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Tether executives said to face criminal probe into bank fraud
- graeme 5y ago> But the Justice Department investigation is focused on conduct that occurred years ago, when Tether was in its more nascent stages. Specifically, federal prosecutors are scrutinizing whether Tether concealed from banks that transactions were linked to crypto, said three people with direct knowledge of the matter who asked not to be named because the probe is confidential. Notably this is for events some time ago. Investigators haven’t gotten far enough ahead to formally file anything relating to the events of March 2020 to present, when Tether added ~$60 billion in tokens and claimed to be one of the largest commercial paper holders in the world. (No one in the commercial paper sector has heard of them) To be clear, by saying it is from some time ago I am not dismissing it. This is extremely serious for Tether.
- nipponese 5y agoHow did you survey the commercial paper sector?
- Clewza313 5y agoThis has been widely reported, see eg Matt Levine's recent take: https://www.bloomberg.com/opinion/articles/2021-07-22/private-equity-firm-got-rich-making-private-equity-firms-rich https://www.bloomberg.com/opinion/articles/2021-07-22/privat...
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- perl4ever 5y agoThis is great: "“Given our portfolio composition in commercial paper, we believe that it is quite important to respect the privacy of the banking partners that we work with.” That’s not a thing! That’s not a thing at all! Every money-market fund just lists all of its holdings, by size and issuer and CUSIP! Tether has broken new ground in the concept of commercial-paper privacy rights!" ... "Tether has traded between $0.9996 and $1.0009 over the last seven days, including during yesterday’s interview. That’s a pretty tight range given that, you know, anyone can watch the interview."
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- gammarator 5y agoThis thread speculates that Tether’s commercial paper may be in Chinese real estate, which is currently suffering huge losses… https://twitter.com/TheLastBearSta1/status/1418302465557110785 https://twitter.com/TheLastBearSta1/status/14183024655571107...
- spookthesunset 5y agoOr more likely tether isn’t backed by anything at all. The auditor they hired quit before completing their audit. Seems legit to me. These dudes are a complete scam but as long as BTC goes to the moon nobody seems to care.
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- fksadfji12 5y agolol
- spywaregorilla 5y agoGiven that you're not allowed to redeem tether for dollars I never quite understood why it mattered. edit: Note the difference between "trade" for dollars and "redeem" for dollars
- graeme 5y agoThe whales can redeem, in minimum chunks of $100,000. Mostly these are exchanges. Thus the peg is supported by the reserves in a roundabout way. If Tether can’t redeem, and trades break the peg, then ultimately either exchanges go insolves or anyone holding tether has to write off their holdings. Or both.
- BLanen 5y ago> The whales can redeem Show me the burns.
- duxup 5y agoI wonder if this is a situation where there is reason to be concerned about this given event, but it's also an easy path for an investigation to proceed / check if it has happened even further? Pull this stunt once, maybe twice, more?
- graeme 5y agoUpdate. Tether has replied here. This site is down, but this tweet has it: https://mobile.twitter.com/bitcoinsguide/status/1419694235268362245 https://mobile.twitter.com/bitcoinsguide/status/141969423526... URL for if their site comes back online: https://tether.to/tether-responds-to-bloomberg-article/ https://tether.to/tether-responds-to-bloomberg-article/
- deleted 5y ago[deleted]
- ceejayoz 5y ago"Open dialogue with law enforcement agencies" is a pretty funny way of describing that relationship.
- arcticbull 5y agoYes I've had similar such dialogues with law enforcement when caught speeding.
- arcticbull 5y agoIMO this feels more like they know they can get them on these crimes, easily, without involving other countries. Lying to banks is pretty trivial to nail them to the wall for. "Hey I'm a real estate company" - "sir these look like crypto deposits?" - "no, I don't think so." That kind of thing. It's like getting Capone on tax evasion. Once they've got them behind bars they can start untangling the clusterf*ck. Thing is untangling the clusterf*ck is likely a multinational, mutli-party, multi-year effort but lying to Wells should be cut and dried. Remember it took 17 countries cooperating to unwind Liberty Reserve and that was a fraction of the scale and audacity. This will allow them to end it the fastest way possible.
- jstx1 5y ago> In February, Bitfinex and several Tether affiliates agreed to pay $18.5 million to settle claims from New York Attorney General Letitia James that the firms hid losses and lied that each token was supported by one U.S. dollar. Can anyone explain this because I'm not familiar with the legal framework here - they paid to settle with NYAG? So you pay and then having potentially broken a law isn't a problem anymore? How does this work?
- machinecontrol 5y agoThis is very common in the US, especially for banks and financial institutions. They settle without admitting any wrongdoing, and agree to pay a fine and promise to change their procedures to avoid doing this in the future. It is exceedingly rare for financial executives to go to jail for crimes committed by a corporation.
- rich_sasha 5y agoThere’s a weird game-theoretic angle to it too. US regulators tend to mostly hammer down when they are confident they can win, they don’t like fighting and losing. So in a way, being told to pay a fine is seen as “pay the fine or else we’re going to court and winning”. It saves the regulators the hassle of actually proving they are right. But of course there is then a second-order effect. If you are defending yourself against the regulators, right or wrong it is assumed the case is very strong, by all parties. Ultimately it’s an agency problem too: regulators want (are incentivised to maintain) “clean” markets, not to send people to jail. In the short term, if their civil fine achieves it, their job is done and there is no need to drag themselves through the courts.
- vmception 5y agoAdditionally, major regulators (feds + ny) are in a habit of not creating monopolies by not sanctioning a company or its executives into dissolution. To them its worse to be responsible for reducing competition, which is a fascinating prisoner’s dilemma.
- 5y ago
- Clewza313 5y agohttps://archive.is/CMqsv https://archive.is/CMqsv
- pwned1 5y agoAn interesting primer on Tether, and whether it is a scam: https://www.zerohedge.com/crypto/what-effect-would-tether-being-complete-fraud-have-cryptos https://www.zerohedge.com/crypto/what-effect-would-tether-be... (Yes, I know it's zerohedge, but this is a decent article) Tether usually has 2-3x the volume of bitcoin in any given day. And no one seems to know anything about how it works. So in my estimation, it probably is a scam...
- mikeblackson 5y agoSome people being ignorant about how it works makes it (probably) a scam? That ZH article's ifs, possiblies, and maybes are doing a lot of heavy lifting. Is the Bitcoin price up? Queue the Tether FUD.
- gjsman-1000 5y agoThis is cryptocurrency, where “Don’t trust. Verify.” is the sentiment, and they’ve done a terrible job at allowing verification.
- pwned1 5y agoJust look at the tether terms of service. A whole section on your representations and warranties as user. The reps and warranties that tether makes? "Tether makes no representations, warranties, or guarantees to you of any kind."
- onepointsixC 5y agoUnlike Bitcoin, Eth, and other coins, Tether was always claimed to be backed by something which ensured it's stable value. Tether the company claims that their tether coins are each worth $1. There are now >$60Bn worth of Tether coin issued. With that much money they'd be a very serious private financial institution, and yet they only have 13 employee's. They have never been audited by any independent third party. They have repetitively lied about who owns the company (the same people who own Binance, the world's largest crypto exchange own Tether, and yet did not disclose that until it was found out). They have receptively changed their story on what backs Tether coin (originally each coin had $1 in a bank account to back it, now it's majoritively unspecified "commercial paper"). There is nothing which proves that Tether actually is backed by anything and the billions in new Tether coin which are minted could very well be worthless.
- Proven 5y agoJust a gentle reminded by US Gov racketeers ... and statists who like to constantly remind us about that
- fergie 5y agoSome smart crypto people are saying that if Tether goes down it will take a whole load of other crypto down with it.
- RankingMember 5y agoWho?
- DJBunnies 5y agoTop. Men.
- phpnode 5y agoAny rational person can see that Tether poses an existential risk to the crypto economy - but the market is highly irrational. There was an interview with tether's CTO and GC the other day that was an absolute car crash[0] and should be sounding deafening warning bells for anyone invested in crypto, but instead we see the BTC price shoot up by 15% in the days since it aired. It is utter madness. [0] https://www.youtube.com/watch?v=ZBEqyiO35cQ https://www.youtube.com/watch?v=ZBEqyiO35cQ
- overtonwhy 5y agoIn the ending days of Mt Gox's meltdown, prices went up up up for quite a few digital assets, until they didn't. Basically the shady exchanges are insolvent and they stop cashing out real money, so peoples' only chance to cash out is to buy crypto and transfer it out, driving up crypto pricing on the insolvent exchanges, that greedy people try to arbitrage.
- swang 5y agoit is because binance got transferred a whole bunch of tether and also created a whole bunch of its own stablecoin right before that huge spike last night. its not irrational, it is just pure fraud.
- phpnode 5y ago
- jasonlaramburu 5y agoEdit: Isn't it a huge red flag that Tether doesn't make any money off transaction fees? Their daily volume is almost 2x that of BTC. They could fully support the company with a tiny transaction fee and avoid all the regulatory uncertainty/FUD. How does tether make money (aside from potential fraud)? Is there a transaction fee that supports the people and cost of running tether (the company)?
- vgeek 5y agoThe float from _allegedly_ having $xx,xxx,xxx,xxx in assets.
- gjsman-1000 5y agoIf you had literally more than $5 billion per employee under management, swiping a few billion because what are the odds of a bank run becomes extremely tempting…
- shawabawa3 5y agoThey invest the funds backing the Tether in dubious investments (mostly short term loans to unknown companies, but some precious metals, bonds, funds, and even some crypto (all according to them, but completely unaudited)
- Clewza313 5y agoThe obvious source of commercial paper is that they sell Tethers at a steep discount to an exchange they're buddy-buddy with, and the exchange gives them an IOU in return. Hey presto, "commercial paper" backing the Tethers.
- runbathtime 5y agoAll of those reserves are technically theirs, they do not belong to token holders.
- gruez 5y agoIf I were running it as a 100% legal/safe operation I'd invest the balance in short term treasuries. If you multiply tether's liabilities ($61.9B) by the current 1 year treasury rate (0.09%), you get $55.7M, which seems like plenty of money to run such an operation.
- runbathtime 5y agoWhat if Tether the company just throws in the towel? Take the reserves and run? What incentive do they have not too?
- phpnode 5y agoI don't think there really are any (or many) reserves. I think they just printed a bunch of tokens, used the tokens to buy BTC and to inflate the value of the crypto they hold in Bitfinex (Bitfinex and Tether are approximately the same company). If they throw in the towel they lose their ability to influence the crypto market which is where their actual gains come from.
- bob33212 5y agoThat seems most likely. They thought that it doesn't matter if they back these tethers with BTC because BTC is a better investment than the UDS anyways. Once they went down that path they had no way of getting out other than printing more tether to prop up BTC when BTC dropped.
- realce 5y agoIf we're being totally honest, the incentive not to do so is probably death. Who knows who is "invested" with them, doubtful it's people who like investments with accurate record-keeping.
- graeme 5y agoJail or death. They’re rumoured to be heavily involved with drug cartels for money laundering. But jail is a near certain outcome if they just took the money and ran off. So they’re stuck with it. Once it implodes they’ll also face jail, but they can kick the can down the road.
- ImPostingOnHN 5y agoWith this much money at play, being incarcerated for even a brief period of time can easily end up being a death sentence
- jellicle 5y agoWhat Tether is doing is replaying the banking scams from the 1800s. A bank would open up, issue an unlimited amount of its paper currency, collect deposits in other, valuable currency, and operate for a while. Eventually it would collapse and the owners would walk away rich, having fleeced the public of a great deal of their money. https://en.wikipedia.org/wiki/Wildcat_banking https://en.wikipedia.org/wiki/Wildcat_banking US banking regulation is nearly weak enough to permit this for regular banking, but not quite. However, US banking regulation is weak enough to permit it as long as you call it "cryptocurrency" instead of "private currency". > "Commissioner Alpheus Felch recalled that one bank's "cash reserves" consisted of boxes of nails and glass topped with silver coins." Pithy! A box that's heavy, makes good clinking noises when you shake it, and has only the tiniest bit of money in it. And so apropos for Tether. I wonder if we'll get some similarly pithy remarks about the modern wildcat banks.
- h2odragon 5y agoRecall E-gold? Them folks were at least honestly nuts... I think they're all out of jail now.
- eingaeKaiy8ujie 5y agoThere is also XAUT (Tether Gold) by the way.
- PhantomGremlin 5y agoI don't think they ever went to "jail" at all, just home detention. They convinced a Federal judge that “the intent was not there to engage in illegal conduct”. Gold & Silver Reserve CEO Douglas Jackson was sentenced to 300 hours of community service, a $200 fine, and three years of supervision, including six months of electronically monitored home detention. https://en.wikipedia.org/wiki/E-gold#Resolution https://en.wikipedia.org/wiki/E-gold#Resolution It's Wikipedia, so it may not have been updated with all the relevant info.
- maverick-iceman 5y agoOk so basically the accusation is that they said to the bank they were consultants/service company and did not disclose crypto Back in the days banks would have meant they were in the cryptography sector or something. Also why is this US business? The US should be careful not to weaponize the USD, SWIFT DTCC or the correspondent banks network. The world entrusted the US with said institutions (as well as the UN, World Bank, IMF) because the US never weaponized them, and never went after thought crimes. The US can't stand Tether, more specifically it can't stand Crypto....so it is trying the same thing which pulled off with Microsoft in 2000 and with Standard Oil back in the days...only this time the population won't be onboard with it because there is no richer than god man in the high castle to point at .
- yellow_lead 5y ago> In the course of its years-long investigation, the Justice Department has examined whether traders used Tether tokens to illegally drive up Bitcoin during an epic rally for cryptocurrencies in 2017. But Bitcoin isn't a security. Is it illegal to manipulate it's price? Why haven't they looked at influencers pumping s*tcoins?
- ceejayoz 5y ago> Why haven't they looked at influencers pumping s*tcoins? They have, and are. https://www.sec.gov/news/press-release/2018-268 https://www.sec.gov/news/press-release/2018-268 "The Securities and Exchange Commission today announced settled charges against professional boxer Floyd Mayweather Jr. and music producer Khaled Khaled, known as DJ Khaled, for failing to disclose payments they received for promoting investments in Initial Coin Offerings (ICOs). These are the SEC's first cases to charge touting violations involving ICOs." As the saying goes: " The wheels of justice turn slowly, but grind exceedingly fine."
- yellow_lead 5y agoFair enough, I guess we'll have to wait to see more action here.
- spywaregorilla 5y agoAs someone who doesn't really care about the virtues of crypto, but has a small investment in btc that has grown into several thousand dollars, I'm feeling that if I want some casual investment in crypto I should move it into eth to avoid regulatory risk from bitcoin's environmental cost and tether collapsing and destroying bitcoin's value. I'm sure eth would tumble down with btc for a while but feel it might diverge positively after a while if either of these two threats hit btc? It feels like btc just has a lot more guns pointed at it. Any opinions on this?
- Kalium 5y agoIf your goal is to avoid regulatory risk, you might consider taking seriously the possibility of avoiding cryptocurrencies entirely.
- dcolkitt 5y agoEhhh. I'm pretty close to an Ethereum maximalist, but I'd actually say ETH is more at risk than BTC for these types of downside risks. For one BTC is just bigger with more people widely invested in it, and more name recognition. That's going to constrain government action from interest groups and the public perception of overreach. If Biden announced tomorrow that he was going to "shut down Bitcoin", a lot of conservatives, and even moderates, would have a knee jerk opposing reaction. If he said he was going to "shut down Ethereum", most people would be like "what the hell is Ethereum?" Two, Ethereum's smart contract system allows a lot more shenanigans. Remember, Tether runs on top of Ethereum, not Bitcoin. As does almost all of DeFi, which is starting to piss off financial regulations. Bitcoin doesn't come with all the baggage attached. 99% of it is just people transferring Bitcoin to one another. That makes its systematic risks pretty self-contained.
- xur17 5y agoI'm not sure ETH would be any better protected from tether's collapse. If anything it might be more affected since a fair number of defi projects use it.
- ancientworldnow 5y agoTether likely impacts eth as much if not more than Bitcoin considering it 1) runs on Eth and 2) Eth tends to be the financial product crypto of which tether is the largest element.
- santamex 5y agoThis one explains the Tether scam quite nice: https://youtu.be/-whuXHSL1Pg https://youtu.be/-whuXHSL1Pg Edit: summary: 8 people founding the tether company, 7 of them with a criminal background. Lying and denying and then admitting after they have no other option. Yeah, seems like a nice company…
- user-the-name 5y agoTether's business at this point is basically manufacturing red flags. It is incredible the mental gymnastics people in the cryptocurrency business go through to defend this group of crooks.
- WalterSear 5y ago"It is difficult to get a man to understand something when the market liquidity his salary is traded and valuated against depends upon his not understanding it."
- TimJRobinson 5y agoI've been in crypto for a while and never met anyone who likes Tether, it seems to be novices that use it that don't know any better. I don't know why anyone would use it over a decentralized stablecoin like DAI.
- WalterSear 5y agoThe entire crypto market is poisoned by this. There is no hiding from it in another currency if the market loses 70% of it's liquidity. "All this is extremely dangerous to everyone, the entire crypto community BTC could go to 1k if we don't act fast" • CFO of Bitfinex & Tether, previously during a Tether crisis.
- user-the-name 5y agoYou know something like 90% of all trades happen in Tether, right?
- lawrenceyan 5y agoRe: their recent settlement with the New York Attorney General - 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... > 3. The OAG finds that the conduct set forth herein violated the Martin Act and Executive Law § 63(12). > 4. The OAG finds the relief and agreements contained in this Settlement Agreement appropriate and in the public interest. Therefore, the OAG is willing to accept this Settlement Agreement pursuant to Executive Law § 63(15), in lieu of commencing a statutory proceeding Page 2 of 17 for violations of the Martin Act and Executive Law § 63(12), based on the conduct described below.
- jpmattia 5y agoQuick summary: The investigation relates to whether Tether misrepresented transactions for crypto in 2014. The statute of limitations for fraud is 5 years, but because it involves a financial org the SoL is 10 years. Note that the lawsuit has nothing to do with Tether backing (despite the majority of HN comments as of this writing). As I've said elsewhere: In order to believe that Tether lacks backing, you have to believe that AG Leticia James got the data from the NYAG subpoenas, and then ignored the fact that Tether has insufficient backing. Not likely.
- cycrutchfield 5y ago"Tether's claims that its virtual currency was fully backed by U.S. dollars at all times was a lie." -- NYAG Letitia James
- jpmattia 5y ago... which is consistent with having sufficient backing. Again: She did not open a criminal prosecution for fraud. Do you think she would just let go of a criminal prosecution?
- JumpCrisscross 5y ago> Do you think she would just let go of a criminal prosecution? Yes? Those are my tax dollars at work. There are better places to prosecute. Let the Feds do the international heavy lifting such a prosecution will require.
- jpmattia 5y ago> Yes? Those are my tax dollars at work. There are better places to prosecute. Let the Feds do the international heavy lifting such a prosecution will require. So you believe Leticia James has documentation saying that USDT is not backed 1:1 with any dollar-based securities, and didn't even say so? And let investors continue to be defrauded, and she'll let the Fed AGs to get the credit? That sounds laughable to me, but ok.
- josh2600 5y agoI have thought tether was a scam for years. I am very deep in the industry. I now think tether is neither a scam nor a Ponzi scheme in the classic sense of the word (they’re not borrowing from Peter to pay Paul). What tether is doing is reframing what 1:1 collateralization means. Typically when we think of a fully collateralized stablecoin, we think a 1:1 mapping of dollars to synthetics. Tether is backed by ‘dollars or other dollar equivalent assets’. Whether ‘other dollar equivalent assets’ will actually add up to dollars in the event of a crash is an exercise for the reader. As for these current charges, they definitely did not have the dollars they said they did once upon a time. They definitely have a ton of money now but whether that’s the right ton of money in the event the market moves a lot is anyone’s guess. For now, the seemingly unstoppable rampage that is tether continues on… Edit: just to be clear I don’t hold tether and don’t make use of the currency personally but I understand why others do.
- ceejayoz 5y ago> What tether is doing is reframing what 1:1 collateralization means. Which is, to be clear, fraudulent. Their website long claimed that for every 1 USDT, that they held $1 in USD. This claim fell apart years ago, as did their claim to regular audits (they still never completed one). It may indeed be that they are collateralized now, but they got there via fraud.
- JumpCrisscross 5y ago> It may indeed be that they are collateralized now, but they got there via fraud They claim to be collateralized with commercial paper which, without further information, is worthless. They could print a billion Tethers, sell them to a buddy for an IOU, and be "collateralized" by that definition.
- jcranmer 5y ago> What tether is doing is reframing what 1:1 collateralization means. Or in simpler terms, Tether is a crypto money market fund, combining the convenience of money market funds with the transparency of a Ponzi scheme. If you read even the little transparency they do provide very carefully, it doesn't exclude the possibility that they're lying through their teeth about their backing: the commercial paper is described as being valued at face value, which, combined with the extreme reluctance to even hint out which industry the commercial paper is in, is not reassuring at all.
- timpez 5y agoThe minting amount of Tether is absurd and does have the free reign to mint how much they want. This issue was already exposed a long time ago, yet as the BTC price went up, they suddenly put up this Tether FUD news. There are some other alternative stable coins vs. USDT, and I think if you weigh in the pros and cons and with the issue of Tether right now, surely USDC and other stable coins would win.
- rubyist5eva 5y agoCryptocurrency pegged to fiat is quite possibly the dumbest possible use of a cryptocurrency I can think of, except for Tether which was an obvious scam from the get go.
- nikanj 5y agoIt's great for crime though. It's like USD cash, except you can transfer it instantaneously across the globe.
- AgentME 5y agoA lot of stablecoins sacrifice decentralization, but there are some like DAI that get you all of the (non-volatility-related) benefits of cryptocurrency like direct control without the price volatility. If you want to use cryptocurrency as money, the price volatility is often a big downside.
- zzok22 5y agoWhy is it dumb?
- rglullis 5y ago- Are you a merchant selling digital goods online and you want a zero-risk chance of dealing with chargebacks? You can accept stabletokens. No credit card fees as well. - Are you hodling a good amount of BTC/ETH/BAT tokens but you would like to get some liquidity, perhaps for a large purchase? Put your crypto as collateralized loan on MakerDAO, get DAI with very low interest and spend that: bonus point, if the crypto you were holding loses value and your loan gets liquidated, you get a tax write-off. - Do you live in some third-world country with poor countries and strong capital controls (e.g, Argentina)? It is a lot easier to buy crypto-pegged to the USD and EUR than it is to buy actual dollars and euros.
- rubyist5eva 5y agoThese are actually all very good points - thank you for sharing.
- zozin 5y agoOh, gee, another excessively dramatic article about crypto/Tether (see “… a potential criminal case that would have broad implications for the cryptocurrency market.”) My gut tells me that the Tether team did break some laws when trying to find a bank to hold their hundreds of millions/billions of dollars, but I don’t think Tether is a scam, since I think they do have the cash reserves to back the stable coin. Their problem was too much success: they literally had too much money and banks didn’t want to touch it, so Tether was forced to become “creative” because you can’t exactly store hundreds of millions of dollars under mattresses. I don’t see how Bitfinex/Tether making money hand over fist from collecting usurious trading fees will bring down crypto markets. Just because some bank executive is found guilty of breaking banking laws doesn’t mean it will have broad implications for the entire banking system.
- perl4ever 5y ago>I think they do have the cash reserves to back the stable coin They haven't completed an audit, have they? If someone starts an audit, they're admitting that it's necessary, and if they quit halfway with some lame excuse, how is there any chance they are legit and actually have the reserves they claim? There is just no innocent explanation I can imagine.
- seaourfreed 5y agoTemplates should be good for stablecoin and crypto industry. Transparency. Audits. Prosecution for fraud.
- yawaworht1978 5y agoAren't many executives Italian? So, whatever the US justice department does, as long they stay in Italy, they will not see jail time, or am I wrong? The company sure can be shut down and blacklisted globally, as well as the current executives. It looks like a shift to USDC is happening, why is that not stopped? It looks like a tether fork with different board, but backing etc look all the same.
- arcticbull 5y agoGenerally speaking if the US can identify some interest in the case (US customers, for instance) then it can file an indictment. Most first-world countries have extradition treaties with the US, and will definitely ship Paolo over for something like this.
- throw_m239339 5y ago> Aren't many executives Italian? So, whatever the US justice department does, as long they stay in Italy, they will not see jail time, or am I wrong? I don't think these people live in Italy, more like Hong Kong or countries where extradition to US is difficult. I want to say this, because a lot of people think that people suspicious of Tether hate bitcoin, quite the contrary, if one values Bitcoin, then one should be very skeptical of everything around Tether and Bitfinex, for Bitcoin's sake.
- arcticbull 5y agoYou don't say.
- guillegette 5y agoWhile everything that has been said about Tether seems valid, not sure what is true and not, it is definitely suspicious. But after reading all comments, I am wondering, isn't the whole financial system also a house of cards? Can we talk about the amount of debt on student loans, credit cards, house loans, those ridiculous low interest rate, the amount of $usd that is being printed and giving it away ? And all of those financial instruments are controlled by the same people that have been "cracking down on stablecoins/crypto"... So my question is, who can we trust? we were born with banks around us so we kind of trust them, but can you imagine the level of corruption that existed when they were being created? how many financial institutions disappear with everyones money... We are just at the early days of crypto, there is people trying to make good things and people trying to make a quick win taking advantage of the current status. Do your own research, make your own decisions...
- jfrunyon 5y ago> isn't the whole financial system also a house of cards Yes. But importantly, it's a house of cards guaranteed by all the money and force of the government of $major_power. > Do your own research, make your own decisions... The vast majority of people are not capable of understanding either the economics or technology involved without investing an unreasonable amount of time. (I'm not ashamed to admit that I don't, and I certainly understand more of the tech and probably understand more of the economics than 99% of the US population...)
- legutierr 5y agoOne thing from the article that people should probably pay more attention to: > A hallmark of Tether is that its creators have said each token is backed by one U.S. dollar, either through actual money or holdings that include commercial paper, corporate bonds and precious metals. That has triggered concerns that if lots of traders sold stable coins all at once, there could be a run on assets backstopping the tokens. Fitch Ratings has warned that such a scenario could destabilize short-term credit markets. Even if Tether is 100% backed and not fraudulent at all, a bank-run scenario could result in Tether needing to sell off billions of dollars of its assets very quickly. What happens if there is a precipitous sale of the assets that currently back the Tether token? Would there be ripple effects across the rest of the economy if additional volatility creeps into the commercial paper market as a result? Regardless as to the actual risk, concern over this specific scenario is animating much of the regulatory interest into stablecoins. One would expect restrictions to be imposed on what types of assets may be used to back stablecoins, and for explicit reporting requirements to be imposed as well.
- JumpCrisscross 5y ago> What happens if there is a precipitous sale of the assets that currently back the Tether token? If Tether is thusly backed, it's a non-interest bearing money market fund. We saw how those break down in the last crisis. In reality, Tether would just halt redemptions. (Unlike a money market fund, there is nothing holding them to convertibility.)
- csomar 5y agoTether has a $60bn market cap. That's a drop in the ocean for the international markets.
- adevx 5y agoWhat I find more interesting than the rumors detailed in the article is the timing of publication. Crypto markets are moved by fud and fomo, to me the timing is no coincidence.
- smoldesu 5y agoWho's surprised here? Disclosure: I know nothing about crypto. I've maybe transacted $300 of it, maximum, in my lifetime. But Tether was obviously shady from the start. The insane social-media pushes, the "thought guards" who would scour crypto hashtags to spam whitepapers at Tether detractors, it all seemed way too sensational from the start. As a side-note, I really do feel bad for the people who have poured their lives into becoming full-time cryptocurrency advocates when Bitcoin took off. I've always thought the technology had potential, it's obviously not a one-size-fits-all solution. It's basically binary search with a sex factor, which makes it all the more fascinating to watch it take off with wild, unfounded speculation pouring in from the finance sector.
- cosmojg 5y agoWhy do people still use Tether? Alternatives like USDC and Dai are plenty liquid. I don't understand why anyone would put up with this level of unnecessary risk.
- WalterSear 5y agoUSDC isn't audited either. And the risk is systemic. Either you put up with it, or you get out of crypto.
- rwiggum 5y agoUSDC is audited monthly https://www.centre.io/usdc-transparency https://www.centre.io/usdc-transparency
- WalterSear 5y agoUSDC is attested monthly. It is not audited. > Top five accounting services firm Grant Thornton LLP issues attestations each month on the US dollar reserves that back the USDC tokens in circulation. Attestations were never intended to be used in this way, and are, in this situation, meaningless. The only reasonable purpose for these attestations is to confuse people who mistakenly conflate them with audits. The fact that USDC is resorting to this behaviour rather than performing audits is not meaningless, however: it's a substantial red flag.
- shawabawa3 5y agoUSDC isn't audited, but it is attested, which means what most laymen think of auditing as meaning - a major auditing firm has confirmed they hold the backing dollars
- WalterSear 5y agoThis entirely false. An attestation is an assurance that published valuations add up correctly. It provides no verification of the veracity of those valuations. Attestations are intended to be used as a follow-up to an actual audit, not as a replacement for one. > One of the things to keep in mind to differentiate each of these services is that audits are performed to discover data, risks, or compliance issues that may not have been known before the audit took place, and attestation is to evaluate and review how true the data or information is when compared to a stated purpose, internal control or system. https://www.ispartnersllc.com/blog/defining-attestation-assurance-auditing/ https://www.ispartnersllc.com/blog/defining-attestation-assu...
- gbronner 5y agoSeems like the obvious thing to do is set up a large Bitcoin short position, buy a bunch of tethers, and publicly try to redeem them If tether has backing, you only lose the tether premium. Otherwise you lose all your tethers, but hopefully you make it back on the rest of your crypto shorts.
- kaminar 5y agoTether is holding on by a string...it's vapor, like all crypto. It will crash, and take the market with it.
- yadaeno 5y agoWhat I don't understand is why major exchanges continue to give tether their customers money when it's not backed by cash? Would an exchange not be incentivised to manage the cash themselves and significantly reduce risk for their customers and business? It seems like huge risk for what looks like a minor convenience. Also, very good video on the history and current state of tether: https://m.youtube.com/watch?v=-whuXHSL1Pg https://m.youtube.com/watch?v=-whuXHSL1Pg
- katejones23 5y agothat's interesting story. this is quite huge and I think that could be crucial to tether and its reputation i wonder if the companies that accept tether now (like those mentioned here https://nowpayments.io/blog/businesses-accepting-tether https://nowpayments.io/blog/businesses-accepting-tether) will continue to do so? what do you think