TheChek News Flow

The Takeaway

On the surface, Tether, the largest stablecoin issuer in the world, might appear to be a formidable force in global finance. It owns more than $100 billion in U.S. Treasury bills, mostly held at Cantor Fitzgerald, the investment bank formerly led by U.S. Secretary of Commerce Howard Lutnick.

But a U.S. government seizure of bank accounts held in the name of an obscure company based in Sacramento, Calif., in recent weeks shows how Tether still relies on a web of sometimes unstable intermediaries to facilitate transactions, thanks to challenges it has faced opening accounts directly at major U.S. banks. And that has exposed Tether to problems at those intermediaries.

One of them is EQIBank, a Caribbean-based bank that Tether used to process wire transfers from clients for buying and selling tether stablecoins, according to people familiar with the matter. But EQIBank, as a foreign bank, needed to rely on a payment provider in the U.S. to connect to the U.S. banking system. So it used another company, Sacramento-based Capstone Limited, to hold funds and move customer cash.

Capstone held EQIBank’s money in accounts at top-tier banks including Wells Fargo and JPMorgan Chase, according to court filings. It was those accounts—holding about $90 million—that the Justice Department seized in July, according to a complaint filed in the U.S. District Court for the Eastern District of California by attorneys for the U.S. government.

According to court filings, Capstone told the U.S. banks it was an information technology business, while it was actually using the accounts with the banks to move millions of dollars on behalf of a bank and a stablecoin firm. People familiar with the matter identified the bank as EQIBank and the stablecoin firm as Tether.

EQIBank has sued to recover the assets seized by the government. In court filings, it said they represent 80% of its assets, and the seizure has left the bank facing the risk of collapse.

EQIBank also said it is an innocent owner of the seized funds. “EQIBank is not a rogue bank that was openly transacting in drug cartel money or funds held by U.S.-sanctioned individuals,” the bank said in a filing. The bank said in a June court filing that the U.S. government has indicated that EQIBank is not a target of the investigation, nor has the government indicated that any of the bank’s depositors are a target or subject of the investigation.

In a written statement, Tether confirmed that the company is a customer of EQIBank. “Tether had no knowledge of the conduct by Capstone alleged by the Department of Justice,” the spokesperson said. “Tether’s assets held at [EQIBank] are limited and represent less than 0.034% of the assets of the group.”

That would amount to about $64 million, based on Tether’s total assets of $187.8 billion reported as of June 30. Tether would have more than enough money to cover any shortfall, as it reported excess assets of $4.1 billion over the amount of Tether tokens it issued, as of the end of June.

A lawyer representing Capstone said the company denied any wrongdoing and planned to challenge the government’s seizure. “Capstone has cooperated with the government’s investigation and hopes to resolve this matter quickly,” said Brian Klein, partner at Cooley LLP.

Capstone’s Story

EQIBank turned to Capstone in 2024 to get access to the U.S. banking system. Capstone told EQIBank the company had accounts with major U.S. banks and could help move money for the bank’s customers, according to court filings.

Capstone presented itself to EQIBank as a “properly registered” money services business that maintained banking relationships with multiple banks, according to court filings. Capstone had registered with the regulatory agency the Financial Crimes Enforcement Network as a money services business.

But Capstone didn’t tell the banks it was a money services business. Capstone obtained access to the U.S. financial system by “repeatedly misrepresenting itself,” including answering “no” when asked by banks if was handling funds on behalf of others and if “virtual currency” would be a high risk attribute applicable for the firm, the U.S. alleged in a court filing.

By failing to disclose it operated as a money transmitter business, Capstone avoided additional scrutiny applied to money transmitters, the U.S. alleged in a court filing. The U.S. also alleged that Capstone moved money it knew to be derived from fraud.

Capstone’s dealings with U.S. banks began to fall apart in May 2025, when Citi found something askew during a regular review of Capstone’s transactions. Citi shut down Capstone’s accounts due to concerns about potential money laundering, court filings allege.

Capstone shifted some of its funds and wire transfer activities to Wells Fargo, which last year discovered Capstone’s registration with the FinCEN, according to the court filings. At the same time, JPMorgan discovered that numerous transactions directed to Capstone’s accounts involved victims of suspected impersonation schemes, according to the court filings.

Citi declined to comment. Wells Fargo and JPMorgan didn’t have an immediate comment.

In one instance, Capstone told JPMorgan a transaction was related to software licensing and related charges, but an executive at Capstone told Miami Beach police that the transaction was related to purchasing tether stablecoins, according to court filings from the U.S. government.

In February, the Federal Bureau of Investigations raided the home of Kotaro Shimogori, an entrepreneur running Capstone from Sacramento, alleging that he had used the company’s bank accounts to run a “crypto-for-cash scheme.”

Victims of impersonation scams sent money to Capstone bank accounts, and Capstone transferred the equivalent amount of crypto to third parties, the government alleged.

Tether has been seeking to expand its banking relationships to protect against these sorts of problems. Last year, it invested in Pave Bank, a commercial bank that holds a banking license from the National Bank of Georgia, in a $39 million funding round led by Accel.