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Lutnick, in a statement issued Thursday, said he would step down from Cantor once the Senate confirms his position as commerce secretary. He said he intended to divest himself of interests in his companies to comply with government ethics rules. The Commerce Department hasn’t historically played a major role in overseeing the crypto industry.

In a statement sent before Lutnick’s selection as commerce secretary, the Tether spokesperson said that “Tether’s relationship with Cantor is entirely professional, based on managing reserves. The claim that Lutnick’s involvement in a transition team somehow translates to influence over regulatory actions is laughable.”

A Cantor spokeswoman declined to comment on the firm’s relationship with Tether, including on the ownership interest.

Tether operates the world’s most transacted cryptocurrency. Known as a stablecoin for its 1:1 backing with the U.S. dollar, tether gained a foothold among crypto speculators as a safe way to cash out trading profits. It has also caught the attention of government officials who say tether is a preferred medium for Russian arms dealers , international fraud rings and terrorist organizations to move money.

The company said earlier this year that it cooperates with law enforcement and freezes digital wallets connected to sanctioned entities.

Lutnick and Devasini are both outsiders. Lutnick’s firm is a storied, scrappy Wall Street player. Devasini’s company is a crypto operation that by its nature disrupts the incumbent, government-backed currency system.

Devasini, an Italian who has refused to travel to the U.S. for fear of arrest, according to some business associates, sees Lutnick as a shield against the efforts of American authorities and rivals to disrupt his lucrative business. He considers Lutnick a highly effective communicator with U.S. politicians given the Cantor boss’s reputation for rebuilding the firm after two-thirds of its New York-based employees died in the Sept. 11, 2001, attacks on the World Trade Center.

This article is based on interviews with people familiar with both of their businesses. The Journal reviewed meeting notes, emails and flight records that supported interviewees’ accounts.

Lutnick and Devasini’s relationship started in earnest during Tether’s time of need.

In 2021, Tether and a related crypto exchange agreed to pay $61 million to settle civil charges by the New York attorney general and the Commodity Futures Trading Commission for allegedly misrepresenting the assets supporting the stablecoin. Tether, whose holding company is registered in the British Virgin Islands, has never released fully audited financials. Tether didn’t admit wrongdoing in the settlements.

After the settlements, Tether’s primary asset manager, a private Bahamian bank called Deltec, lost several of its relationships with foreign banks that it used to clear payments. This threatened to choke off the channels through which Tether could receive customers’ real-world dollars in exchange for issuances of its token.

Spokespeople for Deltec didn’t respond to requests for comment.

Tether initially moved most of its assets, which totaled about $40 billion at the time, to another Bahamian bank. Richard Heathcote, an investment adviser who had headed Deltec’s trading desk, then connected Devasini to Cantor, some of the business associates said. Devasini later hired Heathcote, once a broker in London at Cantor’s brokerage affiliate BGC Group, as Tether’s chief investment officer to manage the company’s portfolio.

Heathcote didn’t respond to requests for comment.

Lutnick, who has a knack for taking on edgier corners of finance such as sports betting and special-purpose acquisition companies, met Devasini in the Bahamas around late 2021 to find out whether Tether had the assets it claimed it did. The 60-year-old Italian, who has never spoken publicly about Tether, splits his time between his Bahamian beachside mansion and homes on the French Riviera and in the Swiss Alps. He has run Tether almost since its founding in 2014, following careers as a plastic surgeon and an electronics importer, according to people familiar with the company.

“I basically told him the movie line. I said, ‘Show me the money,’” Lutnick told a crypto conference in July. “And we found every penny, and they had every penny, but they had it in what I would call pretty godforsaken places,” he said, noting Tether’s holdings of short-term loans to Chinese companies, known as commercial paper.

As the commercial-paper loans matured, Tether sent money to Cantor to buy supersafe Treasurys. Cantor’s long-established position in the Treasury market, where it is a so-called primary dealer that trades directly with the Federal Reserve, would ensure that Tether could easily sell assets to meet any client requests for dollars.

Some of Tether’s closest customers—mostly crypto-trading firms that sell the token into a vast secondary market—joined Cantor as clients.

By the end of 2023, Tether’s assets had exploded to almost $100 billion, about two-thirds of which were short-dated Treasurys. Tether doesn’t pay any interest to its holders. So a jump in interest rates lifted Treasury yields and helped Tether earn $6 billion in profit last year, according to the company.

Lutnick, a registered Republican, was juggling his job as Cantor’s chairman and chief executive, and his roles heading Cantor’s related Wall Street arms, when Trump turned to him about a year ago to help his presidential bid.

At Cantor, Lutnick restricted the number of employees who had contact with Tether to a handful of top executives, according to some of the business associates. He often handled the relationship himself, flying by private jet to meet Devasini in various crypto-friendly places around the world, including El Salvador, which counts bitcoin as a legal tender .

He personally negotiated the investment in Tether, some of the business associates said. It wasn’t common practice for Cantor to buy an ownership interest in a client, they added.

Cantor has helped Tether with its own expanding investment empire . In May, Bitdeer Technologies, a Singapore-based provider of bitcoin mining services that is run by a Chinese-born crypto tycoon, said Cantor was the placement agent for a $150 million deal with Tether to buy its shares. Placement agents help companies manage bringing in new funds from outside investors.

Lutnick’s son Brandon Lutnick had an internship with Tether in 2023 in the Swiss town of Lugano, where Devasini partly resides and maintains some of Tether’s operations. Brandon counted the gold bars that Tether holds in a vault buried inside a mountain to back a separate $660 million token called Tether Gold, some of the business associates said.

Brandon Lutnick, who has worked at Cantor as a trader, didn’t respond to requests for comment.

In January, the United Nations Office on Drugs and Crime branded the stablecoin a “preferred choice” for money launderers in a report. Howard Lutnick came to Tether’s defense. In an interview in Davos, Lutnick confirmed for the first time publicly that Cantor was holding Tether’s assets.

Around the same time, the U.S. Treasury Department asked Congress for new laws that would allow it to block transactions in stablecoins connected to terrorism financing and sanctions evasion, singling out tether by name.

A bipartisan pair of senators, Kirsten Gillibrand (D., N.Y.) and Cynthia Lummis (R., Wyo.), later introduced a bill to regulate stablecoins in the U.S., which would ban the use of offshore, unregulated versions such as tether. The bill hasn’t advanced.

In May, Lutnick met Devasini in Lugano to talk about the coming election. After the meeting, Devasini told some of the business associates that Lutnick would seek to kill any bills that could hurt Tether.

Several weeks later, Lutnick argued on X that the U.S. needed “responsible dollar-backed stablecoins” to maintain “dollar hegemony” across the globe.

Cantor’s congressional lobbyist, Jeff Miller, has focused his efforts this year around proposed legislation to regulate stablecoins, according to lobbying disclosures. Miller didn’t respond to a request for comment.

Trump named Lutnick in August as co-chair of his transition team. The day after Trump won, one of Devasini’s top deputies at Tether tweeted an American flag.

The crypto market has gone into a frenzy since then, and customers have poured over $10 billion into new tether tokens.

Write to Angus Berwick at angus.berwick@wsj.com , Ben Foldy at ben.foldy@wsj.com , Jenny Strasburg at jenny.strasburg@wsj.com and Eliot Brown at Eliot.Brown@wsj.com