In my opinion, regulators have a too-big-to-fail problem here. Tether is known to be used for artificially inflating the crypto market in collusion with certain exchanges. There is a lot of documentation on this, the following two articles are a good start:

https://theodoregreenbaum.medium.com/the-crypto-time-bomb-is...

https://www.bloomberg.com/news/articles/2021-07-26/tether-ex...

If news suddenly come out about Tether being formally accused by the Department of Justice, the market may react in panic and things might get ugly. As an anecdote, I have a friend who told me she put a significant amount of her life savings into "etherium and carnado" (sic). There are millions of people like this who will get absolutely crushed.

I don't see a non-painful solution here. The regulators were too slow and have allowed a monster to be created.