According to news sources, U.S. Senator Elizabeth Warren is opposing the confirmation of President Donald Trump’s nominee, Howard Lutnick, for Commerce Secretary over his firm’s ties to stablecoin issuer Tether. Warren, who has been a crypto skeptic for years, is questioning whether Lutnick’s financial interests could be a conflict of interest if confirmed.
Warren’s Angry Probes
In a letter dated January 27, Warren asked Lutnick directly about his investment firm Cantor Fitzgerald, which has a 5% stake in Tether and manages Tether’s assets. She noted that despite his agreement to sell Cantor Fitzgerald, his personal ties to Tether are still a big problem. Warren wrote:
“While you have agreed to divest your interest in Cantor Fitzgerald, which holds a 5% stake in Tether, and serves as Tether’s asset manager, this divestment does not end the questions about your deep personal ties to the company or its affiliates,”
She asked if he could put the public interest above his personal financial gain if confirmed as Commerce Secretary.
The Massachusetts Senator is worried that if confirmed, he will have “extraordinary access” to Trump and other top officials in charge of crypto regulations. She allegedly said that might allow him to shape policy directly or indirectly that benefits Tether and, by extension, the broader crypto industry.
Tether Transparency
Warren’s letter had 13 questions, asking for Lutnick to clarify his personal financial stake in Tether, any conversations he’s had with Trump administration officials about the stablecoin, and if Cantor Fitzgerald did due diligence on Tether to ensure it complies with Know Your Customer, Bank Secrecy Act, international sanctions and Anti-Money Laundering laws.
She said that Lutnick has until February 10 to respond. Nonetheless, her opinion is not likely to be too heavily weighted owing to the fact that she is not on the Senate Commerce, Science, and Transportation Committee which is looking into Lutnick’s confirmation in hearings on January 29.
Tether’s Legal Issues and Compliance
Tether had been alleged for years to have committed illegal acts in ‘facilitation of money laundering’ along with ‘evading sanctions.’ Warren indicated the unsubstantiated use by bad actors of Tether’s stablecoin to fund a myriad of illegal activities, including its use in North Korea’s nuclear program.
Tether, on the other hand, has been trying to cooperate with law enforcement. For example, on January 27, sources say the company worked with blockchain firms Tron and TRM Labs to help Spanish authorities freeze $26.4 million in crypto linked to a major European money laundering operation.
In September 2023, Tether also reportedly worked with the FBI to recover $6m from scammers targeting US citizens through fraudulent schemes by freezing the wallets related to that illegal activity.
Clearly that hasn’t changed Warren’s mind on crypto regulation. She’s been pushing for legislation to further restrict the industry saying digital assets are a threat to financial stability and national security.
Wrapping Up
Warren has introduced the Digital Asset Anti-Money Laundering Act multiple times to make crypto firms subject to the same AML and counter-terrorism financing laws as traditional financial institutions. The bill was opposed by crypto advocacy groups and some former military officials who said overregulation would drive the industry abroad and reduce US influence in the digital assets space.
Now that Lutnick’s confirmation hearing is imminent, his ties to Tether will be front and center. His responses to Warren will determine if his Tether connections will be a hill too high for him to get over to become Commerce Secretary.
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FAQs
1. Why is Warren asking about Lutnick’s Tether ties?
Warren is concerned that Lutnick’s investment firm Cantor Fitzgerald is connected to Tether, a stablecoin issuer accused of enabling illegal transactions. She thinks if Lutnick is confirmed, he would influence the regulatory policies for Tether.
2. What are the questions Warren asked Lutnick?
Warren asked about Lutnick’s financial stake in Tether, if he’s talked to Trump administration officials about Tether and if Cantor Fitzgerald did due diligence on Tether to ensure it complies with US financial laws.
3. Has Tether engaged in criminal activity?
While Tether has been linked to illegal transactions, it has also works with law enforcement to freeze funds related to illegal activities. Reports say they recently worked with Spanish authorities and the FBI to freeze millions of dollars from fraudulent schemes.
4. What’s next for Lutnick’s confirmation?
Lutnick’s confirmation hearing is on ‘January 29 before the Senate Commerce Committee. Warren’s concerns will be heard at the hearing but the final decision will be with the committee and the full Senate.
