12 ms·

An 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://

by pwned1 5y ago

An 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 ago
Some 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 ago
  This is cryptocurrency, where “Don’t trust. Verify.” is the sentiment, and they’ve done a terrible job at allowing verification.
- pwned1 5y ago
  Just 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 ago
  Unlike 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.
  - mikeblackson 5y ago
    >There is nothing which proves that Tether actually is backed by anything Also, there is nothing which proves that Tether actually isn't backed by anything. I see a lot of people jumping to conclusions about a topic they are self admittedly ignorant about. Perhaps wait for the DOJ to do their jobs if you don't have insider knowledge. In response to -dsr's sarcasm below (rate limit), I've got a bit of my own. "I've run a profitable business for years and haven't committed fraud during the time I spent in an unregulated environment. Now that regulators are nearing my doorstep, it's the perfect time to start committing fraud." /s
    - Marazan 5y ago
      The NYAG showed that Tether was not fully backed.
      - mikeblackson 5y ago
        >The NYAG showed that Tether was not fully backed. In 2017, when they were busy securing other banking partners due to accounts being shutdown. I consider this a gap due to growing pains, as did the NYAG. How would you shutdown Tether temporarily (2-3 months) if a bank ends a relationship?
        Majromax 5y ago
        > How would you shutdown Tether temporarily (2-3 months) if a bank ends a relationship? By refusing to take deposits for new Tether, and by shutting down redemptions if necessary while the banking relationship is sorted out. Tether doesn't exist ex nihilo; it requires active management to issue and redeem coins. If it ever cannot live up to its "fully backed" claim, then continuing to operate under a pretense is fraudulent.
        mikeblackson 5y ago
        >By refusing to take deposits for new Tether, and by shutting down redemptions if necessary while the banking relationship is sorted out. I agree and expect that is the lesson the $18M fine taught them. The key point is, they had a legitimate reason for under-collateralizing during the biggest bull run in crypto history at that point. 2014-2017 was the perfect period to begin fraudulent activity if they were really interested in it. I guess the question is, what is the best time to commit fraud in the crypto space, earlier or later (during-post increased regulatory scrutiny)?
Tenoke 5y ago
>Tether usually has 2-3x the volume of bitcoin in any given day. And no one seems to know anything about how it works. I think these are both bad arguments. If the most used stablecoin is used for most BTC volume as well as other crypto trades, you'd expect it to be more. >. And no one seems to know anything about how it works What? People do know how it works, or at least as much as with many other projects.
- gjsman-1000 5y ago
  Nobody knows where the USD supposedly backing it goes. Most of it is in “commercial paper” they said, but the investors who work in that industry say they’ve never heard of them. This seems impossible because at their scale, that would make them, like, the 5th largest commercial paper investor on Wall Street. How could commercial paper investors not heard of them?
  - johnnyApplePRNG 5y ago
    >Nobody knows where the USD supposedly backing it goes. Every single time that ifinex was upfront about where the money was going, their bank accounts would be closed with little notice. I can understand why they would stay tight lipped about where they are stashing $60B+.
    - EpicEng 5y ago
      Well they're currently being accused of fraud for misleading banks, so...
  - scsilver 5y ago
    I dont think it matters to people who really use tether. If you cant buy usd due to capital controls, usdt is your other accissible option. As such its seemed to retain its user's opinion that it continues to track the dollar, even when its not backed directly and or backed insufficiently by other assets. Its a tool that has value, beyond its intrinsic value.
    - 5y ago
spookthesunset 5y ago
And yet people are so bought into crypto hype they look the other way. These dudes have been running this scam in plain sight for years now. It always amazes me that the whole house of cards continues to stand and hasn’t completely blown up.
- Semaphor 5y ago
  Probably because most people don’t care much? Tether always seemed like a thing for day-traders and whales.
- deepvibrations 5y ago
  We don't truly know the severity of it yet, but we do know that money has been moving over to other stablecoins such as USDC over the past year or so and so risk is slowly decreasing. There is a huge amount of innovation in the space and i think to gloss over it as a 'house of cards' is a bit naive - there is no denying it is a volatile market, but it is here to stay, so best to embrace it and see if there are actually projects that resonate with you.
  - Marazan 5y ago
    Yes, money started moving over to USDC at exactly the same time they reduced transparency over their reserves and stopped being fully dollar backed. The risk is still right there.
    - onlyrealcuzzo 5y ago
      Is there an article about USDC that describes what/when the major changes happened. My understanding was that Coinbase was 1:1 dollars, and they actually had that money in banks, etc. Then, they ended transparency and the 1:1 peg. This is when people suspect they started getting debt to buy BTC - but this is presumably legal, right? Do they have any obligation to be transparent - being a publicly traded company?
  - deleted 5y ago
    [deleted]
rvz 5y ago
> So in my estimation, it probably is a scam... It IS a scam and it is backed by nothing. Only to pump the BTC price artificially. The unveiling of this scam was seen and covered a mile away and was a long time coming. To Downvoters: I'm sorry BTC maximalists, but this scandal was waiting to be cracked down and no, it is not FUD, or whatever denial spiral you are going through. Just read: https://twitter.com/smdiehl/status/1393669812220465162 https://twitter.com/smdiehl/status/1393669812220465162
- fleddr 5y ago
  Whilst crypto maximalists can be annoying, there's also anti-crypto maximalists such as the source you're linking to. It is legitimate to raise the Tether concern yet he confidently drops into very binary conclusions driven by his pure hate for crypto. For example, his claim that it's 100% a scam whilst this fact isn't established. Or calling any trade in crypto "shady". This one shows his true colors. A huge amount of people just deposit dollars on a KYC exchange, then buy and sell whatever crypto they fancy. None of this is shady. It's fully legal, taxes are paid, it's like stocks. Yet according to him, any trade in crypto is shady. Or, the claim that the 800 billion market cap of Bitcoin is solely based on Tether. That's an absurd statement. As said, maximalists can be extreme, but so can anti-maximalists. He deeply hates any and all crypto, has zero nuance, and is not open to any type of discussion.
  - ImPostingOnHN 5y ago
    they're just called minimalists, vs. anti-maximalists, and announcing what someone who isn't you hates is a pretty unconvincing way of making your case, unless they've also announced that they "hate" it
    - fleddr 5y ago
      I don't have a case to defend. I'm indifferent to people being pro or anti crypto. The only thing I did is to point out the agenda at work, and the limitations of the claims made: zero nuance, always hides from defending his case. The guy hates crypto. A normal person would declare that and move on. He makes it his life work to hate crypto. He's consumed by it. That's anti-crypto maximalism. A source to distrust as much as a pro maximimalist. Both have agendas set in stone, are not open to reason and nuance.
matheusmoreira 5y ago
USD is the real scam. It's not backed by anything either. Tether only exists because nobody else wants to touch the USD and its annoying regulations. I find it hard to care about Tether printing billions when the US government prints trillions. Wish we could have a 100% XMR world without even a single dollar in sight. Won't happen until the end of the petrodollar which won't happen until the end of the US military.
- bathtub365 5y ago
  I think are at least a couple hundred million people who use USD.
- rchaud 5y ago
  It is, though. It's backed by the economic output of the United States, which is transacted in USD. But why are you conflating USD with crypto anyway? USD is a currency that is actually used for purchasing goods and services. Crypto isn't used for anything except speculation. If capital gains is the goal, then yes, the USD won't be of much value to you as it's not particularly volatile.
  - matheusmoreira 5y ago
    https://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx https://www.treasury.gov/resource-center/faqs/Currency/Pages... > Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything Bigger scam than Tether. Has been running for almost a century now. > Crypto isn't used for anything except speculation. Looks like Amazon's going to accept cryptocurrency as payment: https://www.businessinsider.com/amazon-cryptocurrency-seeks-new-blockchain-leader-customers-payments-ecommerce-2021-7 https://www.businessinsider.com/amazon-cryptocurrency-seeks-... Hopefully we'll be able to put this "cryptocurrency is just speculation" argument to rest soon.
    - ketzo 5y ago
      And yet if I walk into a grocery store, I can buy milk with USD. Weird — it’s almost like there is something backing it, and it’s not just strictly gold/silver!
jpmattia 5y ago
> (Yes, I know it's zerohedge, but this is a decent article) It's not even zerohedge: It's copied from bombthrower.com
arcticbull 5y ago
I highly recommend the first five Cas Piancey and Bennett Tomlin podcasts [1] and the (albit a little bit dated) Kalzumeus post [2]. I also really enjoyed the Calacanis podcast with Bitfinex'ed [3] and the Coffeezilla [4]. [1] https://cryptocriticscorner.com/ https://cryptocriticscorner.com/ [2] https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/ https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/ [3] https://www.youtube.com/watch?v=5fgv4DJ0VAI https://www.youtube.com/watch?v=5fgv4DJ0VAI [4] https://www.youtube.com/watch?v=-whuXHSL1Pg https://www.youtube.com/watch?v=-whuXHSL1Pg

by pwned1 5y ago

mikeblackson 5y ago

Some 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 ago
This is cryptocurrency, where “Don’t trust. Verify.” is the sentiment, and they’ve done a terrible job at allowing verification.
pwned1 5y ago
Just 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 ago
Unlike 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.
- mikeblackson 5y ago
  >There is nothing which proves that Tether actually is backed by anything Also, there is nothing which proves that Tether actually isn't backed by anything. I see a lot of people jumping to conclusions about a topic they are self admittedly ignorant about. Perhaps wait for the DOJ to do their jobs if you don't have insider knowledge. In response to -dsr's sarcasm below (rate limit), I've got a bit of my own. "I've run a profitable business for years and haven't committed fraud during the time I spent in an unregulated environment. Now that regulators are nearing my doorstep, it's the perfect time to start committing fraud." /s
  - Marazan 5y ago
    The NYAG showed that Tether was not fully backed.
    - mikeblackson 5y ago
      >The NYAG showed that Tether was not fully backed. In 2017, when they were busy securing other banking partners due to accounts being shutdown. I consider this a gap due to growing pains, as did the NYAG. How would you shutdown Tether temporarily (2-3 months) if a bank ends a relationship?
      - Majromax 5y ago
        > How would you shutdown Tether temporarily (2-3 months) if a bank ends a relationship? By refusing to take deposits for new Tether, and by shutting down redemptions if necessary while the banking relationship is sorted out. Tether doesn't exist ex nihilo; it requires active management to issue and redeem coins. If it ever cannot live up to its "fully backed" claim, then continuing to operate under a pretense is fraudulent.
        mikeblackson 5y ago
        >By refusing to take deposits for new Tether, and by shutting down redemptions if necessary while the banking relationship is sorted out. I agree and expect that is the lesson the $18M fine taught them. The key point is, they had a legitimate reason for under-collateralizing during the biggest bull run in crypto history at that point. 2014-2017 was the perfect period to begin fraudulent activity if they were really interested in it. I guess the question is, what is the best time to commit fraud in the crypto space, earlier or later (during-post increased regulatory scrutiny)?

Tenoke 5y ago

>Tether usually has 2-3x the volume of bitcoin in any given day. And no one seems to know anything about how it works. I think these are both bad arguments. If the most used stablecoin is used for most BTC volume as well as other crypto trades, you'd expect it to be more. >. And no one seems to know anything about how it works What? People do know how it works, or at least as much as with many other projects.

gjsman-1000 5y ago
Nobody knows where the USD supposedly backing it goes. Most of it is in “commercial paper” they said, but the investors who work in that industry say they’ve never heard of them. This seems impossible because at their scale, that would make them, like, the 5th largest commercial paper investor on Wall Street. How could commercial paper investors not heard of them?
- johnnyApplePRNG 5y ago
  >Nobody knows where the USD supposedly backing it goes. Every single time that ifinex was upfront about where the money was going, their bank accounts would be closed with little notice. I can understand why they would stay tight lipped about where they are stashing $60B+.
  - EpicEng 5y ago
    Well they're currently being accused of fraud for misleading banks, so...
- scsilver 5y ago
  I dont think it matters to people who really use tether. If you cant buy usd due to capital controls, usdt is your other accissible option. As such its seemed to retain its user's opinion that it continues to track the dollar, even when its not backed directly and or backed insufficiently by other assets. Its a tool that has value, beyond its intrinsic value.
  - 5y ago

spookthesunset 5y ago

And yet people are so bought into crypto hype they look the other way. These dudes have been running this scam in plain sight for years now. It always amazes me that the whole house of cards continues to stand and hasn’t completely blown up.

Semaphor 5y ago
Probably because most people don’t care much? Tether always seemed like a thing for day-traders and whales.
deepvibrations 5y ago
We don't truly know the severity of it yet, but we do know that money has been moving over to other stablecoins such as USDC over the past year or so and so risk is slowly decreasing. There is a huge amount of innovation in the space and i think to gloss over it as a 'house of cards' is a bit naive - there is no denying it is a volatile market, but it is here to stay, so best to embrace it and see if there are actually projects that resonate with you.
- Marazan 5y ago
  Yes, money started moving over to USDC at exactly the same time they reduced transparency over their reserves and stopped being fully dollar backed. The risk is still right there.
  - onlyrealcuzzo 5y ago
    Is there an article about USDC that describes what/when the major changes happened. My understanding was that Coinbase was 1:1 dollars, and they actually had that money in banks, etc. Then, they ended transparency and the 1:1 peg. This is when people suspect they started getting debt to buy BTC - but this is presumably legal, right? Do they have any obligation to be transparent - being a publicly traded company?
- deleted 5y ago
  [deleted]

rvz 5y ago

> So in my estimation, it probably is a scam... It IS a scam and it is backed by nothing. Only to pump the BTC price artificially. The unveiling of this scam was seen and covered a mile away and was a long time coming. To Downvoters: I'm sorry BTC maximalists, but this scandal was waiting to be cracked down and no, it is not FUD, or whatever denial spiral you are going through. Just read: https://twitter.com/smdiehl/status/1393669812220465162 https://twitter.com/smdiehl/status/1393669812220465162

fleddr 5y ago
Whilst crypto maximalists can be annoying, there's also anti-crypto maximalists such as the source you're linking to. It is legitimate to raise the Tether concern yet he confidently drops into very binary conclusions driven by his pure hate for crypto. For example, his claim that it's 100% a scam whilst this fact isn't established. Or calling any trade in crypto "shady". This one shows his true colors. A huge amount of people just deposit dollars on a KYC exchange, then buy and sell whatever crypto they fancy. None of this is shady. It's fully legal, taxes are paid, it's like stocks. Yet according to him, any trade in crypto is shady. Or, the claim that the 800 billion market cap of Bitcoin is solely based on Tether. That's an absurd statement. As said, maximalists can be extreme, but so can anti-maximalists. He deeply hates any and all crypto, has zero nuance, and is not open to any type of discussion.
- ImPostingOnHN 5y ago
  they're just called minimalists, vs. anti-maximalists, and announcing what someone who isn't you hates is a pretty unconvincing way of making your case, unless they've also announced that they "hate" it
  - fleddr 5y ago
    I don't have a case to defend. I'm indifferent to people being pro or anti crypto. The only thing I did is to point out the agenda at work, and the limitations of the claims made: zero nuance, always hides from defending his case. The guy hates crypto. A normal person would declare that and move on. He makes it his life work to hate crypto. He's consumed by it. That's anti-crypto maximalism. A source to distrust as much as a pro maximimalist. Both have agendas set in stone, are not open to reason and nuance.

matheusmoreira 5y ago

USD is the real scam. It's not backed by anything either. Tether only exists because nobody else wants to touch the USD and its annoying regulations. I find it hard to care about Tether printing billions when the US government prints trillions. Wish we could have a 100% XMR world without even a single dollar in sight. Won't happen until the end of the petrodollar which won't happen until the end of the US military.

bathtub365 5y ago
I think are at least a couple hundred million people who use USD.
rchaud 5y ago
It is, though. It's backed by the economic output of the United States, which is transacted in USD. But why are you conflating USD with crypto anyway? USD is a currency that is actually used for purchasing goods and services. Crypto isn't used for anything except speculation. If capital gains is the goal, then yes, the USD won't be of much value to you as it's not particularly volatile.
- matheusmoreira 5y ago
  https://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx https://www.treasury.gov/resource-center/faqs/Currency/Pages... > Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything Bigger scam than Tether. Has been running for almost a century now. > Crypto isn't used for anything except speculation. Looks like Amazon's going to accept cryptocurrency as payment: https://www.businessinsider.com/amazon-cryptocurrency-seeks-new-blockchain-leader-customers-payments-ecommerce-2021-7 https://www.businessinsider.com/amazon-cryptocurrency-seeks-... Hopefully we'll be able to put this "cryptocurrency is just speculation" argument to rest soon.
  - ketzo 5y ago
    And yet if I walk into a grocery store, I can buy milk with USD. Weird — it’s almost like there is something backing it, and it’s not just strictly gold/silver!

jpmattia 5y ago

> (Yes, I know it's zerohedge, but this is a decent article) It's not even zerohedge: It's copied from bombthrower.com

arcticbull 5y ago

I highly recommend the first five Cas Piancey and Bennett Tomlin podcasts [1] and the (albit a little bit dated) Kalzumeus post [2]. I also really enjoyed the Calacanis podcast with Bitfinex'ed [3] and the Coffeezilla [4]. [1] https://cryptocriticscorner.com/ https://cryptocriticscorner.com/ [2] https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/ https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/ [3] https://www.youtube.com/watch?v=5fgv4DJ0VAI https://www.youtube.com/watch?v=5fgv4DJ0VAI [4] https://www.youtube.com/watch?v=-whuXHSL1Pg https://www.youtube.com/watch?v=-whuXHSL1Pg