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Summary for newbs: Bitfinex is a crypto exchange kinda based in Hong Kong and kind of based in Taiwan (this seems to change depending on convenience.) Taiwan r
by drcode 9y ago
Summary for newbs:
Bitfinex is a crypto exchange kinda based in Hong Kong and kind of based in Taiwan (this seems to change depending on convenience.) Taiwan recently started becoming more rigorous about monitoring international USD wires, and lots of Bitfinex users had their money stranded in Taiwan. Bitfinex stopped supporting US customers because of these difficulties (AFAIK most customers did eventually get their money out though)
Tether is a company/product that is a cryptocurrency that (aspirationally) has a value of exactly 1 USD. The Tether company and Bitfinex are (supposedly) two unrelated companies that nevertheless have mostly the same people employed as principals. Because crypto daytraders need easy ways to quickly pull their money in/out of crypto exposure, the Tether currency has been a massive hit as a way to convert into pseudo-dollars. Because of this, people have bought billions of these "tethers" from the company, but no one has a good handle on where these billions of dollars are safeguarded, if at all.
- gressquel 9y agoa little correction. Tether and Bitfinex were exposed in Panama Papers as sister companies. They are not two unrelated as they say they are. Even more reason to stay away from Bitfinex and USDT
- profuse99 9y agocorrect. phil potter is director at both bitfinex and tether. tethers get deposited straight to bitfinex upon creation as far as i understand it. source: https://offshoreleaks.icij.org/nodes/82024464 https://offshoreleaks.icij.org/nodes/82024464
- arez 9y agoyes that's true. You can even see the tether printer and the sends of tether on the omni network. The omni network is a layer on top of bitcoin and is totally transparent
- ttul 9y agoCan you show us where we can find these transactions?
- carbocation 9y agoHere: https://omniexplorer.info/lookupadd.aspx?address=3MbYQMMmSkC3AgWkj9FMo5LsPTW1zBTwXL https://omniexplorer.info/lookupadd.aspx?address=3MbYQMMmSkC...
- nopriorarrests 9y agothis handy twitter bot sends a message every time new tethers are issued -- https://twitter.com/tetherprinter https://twitter.com/tetherprinter
- simonebrunozzi 9y agoFollow the trail related to Bitfinex's CFO (in the Panama papers, and elsewhere). Pretty interesting findings.
- api 9y agoGot a good link? This stuff is interesting.
- trevorcreech 9y agoYou can search the Panama Papers here: https://offshoreleaks.icij.org https://offshoreleaks.icij.org
- ebbv 9y agoYou're skipping a key bit here; billions of Tethers magically appeared on the market in the last month and were used to buy BTC in suspiciously regular fashion, in 100 million USDT amounts, and with no clear evidence that it was actually purchased by anyone using real USD.
- ceejayoz 9y agoAnother key bit: Tether's website claims "frequent audits", but their auditor a) never completed their first audit and b) just severed their relationship. https://www.coindesk.com/tether-confirms-relationship-auditor-dissolved/ https://www.coindesk.com/tether-confirms-relationship-audito...
- jandrese 9y agoI'm guessing the auditors weren't happy with "out of thin air" when they asked where the the backing currency came from. The Tether folks were like "Our balance sheet is really simple! We just add numbers to this column until it evens out, what's the problem?!?" and the auditors are like "that's just fraud".
- blibble 9y agothat's more or less what happens when you go and get a loan or a mortgage from the bank
- deleted 9y ago[deleted]
- ceejayoz 9y agoBanks can repossess your property if you don't pay. If you're not putting in much money as a down payment, they'll also force you to pay for insurance (PMI) on the mortgage. They're also not promising otherwise and claiming to be regularly audited while firing/being fired by their auditor.
- 9y ago
- mhmiles 9y agoGood summary. There’s also the accusation that a lot/most of those tethers were not paid for at all and simply minted and used to purchase Bitcoin.
- bhouston 9y agoExactly. There is some circumstantial evidence that Tether printing may be inflating bitcoin prices: http://www.tetherreport.com/ http://www.tetherreport.com/ But it is just circumstantial at this point. There are a lot of ifs related to Tether, but it has that fishy feeling to it. While I think there is a very good chance that Tether is not backed by USD, I think the regulators may actually be more interested in USDT being used for money laundering and non-reporting of investment proceeds. In fact, that is likely a larger crime with respect to US regulators.
- jboggan 9y agoThat would be the SEC's domain. If CFTC is getting involved it's probably because they are potentially manipulating the price on a regulated futures contract.
- deleted 9y ago[deleted]
- AlexCoventry 9y agoBut bitcoin futures didn't start until Dec 17, and the subpoena was sent Dec 6, so that would imply they're messing in futures based on some other commodity.
- jboggan 9y agoYou are correct about the dates but the regulatory planning and preparation for the CFTC regarding the futures contracts has been a long process. CFTC had jurisdiction and interest in assessing asset pricing conditions leading up to the contract launch.
- espano_ 9y agohttps://medium.com/@espano/why-tethers-latest-statement-about-its-auditor-is-complete-bs-42f41e9ade9d https://medium.com/@espano/why-tethers-latest-statement-abou...
- zerostar07 9y agodumb question but how is it minted? Every time someone wants to buy one, they print one? they have a limit?
- this_user 9y agoThey just create one out of thin air and claim that it is backed by real money. But they don't tell you where that money is actually being held, and their auditor recently resigned, so there is no trustworthy independent verification that this money really exists.
- conanbatt 9y agoThey are probably holding Tether reserves in BTC, in a way gambling with the storage moeny. Figure that 2 billion dollars in sitting money generates very little interest, in comparison to 2 billion dollars in btc that might jump 10% in one week. This bet however, inflates the price of btc alone, since its like someone selling a btc doesnt take any btc from the market (as a btc is traded for another btc concealed). This double spend increases demand for btc, and on paper makes tether rich. However, if BTC drops below the cost of acquiring it, the fund becomes insolvent, and as it can't sell anything to recoup it can only spiral down. Thats one theory anyway.
- bb88 9y agoSo, it's better to sell BTC when the market is higher, and convert BTC back to paper currency. Then USDT could in fact be solvent and possibly earn a profit with the a jump in BTC price. If they have billions of dollars in BTC, it might not be infeasible then to print USDT because their profit would guarantee people would get their money.
- conanbatt 9y agoThats like saying you can make a loan for the bank, and buy the bank's stock saying that the bank is making more profits on loans now. It may work in an incredible bull market (which we have) but it has immense risk exposure. Also bear that the monet that Tether sells their btc, they depreciate their own reserves.
- dfgin 9y agoIsn't this kinda similar to the fractional banking system we have already?
- rspeer 9y agoDo you want Tether to be audited and regulated like the fractional reserves of a bank? I'd sure find it entertaining while it lasts. This is also moving the goalposts, because they claim that Tether is fully backed, not fractionally. Changing their story there would involve admitting to a billion-plus-dollar fraud.
- Feniks 9y agoFully backed, has anyone been able to independently audit their reserves?
- dingo_bat 9y agoThey've said an audit is coming for months now.
- adbachman 9y agoThe auditing firm they hired to do that audit last year just (in the last two weeks) erased all trace of the relationship from their website. No audit is expected at this point, we're getting close to the "exit" phase of the scam.
- stephen_g 9y agoNot at all. First of all, banks do have to balance their books. The 'fractional reserve' model taught in school is actually not how banks work in reality, and violates accounting rules. Every single deposit in the bank does need to be backed by something - if banks just stored deposits then they would have to either have the full reserve backing, or other assets (cash, investments, etc.) backing every dollar. Lending seems different, but is really the same. Lending creates new money, by creating a new asset on the bank's balance sheet (the loan), and creating a matching liability of the bank (the deposit). But it is still backed by an asset - the debt to the person they lent to. (Central bank reserves don't actually come into lending, until the banks need to transfer money to other banks. Reserves are used for this, and the bank requires enough in their asset mix to maintain liquidity of their interbank transfers. They can just borrow reserves, for pretty close to the headline interest rate from other banks if they need some extra though). So, Tether could be operating like the banking system, but, if they don't have full backing they would have to be creating matching debt for the remainder, with the intention of it being repaid. Otherwise their liabilities (the Tether) don't match their assets and it's just fraud. Secondly, banking systems have a lender of last resort. If a bank faces a liquidity problem, they can still borrow reserves from the central bank. If Tether faces a liquidity problem, it's likely that nobody will lend them money, their business will collapse and all tethers will be rendered worthless.
- h1d 9y agoAnd for those who want to know more. (Just a third party blog.) https://medium.com/@bitfinexed https://medium.com/@bitfinexed