8 ms·

Tether is under undisclosed SEC investigation, FOIA blocked

130 points by bhouston 5y ago

ryanlol 5y ago
Is this not a super standard FOIA response?
- ceejayoz 5y ago
  Only if there's an active law enforcement investigation the FOIA request touches.
  - ryanlol 5y ago
    I don’t think that your comment acknowledges the reality that FOIA responses are decided by RNG unless you sue.
  - dragonwriter 5y ago
    > Only if there's an active law enforcement investigation the FOIA request touches. Right, but that doesn't mean that the named entity is either the target or even a subject of the investigation. Because the FOIA request is for all documents relating to the entity, if there is even one document related to any investigation of anything that mentions the named entity in any capacity, it is going to be withheld for that reason.
- ajkdhcb2 5y ago
  Yes. The tweet crops out a following paragraph that says it should not be taken as evidence that an investigation is underway. So this is fake news. You can see the full letter here: https://twitter.com/CryptoWhale/status/1429819156052983816 https://twitter.com/CryptoWhale/status/1429819156052983816
  - ceejayoz 5y ago
    "We can't give you these records because it'd interfere with law enforcement activities, which may not exist" seems like it'd be a pretty big loophole in FOIA if you could use it that way.
    - kube-system 5y ago
      That's not what it's saying. They didn't say law enforcement activities didn't exist, they said a violation of the law may not exist. In the case of literally any law enforcement activity, information is collected before law enforcement can come to any conclusion whether or not a law was broken.
      - ceejayoz 5y ago
        > they said a violation of the law may not exist The claim made is "under undisclosed SEC investigation", not "has already been convicted". A FOIA response of this nature indicates there's some level of investigation occurring, or they couldn't use that reason and would have to find another reason to deny it.
        ajkdhcb2 5y ago
        >A FOIA response of this nature indicates there's some level of investigation occurring How is that possible when it says "the Commission does not disclose the existence or non-existence of an investigation"?
        ceejayoz 5y ago
        If there were no investigation, they couldn't legally use that FOIA rejection reason. They'd have to give a different reason.
        deleted 5y ago
        [deleted]
        ajkdhcb2 5y ago
        The question itself presupposes that there is an investigation, so they are essentially saying that if there were such materials it would be covered by that reason. FOIA would be abused like crazy to unearth classified information if this method of questioning worked
  - bhouston 5y ago
    Others are now reporting this such as coin desk: https://www.coindesk.com/policy/2021/09/24/sec-hints-at-tether-probe-in-records-request-denial/ https://www.coindesk.com/policy/2021/09/24/sec-hints-at-teth...
    - ajkdhcb2 5y ago
      The same form of letter was sent a month ago, so that just reflects badly on them
gruez 5y ago
"tether is a fraud/ponzi" claims aside, does SEC even have jurisdiction here? The SEC isn't out to protect all investors, only to protect them from securities fraud. I'm skeptical whether a stablecoin could even count as a security. From bloomberg: >The rule in the U.S. is that an “investment contract,” meaning “the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others,” is a security https://www.bloomberg.com/opinion/articles/2021-09-08/lending-bitcoins-is-tricky https://www.bloomberg.com/opinion/articles/2021-09-08/lendin... Under that definition, are stablecoins even securities? You buy it at $1 and the best you can hope for it is that the value remains at $1. There's no expectation of profits.
- mywittyname 5y ago
  Well, the other half of Securities & Exchange is exchange. Tether is owned and controlled by Bitfinex, who does claim to be a cryptocurrency exchange.
- josefx 5y ago
  Your link only says that a "investment contract" is a security, not that all securities are "investment contracts".
  - gruez 5y ago
    >not that all securities are "investment contracts". If you search around people do seem to think that "investment contracts" are "security" (eg. https://www.investopedia.com/terms/h/howey-test.asp https://www.investopedia.com/terms/h/howey-test.asp) although I can't find someone saying "investment contracts iff security". If that's not the case, can you list what else counts as securities, and why do you think stablecoins meets those definitions?
    - josefx 5y ago
      I am far from an expert however following https://www.investopedia.com/terms/s/seact1934.asp https://www.investopedia.com/terms/s/seact1934.asp the SEC can over see over the counter securieties (https://www.investopedia.com/terms/o/otc.asp https://www.investopedia.com/terms/o/otc.asp) that seems to cover financial contracts that derive their value from an underlying asset. As far as I understand Tether is backing its value with dollars and has already been in trouble over lending the money it officially used to back its cryptocurrency away without disclosing that to its users.
tomhunters 5y ago
This has been quite the issue for a long time, and I can't think why the authorities are delaying their actions against Tether.
- lamontcg 5y ago
  Regulators don't take actions that risk popping entire markets and creating many billions of dollars of losses on the balance sheets of publicly traded companies like TSLA. Madoff's Ponzi was pretty obviously a Ponzi and was reported for years as a Ponzi to the SEC and nothing happened until it was finally popped by the market retreating in 2008 and redemptions causing the Ponzi to go completely cash insolvent. Tether/crypto is going to pop when it pops, and regulators will then step in aggressively afterwards.
  - mckirk 5y ago
    Given the Evergrande development, it might pop rather sooner than later. Tether's 'reserves' are largely backed with commercial paper after all, and it stands to reason that much of that is intertwined with the China debt-bubble in one way or another.
  - FDSGSG 5y ago
    > Tether/crypto is going to pop when it pops, and regulators will then step in aggressively afterwards. Or it might not. Unlike what Madoff was doing, it's perfectly possible for Tether to keep their game up in perpetuity. Madoff kept his far more ambitious and risky operation going for decades, I think Tether can certainly last for longer if not eviscerated by lawmakers.
Havoc 5y ago
Honestly I'd be more surprised if they weren't. Wouldn't mind if the SEC takes tether down a notch...they're a risk to the entire crypto ecosystem
trident5000 5y ago
If tether went belly up what would happen is everyone would sell their tether for BTC and other cryptos (whatever they can get into) and you would have the largest squeeze of all time. We actually witnessed this during the tether freak out saga a couple years ago where BTC on the bitfinex exchange was priced like 10 or 15% higher than the rest of the market. I wouldnt mind just getting it over with. Then we could get that over with an just have USD trading. But what most likely will happen is they will just be forced to comply with certain rules.
- rcohngru 5y ago
  The thought process here is that if you're stuck holding tether if/when it collapses, you can just sell for a crypto that hasn't collapsed. But who in their right minds would want to trade something of value for something that has just been shown to be worth $0?
  - trident5000 5y ago
    For exchanges that use USDT, exchanging for crypto is your only immediate option.
    - rcohngru 5y ago
      Right, but who would want to be on the other side of that trade? You're telling me that if I have something worth $0 and you have something of value, you'd want to make that trade with me?
      - trident5000 5y ago
        Exactly, thats what causes a squeeze/absurd drive up in price. Its why I dont hold tether.
        dekerta 5y ago
        Are you thinking of something like a short squeeze? That only happens because shorts would be forced to buy shares to cover their positions. I don't see how that would apply here. Who's forced to buy people's tether if the price goes to zero? In reality, everyone who holds tether would just be screwed. Their imaginary token would be worth nothing and they wouldn't be able to exchange them for anything. The value would just disappear in to the air
bhouston 5y ago
Another article on the topic: https://www.coindesk.com/policy/2021/09/24/sec-hints-at-tether-probe-in-records-request-denial/ https://www.coindesk.com/policy/2021/09/24/sec-hints-at-teth...

130 points by bhouston 5y ago

ryanlol 5y ago

Is this not a super standard FOIA response?

ceejayoz 5y ago
Only if there's an active law enforcement investigation the FOIA request touches.
- ryanlol 5y ago
  I don’t think that your comment acknowledges the reality that FOIA responses are decided by RNG unless you sue.
- dragonwriter 5y ago
  > Only if there's an active law enforcement investigation the FOIA request touches. Right, but that doesn't mean that the named entity is either the target or even a subject of the investigation. Because the FOIA request is for all documents relating to the entity, if there is even one document related to any investigation of anything that mentions the named entity in any capacity, it is going to be withheld for that reason.
ajkdhcb2 5y ago
Yes. The tweet crops out a following paragraph that says it should not be taken as evidence that an investigation is underway. So this is fake news. You can see the full letter here: https://twitter.com/CryptoWhale/status/1429819156052983816 https://twitter.com/CryptoWhale/status/1429819156052983816
- ceejayoz 5y ago
  "We can't give you these records because it'd interfere with law enforcement activities, which may not exist" seems like it'd be a pretty big loophole in FOIA if you could use it that way.
  - kube-system 5y ago
    That's not what it's saying. They didn't say law enforcement activities didn't exist, they said a violation of the law may not exist. In the case of literally any law enforcement activity, information is collected before law enforcement can come to any conclusion whether or not a law was broken.
    - ceejayoz 5y ago
      > they said a violation of the law may not exist The claim made is "under undisclosed SEC investigation", not "has already been convicted". A FOIA response of this nature indicates there's some level of investigation occurring, or they couldn't use that reason and would have to find another reason to deny it.
      - ajkdhcb2 5y ago
        >A FOIA response of this nature indicates there's some level of investigation occurring How is that possible when it says "the Commission does not disclose the existence or non-existence of an investigation"?
        ceejayoz 5y ago
        If there were no investigation, they couldn't legally use that FOIA rejection reason. They'd have to give a different reason.
        deleted 5y ago
        [deleted]
        ajkdhcb2 5y ago
        The question itself presupposes that there is an investigation, so they are essentially saying that if there were such materials it would be covered by that reason. FOIA would be abused like crazy to unearth classified information if this method of questioning worked
- bhouston 5y ago
  Others are now reporting this such as coin desk: https://www.coindesk.com/policy/2021/09/24/sec-hints-at-tether-probe-in-records-request-denial/ https://www.coindesk.com/policy/2021/09/24/sec-hints-at-teth...
  - ajkdhcb2 5y ago
    The same form of letter was sent a month ago, so that just reflects badly on them

gruez 5y ago

"tether is a fraud/ponzi" claims aside, does SEC even have jurisdiction here? The SEC isn't out to protect all investors, only to protect them from securities fraud. I'm skeptical whether a stablecoin could even count as a security. From bloomberg: >The rule in the U.S. is that an “investment contract,” meaning “the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others,” is a security https://www.bloomberg.com/opinion/articles/2021-09-08/lending-bitcoins-is-tricky https://www.bloomberg.com/opinion/articles/2021-09-08/lendin... Under that definition, are stablecoins even securities? You buy it at $1 and the best you can hope for it is that the value remains at $1. There's no expectation of profits.

mywittyname 5y ago
Well, the other half of Securities & Exchange is exchange. Tether is owned and controlled by Bitfinex, who does claim to be a cryptocurrency exchange.
josefx 5y ago
Your link only says that a "investment contract" is a security, not that all securities are "investment contracts".
- gruez 5y ago
  >not that all securities are "investment contracts". If you search around people do seem to think that "investment contracts" are "security" (eg. https://www.investopedia.com/terms/h/howey-test.asp https://www.investopedia.com/terms/h/howey-test.asp) although I can't find someone saying "investment contracts iff security". If that's not the case, can you list what else counts as securities, and why do you think stablecoins meets those definitions?
  - josefx 5y ago
    I am far from an expert however following https://www.investopedia.com/terms/s/seact1934.asp https://www.investopedia.com/terms/s/seact1934.asp the SEC can over see over the counter securieties (https://www.investopedia.com/terms/o/otc.asp https://www.investopedia.com/terms/o/otc.asp) that seems to cover financial contracts that derive their value from an underlying asset. As far as I understand Tether is backing its value with dollars and has already been in trouble over lending the money it officially used to back its cryptocurrency away without disclosing that to its users.

tomhunters 5y ago

This has been quite the issue for a long time, and I can't think why the authorities are delaying their actions against Tether.

lamontcg 5y ago
Regulators don't take actions that risk popping entire markets and creating many billions of dollars of losses on the balance sheets of publicly traded companies like TSLA. Madoff's Ponzi was pretty obviously a Ponzi and was reported for years as a Ponzi to the SEC and nothing happened until it was finally popped by the market retreating in 2008 and redemptions causing the Ponzi to go completely cash insolvent. Tether/crypto is going to pop when it pops, and regulators will then step in aggressively afterwards.
- mckirk 5y ago
  Given the Evergrande development, it might pop rather sooner than later. Tether's 'reserves' are largely backed with commercial paper after all, and it stands to reason that much of that is intertwined with the China debt-bubble in one way or another.
- FDSGSG 5y ago
  > Tether/crypto is going to pop when it pops, and regulators will then step in aggressively afterwards. Or it might not. Unlike what Madoff was doing, it's perfectly possible for Tether to keep their game up in perpetuity. Madoff kept his far more ambitious and risky operation going for decades, I think Tether can certainly last for longer if not eviscerated by lawmakers.

Havoc 5y ago

Honestly I'd be more surprised if they weren't. Wouldn't mind if the SEC takes tether down a notch...they're a risk to the entire crypto ecosystem

trident5000 5y ago

If tether went belly up what would happen is everyone would sell their tether for BTC and other cryptos (whatever they can get into) and you would have the largest squeeze of all time. We actually witnessed this during the tether freak out saga a couple years ago where BTC on the bitfinex exchange was priced like 10 or 15% higher than the rest of the market. I wouldnt mind just getting it over with. Then we could get that over with an just have USD trading. But what most likely will happen is they will just be forced to comply with certain rules.

rcohngru 5y ago
The thought process here is that if you're stuck holding tether if/when it collapses, you can just sell for a crypto that hasn't collapsed. But who in their right minds would want to trade something of value for something that has just been shown to be worth $0?
- trident5000 5y ago
  For exchanges that use USDT, exchanging for crypto is your only immediate option.
  - rcohngru 5y ago
    Right, but who would want to be on the other side of that trade? You're telling me that if I have something worth $0 and you have something of value, you'd want to make that trade with me?
    - trident5000 5y ago
      Exactly, thats what causes a squeeze/absurd drive up in price. Its why I dont hold tether.
      - dekerta 5y ago
        Are you thinking of something like a short squeeze? That only happens because shorts would be forced to buy shares to cover their positions. I don't see how that would apply here. Who's forced to buy people's tether if the price goes to zero? In reality, everyone who holds tether would just be screwed. Their imaginary token would be worth nothing and they wouldn't be able to exchange them for anything. The value would just disappear in to the air

bhouston 5y ago

Another article on the topic: https://www.coindesk.com/policy/2021/09/24/sec-hints-at-tether-probe-in-records-request-denial/ https://www.coindesk.com/policy/2021/09/24/sec-hints-at-teth...