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Trump Campaign

Johnnie Izquierdo

Officials at the Treasury Department have spent months weighing sanctions against the cryptocurrency Tether for allegedly facilitating illicit financial activities, according to two people with knowledge of the matter — which could pose a conflict of interest for the co-chair of President-elect Donald Trump’s transition, billionaire Cantor Fitzgerald CEO Howard Lutnick.

Lutnick, who is also a candidate to be treasury secretary, has touted Tether in media interviews and has said he manages assets for the cryptocurrency.

The people, who spoke on the condition of anonymity because the deliberations are not public, said Treasury is looking at sanctioning Tether, which has been accused by federal authorities of facilitating transactions for Mexican drug cartels. Treasury has also publicly pointed to private-sector analyses allegedly showing terrorist groups have used Tether to move and store funds. They stressed that the Treasury probe predates Lutnick’s involvement in Trump’s campaign and that the discussions of sanctions against Tether are unrelated to his political activities.

The United States has already imposed penalties on a range of crypto firms, such as <a href="https://home.treasury.gov/news/press-releases/jy1925" target=_blank>Binance</a> and <a href="https://home.treasury.gov/news/press-releases/jy0916" target=_blank>Tornado Cash</a>, for their role in illicit financial transactions. Tether, which issues a stablecoin whose value is tied to the U.S. dollar, has been on the agency’s radar publicly for months. Deputy Treasury Secretary Wally Adeyemo <a href="https://home.treasury.gov/news/press-releases/jy2243">told </a>the House Banking Committee in April that “we’ve seen Russia increasingly turning to alternative payment mechanisms — including the stablecoin Tether — to try to circumvent our sanctions and continue to finance its war machine.”

An <a href="https://www.fincen.gov/sites/default/files/advisory/2024-06-20/FinCEN-Supplemental-Advisory-on-Fentanyl-508C.pdf">advisory</a> published in June by the Financial Crimes Enforcement Network, a bureau within Treasury, said that transnational criminal organizations were increasingly buying equipment and chemicals from Chinese suppliers through virtual currencies, including Tether. <a href="https://www.washingtonpost.com/business/interactive/2024/us-sanction-countries-work/">Sanctions</a> would prohibit people and companies from doing business with the cryptocurrency for fear of punishment by the U.S. government.

Tether officials have aggressively denied the allegations. Last month, Tether CEO Paolo Ardoino <a href="https://x.com/ttmygh/status/1849879710416896336">said</a> on X that there was “no indication that Tether is under investigation,” after a Wall Street Journal story <a href="https://www.wsj.com/finance/currencies/federal-investigators-probe-cryptocurrency-firm-tether-a13804e5">disclosed</a> the possibility of sanctions. Tether also released a <a href="https://tether.io/news/tether-slams-wsjs-irresponsible-reporting-stands-by-strong-law-enforcement-track-record/">statement</a> saying it “has no knowledge of any such investigations into the company” despite being in extensive contact with law enforcement agencies. The company declined to comment further to The Washington Post.

The Treasury Department declined to comment.

In addition to his role in Trump’s transition, Lutnick has been under consideration as a possible treasury secretary for weeks, according to two other people with knowledge of that matter, who spoke on the condition of anonymity to describe confidential deliberations.

Although Lutnick has proved a loyal surrogate for Trump, the Treasury investigation has raised concerns among transition officials about potential conflicts of interest should Lutnick be asked to lead the department — which would give him oversight of sanctions. Even if he does not land at Treasury, as co-chair of the transition team and a key decision-maker on personnel, Lutnick could have substantial influence on a wide range of decisions that intersect with the crypto industry.

Lutnick’s ties to Tether reflect the broader alliance between the crypto industry and many other figures whom Trump is expected to tap for important government positions in his second administration. Trump has repeatedly boasted of his support from the industry, which now has extensive ties to members of both parties.

Scott Bessent and John Paulson, two longtime financiers who served as advisers and surrogates for the Trump campaign, have also emerged as candidates for treasury secretary, with Bessent described by several people close to the process as the current front-runner. Bessent has also been a supporter of crypto; Paulson has stakes in federal mortgage giants Fannie Mae and Freddie Mac, which are overseen by the Treasury Department.

In media interviews leading up to the election, Lutnick repeatedly plugged Tether, for which he said he manages some financial holdings.

“There’s a company that I like, it’s called Tether,” Lutnick <a href="https://x.com/nic__carter/status/1747271523088601515">told Bloomberg News </a>in January. “I manage many, many of their assets,” he added.

If Lutnick did move to Treasury, he would probably have to unwind his considerable financial assets, since incoming Cabinet officials are often <a href="https://www.oge.gov/web/OGE.nsf/0/D9246BEE2437F154852585B6005A17D1/$FILE/Certificate%20of%20Divestiture%20Fact%20Sheet.pdf">directed</a> by the Office of Government Ethics to sell or divest of assets that could pose conflicts of interest or the appearance of one. The Trump transition also committed to a <a href="https://static01.nyt.com/newsgraphics/documenttools/217e53b5af610019/a1ad8a5d-full.pdf">code of ethical conduct</a> that requires members to disqualify themselves from involvement “in any particular Transition matter” that to their knowledge “may directly conflict with a financial interest” of theirs. At times during his first term, though, Trump dismissed traditional ethics standards: Nearly all presidents since the 1970s have put their assets into a blind trust, which Trump declined to do his first term.

“President-elect Trump will begin making decisions on who will serve in his second administration soon,” said Karoline Leavitt, a spokeswoman for the transition. “Those decisions will be announced when they are made.”

In addition to financial institution Cantor Fitzgerald, Lutnick is chairman and chief executive of the investment firm BGC Group and executive chairman of the real estate brokerage Newmark Group. The specifics of how he manages Tether’s assets are unclear. He declined to comment, through a bank spokeswoman.

Some observers said Lutnick’s ties to Tether shouldn’t pose a risk to his odds of becoming treasury secretary. Avik Roy, founder of the Foundation for Research on Equal Opportunity, a think tank that promotes free markets, said Lutnick’s firm had been helping Tether to rely more heavily on conventional financial assets — exactly what Tether should be doing, from the perspective of government regulators. The Senate, which would have to confirm Lutnick, is also expected to be more supportive of the crypto industry in 2025 than it has been, with <a href="https://www.washingtonpost.com/business/interactive/2024/crypto-firms-candidates-house-senate-election-2024/">backers of the industry winning</a> in Ohio, Arizona, Pennsylvania and elsewhere.

“Unless there’s a scandal, I wouldn’t expect there to be a problem with confirmation,” Roy said. “Lutnick has been doing some of the underlying infrastructure for Tether and others, but that’s a good thing. If you’re a regulator, I would think you would want regulated entities like Cantor Fitzgerald to be the ones providing backing for Tether.”

Past secretaries, many of them carrying enormous Wall Street wealth, have faced their own concerns about financial holdings. Steven Mnuchin, who filled the role during Trump’s first term, sold dozens of assets when he entered the government but <a href="https://www.cnn.com/2019/04/05/politics/treasury-mnuchin-ethics-financial-disclosure/index.html">was questioned</a> over the sale of his film production company to his wife. George W. Bush’s pick for Treasury, Henry Paulson, sold his stake in Goldman Sachs, his former employer, but <a href="https://www.nytimes.com/2009/08/09/business/09paulson.html">faced accusations</a> of working to benefit the company. Both men denied doing anything improper.

“It is incredibly important that the people in charge of the Treasury Department and bank regulators be free from conflicts of interest in crypto,” said Aaron Klein, senior fellow in economic studies at the Brookings Institution, a Washington-based think tank.

Shayna Jacobs and Perry Stein contributed to this report.

New York State Associated Press Young Journalist of the Year

Cornell University, BA in history

Jeff Stein is the White House economics reporter for The Washington Post. He was a crime reporter for the Syracuse Post-Standard and, in 2014, founded the local news nonprofit the Ithaca Voice in Upstate New York. He was also a reporter for Vox.

Jeff Stein

University of Wisconsin-Madison

Jonathan O'Connell is a reporter focused on investigations. He has covered economic development, commercial real estate and President Donald Trump's business. He joined The Post in 2010.

Jonathan O'Connell

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Treasury weighs sanctions on cryptocurrency tied to Howard Lutnick

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