After Signature Bank collapsed last month, most of its assets and some of its loans were taken over by New York Community Bancorp (NYCB).
All crypto-related clients, however, were told that their accounts would be closed in short order. Signet, Signature Bank’s proprietary software that allowed its crypto clients to transact in USD between such platforms at all hours of the day, remained in receivership at the FDIC.
No Direct Exposure
When Signature originally went under, Paolo Ardoino – Tether’s CTO – stated that Tether had no exposure to Signature Bank.
#tether doesn’t have any exposure to Signature Bank.
— Paolo Ardoino (@paoloardoino) March 12, 2023
While Tether did not have an account opened at Signature, unnamed sources have stated that the firm did use Signet as a way to transfer funds to the U.S., according to Bloomberg.
In order to pay for USDT, Tether instructed customers to send money via Signet to Bahamas-based Capital Union Bank Ltd., one of the banks tied to the company, along with Deltec Bank & Trust Ltd. and Cantor Fitzgerald Ltd.
When reached for comment, Tether stated that the use of Signet was only one of several ways that they maintained links to the global banking system.
“Banks used by Tether always had access to several banking channels and counterparties. This enabled us to identify particular risks and weaknesses that others had missed, ensuring our entities wouldn’t be affected by either direct or indirect exposure to Signature.”
The source declined to comment on the timeframe of Signet’s use by Tether.
No Accusations of Wrongdoing
It’s unclear whether this arrangement was set in stone for all transactions of this type or whether Signature Bank knowingly approved the use of Signet by Tether. Alma Angotti, a former representative of the SEC and the Treasury Department, stated that if Signature knew about the arrangement, it could have been a way of dealing with Tether without taking on all the risk of working with an offshore stablecoin company.
“If Signature knew about and allowed the arrangement, that may speak to a high-risk appetite. They may well have known and decided this is less risky than opening up an account for Tether directly.”
However, Tether has never been sanctioned, so dealing with the firm in any capacity would not have engendered any legal risk for Signature. Furthermore, Signature Bank and its employees have not been accused of any wrongdoing in this regard and will likely remain without accusations leveled at them.
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