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I've been following Tether for quite a long time. I have no absolute proof it is a scam but the writing is on the wall. Here are some facts. - The current Mark

by dudus 6y ago

I've been following Tether for quite a long time. I have no absolute proof it is a scam but the writing is on the wall. Here are some facts. - The current Market Cap of USDT is 34 Billion Dollars. It was 4B this time last year. Since the value is pegged this means there has been an influx of cash of 30 B into this shady company in the last year alone. Who invested this money? We have no idea since Tether doesn't disclose, but we're supposed to believe all this money entered USDT even with the red flags we see. - There's a correlation between Tether printing new USDT and the Bitcoin Price. - There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try. - Daily volume of transaction is in the 100 B mark. Twice that of Bitcoin and 3 times Tether daily volume this time last year. - BitFinex is included in the NY decision because it's proven now that Bitfinex and Tether are operated by the same people. Note that a few years ago this was not only undisclosed but actively denied by Tether. - Tether initially told its investors it was 100% backed by dollar reserves and that it would be subjected to constant audits. The audits never happened, and they eventually conceded only ~70% was backed by "short term cash reserves". My conclusion is that the folks at BitFinex came up with a new currency, printed billions of it and used it to wash trade against itself and other crypto, creating an artificial demand that drove the prices up. It's textbook Ponzi scheme and will inevitably come crashing down, killing Tether, BitFinex and a chunk of the Crypto Market. Crypto folks will counter argue that people has been saying this for years but Tether is still chugging along and crypto is healthier than ever. Personally I won't touch any crypto with a 10 foot pole until this thing blows over. If that means missing out on a lot of possible gains so be it.

zby 6y ago
"There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try." How about Bitfinex? I had some problems with withdrawals there in the past - but now it seems to work.
vmception 6y ago
Almost all fiat deposits into Bitfinex create USDT. Thats an additional fact that the amount is in line with the amounts that would be deposited into any big exchange. If Coinbase minted USDC whenever someone deposited, you would see the same kind of growth. The basis of your entire post is assuming impropriety based on pretty normal behavior with the addition of the business quirk of when USDT is created. The ability for impropriety is a good enough reason to avoid it, and their unilateral willingness to do so without any discussion can reinforce that. But people thought everything you thought since the beginning of Tether in like 2014 or so, but the reality is that it “only went fractional reserve” in 2018. Its kind of like they threw up their hands and said “well people think its a ponzi anyway might as well cover this business debt!” The irony being that the NY AG investigation actually proved that prior to 2018 it functioned exactly as promised, barring their 2017 distress by having nowhere to put their fiat deposits. But if you assume that it hasnt come crashing down because Bitfinex does what they said, then it still does make sense: crypto prices pump after Tether mints because it is people depositing into the exchange and then buying crypto. Any way glad USDC and DAI are growing a lot now, which have grown by the same orders of magnitude.
- lazide 6y ago
  Is 'pretty normal business behavior' pretending two entities (bitfinex and Tether) are arms lengths entities with no relationship to each other to hide the conflict of interest, along with the provably lying about the actual backing of the coin, and using what were supposed to be customer trust funds to bail out what was supposed to be an explicitly stated unrelated business? If so - be aware those are felonies in many industries and are probably criminal in most jurisdictions (fraud at a minimum). For very good reasons.
  - vmception 6y ago
    I am able to perceive things that don’t all reach negative conclusions. That doesn’t mean I like the product or the organization or have any specific opinion on it. That’s how due diligence works.
  - lotaezenwa 6y ago
    Yes, this is precisely how investment banks work.
  - ban5wall 6y ago
    Surprisingly, yes. That is fairly normal in financial institutions. It seems nonsensical at a first glance, but: https://www.investopedia.com/articles/analyst/090501.asp https://www.investopedia.com/articles/analyst/090501.asp
    - lazide 6y ago
      What you are pointing to is expressly pointing out that 1) it is illegal, 2) it is illegal for a very good reason, 3) if anyone finds out the illegal things going on, it will likely result in catastrophic (or at least very, very expensive) consequences. The pretending part that Tether and Bitfinex were doing was fundamentally different than the walling happening within financial institutions, where it has to be disjoint staff, disjoint control/leadership, and if someone sneaks through compliance and shares data (wink wink) it is highly likely someone will get fired if compliance finds out. In the Tether/Bitfinex issue, they shared board members and ownership despite claiming they didn't in public, and were misrepresenting themselves in a very material way as independent. If you were just adding some information, apologies. If you were advocating that clear evidence someone is brazenly committing a crime is not a justifiable and strong reason to distrust them, or even that it is inappropriate to hypothesize how they could be getting rich while continue to do similar things - then yikes? If you were saying Situation Normal, All Fucked Up - then extra yikes? Goldman Sachs (or some random VC firm) say might have some subtle versions of this going on, but if they were doing what Tether is and has been doing right now, they wouldn't be a solvent entity for very long. That Tether is hiding from jurisdictions (for now) in a way that Goldman can't doesn't inspire confidence in their trustworthiness or stability going forward, as they're clearly on the radar now and blood is in the water. Along with a lot of money and some high profile political promotions, potentially.
dcolkitt 6y ago
> There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try. There is an easy way. Swap USDT to USDC on Curve. Deposit USDC on Coinbase. Convert USDC to USD on Coinbase. Withdraw USD. I'm not saying I disagree with your overall thesis. But this specific point makes it sound like USDT is some sort of roach motel ("you can get in, but you can't get out"). That's not true, it's fairly easy to get back to USD at low cost. The fact that USDT is trading at near parity with USDC on Curve indicates that most of the market doesn't perceive a risk.
- tutfbhuf 6y ago
  > There is an easy way. Swap USDT to USDC on Curve. Deposit USDC on Coinbase. Convert USDC to USD on Coinbase. Withdraw USD. Then what is your explanation for why it is not possible to directly exchange USDT for USD, there must be a reason that no exchange wants to do that. > that most of the market doesn't perceive a risk. That is absolutely no indicator for safety.
  - vidarh 6y ago
    > Then what is your explanation for why it is not possible to directly exchange USDT for USD, there must be a reason that no exchange wants to do that. https://global.bittrex.com/Market/Index?MarketName=USD-USDT https://global.bittrex.com/Market/Index?MarketName=USD-USDT
    - pas 6y ago
      Do they process withdrawals in a reasonable time?
      - vidarh 6y ago
        I have not had problems with them, but I'm also not doing any large transactions.
        6y ago
hntrader 6y ago
If the total amount of USDT exceeds their USD cash reserves, who became the beneficiary of the extra USDT?
- rednerrus 6y ago
  Bitcoin holders.
  - hntrader 6y ago
    Which BTC holders and how? What's the path from onboarding on an exchange website, to eventually getting unbacked USDT? If I put USD onto an exchange, why would the exchange give me more USDT than what I deposited (and if this never happened, then how did the first unbacked USDT come into existence)? I hold BTC but didn't use USDT in the process, just deposited normal fiat and bought BTC using that.
    - _jjkk 6y ago
      1. Bitfinex processes a USD deposit and dispenses USDT 2. USDT holder purchases BTC with it 3. Bitfinex purchases crypto (mostly BTC) with the USD, instead of holding it as promised Thus the original USD of the person buying BTC at the exchange has effectively double the buying pressure on the BTC market because Bitfinex is actively investing all their USD holdings that "back" Tether into the market as well.
      - hntrader 6y ago
        Good explanation. Why do they do step (3)? Aren't they just opening themselves up to massive legal liability?
        _jjkk 6y ago
        Some believe this is an intentional Ponzi scheme to print some money for the owners of Tether and Bitfinex, others believe they had good intentions at first, but through bad investment or otherwise got underwater, and started "investing" their USDT-backing dollars to claw back up. Bitfinex originally denied relation to Tether but it's been proven that was a lie. The worry is, at some point there could be a "run" on Tether, when the curtains are pulled back, where all the USDT-BTC traders who happen to have USDT holdings and they suddenly become worthless because nobody wants to trade USDT-BTC anymore at 1-1. As long as "public confidence" in USDT continues, the charade will too
blu_ 6y ago
Not considering your other points - I never had issues converting between USDT and USD. I just did it yesterday in fact.
- joshstrange 6y ago
  Did you exchange USDT for USD through the exchange or did you trade USDT for USD, there is a difference. In the first instance the exchange is on the hook for the USDT and they have to go to Tether to get USD to cover it. In the second instance the other user you traded with is on the hook for the USDT and they will probably just trade it for USD in the future or another crypto.
bbfnfkvkfk 6y ago
What will happen to NY AG which investigated Tether for 2 years, went through 2.5 mil pages of documentation, yet missed such an obvious scam that a lot of people, including on this forum, can clearly see? If Tether implodes, is this proof that NY AG is incompetent or even worse, somehow implicated in this giant scam by covering it up? In the NY AG settlement PDF it clearly states that they will not indict Tether in the future for the investigated crimes, including not being backed up by assets, which happened before the date of the payment of the fine: > 56. Within five (5) days of the receipt of the penalty ... and agrees not to bring any claims or causes of action against Bitfinex or Tether ... for matters relating to the conduct set forth in the Findings and the Petition ... arising out of Bitfinex or Tether’s representations concerning the backing of tethers during the time period January 1, 2014 to the effective date of this Settlement Agreement; transfers of a portion of the cash reserves backing tethers to Bitfinex pursuant to the line of credit
- Bombthecat 6y ago
  I wouldn't be surprised if they are into the scam and got bought. The real world isn't a nice place and police show...
- ac29 6y ago
  Doesn't mean the DOJ or any other State AG can't bring action. NY also doesnt remove themselves from prosecuting over any future action, like being unable to provide the agreed upon transparency reports.
mcintyre1994 6y ago
> There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try. So what actually happens when people sell Bitcoin? They get USDT on an exchange and then can never get cash out? Is there some convoluted series of trades you can make from USDT -> ??? -> USD or something instead? And people selling Bitcoin have made enough profit to just ignore the overhead of those trades I guess?
- T0Bi 6y ago
  OP got that wrong. It's very simple to exchange USDT for USD, you can do it on Kraken and Binance and withdraw to your bank account. No problem at all
  - kevingadd 6y ago
    Isn't that trading, you're selling USDT to someone who wants to give you USD for it? That's different from telling the operators of Tether itself "Here's some USDT, give me the USD that backs it".
quentinadam 6y ago
> There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try. It's perfectly possible to exchange USDT for USD and withdraw USD to your bank account; it does not involve complicated steps nor outrageous fees. Kraken, for example, has a very liquid USDT/USD market, is a well respected exchange, and processes USD withdrawals that arrive within minutes to US bank accounts. I'am speaking as an industry insider and hedge fund manager that trades ~$1B/month on the crypto markets.
- boring_twenties 6y ago
  How do you get withdrawals arriving within minutes? Mine take about 2 days, I'm on the highest verification level that they list publicly ("Pro").
  - quentinadam 6y ago
    It may help that we bank at all of the same banks as Kraken, so most transfers are internal transfers. But even to outside banks, normally US wires should be pretty fast (usually within the day). It may also be the case that we literally wire millions every day on a regular basis, so our wires probably don't get held up at any compliance checks.
    - boring_twenties 6y ago
      > It may help that we bank at all of the same banks as Kraken Sounds like a good idea. Do you happen to know if a list of such banks is public?
      - quentinadam 6y ago
        As a start, you can check out Signature Bank and Silvergate Bank. They are known for being crypto-friendly banks, and they bank literally every exchange that trades crypto versus USD.
        6y ago
tim333 6y ago
>There's no way to transfer USDT into USD Use Kraken. You can change USDT to USD and withdraw money. I've done both.
- mastermojo 6y ago
  This is the confusing part to me. Everything I read online talks about Tether being fraudulent. Shouldn't the price of Tether reflect a discount based on that? If it doesn't, does that mean the market is okay with a Tether being 1 USD even if it is not backed by anything?
  - firekvz 6y ago
    At some point yesterday, BTC/USD pair was trading up to 400$ lower than the BTC/USDT, that should be enough to tell you that a lot of people don't really want the USDT anymore and were willing to pay a 400$ premium to get real USD, it will start getting ugly at some point
  - tim333 6y ago
    Not necessarily because Tether the company will use the USD or similar that they have to buy tethers on the market if the price falls below $0.995 or so. The worry is if there are say 30bn tethers out there and they only have $20bn cash and enough people redeem the the price will stay about $1 until the $20bn runs out and then suddenly drop to not much. It's actually possible that rather than just holding US$ against USDT they have put some into bitcoin instead which would mean they may have plenty of funds unless bitcoin crashes in an unfortunate way.
    - mastermojo 6y ago
      So the consensus here seems to be that Tether the company is doing some sort of fractional reserve banking? I'm assuming no one on hacker news is holding Tether ... To the point of actions speaking louder than words, why are there people who trust Tether enough to hold it? If there is no trust there wouldn't everyone redeem and create a bank run?
jtms 6y ago
The author of this report from 2018 agrees with your assessment https://www.tetherreport.com/ https://www.tetherreport.com/
jrl 6y ago
Even the 70% backing number is too high. According to the findings of the NYAG: "Because of Tether’s inability to conduct significant banking activity during this time, it could not itself hold dollars sufficient to back the hundreds of millions of new tethers that had entered the market. Until September 15, 2017, the only U.S. dollars held by Tether ostensibly backing the approximately 442 million tethers in circulation was the approximately $61 million on deposit at the Bank of Montreal." https://ag.ny.gov/sites/default/files/2021.02.17_-_settlement_agreement_-_execution_version.b-t_signed-c2_oag_signed.pdf https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
tim333 6y ago
I've also been following Tether a while. I even shorted a bit back in 2018 but I'm starting to think maybe they are basically legit apart from maybe not dotting all the Is on the money launder regs. Here's Gregory Pepin "Deputy Chief Executive Officer at Deltec Bank & Trust", Tether's bankers, saying they have the money: https://youtu.be/rQ3nQ8-KY28?t=281 https://youtu.be/rQ3nQ8-KY28?t=281
swyx 6y ago
> Personally I won't touch any crypto with a 10 foot pole if you dont mind explaining to a relative newbie - how does any of this affect Bitcoin? it clearly has had some effect, but I just dont understand the causal chain.
phrozenone 6y ago
In addition to all of this they claim to bank in the Bahamas. Bahamas discloses total banked assets and the amount of Tether issued far outpaces the rate at which the whole nation of the Bahamas' assets have been increasing.
antb123 6y ago
Backed by cash in a bank account doesn't mean that much. As you probably know any bank will take deposits and use them for loans. Strangely USDT sells at a premium to USDC (audited) for years now. My guess is it will slowly be replaced by an audited stable token if the market wants that.

by dudus 6y ago

zby 6y ago

"There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try." How about Bitfinex? I had some problems with withdrawals there in the past - but now it seems to work.

vmception 6y ago

Almost all fiat deposits into Bitfinex create USDT. Thats an additional fact that the amount is in line with the amounts that would be deposited into any big exchange. If Coinbase minted USDC whenever someone deposited, you would see the same kind of growth. The basis of your entire post is assuming impropriety based on pretty normal behavior with the addition of the business quirk of when USDT is created. The ability for impropriety is a good enough reason to avoid it, and their unilateral willingness to do so without any discussion can reinforce that. But people thought everything you thought since the beginning of Tether in like 2014 or so, but the reality is that it “only went fractional reserve” in 2018. Its kind of like they threw up their hands and said “well people think its a ponzi anyway might as well cover this business debt!” The irony being that the NY AG investigation actually proved that prior to 2018 it functioned exactly as promised, barring their 2017 distress by having nowhere to put their fiat deposits. But if you assume that it hasnt come crashing down because Bitfinex does what they said, then it still does make sense: crypto prices pump after Tether mints because it is people depositing into the exchange and then buying crypto. Any way glad USDC and DAI are growing a lot now, which have grown by the same orders of magnitude.

lazide 6y ago
Is 'pretty normal business behavior' pretending two entities (bitfinex and Tether) are arms lengths entities with no relationship to each other to hide the conflict of interest, along with the provably lying about the actual backing of the coin, and using what were supposed to be customer trust funds to bail out what was supposed to be an explicitly stated unrelated business? If so - be aware those are felonies in many industries and are probably criminal in most jurisdictions (fraud at a minimum). For very good reasons.
- vmception 6y ago
  I am able to perceive things that don’t all reach negative conclusions. That doesn’t mean I like the product or the organization or have any specific opinion on it. That’s how due diligence works.
- lotaezenwa 6y ago
  Yes, this is precisely how investment banks work.
- ban5wall 6y ago
  Surprisingly, yes. That is fairly normal in financial institutions. It seems nonsensical at a first glance, but: https://www.investopedia.com/articles/analyst/090501.asp https://www.investopedia.com/articles/analyst/090501.asp
  - lazide 6y ago
    What you are pointing to is expressly pointing out that 1) it is illegal, 2) it is illegal for a very good reason, 3) if anyone finds out the illegal things going on, it will likely result in catastrophic (or at least very, very expensive) consequences. The pretending part that Tether and Bitfinex were doing was fundamentally different than the walling happening within financial institutions, where it has to be disjoint staff, disjoint control/leadership, and if someone sneaks through compliance and shares data (wink wink) it is highly likely someone will get fired if compliance finds out. In the Tether/Bitfinex issue, they shared board members and ownership despite claiming they didn't in public, and were misrepresenting themselves in a very material way as independent. If you were just adding some information, apologies. If you were advocating that clear evidence someone is brazenly committing a crime is not a justifiable and strong reason to distrust them, or even that it is inappropriate to hypothesize how they could be getting rich while continue to do similar things - then yikes? If you were saying Situation Normal, All Fucked Up - then extra yikes? Goldman Sachs (or some random VC firm) say might have some subtle versions of this going on, but if they were doing what Tether is and has been doing right now, they wouldn't be a solvent entity for very long. That Tether is hiding from jurisdictions (for now) in a way that Goldman can't doesn't inspire confidence in their trustworthiness or stability going forward, as they're clearly on the radar now and blood is in the water. Along with a lot of money and some high profile political promotions, potentially.

dcolkitt 6y ago

> There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try. There is an easy way. Swap USDT to USDC on Curve. Deposit USDC on Coinbase. Convert USDC to USD on Coinbase. Withdraw USD. I'm not saying I disagree with your overall thesis. But this specific point makes it sound like USDT is some sort of roach motel ("you can get in, but you can't get out"). That's not true, it's fairly easy to get back to USD at low cost. The fact that USDT is trading at near parity with USDC on Curve indicates that most of the market doesn't perceive a risk.

tutfbhuf 6y ago
> There is an easy way. Swap USDT to USDC on Curve. Deposit USDC on Coinbase. Convert USDC to USD on Coinbase. Withdraw USD. Then what is your explanation for why it is not possible to directly exchange USDT for USD, there must be a reason that no exchange wants to do that. > that most of the market doesn't perceive a risk. That is absolutely no indicator for safety.
- vidarh 6y ago
  > Then what is your explanation for why it is not possible to directly exchange USDT for USD, there must be a reason that no exchange wants to do that. https://global.bittrex.com/Market/Index?MarketName=USD-USDT https://global.bittrex.com/Market/Index?MarketName=USD-USDT
  - pas 6y ago
    Do they process withdrawals in a reasonable time?
    - vidarh 6y ago
      I have not had problems with them, but I'm also not doing any large transactions.
      - 6y ago

hntrader 6y ago

If the total amount of USDT exceeds their USD cash reserves, who became the beneficiary of the extra USDT?

rednerrus 6y ago
Bitcoin holders.
- hntrader 6y ago
  Which BTC holders and how? What's the path from onboarding on an exchange website, to eventually getting unbacked USDT? If I put USD onto an exchange, why would the exchange give me more USDT than what I deposited (and if this never happened, then how did the first unbacked USDT come into existence)? I hold BTC but didn't use USDT in the process, just deposited normal fiat and bought BTC using that.
  - _jjkk 6y ago
    1. Bitfinex processes a USD deposit and dispenses USDT 2. USDT holder purchases BTC with it 3. Bitfinex purchases crypto (mostly BTC) with the USD, instead of holding it as promised Thus the original USD of the person buying BTC at the exchange has effectively double the buying pressure on the BTC market because Bitfinex is actively investing all their USD holdings that "back" Tether into the market as well.
    - hntrader 6y ago
      Good explanation. Why do they do step (3)? Aren't they just opening themselves up to massive legal liability?
      - _jjkk 6y ago
        Some believe this is an intentional Ponzi scheme to print some money for the owners of Tether and Bitfinex, others believe they had good intentions at first, but through bad investment or otherwise got underwater, and started "investing" their USDT-backing dollars to claw back up. Bitfinex originally denied relation to Tether but it's been proven that was a lie. The worry is, at some point there could be a "run" on Tether, when the curtains are pulled back, where all the USDT-BTC traders who happen to have USDT holdings and they suddenly become worthless because nobody wants to trade USDT-BTC anymore at 1-1. As long as "public confidence" in USDT continues, the charade will too

blu_ 6y ago

Not considering your other points - I never had issues converting between USDT and USD. I just did it yesterday in fact.

joshstrange 6y ago
Did you exchange USDT for USD through the exchange or did you trade USDT for USD, there is a difference. In the first instance the exchange is on the hook for the USDT and they have to go to Tether to get USD to cover it. In the second instance the other user you traded with is on the hook for the USDT and they will probably just trade it for USD in the future or another crypto.

bbfnfkvkfk 6y ago

What will happen to NY AG which investigated Tether for 2 years, went through 2.5 mil pages of documentation, yet missed such an obvious scam that a lot of people, including on this forum, can clearly see? If Tether implodes, is this proof that NY AG is incompetent or even worse, somehow implicated in this giant scam by covering it up? In the NY AG settlement PDF it clearly states that they will not indict Tether in the future for the investigated crimes, including not being backed up by assets, which happened before the date of the payment of the fine: > 56. Within five (5) days of the receipt of the penalty ... and agrees not to bring any claims or causes of action against Bitfinex or Tether ... for matters relating to the conduct set forth in the Findings and the Petition ... arising out of Bitfinex or Tether’s representations concerning the backing of tethers during the time period January 1, 2014 to the effective date of this Settlement Agreement; transfers of a portion of the cash reserves backing tethers to Bitfinex pursuant to the line of credit

Bombthecat 6y ago
I wouldn't be surprised if they are into the scam and got bought. The real world isn't a nice place and police show...
ac29 6y ago
Doesn't mean the DOJ or any other State AG can't bring action. NY also doesnt remove themselves from prosecuting over any future action, like being unable to provide the agreed upon transparency reports.

mcintyre1994 6y ago

> There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try. So what actually happens when people sell Bitcoin? They get USDT on an exchange and then can never get cash out? Is there some convoluted series of trades you can make from USDT -> ??? -> USD or something instead? And people selling Bitcoin have made enough profit to just ignore the overhead of those trades I guess?

T0Bi 6y ago
OP got that wrong. It's very simple to exchange USDT for USD, you can do it on Kraken and Binance and withdraw to your bank account. No problem at all
- kevingadd 6y ago
  Isn't that trading, you're selling USDT to someone who wants to give you USD for it? That's different from telling the operators of Tether itself "Here's some USDT, give me the USD that backs it".

quentinadam 6y ago

> There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try. It's perfectly possible to exchange USDT for USD and withdraw USD to your bank account; it does not involve complicated steps nor outrageous fees. Kraken, for example, has a very liquid USDT/USD market, is a well respected exchange, and processes USD withdrawals that arrive within minutes to US bank accounts. I'am speaking as an industry insider and hedge fund manager that trades ~$1B/month on the crypto markets.

boring_twenties 6y ago
How do you get withdrawals arriving within minutes? Mine take about 2 days, I'm on the highest verification level that they list publicly ("Pro").
- quentinadam 6y ago
  It may help that we bank at all of the same banks as Kraken, so most transfers are internal transfers. But even to outside banks, normally US wires should be pretty fast (usually within the day). It may also be the case that we literally wire millions every day on a regular basis, so our wires probably don't get held up at any compliance checks.
  - boring_twenties 6y ago
    > It may help that we bank at all of the same banks as Kraken Sounds like a good idea. Do you happen to know if a list of such banks is public?
    - quentinadam 6y ago
      As a start, you can check out Signature Bank and Silvergate Bank. They are known for being crypto-friendly banks, and they bank literally every exchange that trades crypto versus USD.
      - 6y ago

tim333 6y ago

>There's no way to transfer USDT into USD Use Kraken. You can change USDT to USD and withdraw money. I've done both.

mastermojo 6y ago
This is the confusing part to me. Everything I read online talks about Tether being fraudulent. Shouldn't the price of Tether reflect a discount based on that? If it doesn't, does that mean the market is okay with a Tether being 1 USD even if it is not backed by anything?
- firekvz 6y ago
  At some point yesterday, BTC/USD pair was trading up to 400$ lower than the BTC/USDT, that should be enough to tell you that a lot of people don't really want the USDT anymore and were willing to pay a 400$ premium to get real USD, it will start getting ugly at some point
- tim333 6y ago
  Not necessarily because Tether the company will use the USD or similar that they have to buy tethers on the market if the price falls below $0.995 or so. The worry is if there are say 30bn tethers out there and they only have $20bn cash and enough people redeem the the price will stay about $1 until the $20bn runs out and then suddenly drop to not much. It's actually possible that rather than just holding US$ against USDT they have put some into bitcoin instead which would mean they may have plenty of funds unless bitcoin crashes in an unfortunate way.
  - mastermojo 6y ago
    So the consensus here seems to be that Tether the company is doing some sort of fractional reserve banking? I'm assuming no one on hacker news is holding Tether ... To the point of actions speaking louder than words, why are there people who trust Tether enough to hold it? If there is no trust there wouldn't everyone redeem and create a bank run?

jtms 6y ago

The author of this report from 2018 agrees with your assessment https://www.tetherreport.com/ https://www.tetherreport.com/

jrl 6y ago

Even the 70% backing number is too high. According to the findings of the NYAG: "Because of Tether’s inability to conduct significant banking activity during this time, it could not itself hold dollars sufficient to back the hundreds of millions of new tethers that had entered the market. Until September 15, 2017, the only U.S. dollars held by Tether ostensibly backing the approximately 442 million tethers in circulation was the approximately $61 million on deposit at the Bank of Montreal." https://ag.ny.gov/sites/default/files/2021.02.17_-_settlement_agreement_-_execution_version.b-t_signed-c2_oag_signed.pdf https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...

tim333 6y ago

I've also been following Tether a while. I even shorted a bit back in 2018 but I'm starting to think maybe they are basically legit apart from maybe not dotting all the Is on the money launder regs. Here's Gregory Pepin "Deputy Chief Executive Officer at Deltec Bank & Trust", Tether's bankers, saying they have the money: https://youtu.be/rQ3nQ8-KY28?t=281 https://youtu.be/rQ3nQ8-KY28?t=281

swyx 6y ago

> Personally I won't touch any crypto with a 10 foot pole if you dont mind explaining to a relative newbie - how does any of this affect Bitcoin? it clearly has had some effect, but I just dont understand the causal chain.

phrozenone 6y ago

In addition to all of this they claim to bank in the Bahamas. Bahamas discloses total banked assets and the amount of Tether issued far outpaces the rate at which the whole nation of the Bahamas' assets have been increasing.

antb123 6y ago

Backed by cash in a bank account doesn't mean that much. As you probably know any bank will take deposits and use them for loans. Strangely USDT sells at a premium to USDC (audited) for years now. My guess is it will slowly be replaced by an audited stable token if the market wants that.