Efforts to promote the new, Tron-powered version of USDT are stumbling following the New York Attorney General's fraud allegations against the companies behind the stablecoin.

CoinFlip, a crypto ATM startup, had planned to add the Tron version of USDT to more than 180 of its machines, allowing people to buy the token for cash at convenience stores, gas stations and tobacco shops across the U.S.

But according to Daniel Polotsky, co-founder and CEO of CoinFlip, this plan has been put on hold due to the NYAG's court case involving Tether, the issuer of the token, and Bitfinex, the cryptocurrency exchange with overlapping management and owners.

"Given the news, we are going to be postponing our launch until the smoke clears (if it ever does)," Daniel Polotsky, co-founder and CEO of CoinFlip, told CoinDesk Wednesday, adding:

Tron has also postponed a $20 million rewards program that was designed to encourage adoption of its version of USDT.

The blockchain project had planned to work with Huobi, OKEx and other exchanges to airdrop Tron-based USDT and encourage users to migrate their tokens from the Omni protocol (where USDT initially was issued and where the biggest part of its supply still lives) to Tron, with offers like 20 percent annualized interest rate on their holdings.

However, the reward program was postponed "until there's more clarity regarding Bitfinex and Tether," Tron CEO Justin Sun tweeted Wednesday.

USDT is designed to trade 1-to-1 with the U.S. dollar, and for most of its history, it has done so, despite longstanding questions about its cash reserves.

New York Attorney General Letitia James revealed last week that Tether had loaned more than $700 million to Bitfinex, because the latter was unable to access more than $800 million held at a payment processor.

As a result, the roughly 2.6 billion of USDT outstanding are now only 74 percent backed by cash and equivalents, as Tether's general counsel acknowledged.

Stepping back, Tether has issued USDT via Omni (which runs on top of the bitcoin blockchain) since 2014, but in recent years it's launched versions of the token on other networks.

The ethereum version of USDT debuted in 2017, and in March of this year, Tron and Tether announced their partnership.

The rationale for Tron was, according to the firm, the chance to boost liquidity for decentralized applications and make Tron more accessible to institutional investors by providing a stablecoin option.

"The stablecoin will allow users to access the DAPP ecosystem with a more familiar USD concept, and therefore mitigates the effects of price fluctuations, providing a better cash-in/cash-out and risk-avoiding method for DAPPs and enabling scalable application of DAPPs," Tron's blog post said on April 2.

Since April 16, Tether has issued 137.9 million of the dollar-pegged tokens on the Tron network. This is still a drop in the bucket compared to the Omni protcol's tethers, of which more than 2 billion are outstanding.

In a live video "ask-me-anything" session on Twitter on April 25, Sun told his 1.11 million followers:

Later that day, news broke of the attorney general's investigation.

Asked Tuesday if Tron received any proof of the USDT token's fiat backing from Tether, Tron spokesperson Cliff Edwards told CoinDesk:

Edwards would not elaborate on the details of those "assurances."

Justin Sun image by Brady Dale for CoinDesk