DOJ Seeks to Seize $84 Million Linked to Tether Payments
The U.S. Department of Justice is seeking to seize $84.2 million that allegedly flowed through accounts used for processing payments for Tether, the cryptocurrency issuer.
Unlicensed Money Transmitter Targeted
The funds are tied to Capstone Ltd., a Montana-based payments firm that operated as an unlicensed money transmitter in at least six states, according to a civil forfeiture complaint filed on July 15 in the Eastern District of California. The complaint, before Judge Dale A. Drozd, alleges that Capstone misrepresented itself to banks as an ordinary IT services company.
Owners Named, Company Denies Wrongdoing
Capstone’s owners, identified as Kotaro Shimogori and Mary Jeanne Thompson, are named in the complaint. The FBI executed a search warrant at a Sacramento residence in connection with the case. Their attorney told the Financial Times that the company “denies any wrongdoing” and hopes to “resolve this matter quickly.”
Breakdown of Seized Funds
Of the $84.2 million targeted for forfeiture, $79.11 million originated from a Wells Fargo Securities account in Capstone’s name on September 14. Civil forfeiture allows the government to seize assets linked to alleged criminal activity without requiring a criminal conviction of the owner.
Additional funds include $2.06 million held at JPMorgan Chase, $1.86 million in a separate Wells Fargo account, and just over $1.1 million split between two wallets holding USDT, Tether’s stablecoin designed to maintain a one-dollar peg.
Digital Bank Faces Liquidation Risk
Behind Capstone is EQIBank, a digital bank licensed in Dominica. Prosecutors claim EQIBank directed how Capstone moved the money. EQIBank has previously warned that the loss of these funds, representing approximately 80% of its total holdings, could lead to its liquidation.
Tether’s Limited Exposure
Tether confirmed that EQIBank handled its USDT purchase and redemption transfers. However, in a statement to Reuters, Tether insisted it had “no knowledge of the conduct by Capstone alleged by the Department of Justice.” A spokesperson stated that the total exposure was less than 0.034% of group assets, a minimal share compared to Tether’s reported $187.75 billion in assets at the close of the second quarter.
Past Scrutiny for Tether and Bitfinex
This is not the first instance of Tether and its sister company, Bitfinex, facing scrutiny from prosecutors regarding their financial operations. In 2021, both companies reached a settlement with the New York Attorney General after admitting that USDT was not always backed dollar-for-dollar as advertised. They paid an $18.5 million fine and agreed to cease trading in New York.
Innocent Owner Defense Filed
Capstone and EQIBank have filed an innocent owner defense regarding the seized funds. Under Supplemental Rule G, which governs forfeiture cases, claimants have 21 days to respond to the government’s complaint after a formal claim is filed with the court.
