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Tether Fined $41M for Lying About Reserves
- system2 5y agoI am blown away. 61.5 million dollars for $68,536,825,819 (68 billion dollars.) Maybe not the same in 2017 but damn, how does this even work without anyone panicking?
- loeg 5y agoIt was something like ~400 million tether at the time, not 68 billion. The recent run-up post-dates the period of this malfeasance (and is probably also fraudulent in some way).
- inopinatus 5y agoIt doesn’t, but that’s bubbles for you.
- matheusmoreira 5y agoBanks do the same thing. How do banks work without anybody panicking? Liquidity injections. The government will literally print money and give it to banks so they can fulfill withdrawals during bank runs. If the governments didn't bail them out, they'd be insolvent. They should just do the same for Tether.
- jakeinspace 5y agoBanks do not have enough cash on hand to meet their liabilities (deposits), but they are for the most part net-positive over all assets and liabilities. They aren't just burning depositor's money, they're putting it into mortgages and riskier loans. So while they cannot afford a quick payout above 10% of total deposits, the assets are there in the form of loans and securities.
- matheusmoreira 5y agoThe effect is the same: people want to cash out and they can't. The solution is the same: bail out the banks in order to avoid even worse economic impact. I don't see why banks deserve this royal treatment while Tether doesn't. Whether Tether was or wasn't responsible with the money is another matter entirely. I fully support any efforts to hold them accountable for their actions there.
- throwawaygh 5y agoBanks don't get that special treatment for free. They pay for insurance and comply with regulations. Some of those regulations exist to reduce the risks associated with FDIC insurance, and a lot of those regulations exist to force banks to serve important social functions. You can fault banking regulation for not being stringent enough, and I won't argue with you. But I'll never understand how "fuck banks getting special treatment" should ever translate into "therefore wildcat banks are a GREAT idea, right?" Or, to put it another way: I don't want to bail out the big banks; why in fuck's sake would I want to bail out Tether speculators?
- matheusmoreira 5y ago> therefore wildcat banks are a GREAT idea, right? They're not. Cryptocurrency is not even supposed to have banks in the first place! It was supposed to put an end to all that stuff. People should not be exchanging crypto for fiat, they should be transacting directly in crypto. Instead the exchanges became banks and people invented USDT because dealing with USD is hell on earth. There was supposed to be no need to ever deal with USD or any other fiat currency. Everything crypto was invented to solve became integral to the crypto market ... > I don't want to bail out the big banks; why in fuck's sake would I want to bail out Tether speculators? I don't want that either. I want banks to face the consequences of their risk taking. It's never gonna happen though. They'll keep bailing out the banks. So there's no reason they shouldn't do the same for crypto.
- mkr-hn 5y agoBanks (in the US) pay fees to the FDIC to insure deposits well past what most people have and are subject to reserve requirements.
- nickff 5y agoThe CFTC claims to be helping end-customers by doing this kind of thing, but it is really taking money that could have been distributed off the table. Fining (and perhaps requiring the dismissal of) Tether's corporate officers would likely instill more discipline, but fining the company just hurts the customer.
- klyrs 5y agoNo. This teaches scammers and customers alike that this is a risky business. Fining the corporate officers is almost certainly off the table, because Tether appears to be some form of limited liability corporation (but I don't know anything about the law in HK). Play stupid games, win stupid prizes. I'd hope the founders end up in jail for what appears to be blatant fraud... but chances are, they'll just move on to the next thing after Tether crumples.
- nickff 5y agoThe CFTC mission statement is: >"The mission of the Commodity Futures Trading Commission is to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation." I don't see how punishing customers accomplishes that goal.
- klyrs 5y agoLet's read that carefully, now. The CFTC provides "sound regulation," not insurance. Insurance protects customers. Regulation by the CFTC is meant to protect "the U.S. derivatives markets." They aren't there to protect customers. If the customers wanted a safe investment, they should have used an insured vehicle for that.
- tdeck 5y agoIt would be better to confiscate Tether's entire reserve, force them to allow tether holders to cash out (for fractional amounts), and punish the execs directly.
- 5y ago
- thaumasiotes 5y agoProblem: Tether has less money than they're supposed to have in order to back their obligations. Solution: take some of their money away.
- missedthecue 5y agoHear that? That's the sound of 41 million new tether coins entering the market
- adflux 5y agoPerfect haha. Tether has figured out how to print money and nobody seems to care.
- rossdavidh 5y agoWell I think it's maybe more like how to do a GoFundMe on a massive scale.
- zardo 5y agoThey just printed $440 Million in technically not counterfeit USD
- Hamuko 5y agoWhere can I apply to get this silk glove treatment by the authorities when I start making "untrue or misleading" bank notes?
- BitwiseFool 5y ago"Stay out of my territory" - Jerome Powell, PBUH
- SilasX 5y agolol yeah: "So can we pay the fine in--" "No." (Reminds me of Zimbabwe having to come up with money to pay Switzerland for printing their hyperinflating currency.)
- pkulak 5y agoJokes aside, Tether can't both determine how many coins are in the market and the price of those coins.
- 5y ago
- tdeck 5y agoI don't understand why this is something they can settle rather than something that gets them completely shut down.
- BitwiseFool 5y agoI'm not saying they shouldn't be shut down, but I genuinely wonder how that process would work. People don't have an account with Tether itself, so how would they be able to compel people to "return?" the Tethers and get their cash back?
- skybrian 5y agoIn theory, by announcing a changeover period and a deadline for turning them in? If they don’t, it’s on them. A similar thing was done when upgrading national currencies to the Euro: https://europa.eu/european-union/about-eu/euro/exchanging-national-currency_en https://europa.eu/european-union/about-eu/euro/exchanging-na...
- WalterSear 5y ago* They don't need to? If Tether, the company, disappeared, the market can decide what to do with the, now entirely unbacked, Tether cryptocurrency. * Tether, the company, can freeze specific Tethers they have issued, making them unusable as currency. Whoever shuts them down might be able to force them to do this en masse.
- BitwiseFool 5y agoThat's the thing, though, Tether is supposed to be holding all these assets and individuals are able to redeem Tethers proportionally. Leaving aside the strict notion of 1 Tether = 1 Dollar convertibility, just closing up shop would mean all those actual real world assets now belong to... who exactly?
- WalterSear 5y agoI'm confused as to what 'real world assets' you are referring to. If Tether goes away, any value goes with it, like a gift card to Blockbuster's. Fwiw, it's likely just the pretence of redemption that would go away - it may never have been really there. Tether is explicit that they only redeem Tethers at their discretion. While they also specify that they will only redeem them for high value, non-US parties, I suspect this is misdirection. There is no evidence of any appreciable redemption going on, though they have announced the burning of $1.5 billion Tethers - all in the last six months. According to Tether, this is because they just 'keep them for later'. https://cointelegraph.com/news/tether-explains-why-it-hasnt-burned-any-usdt https://cointelegraph.com/news/tether-explains-why-it-hasnt-... https://cointelegraph.com/news/bitfinex-is-constantly-printing-more-tether-none-of-it-has-ever-been-burned https://cointelegraph.com/news/bitfinex-is-constantly-printi...
- satellites 5y agoBut crypto coins are so much more trustworthy and secure than traditional financial institutions... /s
- robcohen 5y agoI’m pretty sure no one thinks digital IOUs are worth more than the word that’s behind them. It’s not reasonable to conflate decentralized cryptocurrency with digital coupon IOUs.
- jfk13 5y agoSee also https://news.ycombinator.com/item?id=28878874 https://news.ycombinator.com/item?id=28878874, which (currently, at least) has more extensive discussion.
- rkagerer 5y agohttps://archive.is/eqUP1 https://archive.is/eqUP1
- danuker 5y ago> there was never more than $61.5 million backing Tether, even as more 442 million coins were circulating at one point. Ah, pulling the classic "fractional reserve" I see.
- pfisherman 5y ago<insert crypto rant> fiat <more crypto rant > debasing the currency. What I find ironic is that the crypto ecosystem still ended up with something like central banks, only in this case their mandate is make money for its owners, and they have no accountability or obligation to serve the general public.
- DennisP 5y agoPlay centralized games, win centralized prizes.
- rgrieselhuber 5y agoExactly.
- OneLeggedCat 5y ago> crypto ecosystem still ended up It's decades from its final form.
- tmcw 5y agoGive it a few decades, it'll still be early, somehow.
- rzwitserloot 5y agoPerhaps. But we're, what? 10 years in and so far crypto has enabled 'I encrypted your data!' scams, caused political instability, been a vehicle for highly volatile investment (but the world wasn't hurting for such opportunities...), and served as a fine buzzword for dev teams around the world to get a sack of cash to update some systems. That's a pretty poor result for 10 years of this much investment and focus. The internet was waaaaaaaaaaaaay more useful 10 years in. I don't think crypto gets to claim the benefits of the oft touted protection against centralized bullies or scams. Quite the opposite: You need to go pretty deep into political dictatorships before crypto on net balance seems favourable. So far crypto coins are far more likely to be fleeced, and the vast majority of crypto holding folks are working with mostly centralized entities (such as Tether), which rate, as far as trustability and good shepherdship goes, not in a good place. Better than Pol Pot and Mugabe. Maybe. Oof. So if it's decades from its final form, when is it going to deliver on its first actually useful to humanity milestone? I'm still waiting.
- kangnkodos 5y agoWhat is the average daily net inflow of US dollars into Tether? How many days of net inflow is $41M?
- FireBeyond 5y agoAt times they've claimed that it is in the billion dollar a week range. But their cash backings say that that was most likely always bullshit, even as they move to "other instruments" (cough Chinese junk paper cough).
- buhrmi 5y agoProbably paid in USDT.
- sneak 5y agoThey don't need to; they can print USDT, swap it for Ether, and take Ether to any normal, above-board exchange and get Real Dollars.
- roywiggins 5y agoDon't think the USG accepts USDT as legal tender...
- mensetmanusman 5y agoThey will have to spin up 41,000,000 more Tethers to pay for this!
- singularity2001 5y agoAnd pay their fine with it
- dylan604 5y agoBut when they submit the payment, they print out the hashes for the coins in 6pt font double spaced in a script style font.
- joelbondurant 5y agoFiat backing, lol , clown world.
- gws 5y agoDon’t really get you guys saying Tether should be shut down… the big banks get routinely fined with much bigger fines for much bigger crimes, are we gonna shut them all down then? At least Tether did not steal from nor defraud anyone. Just as a random example: https://www.justice.gov/opa/pr/jpmorgan-chase-co-agrees-pay-920-million-connection-schemes-defraud-precious-metals-and-us https://www.justice.gov/opa/pr/jpmorgan-chase-co-agrees-pay-...
- gws 5y agoWill reply here rather than in all the sub-threads: I’m not saying lying is good, I’m pointing my finger at the paradox that on one side everybody is scandalized that Tether is not shut down, on the other everybody is happy to keep their money with big institutions that are proven to be even worse.
- ceejayoz 5y agoTether did defraud people. They lied on their website, claiming a) audits (which they never completed a single one of) and b) 1:1 backing of each Tether with a dollar in the bank (which they didn't have).
- gws 5y agoYou are right, they lied, and people could have been harmed if there were a “bank run” on Tether. But in practice there was not and nobody suffered any damage, zero, nada, nicht. While big banks got fined for actually taking money illegally out of people’s pockets and nobody said let’s shut them down
- chrononaut 5y agoJust because something is built upon fraud doesn't mean it will face imminent collapse. Usually it's events that put notable financial pressure on institutions that reveal their underlying flaws. The extent of the fraud notionally influences how easily it will end up collapsing. Hence why Madoff was able to keep up his scandal for quite a long time.
- 5y ago
- bagels 5y agoIs it possible to short tether effectively to profit when the whole scam collapses?
- vkou 5y agoSure, if you'd like to collect your winnings in bottle caps and IOUs. And if the exchange you are shorting it on doesn't wipe your position out through a margin call, in one of those strange moments where due to a mysterious glitch, tether breaks the USD peg for a few seconds. If you're looking for easier money, I'd recommend card-counting at a speak-easy ran by the mob, before I'd recommend getting into this business.
- bagels 5y agoYes, this is why I said effectively. That does not sound very effective.
- iammisc 5y agoThe executives should be in jail if they knew of the fraud and did nothing. Why are they getting off on a fine?
- bob229 5y agoLol all crypto is a scam and useful only to cranks and criminals