and violating sanctions. Tether CEO Paolo Ardoino pushed back against that report and said there was "no indication that Tether is under investigation."