U.S. authorities have confiscated approximately $84.2 million in assets linked to payment processing firm Capstone Limited, which provided access to the U.S. banking system for EQIBank, a bank registered in Dominica. EQIBank was known to offer services to Tether, as reported by The Information.

The connection between Capstone and Tether is indirect; Tether reportedly utilized EQIBank for processing bank transfers for clients buying and redeeming its stablecoin. For dollar transactions within the U.S., EQIBank relied on Capstone's services.

Documents from a federal court in California indicate that the seized assets include $79.1 million from Capstone's account at Wells Fargo Securities, $1.86 million at Wells Fargo Bank, and $2.06 million at JPMorgan Chase. Additionally, around 1.18 million USDT from two addresses are part of the seizure, bringing the total estimated value of the assets to about $84.2 million.

The prosecution is seeking the forfeiture of these assets as part of a civil case, but a final ruling on the ownership of the funds is still pending.

On September 14, the court ordered a notice regarding the case to be published on forfeiture.gov for 30 days, allowing interested parties to claim rights to the assets within the specified timeframe.

EQIBank Challenges the Seizure

On June 29, EQIBank filed a motion in federal court to recover the seized funds.

The bank values the assets at approximately $89 million, claiming they constitute around 80% of its cash holdings. EQIBank has warned that a complete loss of these funds could pose a risk of liquidation.

On July 15, U.S. prosecutors filed a separate civil suit seeking the forfeiture of about $84.2 million associated with Capstone's accounts and the two USDT addresses.

On July 16, federal judge Dale Drozd denied EQIBank's motion to return the property.

The court stated that after the filing of the separate forfeiture suit, it did not possess the jurisdiction necessary to address the bank's claim under Rule 41(g). The decision does not determine the final ownership of the assets.

While EQIBank claims around $89 million in seized assets, the forfeiture suit lists assets valued at approximately $84.2 million. The legal dispute is ongoing.

According to U.S. prosecutors, Capstone misrepresented itself to banks as an IT company, while it actually used accounts to transfer money on behalf of financial and cryptocurrency clients. This assertion is part of the prosecution's position, not an established fact by the court.

Tether Describes Exposure as Minimal

Tether has confirmed the existence of assets at EQIBank, stating that their value represents less than 0.034% of the group's total assets. The exact amount has not been disclosed by the USDT issuer.

The company also stated that it was unaware of Capstone's actions, which the U.S. Department of Justice deems unlawful.

According to Tether's latest quarterly audit, as of the end of June, the total assets of the group stood at $187.75 billion, with reserves exceeding liabilities by $4.11 billion.

This case pertains to one of the firm's banking partners and does not reflect the backing of the entire USDT supply.

It is worth noting that Tether has previously faced scrutiny over payment intermediaries, including issues involving Bitfinex. In 2019, the New York Attorney General accused the exchange of concealing the loss of access to $850 million sent to processing firm Crypto Capital and using Tether's funds to cover the shortfall. Both companies denied any wrongdoing.

In 2021, the parties settled the dispute for $18.5 million without admitting guilt.

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