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Tether loaned USDT to investors and illegally traded in New York, says NYAG
- pretfood 7y agooh man, I'm in New York and I've got Tethers. Time to pull the eject cord (on both)
- 6nf 7y agoIf you don't mind me asking, what did you get the tethers for?
- SimonPStevens 7y agoSerious question. What is the reason for holding Tethers? They a supposedly pinned to the dollar, so there isn't much point in holding them hoping they will gain in value. If anything their peg is questionable so they are only likely to decrease in value. As far as I can see their only purpose is a a way of transferring between other crypto currencies and exchanges, but you would only ever need the tethers very short term while you completed the movement or transaction.
- koolba 7y agoThe reason is when you have some other crypto holding and you want to close out your position but not have any reportable tax or legal liability. Of course you’re trading one set of liabilities and legal ramifications for a whole new set. Plus a hell of a lot of counter party risk.
- SimonPStevens 7y agoSo to clarify... If you were holding bitcoin, but decided you wanted out because you think it's about to go down, you'd exchange for tether and hold that instead until you decided that bitcoin is ready to start going back up again. And you accept all the associated risk rather than fully cashing out to real dollars because your jurisdiction doesn't treat crypto to crypto purchase as a taxable event? Interesting. Thank you.
- carbocation 7y agoBut if your jurisdiction is NY (as it is for OP), then this doesn't really answer your question IMHO.
- trixie_ 7y agoOn a crypto only exchange, if you want to have some of your holdings fixed to the dollar then you hold it as tether. Usually because you are getting out of crypto or waiting to get in. Taxable events are on you to report and pay regardless.
- xur17 7y ago> The reason is when you have some other crypto holding and you want to close out your position but not have any reportable tax or legal liability. In the US trading crypto to crypto has tax liabilities.
- Alex3917 7y ago> In the US trading crypto to crypto has tax liabilities. Or, more accurately, just because you record the ownership of an asset on a blockchain doesn't mean you're allowed to violate the law.
- SimonPStevens 7y agoI believe it's not as clear cut as that. I believe that in many jurisdictions there are various rules that allow trading within certain assets classes to not be treated as a taxable event for capital gains purposes unless you trade outside the class back to a regular currency. The taxable event can occur only when you realise the profit or loss. Whether this is the case with crypto currencies is all dependent on how your particular jurisdiction has chosen to classify crypto. Or often just your best guess if your particular jurisdiction hasn't been clear on the classification as many haven't.
- tehlike 7y agoFor us, it is a taxable event, it is pretty clear.
- arcticbull 7y agoNope, it is that clear cut. Some coiners tried to convince the SEC crypto-to-crypto exchanges were like kind 1031 exchanges and the SEC had none of it. If you've been under the impression it was not a taxable event, you should solicit a very competent tax attorney to get you out of whatever hole you're looking up from the bottom of.
- jki275 7y agoIt's never been that way in the US. Sale of any cryptocurrency for any other or any asset or even a cup of coffee has been a taxable event since the beginning. You realize a profit or loss every time you transact, and that's a taxable event. It's not tied to whether or not the transaction is into or out of fiat currency.
- giaour 7y agoReceiving the proceeds of the sale of one crypto currency in another crypto currency doesn't magically wipe out your tax liability. Your capital gains are still taxable, just as they would be if you bartered stocks without first selling your holdings.
- koolba 7y agoOh for sure. I didn't mean to imply it was a good idea. For anybody in the USA this is not going to be a legal winner as any transformation from crypto A to crypto B is going to be a taxable event. I bet there's still plenty of people using this for tax purposes, either misguidingly for tax avoidance or explicitly for tax evasion.
- nsx147 7y agoHolding tether is useful when you are trading on an exchange that has no fiat on ramp or checking account. Many exchanges are crypto-only, you send crypto in, trade, crypto out. You can hold tether if you want to be exposed to the USD position without having to send out
- HipGeeks 7y agoQuick - someone call the SEC!
- slappyjoe 7y agoI still don't see how the State of New York can claim jurisdiction. I mean, it can "claim it" but good luck getting Bitfinex and Tether to comply.
- dsl 7y agoThe article says after being banned from doing business in New York, they opened up offshore shell companies to open accounts with NY banks, engaged accounting firms in NY, and dealt directly with NY based investors. That is pretty solidly doing business in New York.
- Lazare 7y agoYeah, Bitfinex and Tether won't have anything to worry about... ...as long as they don't want to have USD denominated bank accounts, or transact with USD, or do business with people with USD denominated bank accounts. Which, of course, they do. If you touch the US financial system in any way, or if any of your counterparties do, or if your counterparties want to have other counterparties that do, then you need to care deeply about what the US federal government and the NY state government think.
- oyebenny 7y agoWhat are your thoughts on Gemini?
- solotronics 7y agoGemini and Coinbase are on the forefront of legitimizing cryptos. They go out of their way to cooperate with American authorities, which is a good move for their business model. Contrast this with a crypto exchange based outside of the US that would loose their clientele if they worked with the American government in any way. Why you ask? Do research about Americans trying to open bank accounts in Europe. Basically under the new laws banks in Europe prefer to reject Americans rather than try and go through all the extra reporting involved.
- 7y ago
- seibelj 7y agoUSDT has a strong following in APAC countries. Also for some crypto users part of its allure is that it’s vaguely sketchy - it means they are less likely to have their funds blacklisted, a feature which Tether maintains the ability to do but has never enforced as far as I’m aware. If you are getting into the space now USDC is an audited stablecoin backed by Coinbase and Circle which has the second highest issuance after Tether. Most likely you would prefer USDC over tether. https://www.circle.com/en/usdc https://www.circle.com/en/usdc
- carbocation 7y agoIf you want to buy cryptocurrency, why not just buy Bitcoin? In contrast, I don't see a worthy reason to sell US dollars for any stablecoin.
- homero 7y agoIt helps with transferring cash between exchanges
- carbocation 7y agoAny quantity of Bitcoin can be transferred between exchanges for pennies these days.
- 7y ago
- dawhizkid 7y agoThis would explain the mini Bitcoin rally
- lanrh1836 7y agoI know there are a lot of crypto skeptics here, but if you believe in Bitcoin more than Tether at least then you should buy Bitcoin...if Tether does indeed fail Bitcoin will almost certainly spike past 2017 highs.
- human20190310 7y agoWhy would bitcoin spike?
- ForHackernews 7y agoSince it's very difficult to convert USDT into real USD, if people were desperately trying to exit their Tether positions, they'd likely do it by changing for other cryptocurrencies like bitcoin.
- arisAlexis 7y agobut they don't and they never had so this argument is flawed
- Havoc 7y ago>Since it's very difficult to convert USDT into real USD, The irony in this sentence should given even the most hardened USDT fan something to think about
- jki275 7y agoAlso it's not "very difficult", it's nearly (if not exactly) impossible.
- human20190310 7y agoI think that would be a spike in Bitcoin relative to Tether, not relative to the dollar. In the extreme, people might want to exchange any amount of Tether for the tiniest piece of a Bitcoin, but that doesn't necessarily mean that the Bitcoin/dollar rate changes.
- Lucadg 7y agoTether business model is dependent on banks. Banks are always a huge risk when you deal with crypto. They can freeze your funds anytime. You need to be on regulators side or they'll attack you on the bank accounts. That means full compliance with KYC/AML and so on.
- Proven 7y agoThat’s how people make money, what’s the big deal? How reasonable is it to expect they can loan USD to people for free (ie at zero interest)? Only a moron would do that.
- trophycase 7y ago"Loaned USDT" in this context just means created tether and gave it before the wire transfers went through (but presumably these pending wire transfers count as assets, especially considering they can blacklist tokens at will). Not exactly damning evidence. Also it seems like "illegally traded" just means that NY companies set up foreign shell companies to skirt NY regulations? I don't see how this is iFinex's fault either tbh
- llamataboot 7y agoTether has been an openly fraudulent enterprise since the beginning. Pretty much anyone with any experience in financial securities and even passing knowledge of crypto was raising red flags, including on this website. Never wanna blame the victim, but kinda feel like anyone with any due diligence here was just hoping for casino rallies and didn't believe what they were being sold.
- A2017U1 7y agoDo you have any proof? The US authorities have literally shown in court they have vast sums backing tethers. Bifinex itself is a money printing machine. I'd love to take some serious 5 figure wagers with the people who say this stuff. Because they've been saying it for years now and have been consistently proven wrong.
- pfisch 7y agoThere is no chance it is 100% backed like they claim. I would happily wager $10000 on it if a framework for such a wager existed.
- repomies691 7y agoThe majority of markets don't care if it is 100% backed, like they don't care when their bank does fractional reserve. They care about whether the USD peg will last within their timespan they plan to use tether. One of the most common advertised applications for tether is arbitrage between exchanges. There it hardly matters whether tether has 100% reserves, what matters if the peg stays within the days that you are doing the arbitrage (buying tether from one exchange, transfering to other, selling it).
- pfisch 7y ago>The majority of markets don't care if it is 100% backed, like they don't care when their bank does fractional reserve. Banks are insured, and in general they haven't failed for the last like 100+ years. I do think what you are saying about usdt is mostly true though, however if(when) usdt does fail the entire market will take a dive off a cliff. So even if your assets are in other cryptos it still represents a systemic risk to the entire system.
- chvid 7y agoI am curious. Has anyone actually tried to redeem a tether? https://tether.to/fees/ https://tether.to/fees/ It sure seems like they would like to just have people trade them on an exchange.
- shawabawa3 7y agoSo best case scenario you can get $0.996 per USDT, and yet people still choose to buy them for $1 on exchanges...
- shireboy 7y agoCurious what HN thinks about Maker DAO. Dai is pegged to the dollar by a decentralized scheme where people loan/borrow an underlying asset. Seems to be floating pretty close to $1 and I wonder if it will replace USDT...