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Legal expert says Tether and Binance Coin are likely picks for SEC lawsuit
- paulgb 5y agoA YouTuber called Coffeezilla had an entertaining video yesterday that I think is one of the most comprehensive (and entertaining) takes on this. It's pretty damning when you look at all the evidence together. https://www.youtube.com/watch?v=-whuXHSL1Pg https://www.youtube.com/watch?v=-whuXHSL1Pg Even in the off-chance that people with a track record of lying about being backed have suddenly gone legitimate, it's a pretty big indictment of the system that it could grow to the size it did while looking incredibly like a scam.
- billytetrud 5y agoVery interesting video. Seems pretty clear that Tether is a scam, as people have been saying for years at this point. However, I would be surprised if Tether's downfall really has much of a significant effect on bitcoin or other cryptocurrencies. I mean, maybe for a week or two, but not for any significant length of time.
- overtonwhy 5y agoIsn't tether the #1 way for US customers to gain access to the shitcoins that are too illegitimate to be traded on US accessible exchanges? They convert Bitcoin to tether that can then be deposited at unlicensed exchanges that don't do KYC/AML?
- billytetrud 5y agoI suppose I don't care enough about shady altcoins to care about tether. I agree that tether's downfall would be a struggle for all those altoins. Bitcoin or Ethereum on the other hand will hardly notice.
- overtonwhy 5y agoA ton of shitcoins rely on ETH and a lot of the value of ETH is derived from shitcoins.
- mdoms 5y agoThat was the most annoying video I have ever seen. I couldn't make it past about 4 minutes because the dude simply cannot get to the point.
- Flatcircle 5y agoIf you spend 10 mins looking into tether online, it’s easy to see it’s a totally fucking scam. It’s unbelievable.
- Synaesthesia 5y agoI have spent 10 min looking into it, and I'm suspicious. But could you maybe elaborate?
- Jenk 5y agoTheir Wiki page[0] is quite damning: Tether is a controversial[1] cryptocurrency with tokens issued by Tether Limited, which in turn is controlled by the owners of Bitfinex.[2][3] Tether Limited formerly falsely[4] claimed that each token was backed by one United States dollar, but on 14 March 2019 changed the backing to include loans to affiliate companies.[5][6] The Bitfinex exchange was the subject of a lawsuit by the New York Attorney General of using Tether's funds to cover up $850 million in funds missing since mid-2018.[7][8] The investigation found that iFinex — the operator of Bitfinex and Tether — made false statements about the backing of the Tether and about the movement of hundreds of millions of dollars between the two companies to cover up the truth about massive losses by Bitfinex. According to the New York Attorney General, "Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie".[4] [0]: https://en.wikipedia.org/wiki/Tether_(cryptocurrency) https://en.wikipedia.org/wiki/Tether_(cryptocurrency)
- lovecg 5y agoThis article was an entertaining read https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/ https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/
- cheeseomlit 5y agoIt really is quite obvious- the funny thing is the USD/Federal Reserve has been running the same scam for decades (expanding the money supply with no backing) and it's just as obvious
- _fat_santa 5y agoSaw a really good YT video[1] on Tether yesterday. Breaks down all the sketchiness. But the problem he mentions in the video is a problem with pretty much all stablecoins, in order to function you must have the proper reserves before generating a token, but inevatably greed kicks in and you start thinking what if you minted coins without the backing. USD pegged stablecoins are basically money printing machines in the hands of whoever runs the project. [1]: https://www.youtube.com/watch?v=-whuXHSL1Pg https://www.youtube.com/watch?v=-whuXHSL1Pg
- vadansky 5y agoFYI skip to 2:10 if you don't wanna watch a skit
- beforeolives 5y agoThe whole video would have been better if he had built an argument from the ground up instead of starting with the idea that Tether is a scam and laying so many attempts at humor and irony on top of it. Or at least it would have been clearer and more educational; I haven't seen his videos before and maybe other people watch him for entertainment.
- derimagia 5y agoI started using SponsorBlock (https://sponsor.ajay.app/ https://sponsor.ajay.app/) a bit ago. I was skeptical that the crowdsourcing wouldn't reach enough but I find it works for most videos. It essentially tags parts of videos and it's pretty customizable - it only highlight a certain type, have it skip automatically, etc. I already pay for YouTube Premium and am not a fan of ads.
- jbverschoor 5y agoThat's exactly how fractional reserve banking started...
- toomuchtodo 5y agoWhich is backed by a governments, laws, and regulators… If my deposit account gives up the ghost, I know the FDIC or the Fed will make me whole (or SPIC for my brokerage account). Who will do the same for Tether and other stablecoins? Not good!
- dcolkitt 5y agoThere seems like a huge number of people who, at least in online discussions are skeptical of Tether's stability. And they may very possibly be correct? However, my question is why do virtually none of these people actually out money behind these views and short USDT? It's pretty cheap and easy to take a short position in Tether. You can borrow USDT on Compound for 3.37%, convert it to USDC at Curve for 0.06%, then collect 2.32% on USDC at AAVE. If/when Tether collapses, you'll only have to cover your short at the collapsed value. Many in comment sections like these will argue that Tether is less than 50% backed by hard assets. If you genuinely believed that to be the case, why would you not be happy to pay less than 1.5% per year to earn a 50% profit when the house of cards collapses?
- esyir 5y agoBecause the market can remain irrational longer than you can remain solvent. Just look at the state of Meme stocks now.
- gruez 5y agobut stablecoins are basically guaranteed to never exceed $1, so your downside is essentially limited to the interest you pay.
- esyir 5y agoTherin lies the rub. With options, you're making a double bet :first that it is overvalued, and second that you got the timing right. If you're wrong on either, you lose money. You don't get the really huge blowout risk due to the stable nature, but the other two still apply.
- croes 5y agoI don't think so https://twitter.com/Bitfinexed/status/1405037796172222466?s=20 https://twitter.com/Bitfinexed/status/1405037796172222466?s=...
- gruez 5y ago
- deleted 5y ago[deleted]
- ur-whale 5y agoAre US folks allowed to buy BNB from Binance directly?
- kemonocode 5y agoAs of a little while ago, yes: https://www.binance.us/ https://www.binance.us/
- superkuh 5y agoI like that he calls them "coin". Because they definitely aren't cryptocurrency and have almost nothing to do with cryptocurrency. They're all just off-chain market inventions created by financial people because they refuse to understand what cryptocurrency is and want something more like their normal, easily manipulated, financial markets and derivatives.
- beforeolives 5y agoIt's not even created by financial people. If you watch the coffeezilla video that some other people in this thread linked to, you'll see that the people behind Tether have backgrounds in various types of fraud. Also, this affects the entire cryptocurrency market. If you own any cryptocurrency, you're exposed to risk from Tether's collapse even if you hold no Tether yourself.
- superkuh 5y ago>backgrounds in various types of fraud. Right. Financial people.
- deleted 5y ago[deleted]
- jfrunyon 5y agoOr, maybe it's because cryptocurrency isn't actually useful for the things people claim it's useful for...
- beforeolives 5y agoIs there a mechanism for Tether to collapse on its own or does the collapse have to necessarily come from regulation? If the SEC do nothing about this, can Tether keep printing forever?
- hiq 5y agoThe collapse would come from a loss of trust from USDT holders who would then try to dump their positions (basically a bank run) for less than their pegged values. SEC action could be a cause for such a loss of trust, but you can imagine many others, such as leaks (of damning information) from insiders, other exchanges unlisting USDT, and so on.
- elliekelly 5y agoIf everyone holding tether attempted to redeem their tether coins for USD in rapid succession it would implode. Of course, if tether were telling the truth it would be an operational headache but otherwise a non-issue. There’s also a certain point where they can no longer “print” coins that are believably backed. If tether is to be believed (and, for the record, I’m of the opinion they shouldn’t be) then they’re already responsible for an absurd portion of the commercial paper market.
- pointsphere 5y agoMaybe they invented their holdings of commercial paper as well. Pretending to be fully backed by USD didn't work out, so now they pretend to hold equivalent assets.
- ulzeraj 5y agoI think only exchanges can redeem USDT from the Tether treasury or company or weather is called.
- pointsphere 5y agoMaybe a bank run on Tether for some other reason than the SEC? It would require a lot of people to lose trust in Tether at the same time, which surprisingly still doesn't look likely. But it might happen.
- washedup 5y agoWho the hell even holds Tether? Don't people get it and then convert into a different crypto pretty quickly? If all remaining Tether got "burned" after they got shut down, wouldn't it's impact on crypto markets be rather trivial? I don't see why there is so much focus on it. Either they have funds to back up the printing or they don't (yes, they didn't for a period of time in 2018, but settled that lawsuit). If they still don't, and Tether goes away, I would think it would only lower Bitcoin/crypto volume and volatility as there is one less funding source. But, anyone that bought Tether to buy Bitcoin has already done so, and that Tether is sitting with someone else like an exchange, lender, or liquidity pool. If they truly are a fraudulent weak-link in the ecosystem, than I am all for figuring this out so we can move on.
- throwaway6734 5y agoOne thing I think is interesting is what if tether fraudulently printed notes to push up the price of BTC, and now they either have made enough money to back what they printed or the price of BTC is now anchored to these inflated prices so their actions no longer matter as much
- jMyles 5y agoPeople do hold it sadly. It provides fiat-pegged stability with crypto-level defi liquidity. So people choose to hold it for use in defi products. It's a blight on the blockchain world.
- washedup 5y agoGot it - that makes sense... they would certainly be hurt by this and likely have to liquidate crypto holdings to recover.
- SpicyLemonZest 5y agoConverting to a different crypto just means that whoever you traded with is now holding the Tether you paid them. In the absence of a practical redemption mechanism, someone will always end up holding the bag.
- Tenoke 5y agoBinance isn't even allowed in the US. What would a SEC lawsuit even mean?
- auc 5y agoBinance _is_ allowed in the US. They have a special US facing website.
- Tenoke 5y agoBinance.us isn't Binance, and doesn't offer most of their services (does it even have BUSD?). It's a completely separate company actually based in the US and run by different people who basically pay Binance to use the name. They definitely do not run or are responsible for BUSD.
- ipnon 5y agoI would much rather live in a world where I can choose for myself whether or not using crypto like Tether or Binance Coin is too risky. It has been said that crypto is essentially regulatory arbitrage. It's like a UFO landing on Wall Street, yes it's obviously finance but it is different enough that the government doesn't know how to deal with it. This has clearly led to new financial and cryptoeconomic innovations, as well as clear scams and crashes. Nonetheless I would rather make the decision for myself. Financial regulations are already looser for the rich in the United States than the poor. There are many more shackles on what you can do with your money as a retail trader than a institutional trader. At least one benefit that crypto has over traditional finance is that all participants have the same opportunities. For the most part it is open source code for nodes that anyone can run themselves. Finally I'd like to add that the nature of crypto means that when the United States removes its regulatory ambiguity, or if USG decides to crackdown on the whole endeavor, there will most likely still be some country like El Salvador where it is still legal and accepted. So to me it seems that the future of crypto is still bright despite what may be seen as increasing regulatory pressure from the elephant in the room.
- deleted 5y ago[deleted]
- kenneth1amar 5y agoClearly the freedom to choose is the actual problem here. No one here is taking time to point out issues in bitcoin that would fail to laugh at someone loosing their money as a result, let's be honest about that at least. Thus it's pretty clear that all of this a double standard to crypto, and are only feigning concern for it's users. The real issue here is the collective concern about crypto's impact on an already failing USD. These people are just trying to selfishly protect their own investments by utilizing the legal system like a bully. Hey, this sounds like a problem crypto might solve...
- jpdaigle 5y agoWhat's incomprehensible to me about the Tether saga is: the idea of a stablecoin pegged to USD is so incredibly useful as a bridge between financial systems... why go through all the trouble and risk of doing it fraudulently when you could... just not be crooked? The basic idea seems sound: people want to transfer around cryptocurrencies (or speculate on them, fine), but actually selling them for USD is somewhat hard and peppered with regulatory issues. So swoop in with a partial solution: a stablecoin worth exactly 1$ USD that you can transfer quickly around using the blockchain, but doesn't have any price volatility so is a safe store of value until you can move out and redeem for USD through a slower, regulated offramp (of which there are fewer). That seems like the hard part? They solved all the hard problems, and it's so useful that it should be possible to get rich just by charging small transaction fees, success just requires doing all that plus not being crooked and lying about the 1:1 backing.
- haskellandchill 5y agoOk so I know this answer! They lost money through exchange hacks and bad banking relationships so they could never rely on 1:1 backing and fees, they had to make it up through bitcoin price increase which they contributed in pumping and then backing with commercial paper from their sister exchange.
- ArkanExplorer 5y agoPeople want to transfer around cryptocurrencies, because their price is high and they can speculate on them and mine them. If the price was lower, then the mining activity would be reduced as would the interest in speculation. The interest in tether is thus directly associated with the price of bitcoin. It makes sense then to use the power of controlling Tether and Bitfinex to pump up the value of bitcoin, in the hope (I guess) that the value becomes self-sustaining. But, basically, we have been duped at a civilizational level and this whole crypto pyramid needs to come crashing down for the good of electricity, chip shortages, limiting ransomware and criminality, and wasting technical talent. Crypto is basically the Uber of money laundering and ponzi schemes.
- MinorTom 5y agoInteracting between the crypto space and the U.S. financial system is hard. USDC does it by being a well-regulated in the U.S. and internationally financial institution, but that's certainly not easy. Just one example (from [1]): > At the time, Bitfinex (theoretically a Hong Kong entity but whose location, like a Bond villain, changes moment-to-moment to fit the needs of the scene) was banking in Taiwan at Hwaitai Commercial Bank, KGI Bank, First Commercial Bank, and Taishin Bank. > Taiwanese banks do not have direct access to the U.S. financial system; they engage via correspondent banking relationships. These banks corresponded through Wells Fargo. Wells, in the wake of publicity about the Bitfinex hack, told the banks they would no longer clear USD wires to or from Bitfinex. [1] https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/ https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/
- gatkinso 5y agoIt may shock certain commenters here to learn about something called 'fractional reserve banking'.
- kenneth1amar 5y agoI'm sure plenty here are aware. This looks like a game because it is, they're pretending not to see their collective bias because they know it's being weaponized to make crypto illegal, as a means to protect their entrenched investments in the current corrupt system.
- gatkinso 5y agoyes, this is power at work
- haskellandchill 5y agoHonestly I am concerned for my friends I see dumping their savings into crypto because people are confusing them with technology they don't understand. It's a massive fraud and people are going to get hurt. That's my concern, if there was a crypto asset I believed in I'd invest but none of them match my world view. I do want a new economy, but I don't think crypto is the way to do it. For me book keeping is secondary to the cultural change necessary to have a better economical system.
- jpmattia 5y agoI find it a little strange that 100% of the comments (as of this moment, with 154 comments) are not about the main thrust of the article: Whether the SEC has Tether and BCB in their sites for a lawsuit. For those who are looking for the usual HN summary: The tldr is that BCB is likely to incur SEC lawsuit mainly because of an ICO back in 2017, and the "legal expert" did not actually give a probability of Tether incurring an SEC lawsuit.
- haskellandchill 5y agoGood point, it kind of is Hacker News style not to read the article and just go off on interesting tangents in the comments. Thanks for the summary!
- kenneth1amar 5y agoReading the comments here, I'm curious why there are no disclosures found in this tread. It seem most of anti-bitcoin proponents are happy to hold a double standard due to their gleeful investment in the Fed's corrupt management of the USD. Is it really any surprise those which aren't overly invested in the current house-of-cards are willing turn to what might amount to the wild-west of financial investments? Get off the self-righteous horse and drop that Pravda. All of your hands are dirty from the current propped up system, and your feigned ignorance of it's glaring mismanagement shows there's little to no value in the arguments here against using crypto. Side note: this lot have clearly lost control of the narrative, that means it's about time for taking a back-log of medicine. Oh gnashing of teeth.
- tubbyjr 5y agoHow about Chainlink being a likely pick for an SEC lawsuit? - Tech is a literal JSON parser designed as a Rube Goldberg machine. - They came out with a whitepaper 2.0, even though not even 30% of what was promised in "WP" 1.0 was delivered. - All the founders are in the USA, and the company was initially in the USA when they ICO'd, but now their company magically migrated to the Caymans, even though their operations are completely in the US, San Fran and NY. - Literal 4chan coin, to the point, one of their execs, Mark Oblad, was some sort of staff at 4chan. - They dump $20-60M every 2 or so days, depending on what the price is (they dump the same amount of tokens, amount in USD depends on price). Yet have nothing to show for it, apart for a Lambo for the Russian founder's Papa, plus 2 of the founders bought a whole block of NY condos apparently. - Thousands of "Partnerships" done purely for marketing, to get 4channers/linkers to hopefully shill their products too, even though there is no actual partnering of any kind. - Rampant insider info leaks happening from their founders, for announcements and dealings that will pump or dump the price. I'd even be able to showcase some in court myself.
- runbathtime 5y agoLooking up the definitions of security, financial asset, debt instrument, bank deposits, and thinking about really what tether is and the statements they make about 'backing' I come to the conclusion that tether is an unregistered security. The fact that Tether may state they have no obligation to exchange tethers for dollars on demand can be discounted by their own statements about Tether's reserves giving value to the tether tokens and the general perception by the public on what tethers are and represents. A tether token is a financial asset. It represents a loan to Tether in return for the promise of getting a dollar back when a customer wants to withdrawal dollars from Tether. It is like a bank deposit, which is also a financial asset (a liability of the bank), not dollars themselves. Stablecoins allow anyone to trade their 'account or claim' at the Tether Bank by transferring the entire account to someone for dollars or something valuable like bitcoin on the secondary market. Tether doesn't have to satisfy demand deposit withdrawals as much as a bank because you can trade your account to someone else who accepts tether. People only accept it because you can get dollars out in the secondary market. Tether's value comes from ownership claims and confidence in Tether to be the exchanger of last resort and honor claims on dollars for tethers. Tethers are fungible (they are all 1 dollar or represent the same claim) and they can be traded, therefore it is a security. Thinking about claims and trading and what are financial assets is more useful than Howey test. Imo the Howey test is overused to explain securities with crypto context. People just rattle off 1,2, 3, 4, talking points (the questions) without really explaining fundamentals or connecting it. In terms of Howey, Tether the company is taking your investment dollars (loan) and investing it, they are in the business of making profits (they just don't share profits), but they are expected to repay the loan of dollars you gave them, and this repayment depends on the work of others (Tether investing wisely). Tether the company is in a common enterprise with anyone that holds tethers (loans them money).
- ariyadi 5y agoMONEY IS SCAM!