Tether deposits $1 billion in investment group founded by Tory donor

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Tether has deposited more than $1 billion with a financial services group founded by a Tory party donor who was indicted last year on bribery charges by US authorities.

The world’s largest issuer of stablecoins transferred the funds to a subsidiary of Britannia Financial Group, according to documents filed at London’s High Court, offering a rare glimpse into the banking relationships built by Tether.

Despite Tether’s key role in crypto markets, the company has kept its ownership structure, how its roughly $87 billion worth of assets are managed, and its relationships with financial institutions strictly confidential. Its stablecoin, USDT, helps underpin crypto markets, offering a seamless way to trade assets like Bitcoin and Ethereum.

Tether says each of its stablecoins is backed by a dollar, allowing investors to redeem the digital tokens on demand. A company’s ability to keep that promise ultimately depends on the liquidity and safety of its reserves.

The more than $1 billion Tether deposit is at the heart of a previously unreported legal battle between Britannia Financial and Arbitral International, a company incorporated in the British Virgin Islands. Tether opened an account at a subsidiary of Britannia Financial in November 2021, according to court documents.

Britannia Financial was founded by Venezuelan-Italian banker Julio Herrera Vellutini, who in August 2022 was indicted by US authorities in an alleged bribery scheme involving a Puerto Rican politician. Herrera Vellutini strongly rejected the allegations, calling them “baseless” and “politically motivated”. Britannia Financial was not accused of any wrongdoing.

Tether itself is subject to regulatory scrutiny. In 2021, the Commodity Futures Trading Commission alleged that the company made misleading statements that it had enough dollars to back each of its stablecoins in circulation.

An investigation that year by the New York attorney general against Tether for allegedly concealing huge losses said that for a period from mid-2017, the group did not have access to banks anywhere in the world. Tether settled both probes without admitting liability.

The company’s chief technology officer, Paolo Ardoino, told the Financial Times last year that it had strong relationships with more than seven banks.

Earlier this year, Arbitral filed a lawsuit in London alleging Britannia Financial failed to pay the full price for a Bahamas-based brokerage it sold to the group in June 2021.

According to the filings, there was an agreement by both parties that Britannia Financial would pay an additional amount based on the amount of income-generating assets the business had one year after its sale, including those from clients initially brought in by arbitration or related parties.

The arbitrator claims he is owed money under that settlement because the Tether deposit was made in the 12 months after the business was sold. Britannia Financial denies owing more money, saying Tether invested the funds in London-based subsidiary Britannia Global Markets, not the brokerage it bought from Arbitral. Britannia Global Markets acts as an executive broker and securities custodian.

Britannia Financial says it was introduced to Tether by Aldo Mazzella, whom it describes in the filings as a “professional introducer” and someone it believes has had a commercial relationship with Tether since around 2017. However, the arbitration alleges that an executive of the former Bahamas brokerage also played a role in the rollout.

Julio Herrera Vellutini, founder of Britannia Financial

In its court filing, Britannia Financial said Tether had initially considered investing some of its funds in the Bahamas-based brokerage it had acquired from Arbitral, but decided it “wanted its assets to be held in the UK, and not in the Bahamas’.

Headquartered in London’s Scalpel Building, Britannia Financial provides investment banking, brokerage, as well as asset and wealth management services.

London is looking to establish itself as a hub for the cryptocurrency industry. Earlier this month, regulators set out proposals that could eventually lead to stablecoins being used as a means of payment in the UK.

In August, Bloomberg reported that Tether had begun using Britannia Bank & Trust, a Bahamas-based bank that is also owned by Britannia Financial, to process dollar transfers.

Through Britannia Financial, Herrera Velutini has donated more than half a million pounds to the UK Conservative Party since former Prime Minister Boris Johnson took office, including £100,000 days before the 2019 general election. Last year, Britannia Financial sponsored the Platinum Jubilee Competition which marked The 70th anniversary of the accession to the throne of the late Queen Elizabeth II.

This summer, Herrera Velutini transferred ownership of Britannia Financial Group to his 26-year-old son, Julio Cesar Herrera, according to Companies House filings.

Mark Bruce, chief executive of Britannia Financial, told the FT that Herrera Vellutini had resigned as director of Britannia Global Markets at the end of November 2021 and was “not involved in the day-to-day management of any other Britannia entity”. .

Tether and Mazzella did not respond to requests for comment. A lawyer for Arbitral International declined to comment.

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