US Senator Richard Blumenthal has demanded records on Cantor Fitzgerald’s Tether reserve business amid questions about sanctions compliance and the firm’s financial ties to the stablecoin issuer. The October 8 request follows a Senate staff report on USDT transactions linked to Iran.
In his letter on October 8, Blumenthal, the top Democrat on the Senate Permanent Subcommittee on Investigations, directed Cantor to provide records on custody services, sanctions screening, and finance. Cantor has until October 23 to reply to the letter.
At the center of the Tether reserve inquiry is what Cantor knew about USDT-related risks. It also seeks to separate the firm’s duties as an asset custodian from Tether’s powers as a token issuer. The letter makes no finding of wrongdoing.
What Does Cantor Control in the Tether Reserve Partnership?
Cantor possesses US Treasury bonds supporting the Tether stablecoin pegged to the dollar. Blumenthal seeks to know more about the asset, as well as details about its contracts and services provided by the firm. The requests concern also other investments connected to Tether.
Moreover, Cantor’s partnership with Tether in connection with the reserves also includes an equity stake, according to the senator. According to him, it constitutes 5% of Cantor and equals in value almost $10 billion. It is his estimation of the stake, not the stock exchange one.
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The senator seeks to learn the yearly income that Cantor earns from Tether. He would also like to know how much income is earned from it by the Lutnick family. In addition, he would like to see whether there were independent audits performed by the firm. These documents would show the responsibilities of the company concerning Tether.
Reserve custody and the blockchain are responsible for different tasks. The custodian manages the securities and takes the instructions for the accounts. USDT could be transferred between external wallets without trading it in the Treasury reserve portfolio.
The Tether reserve agreements alone cannot prove that Cantor could stop the transaction on TRON or Ethereum. Blumenthal is trying to find out what information Cantor gets and how it reacts to such warnings.
Why Did Iran-Linked USDT Activity Trigger the Inquiry?
The October 8 investigation was preceded by a September 28 report from the Democratic staff of the subcommittee. The investigators looked at 846 wallets that were sanctioned or marked for seizure on suspicion of being linked to Iran and regional organizations.
According to the report, 84% of the wallets used only or mainly USDT. The data is representative of a selected number of flagged wallets. It does not mean that the same percentage of USDT transactions was related to criminal operations.
The staff alleged that Tether failed to block some of the wallets connected to illicit finance. Blumenthal then called upon the Treasury and the Justice departments to take measures. These allegations cannot prove that Cantor broke any sanctions laws.
The Tether reserve custody of Cantor came under investigation due to the latter’s custody services and interest in the issuer. Blumenthal wants to know how the firm assesses its business partners. He also inquired whether the allegations led to an internal investigation.
On September 28, the issuer refuted the claims that it is overly forgiving of sanctioned entities. According to Tether, it helped freeze approximately $550 million worth of Iran-linked USDT in 2026. These numbers come from the company reports.
Who Controls USDT Freezes and Tether Reserve Assets?
The issuer, Tether, can administratively freeze specified wallet addresses. This would prohibit movement of tokens from the addressed wallet address. It is distinct from the management of Tether securities by Cantor.
It should be noted that a frozen account differs from the seizure of money, and further actions do not necessarily entail resolution of ownership issues or recovery of funds. Legal measures will depend on further developments and the policy of the issuer.
Being a custodian of Tether securities, Cantor can study the client and the necessary documents. However, the statement on securities does not necessarily contain the identification of the parties involved in transactions unrelated to securities. This is important to determine responsibility for suspicious operations.
Blockchain can provide information about the amount, addresses, and time of transfer. It is not always possible to find out the identity of the wallet owner or the date when the firm became aware of sanctions concerns.
What Happens by October 23?
Blumenthal also sought information regarding the transfer by Howard Lutnick of Cantor interests to his children, along with possible financing related to the transaction and subsequent correspondence. Such requests cannot prove that there was any such financing.
The current probe into the Tether reserve also includes the policy on ending business relations and assessing sanctions risks. The reply from Cantor may clarify which obligations are incumbent on the custodian and which stay with Tether. The October 23 date is just the deadline for replies, not a decision.
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