Prominent American businessman Reginald Fowler is at the center of a controversy surrounding Bitfinex that was taken to US courts for allegations of bank fraud. Fowler had opened a network of international bank accounts in order to launder funds from the Tether reserves.
The Tether reserves exist to back up the value of USD Tether tokens as equivalent to the exact value of the US Dollar. In other words, there must be exactly 1 USD for every USDT token in circulation in order to exchange the token for exactly 1 USD. These reserves are managed by the Tether developers, and access was compromised.
About $850 million of Bitfinex funds were laundered illegally through this network of international bank accounts and the gap was filled by transferring funds from the Tether reserve. When the banks involved were made aware of this, they filed a civil suit against Fowler and his associates in order to seek justice in the courts and to recover the funds.
The New York Attorney General and Tether have been carrying out a protracted legal battle surrounding the missing funds. The company’s expert legal team has been delaying the process for as long as possible. Meanwhile, the reputation of USD Tether and Bitfinex alike has taken a large hit.
In response to this, LEO was launched in order to recover the funds through retail investment and the investment of Bitfinex profits. It also seeks to increase transparency with Bitfinex’s accounting and financial dealing in order to recover public confidence.