Officials at the Treasury Department have spent months weighing sanctions against the cryptocurrency Tether for reportedly 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 purportedly 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.
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 told 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 advisory published in June by the Financial Crimes Enforcement Network, a bureau within Treasury, said transnational criminal organizations were increasingly buying equipment and chemicals from Chinese suppliers through virtual currencies, including Tether. Sanctions 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 accusations. Last month, Tether CEO Paolo Ardoino said on the social media platform X that there was "no indication that Tether is under investigation," after a Wall Street Journal story disclosed the possibility of sanctions. Tether also released a statement 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.
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.
If Lutnick did move to Treasury, he would likely have to unwind his considerable financial assets, since incoming Cabinet officials are often directed 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 code of ethical conduct 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.
"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."
Information for this article was contributed by Shayna Jacobs and Perry Stein of The Washington Post.