Summary
- The Department of Justice has initiated a civil forfeiture action on July 15, targeting $84.2 million linked to Capstone Ltd., a payments company accused of facilitating transactions for Tether without proper licensing.
- A significant portion of the funds, amounting to $79.11 million, is held in a Wells Fargo Securities account, with smaller amounts at JPMorgan Chase and in two USDT wallets.
- Tether acknowledged that EQIBank, the bank based in Dominica which is connected to Capstone, managed its wire transfers but stated it was unaware of the alleged misconduct and claimed its exposure is less than 0.034% of total assets.
The U.S. Department of Justice is seeking to seize $84.2 million reportedly associated with accounts that processed payments for Tether, as outlined in a civil forfeiture complaint.
The complaint, submitted on July 15 in the Eastern District of California before Judge Dale A. Drozd, focuses on Capstone Ltd., a payments firm based in Montana. The document claims that Capstone acted as an unlicensed money transmitter—a category that mandates regulatory approval due to the nature of handling other individuals' funds—in at least six states, while misrepresenting itself to banks as a standard IT services provider.
Myriad: How high will Bitcoin go? Click to make your prediction.Capstone's proprietors, Kotaro Shimogori and Mary Jeanne Thompson, are named in the complaint, and the FBI conducted a search at a residence in Sacramento. Their legal representative stated that the company "denies any wrongdoing" and is eager to "resolve this matter quickly," as reported by the Financial Times.
Out of the total $84.2 million, $79.11 million was located in a Wells Fargo Securities account under Capstone's name as of September 14. Civil forfeiture allows the government to confiscate funds linked to alleged criminal activity without needing a criminal conviction against the owner of those funds.
Additionally, $2.06 million was held at JPMorgan Chase, $1.86 million in another Wells Fargo account, and slightly over $1.1 million was distributed across two wallets containing USDT, Tether's stablecoin, which is designed to maintain a one-dollar value.
EQIBank, a digital bank licensed in Dominica and associated with Capstone, has been identified by prosecutors as having directed the money transfer operations. EQIBank has cautioned that losing these funds—approximately 80% of its total assets—could lead to its liquidation.
Tether has confirmed that EQIBank was responsible for its USDT transaction processes but maintained that it had "no knowledge of the conduct by Capstone alleged by the Department of Justice," according to a statement given to Reuters. A spokesperson noted that the total exposure was less than 0.034% of its group assets, a figure that seems negligible compared to the $187.75 billion in assets Tether reported at the end of Q2.
This situation is not the first legal issue for Tether and its sister company Bitfinex regarding their financial practices. In 2021, both firms reached a settlement with the New York Attorney General after admitting that USDT was not consistently backed on a dollar-for-dollar basis as claimed, resulting in an $18.5 million fine and a commitment to cease trading in New York.
Capstone and EQIBank have initiated an innocent-owner defense concerning the seized assets. Under Supplemental Rule G, which applies to forfeiture cases, any claimant has 21 days to respond to the government's complaint after a formal claim is filed with the court.