Tether, the issuer of the largest stablecoin USDT, is facing a lawsuit from a former client who claims that the company breached its contract and failed to return a $1 billion deposit.
The plaintiff, Crypto Capital Corp, a Panama-based payment processor that has been accused of money laundering and fraud by multiple authorities, alleges that Tether and its bank partner Britannia Bank & Trust, a privately held bank based in the Bahamas, conspired to freeze and confiscate its funds without justification.
According to the complaint filed in the Supreme Court of the Bahamas on November 17, Crypto Capital Corp entered into an agreement with Tether in 2018 to provide banking services for its USDT operations.
Crypto Capital Corp says it deposited $1 billion in a segregated account at Britannia, which was supposed to be exclusively controlled by Tether.
However, in October 2019, Crypto Capital Corp claims that Tether instructed Britannia to transfer $880 million of its funds to another account at Deltec Bank, another Bahamas-based bank that also works with Tether.
Crypto Capital Corp says it did not consent to this transfer and that it violated the terms of their agreement.
Crypto Capital Corp further alleges that Tether and Britannia then refused to return the remaining $120 million in its account, despite repeated requests and legal notices.
Crypto Capital Corp accuses Tether and Britannia of breach of contract, conversion, conspiracy, unjust enrichment, and fraudulent misrepresentation.
Now, it seeks damages, interest, and costs, as well as an order to release its funds.
Tether has previously faced scrutiny from regulators and law enforcement agencies over its reserves and transparency.
In February, Tether and its sister company Bitfinex agreed to pay $18.5 million to settle a probe by the New York Attorney General, who accused them of covering up an $850 million loss of funds that were held by Crypto Capital Corp.
Tether is the largest stablecoin in the crypto market, with a market capitalization of over $70 billion. It claims to back each USDT token with one US dollar or equivalent assets, but it has not provided a full audit of its reserves.
Tether has recently added Britannia as one of its bank partners, along with Deltec and Silvergate Bank, as US banks have cut ties with crypto firms
Tether has also issued USDT on eight different blockchains and layers, including Omni, Liquid, Ethereum, Tron, Simple Ledger Protocol, EOS, Solana, and Algorand.