Tether, issuer of the eponymous stablecoin, has lent $1 billion to Celsius Network, a startup offering crypto lending that has drawn the ire of financial regulators in a number of U.S. states.
Celsius Network CEO Alex Mashinsky said the company pays an interest rate of 5%-6% to Tether, Bloomberg reported Thursday as part of an investigation into the stablecoin provider’s reserves.
The investigation found that Tether had lent billions of dollars to crypto companies using bitcoin as collateral.
Tether was the lead investor in Celsius Network’s $30 million funding round in June 2020.
Most recently, Celsius Network was issued with a cease-and-desist order from Kentucky’s securities regulator over interest earned on certain crypto accounts. The regulator says they violate the state’s securities laws and fail to disclose to customers what happens to their deposits and whether they are protected under state regulation.
The investigation also found that Tether’s reserves include billions of dollars of short-term loans to large Chinese firms, something that has been speculated on widely.