It makes sense if Tether buys BTC with USDT that it just created out of nothing, then sells those BTC later for real dollars. Those real dollars can be used to

It makes sense if Tether buys BTC with USDT that it just created out of nothing, then sells those BTC later for real dollars. Those real dollars can be used to collateralize the USDT "after the fact", and if the price went up between the two transactions, Tether keeps the difference. It's sort of like an uncovered short of USDT - they take a negative position, buy BTC, sell BTC, then cover the negative position. (Except "cover" in this case really means "collateralize the USDT that someone else is holding".) EDIT: I have no idea if that's what they were actually doing, but that's my interpretation of the author's interpretation of the lawsuit.