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Over the last year Tether has looked more and more like fraud. I was reading this article covering some of the recent developments since Tether's failed attempt

Over the last year Tether has looked more and more like fraud. I was reading this article covering some of the recent developments since Tether's failed attempt to suppress discovery by New York's Attorney General https://crypto-anonymous-2021.medium.com/the-bit-short-inside-cryptos-doomsday-machine-f8dcf78a64d3 https://crypto-anonymous-2021.medium.com/the-bit-short-insid...

gge 6y ago
Here is a good piece explaining why the data backing that articles arguments is BS: https://medium.com/@nic__carter/assessing-bitcoins-liquidity-with-coinlib-data-is-indefensible-3e5fdad51646 https://medium.com/@nic__carter/assessing-bitcoins-liquidity...
- phire 6y ago
  On top of the suspect data source, I notice I few more issues with that teather hit piece. 1. They are only looking on the buy sides. They don't even show the sell side with all the people selling their bitcoin back for teather. On most exchanges, the amount of teather buys is roughly equal to the amount of teather sells. People just sit there all day selling back and forwards between teather and bitcoin, trying to take advantages in short-term fluctuations in the price. But by only presenting one side of the trades, that hit piece implies (but never actually claims) that teather is being created out of thin air to buy bitcoin. 2. They misrepresent teather's reserve by implying (and once again not claiming) that it is all cash held in a single bank account in a single Bahamian bank account. (and then pointing out that the value of teather massively exceeds all Bahamian bank holding) In reality, teather claims their reserves are cash and cash equivalents. They only need to hold a small fraction as actual cash for quick withdrawals. And there is a good chance that teather hold cash in multiple bank accounts in multiple countries. It's a huge risk to have it all in a single bank. -------- Personally, I'm not a fan of teather, or cryptocurrencies in general. Teather even admit they don't hold full cash/cash-equivalent reserves, saying in April 2019 they only had 74% cash+equivalent reserves. But I hate misleading journalism way more than I dislike teather. That article is hugely misleading and feels like it's designed to drive the price of bitcoin down so the anonymous author can profit from a short position.
  - sillysaurusx 6y ago
    (Psst, it's tether, not teather. Carry on.)
  - arcticbull 6y ago
    > In reality, teather claims their reserves are cash and cash equivalents. They only need to hold a small fraction as actual cash for quick withdrawals. And there is a good chance that teather hold cash in multiple bank accounts in multiple countries. It's a huge risk to have it all in a single bank. They haven't burned a single token in the last year. Give or take zero banks in the world want to do business with Tether, they're totally and utterly toxic to USD banking. Tether got shut down by every major bank on the mainland US, one. By. One. It got so bad they started getting rejected by third and fourth tier banks. They had to purchase Noble bank in Puerto Rico to get them onboard. Once Noble's mainland US correspondent bank found out, they got shut down immediately and pushed into insolvency. So they found the sketchiest bank in the entire world, Deltec, chaired by the man who created the Inspector Gadget TV series, Jean Chalopin. Look, I'm not saying they don't have the money, I'm saying I don't believe them, neither should you, and neither should anyone else until they pony up an audit.
    - phire 6y ago
      > They haven't burned a single token in the last year. They burned 1 billion tokens 6 months ago, back in August. Besides, why do people act like not burning tokens is evidence of wrong-doing? That just shows ignorance for how tether have setup their accounts. They have a "treasury account" where tether tokens go when people redeem them, and where they can quickly issue tokens when people deposit cash. They only need to issue more tokens when the treasury account gets low, and they only need to burn tokens when they have an excess in treasury. It makes total sense that in the current bull market that they haven't had the need to burn many tokens. The burn in August only happened because they now have multiple tokens on multiple networks and their TRON treasury account had too much. ------------ All your remaining criticism about banking is 100% valid. And other peoples criticism about auditing and legal troubles. I don't want to write comments on hackernews rebutting claims about Teather. I want the crypto market to go bust again so I can afford a new GPU. But so many people just parrot invalid criticism without understanding it.
- arcticbull 6y ago
  It actually doesn't really matter. Yes, The Bit Short isn't completely right, but it's right enough that even if you go back and make the corrections to the data, the point remains equally valid. Here's one follow-up piece worth reading that does some statistical analysis: [1]. Nic goes on for days about fake volume. Let's use Bitcoin Trade Volume, which I'm led to believe is a very generous pro-crypto take on the actual volume in the space. It shows 59% USD and 41% USDT. That's not the 75% USDT The Bit Short suggested, but who cares? It's huge. If you sub in those numbers when you're reading The Bit Short, it's just as compelling. Something Nic doesn't care to talk about, slamming the WSJ instead of who he should be pointed at, Paolo Arduino. [1] https://adrianbarwicki.medium.com/impact-of-tether-trading-on-the-bitcoin-price-f915e26c2c44 https://adrianbarwicki.medium.com/impact-of-tether-trading-o... [2] https://www.bitcointradevolume.com/ https://www.bitcointradevolume.com/
  - gge 6y ago
    Cope
    - creepto 6y ago
      Is that your reply? Cope? God damn do I love coiners.
  - 5600k 6y ago
    Bitcoin still feels like a house of cards. Does anyone remember what happened after everyone said “buy gold”?
    - nivenkos 6y ago
      The biggest tell IMO is that you still can't buy many things with Bitcoin. The transactions are extremely slow, and Steam etc. have even stopped accepting Bitcoin payments. Then where does the value come from? Sure there's a base layer of narcotics trading, etc. but that could switch to other cryptocurrencies too (like Monero). It just feels like a massive pump and dump built over some base layer of illegal transactions (drugs and money laundering).
- thecupisblue 6y ago
  >I am the cofounder of Coin Metrics, a data business that licenses crypto market data to financial institutions, asset managers, and banks Oh, so his credentials are "my company depends on crypto and if it fails we fail". And he's saying "oh these exchanges arent legit by our metrics we wont count them". That's the exactly the problem and he's saying "put on a blindfold and its gone".
  - poontang1 6y ago
    This is a horrible take. Anyone who knows the crypto industry knows many exchanges fake volume and companies like CoinMetrics reduce the noise to get better figures on the actual nature of transactions and liquidity in the industry. Nic Carter knows the data is bullshit because he has a company that specializes in proving such things.
    - nwah1 6y ago
      The false data from exchanges likely is key to the belief that these coins have value, and thus affects the data even from exchanges that aren't noticeably faking data.
  - karaterobot 6y ago
    I appreciate skepticism, but attacking someone's credibility isn't as useful as attacking their argument on its merits. Are there points he makes or facts he uses in his article which are themselves invalid or in bad faith?
    - thecupisblue 6y ago
      The basis itself of the article is invalid and it is in "bad faith". I'm not attacking their credibility, I am attacking the thesis in itself. But since the author attacks the author of the original article and the WSJ in their rebuttal, I apply the same here and note that they have a large piece of cake in the play they are talking about and are thus also not objective. So to go to the arguments: 1. Total crypto market isn't just US, on which this rebuttal seems to focus. 2. Is bitcoin price determined only by fiat inflow via "whitelisted" exchanges? Are they the only part of the whole crypto community that matters? The answer is no, and thus we gotta count the whole market. 3. And again, the article completely avoids the problem by saying "there are problematic exchanges but we will ignore them". The problematic exchanges are exactly the problem. They are creating fiat-tied coins with no backing and putting that money into market - which is valued by the amount of money in it. So the "whitehat" exchanges, even tho not directly involved in dirty money, are involved and profit off of the same ecosystem the dirty money is in. Thus, they are not an isolated system and cannot be observed as such and the market cannot be judged on the behaviour of these isolated systems alone. Imagine if this was about gambling and illegal casinos (which in a way, it is). So this article would be written by someone working in Vegas saying "Well, yeah if we're looking at all casinos there is illegal stuff going on and people are printing their own chips and trading them for real Vegas chips, but as a company that counts chips, we only count chips sold in Vegas casinos and we haven't found such problems in Vegas casinos". Would you say "hey but there is a bunch of illegal casinos you are not looking at that print chips which are exchanged at your place for money" or "oh okay this makes sense"?
Zamicol 6y ago
For years I've told loved ones, friends, and anyone with a passing interest in the nascent space to avoid Tether like the plague. In my opinion, it's only a matter of time until it blows up.
- randomopining 6y ago
  How do you invest in Tether? I thought it was just like a dollar peg for btc for inter-exchange operations.
  - birdyrooster 6y ago
    I am guessing people park their money in tether during periods of instability without needing to pay a broker to transfer into fiat. It looks like a place for temporarily hedging against crypto generally.
  - rawtxapp 6y ago
    They don't invest in tether, it's just a means of moving money between exchanges like you say or temporary hold between trades.
  - ac29 6y ago
    In theory, if you give Tether some dollars, they will store those dollars in reserve and issue you new Tethers. In practice, there is no evidence that any part of that happens aside from the minting new tethers part. Most likely there is some amount of money and/or crypto held in reserve, but despite allegedly having several tens of billions of dollars in reserve, they refuse to do an audit. I think the currently most plausible answer for how Tether works is: 1 )Tether issues tokens to OTC exchanges in exchange for an IOU 2) The exchange buys BTC with it 3) The exchange sells that bitcoin for dollars, and pays off that IOU. This almost certainly wont fly with regulators, and has many ways it could explode, hence the investigations.
    - dillondoyle 6y ago
      What's the best guess on where the actual cash sits in the meantime, or long term?
snomad 6y ago
The whole thing feels like scammy / tulip mania, but I think it is worth pointing out that Bitfinex repaid $550 million Feb 5. Though nothing comes up right away, I think the next trial date w/New York is Sept 2021.
- nanmen 6y ago
  Why do you think next trial will be only in Autumn?
fny 6y ago
Tether isn't a fraud perse... In the worst case it's a severely overleveraged bank that operates outside of traditional regulatory regimes akin to many eurodollar banks. My bet is they hold something around 5% in reserves. Reserve requirements in the US have dropped from 10% to 0% thanks to the fed, so our fractional reserve system has turned into an inverted ponzi scheme of sorts. The biggest risk for tether is a liquidity event. If everyone cashes in for dollars at once, tether is probably dead. But honestly, I might consider buying the dip.
- phire 6y ago
  The problem is that Teather advertises themselves as 'non-fractional'. They are meant to hold 100% reserves. As for their actual holdings: "On 30 April 2019 Tether Limited's lawyer claimed that each tether was backed by only $0.74 in cash and cash equivalents"* That's better than your pessimistic 5% estimate, assuming their statements can be trusted.
  - arcticbull 6y ago
    That was really, really old data lol. That was from when they had about $3B in market cap. Today they have $33B in market cap. What a difference a year or two makes! In fact, they printed in the last week the entire market cap they had when that statement was made, in $1B USDT increments. That figure comes from the time when Bitfinex reached into the Tether kitty and snagged $850M (leaving an IOU) to make up for the money seized by world governments as being the proceeds of money laundering. That happened when their money launderer, CryptoCapital, got shut down. CryptoCapital was run by former NFL player Reginald Fowler [1] whose lawyers just withdrew from his case because he's broke. Luckily Tether has since moved on, and they bank with Deltec in the Bahamas, whose chairman is the guy who created inspector fucking gadget. [2] I'm not sure 5% is all that far off, given the 33 billion USD they're supposed to have is more than the entire Bahamian banking system has on deposit in USD according to regulators. By like, a lot. [1] https://coingeek.com/crypto-capital-ny-court-grants-reginald-fowler-lawyers-motion-to-withdraw/ https://coingeek.com/crypto-capital-ny-court-grants-reginald... [2] https://en.wikipedia.org/wiki/Jean_Chalopin https://en.wikipedia.org/wiki/Jean_Chalopin
  - 6y ago

gge 6y ago

Here is a good piece explaining why the data backing that articles arguments is BS: https://medium.com/@nic__carter/assessing-bitcoins-liquidity-with-coinlib-data-is-indefensible-3e5fdad51646 https://medium.com/@nic__carter/assessing-bitcoins-liquidity...

phire 6y ago
On top of the suspect data source, I notice I few more issues with that teather hit piece. 1. They are only looking on the buy sides. They don't even show the sell side with all the people selling their bitcoin back for teather. On most exchanges, the amount of teather buys is roughly equal to the amount of teather sells. People just sit there all day selling back and forwards between teather and bitcoin, trying to take advantages in short-term fluctuations in the price. But by only presenting one side of the trades, that hit piece implies (but never actually claims) that teather is being created out of thin air to buy bitcoin. 2. They misrepresent teather's reserve by implying (and once again not claiming) that it is all cash held in a single bank account in a single Bahamian bank account. (and then pointing out that the value of teather massively exceeds all Bahamian bank holding) In reality, teather claims their reserves are cash and cash equivalents. They only need to hold a small fraction as actual cash for quick withdrawals. And there is a good chance that teather hold cash in multiple bank accounts in multiple countries. It's a huge risk to have it all in a single bank. -------- Personally, I'm not a fan of teather, or cryptocurrencies in general. Teather even admit they don't hold full cash/cash-equivalent reserves, saying in April 2019 they only had 74% cash+equivalent reserves. But I hate misleading journalism way more than I dislike teather. That article is hugely misleading and feels like it's designed to drive the price of bitcoin down so the anonymous author can profit from a short position.
- sillysaurusx 6y ago
  (Psst, it's tether, not teather. Carry on.)
- arcticbull 6y ago
  > In reality, teather claims their reserves are cash and cash equivalents. They only need to hold a small fraction as actual cash for quick withdrawals. And there is a good chance that teather hold cash in multiple bank accounts in multiple countries. It's a huge risk to have it all in a single bank. They haven't burned a single token in the last year. Give or take zero banks in the world want to do business with Tether, they're totally and utterly toxic to USD banking. Tether got shut down by every major bank on the mainland US, one. By. One. It got so bad they started getting rejected by third and fourth tier banks. They had to purchase Noble bank in Puerto Rico to get them onboard. Once Noble's mainland US correspondent bank found out, they got shut down immediately and pushed into insolvency. So they found the sketchiest bank in the entire world, Deltec, chaired by the man who created the Inspector Gadget TV series, Jean Chalopin. Look, I'm not saying they don't have the money, I'm saying I don't believe them, neither should you, and neither should anyone else until they pony up an audit.
  - phire 6y ago
    > They haven't burned a single token in the last year. They burned 1 billion tokens 6 months ago, back in August. Besides, why do people act like not burning tokens is evidence of wrong-doing? That just shows ignorance for how tether have setup their accounts. They have a "treasury account" where tether tokens go when people redeem them, and where they can quickly issue tokens when people deposit cash. They only need to issue more tokens when the treasury account gets low, and they only need to burn tokens when they have an excess in treasury. It makes total sense that in the current bull market that they haven't had the need to burn many tokens. The burn in August only happened because they now have multiple tokens on multiple networks and their TRON treasury account had too much. ------------ All your remaining criticism about banking is 100% valid. And other peoples criticism about auditing and legal troubles. I don't want to write comments on hackernews rebutting claims about Teather. I want the crypto market to go bust again so I can afford a new GPU. But so many people just parrot invalid criticism without understanding it.
arcticbull 6y ago
It actually doesn't really matter. Yes, The Bit Short isn't completely right, but it's right enough that even if you go back and make the corrections to the data, the point remains equally valid. Here's one follow-up piece worth reading that does some statistical analysis: [1]. Nic goes on for days about fake volume. Let's use Bitcoin Trade Volume, which I'm led to believe is a very generous pro-crypto take on the actual volume in the space. It shows 59% USD and 41% USDT. That's not the 75% USDT The Bit Short suggested, but who cares? It's huge. If you sub in those numbers when you're reading The Bit Short, it's just as compelling. Something Nic doesn't care to talk about, slamming the WSJ instead of who he should be pointed at, Paolo Arduino. [1] https://adrianbarwicki.medium.com/impact-of-tether-trading-on-the-bitcoin-price-f915e26c2c44 https://adrianbarwicki.medium.com/impact-of-tether-trading-o... [2] https://www.bitcointradevolume.com/ https://www.bitcointradevolume.com/
- gge 6y ago
  Cope
  - creepto 6y ago
    Is that your reply? Cope? God damn do I love coiners.
- 5600k 6y ago
  Bitcoin still feels like a house of cards. Does anyone remember what happened after everyone said “buy gold”?
  - nivenkos 6y ago
    The biggest tell IMO is that you still can't buy many things with Bitcoin. The transactions are extremely slow, and Steam etc. have even stopped accepting Bitcoin payments. Then where does the value come from? Sure there's a base layer of narcotics trading, etc. but that could switch to other cryptocurrencies too (like Monero). It just feels like a massive pump and dump built over some base layer of illegal transactions (drugs and money laundering).
thecupisblue 6y ago
>I am the cofounder of Coin Metrics, a data business that licenses crypto market data to financial institutions, asset managers, and banks Oh, so his credentials are "my company depends on crypto and if it fails we fail". And he's saying "oh these exchanges arent legit by our metrics we wont count them". That's the exactly the problem and he's saying "put on a blindfold and its gone".
- poontang1 6y ago
  This is a horrible take. Anyone who knows the crypto industry knows many exchanges fake volume and companies like CoinMetrics reduce the noise to get better figures on the actual nature of transactions and liquidity in the industry. Nic Carter knows the data is bullshit because he has a company that specializes in proving such things.
  - nwah1 6y ago
    The false data from exchanges likely is key to the belief that these coins have value, and thus affects the data even from exchanges that aren't noticeably faking data.
- karaterobot 6y ago
  I appreciate skepticism, but attacking someone's credibility isn't as useful as attacking their argument on its merits. Are there points he makes or facts he uses in his article which are themselves invalid or in bad faith?
  - thecupisblue 6y ago
    The basis itself of the article is invalid and it is in "bad faith". I'm not attacking their credibility, I am attacking the thesis in itself. But since the author attacks the author of the original article and the WSJ in their rebuttal, I apply the same here and note that they have a large piece of cake in the play they are talking about and are thus also not objective. So to go to the arguments: 1. Total crypto market isn't just US, on which this rebuttal seems to focus. 2. Is bitcoin price determined only by fiat inflow via "whitelisted" exchanges? Are they the only part of the whole crypto community that matters? The answer is no, and thus we gotta count the whole market. 3. And again, the article completely avoids the problem by saying "there are problematic exchanges but we will ignore them". The problematic exchanges are exactly the problem. They are creating fiat-tied coins with no backing and putting that money into market - which is valued by the amount of money in it. So the "whitehat" exchanges, even tho not directly involved in dirty money, are involved and profit off of the same ecosystem the dirty money is in. Thus, they are not an isolated system and cannot be observed as such and the market cannot be judged on the behaviour of these isolated systems alone. Imagine if this was about gambling and illegal casinos (which in a way, it is). So this article would be written by someone working in Vegas saying "Well, yeah if we're looking at all casinos there is illegal stuff going on and people are printing their own chips and trading them for real Vegas chips, but as a company that counts chips, we only count chips sold in Vegas casinos and we haven't found such problems in Vegas casinos". Would you say "hey but there is a bunch of illegal casinos you are not looking at that print chips which are exchanged at your place for money" or "oh okay this makes sense"?

Zamicol 6y ago

For years I've told loved ones, friends, and anyone with a passing interest in the nascent space to avoid Tether like the plague. In my opinion, it's only a matter of time until it blows up.

randomopining 6y ago
How do you invest in Tether? I thought it was just like a dollar peg for btc for inter-exchange operations.
- birdyrooster 6y ago
  I am guessing people park their money in tether during periods of instability without needing to pay a broker to transfer into fiat. It looks like a place for temporarily hedging against crypto generally.
- rawtxapp 6y ago
  They don't invest in tether, it's just a means of moving money between exchanges like you say or temporary hold between trades.
- ac29 6y ago
  In theory, if you give Tether some dollars, they will store those dollars in reserve and issue you new Tethers. In practice, there is no evidence that any part of that happens aside from the minting new tethers part. Most likely there is some amount of money and/or crypto held in reserve, but despite allegedly having several tens of billions of dollars in reserve, they refuse to do an audit. I think the currently most plausible answer for how Tether works is: 1 )Tether issues tokens to OTC exchanges in exchange for an IOU 2) The exchange buys BTC with it 3) The exchange sells that bitcoin for dollars, and pays off that IOU. This almost certainly wont fly with regulators, and has many ways it could explode, hence the investigations.
  - dillondoyle 6y ago
    What's the best guess on where the actual cash sits in the meantime, or long term?

snomad 6y ago

The whole thing feels like scammy / tulip mania, but I think it is worth pointing out that Bitfinex repaid $550 million Feb 5. Though nothing comes up right away, I think the next trial date w/New York is Sept 2021.

nanmen 6y ago
Why do you think next trial will be only in Autumn?

fny 6y ago

Tether isn't a fraud perse... In the worst case it's a severely overleveraged bank that operates outside of traditional regulatory regimes akin to many eurodollar banks. My bet is they hold something around 5% in reserves. Reserve requirements in the US have dropped from 10% to 0% thanks to the fed, so our fractional reserve system has turned into an inverted ponzi scheme of sorts. The biggest risk for tether is a liquidity event. If everyone cashes in for dollars at once, tether is probably dead. But honestly, I might consider buying the dip.

phire 6y ago
The problem is that Teather advertises themselves as 'non-fractional'. They are meant to hold 100% reserves. As for their actual holdings: "On 30 April 2019 Tether Limited's lawyer claimed that each tether was backed by only $0.74 in cash and cash equivalents"* That's better than your pessimistic 5% estimate, assuming their statements can be trusted.
- arcticbull 6y ago
  That was really, really old data lol. That was from when they had about $3B in market cap. Today they have $33B in market cap. What a difference a year or two makes! In fact, they printed in the last week the entire market cap they had when that statement was made, in $1B USDT increments. That figure comes from the time when Bitfinex reached into the Tether kitty and snagged $850M (leaving an IOU) to make up for the money seized by world governments as being the proceeds of money laundering. That happened when their money launderer, CryptoCapital, got shut down. CryptoCapital was run by former NFL player Reginald Fowler [1] whose lawyers just withdrew from his case because he's broke. Luckily Tether has since moved on, and they bank with Deltec in the Bahamas, whose chairman is the guy who created inspector fucking gadget. [2] I'm not sure 5% is all that far off, given the 33 billion USD they're supposed to have is more than the entire Bahamian banking system has on deposit in USD according to regulators. By like, a lot. [1] https://coingeek.com/crypto-capital-ny-court-grants-reginald-fowler-lawyers-motion-to-withdraw/ https://coingeek.com/crypto-capital-ny-court-grants-reginald... [2] https://en.wikipedia.org/wiki/Jean_Chalopin https://en.wikipedia.org/wiki/Jean_Chalopin
- 6y ago