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$1M bounty for details on Tether’s backing
- democracy 5y agoAnyone can issue a "cryptocurrency", yeah, but why would anyone accept that crap? Why would exchanges start trading it if it would take them 10 minutes to launch a "stablecoin" of their own? Was they way in financed by millions and millions of dollars in listing/marketing fees? I think that's the only reason tether even exists.
- lvl100 5y agoSadly the scheme behind crypto extends well beyond tether. This is what happens when you have money sloshing around unregulated market with very loose margin and leverage limits, free money afforded by central banks, and an absolute mania.
- cmckn 5y agoFor sure. The circular dependencies and the turtles-all-the-way-down nature of the crypto ecosystem is kind of terrifying to behold. Like watching a car crash. I have a feeling that this all will unravel exactly as everyone has predicted; but at a time no one expects.
- graeme 5y agoThis is very interesting. Hindenburg is the real deal. One challenge may be that, like the Mafia, Tether keeps its inner circle and employs family members. They have ~15 employees for a 70 billion dollar operation. The CTO’s wife is a manager, and the CEO’s daughter works for an unnamed crypto family office, which may be related. Their counterparties in Chinese commercial paper may not know they are counterparties due to proxies. Still, the statements are out there. Zeke Faux from Bloomberg got a copy of their records somehow. They’ve had to give them to the New York Attorney General, and their accountants in the Cayman Islands, among others. And other counterparties may have bits and pieces. Someone may be tempted by this.
- yawaworht1978 5y agoHow did you get this info? I am inclined to apply, but what would be the the best company? Bitfinex or tether?
- deleted 5y ago[deleted]
- Taikonerd 5y agoI just realized that the Bloomberg reporter who wrote the recent story is named "Zeke Faux." (Faux meaning "fake" in French, in a story about fraud.) Is his name a pseudonym? If not, it's another surreal point in a surreal story.
- OJFord 5y agoIf you're unacquainted, look up (other?) examples of 'nominal determinism' - you're in for a treat!
- kingofpandora 5y ago*nominative determinism
- OJFord 5y agoHm, that does seem to be more standard. Both nominal and onomastic redirect to the page titled nominative determinism on Wikipedia though. Nominal makes a lot more sense to me than nominative.
- lgierth 5y agoZeke = ZK = zero-knowledge?
- speedybird 5y agoI guess it's actually his real name, and Zeke short for Ezekiel isn't uncommon. But Zeke can also mean 'cloak'.
- fuddle 5y agoWow, bold move :)
- filvdg 5y agoDisclosure: Hindenburg Research does not hold positions, either long or short, in Tether, bitcoin or any cryptocurrency at the time of this press release.
- perl4ever 5y agoDid they specify the time down to the nanosecond?
- tcgv 5y agoI wonder why this Reaserch firm is offering such a substantial bounty for information on Tether. What's in it for them? Where will this money come from? From their site they provide an answer (and even a "track record") [1]: > We look for (...) man-made disasters floating around in the market and aim to shed light on them before they lure in more unsuspecting victims. Hence it seems they're doing it for the bennefit of the public. So much for the expression "there's no such thing as a free lunch". [1] https://hindenburgresearch.com/about-us/ https://hindenburgresearch.com/about-us/
- skybrian 5y agoThere are firms that look for good opportunities to short stocks. Find some credible bad news, short the stock, then publicize the bad news. If the news is actually true, this might even be considered a public service (as well as obviously a way to make money). They probably wouldn’t do until they actually got a tip. Also, they might short crypto-related stocks if that’s easier.
- llimos 5y agoThis is how markets weed out the bad ones on their own, without relying on government.
- SantalBlush 5y agoNot really. Markets weed out unprofitable firms. Government doesn't really care about that. On the other side, government regulates firms that engage in some harmful (open to interpretation) practice, and markets don't care about that unless it makes them unprofitable.
- lazyeye 5y agoWorth reading for some background.. The $94b crypto mystery https://www.afr.com/wealth/investing/the-94b-crypto-mystery-20211012-p58zfu https://www.afr.com/wealth/investing/the-94b-crypto-mystery-... 12ft.io gets around the paywall. My favourite quote.. "seemed to be practically quilted out of red flags.."
- Abrownn 5y agoFantastic read, thank you.
- humanbeinc 5y agoBut... does it ultimately matter? All the other sh*tcoins are backed against nothing and have huge market caps as well.
- deleted 5y ago[deleted]
- tppiotrowski 5y agoIt’s different because Tether claims to hold 1 USD for each Tether. A claim that should be verifiable. The value of sh*tcoins is just a function of their future resale value.
- aeternum 5y agoThey claim to hold assets with values equivalent to 1 USD / Tether. Different than holding the USD directly. They provide a more detailed breakdown here: https://tether.to/wp-content/uploads/2021/08/tether_assuranceconsolidated_reserves_report_2021-06-30.pdf https://tether.to/wp-content/uploads/2021/08/tether_assuranc... About half in commercial paper and CODs. A quarter in t-bills. 2B in unspecified "digital tokens".
- jfrunyon 5y agoYes, now that they've been caught claiming to hold 1 USD per Tether without doing so, they claim it's only stuff worth (in their estimation!) 1 USD per Tether. And still refuse to provide any evidence that they are doing so. Please stop defending them.
- aeternum 5y agoI generally agree, not sure why anyone would choose to use Tether when their are alternatives like USDC. However I still think it is important to properly represent Tether's current claims.
- 5y ago
- throw123123123 5y agoIt's a very small bounty...missing at least 2 zeros considering the scope of Tether's supply.
- toomuchtodo 5y agoNo need to overspend. A million dollars will still motivate people with the necessary skills. You can always increase the bounty, decreasing it is frowned upon.
- ghego1 5y agoIt's a million for each submission
- exdsq 5y ago*up to a million
- deleted 5y ago[deleted]
- rexstjohn 5y agoFederal Reserve was crafted in a secret meeting on Jekyll Island (https://en.m.wikipedia.org/wiki/Federal_Reserve https://en.m.wikipedia.org/wiki/Federal_Reserve) between industry and government. Still exists and functions today. Lot of people don’t like it, but it’s there regardless. Even if the origin, operation of Tether is highly suspicious: if it functions, is widely adopted and does what is expected … may last longer than people think. Best response is more open stable coin equivalents.
- xur17 5y ago> Even if the origin, operation of Tether is highly suspicious: if it functions, is widely adopted and does what is expected … may last longer than people think. I think you're right about this point, and I've been trying to imagine what might cause Tether to collapse - you really need a run on the bank situation triggered by something causing them to become insolvent.
- rossdavidh 5y agoLike, say, a bunch of Chinese firms who need cash quickly to pay dollar-denominated bonds, all selling their Tether at the same time?
- Traster 5y agoThe real question is basically how much is it leveraged. We learned this from so many other frauds/crashes. It's not so much that "as long as there isn't a run on the bank it's fine" it's that an outflow of a tiny percentage could effectively be a run on the bank, since they may only be backed by a tiny fraction of what they claim to be backed by. It's one thing if they have 90% backing. What happens if it turns out it's only backed 0.05%? A run on the bank won't kill them, an averagely bad few days could see it all collapse. This is exactly why banks have regulations.
- perl4ever 5y agoA run on a bank can make it insolvent? I thought that insolvency was when they don't have the assets to cover their liabilities. My understanding of a bank run is it happens when a bank is solvent, but doesn't have enough in reserves - liquid, short term assets. But if they simply don't have at least 100% of their liabilities in assets, then they are bust because they can never pay people back barring a miracle.
- arthurcolle 5y agothis is extremely bearish on crypto BRB, buying puts on everything
- _ah 5y agoAs always, Matt Levine is shockingly informative: https://www.bloomberg.com/opinion/articles/2021-10-07/matt-levine-s-money-stuff-looking-for-tether-s-money https://www.bloomberg.com/opinion/articles/2021-10-07/matt-l... Key quote: 1. You get a bunch of Bitcoins. 2. You slice them into junior and senior claims. 3. You sell the junior claims to people who want levered Bitcoin: people who want margin loans against their Bitcoins, etc., who want to gamble on Bitcoin without putting up too much cash. 4. You sell the senior claims as stablecoins: “Even if Bitcoin drops by 50%,” you say, “these coins will still be worth $1, because they are backed by $2 worth of Bitcoin.”
- JumpCrisscross 5y agoTranching is a thing. It's fine. It works, if you don't pretend AAA-rated securities, which have--and historically had--a very low risk of losses, are both safe and liquid. If tranching were all Tether were doing, it would just be fraud. You can't sell a senior tranche on a pool of assets as a fully-backed security and call it a day. But whatever, Tether did that and more, nobody cared, we're on the next tier of the Narcissist's Prayer [1]. The new problem is we have circumstantial evidence that at least some of Tether's assets are Chinese developers' commercial paper. That's a risky asset. Even before Evergrande and Sinic defaulted, it was a speculative asset. (Now it's a distressed one.) If that's what we know they're in, how bad is the rest of their balance sheet? Tether claims to be over-collateralising their crypto-backed loans by 30%. An LTV of 77% will start losing money in a 25% crash. Bitcoin...does that a lot? For an asset they understand, they've set their risk limits woefully low. If that's what we know they're doing, how thin is the rest of their capital? We're going to see a run on Tether. Not might. Statistically, the assets Tether holds will sometimes go down. Sometimes a lot. Most of the time, that will be fine. Some times, however, Tether will get a redemption at the same time. (Assets going down and investors redeeming things are correlated.) Most of the time, that will work out. Some times, however, Tether will need time to avoid their own selling driving down the asset's price. Most of the time, that will be fine. Some of the time, however, the person making the redemption request won't have that time. They'll blow up, and they'll blame Tether. This will prompt additional redemptions, which will force the aforementioned fire sale until, in all likelihood, Tether kills its domain and steals the money. (The last part is a novelty really only afforded by their setup.) [1] https://news.ycombinator.com/item?id=28880280 https://news.ycombinator.com/item?id=28880280 [2] https://www.bloomberg.com/news/articles/2021-10-07/can-you-trust-stablecoin-tether-5-takeaways-from-bw-s-cover-story https://www.bloomberg.com/news/articles/2021-10-07/can-you-t...
- paulpan 5y agoLast week CFTC fined both Tether and Bitfinex $42.5M for allegedly not holding enough reserves and colluding together. https://www.cftc.gov/PressRoom/PressReleases/8450-21 https://www.cftc.gov/PressRoom/PressReleases/8450-21 Seems like a fairly small fine in grand scheme of things no? If the critics are right and $70B+ supply is just made up paper money, then it'll be huge losses for all Tether holders. I'd conjecture it would tank the entire crypto market - and possibly the equity market too.
- omgwtfbyobbq 5y agoWhy do you think it would tank the equity market?
- PKop 5y agoIt's all tied together. If one asset class is crashing people sell others to grab cash. Another way, according to Janet Yellen, that Tether and other stables can destabalize markets, is that they have large portions of reserves in corporate debt, a crisis in these coins would cause a fire sale of billions of corporate debt they hold, itself probably cascading into all risk markets.
- bduerst 5y agoCrypto markets maybe, but not main indexes. Experienced financial players smell tether for the scam it is and don't touch it, or I'd they do, they're in on the grift. Laymen who bought the hype stand to lose a lot though.
- Breza 5y agoMy understanding is that Tether has bought a bunch of bonds and other financial instruments. If they need to raise cash, they would sell those instruments for whatever price they could get. That could lower the prices, which could have negative effects.
- 5y ago
- kfprt 5y agoTether is just shady which is not a word people generally want associated with their money.
- jstx1 5y agoThis made me check the prices. Apparently Bitcoin hit a new all-time high today at over $64k.
- fnordfnordfnord 5y agoATH is 64.8k iirc, so nearing ATH but not there yet. Watch tomorrow, First day of open trading for BITO ETF, might see a new ATH.
- keefe8 5y agoWasn't today (Oct 19) the first day of open trading?
- fnordfnordfnord 5y agoI don't think it was available until after hours, but don't kill me if I'm mistaken, I didn't try to buy any, nor have I paid that close of attention. My understanding is that it should be available on most brokers tomorrow AM.
- thebean11 5y agoIt'll be a sell the news small drop if I had to guess
- paulpauper 5y agoThere has been nothing but Tether doom and gloom since 2017 and yet here it is still at 1.0000 If anyone thinks this will drop, now is the opportunity to short, I suppose.
- RC_ITR 5y agoCirca 2020: There has been nothing but Wirecard doom and gloom since 2019 and yet here it is still at 115. If anyone thinks this will drop, now is the opportunity to short, I suppose.
- hmate9 5y agoExactly. These things dont go down in value slowly as they start rotting. They suddenly collapse in a matter of hours.
- TedDoesntTalk 5y agoJust because you’re paranoid, doesn’t mean you’re wrong.
- hmate9 5y agoShorting Tether is a great play. Either everyone loses faith and nobody trusts them anymore or.... it stays at $1. You are not going to lose. You just have to pay funding fees for your short which on FTX is around 4% a year. Do you think there is a great chance that Tether is a massive scam and will find its doom within the next 25 years? My answer to that is yes.
- JumpCrisscross 5y ago> Shorting Tether is a great play Why do you think there will be a functioning market to pay you out if and when it collapses?
- superfunny 5y agoOr that the person from whom you borrowed Tether to put on your short position won't demand it back while it is collapsing.
- cyberpunk 5y agoAm I missing something here or is this basically a bounty for a black hat hack campaign against tether? I mean, yeah, fuck those guys, but how is any kind of enforcement to be done on how this information was obtained? Sysadmin at Microsoft or google with access to their emails may be mighty tempted by this eh?
- gitfan86 5y agoIt is highly dependent on what prosecutors have jurisdiction and the politics involved. The Duke Lacrosse prosecution is a good example of a prosecutor going over the top on charges for political reasons, and the Jeffrey Epstein plea bargain in 2007 is an example of the opposite.
- paulsutter 5y agoThey should denominate the bounty in Bitcoin, or even Zcash/Monero
- javajosh 5y agoSounds like they're offering to bribe an insider to disclose specifics about the "commercial paper"[1], which is presumably how a company like Tether would make most of its money. That is, taking advantage of the time-value of money over short periods of time (< 30 days) with large quantities of money (tranches of $100k) at a time, reserves which any marketplace would naturally have on hand. Note that Tether looks shady at first blush, with a link to "Proof of Transparency"[2] that is content-free. I also find it sus that their job listings only list "Business Development Specialist" [3]. Is it illegal for a private person to offer to pay someone to illegally snitch on an illegal operation? Do two illegal things cancel out? 1 - https://www.investopedia.com/terms/c/commercialpaper.asp https://www.investopedia.com/terms/c/commercialpaper.asp 2 - https://tether.to/latest-assurance-opinion-confirms-tether-fully-backed/ https://tether.to/latest-assurance-opinion-confirms-tether-f... 3 - https://tether.recruitee.com/ https://tether.recruitee.com/
- Gortal278 5y agoIt doesn't have to be an insider
- arthurcolle 5y agoit's a very small group of people with pretty well-known dubious banking connections. I won't rehash it but the CEO of their main bank is some rando with pretty poor spelling. I doubt anyone beyond the inner circle (I guess maybe the exec assistant of the aforementioned rando might know something interesting) would know anything interesting.
- JumpCrisscross 5y ago> Is it illegal for a private person to offer to pay someone to illegally snitch on an illegal operation? It's not illegal to pay someone for information. If you induce them to violate an NDA, yes, it could be. But given the question "under what jurisdiction does Tether really operate" is a debatable question, I'd say it's probably risky but fine. (If you trade on that information, it could be a different story.)
- TigeriusKirk 5y agoWell, there's a number of very public, very loud Tether skeptics out there. I guess now we'll find out if they have anything concrete. I think the skeptics are probably right, but we're at the point where real information needs to be uncovered.
- honestduane 5y agoTether is a cryptocurrency with tokens issued by Tether Limited, which in turn is controlled by the owners of Bitfinex
- pornel 5y agoIsn't that absurd? Cryptocurrencies were supposed to be fully decentralized, and not require trusting anybody. This one depends on financial hacks done by a single private company. It seems like beenz.com, only with a different tech stack.
- warkdarrior 5y agoOh, we're all equal and decentralized here, but some are more equal than others.
- tppiotrowski 5y agoHow can one profit from a crypto bubble? I’ve heard of an ETF for shorting Bitcoin but never saw any specifics. Can anyone provide a reputable brokerage for shorting crypto currencies?
- pxue 5y agoshort sell MicroStrategy (mstr), they are pegged to crypto because they decided to hold large amounts of crypto as a corporation New crypto ETF is also right around the corner. There will definitely be futures on that.
- thebean11 5y agoThe ETF is based on the futures, which have existed for years.
- jfrunyon 5y ago> MicroStrategy invested ... in Bitcoin as a treasury reserve asset ... [and] has spent over $2.2 billion purchasing Bitcoin [0] WTH? Why does a company with a $7b market cap need over $2b of "treasury reserve assets"? [0] https://en.wikipedia.org/wiki/MicroStrategy https://en.wikipedia.org/wiki/MicroStrategy
- fleddr 5y agoYou don't need an ETF for that, you can directly short any crypto at many exchanges. To profit from the short you should obviously time the market well.
- aazaa 5y agoIt may be counterintuitive, but the best thing that could happen to Bitcoin would be for Tether to collapse in a cloud of dust. Tether is continually cited as a large risk factor to Bitcoin by people who have gotten past the "it's not real money" objection. But I think it's worth considering what happens if the collapse never comes. If government investigation, findings of wrongdoing, admission of lies, and punishment aren't enough to shake Tether users out of their trees, then what would, exactly? Ethereum allowed a claw-back of funds lost fair and square to a defective contract. Where is Ethereum now? Oh yeah, near an all-time high and a market cap approaching half a trillion dollars. What non-users don't get is the fanatical level of devotion by users. It waxes and wanes with the Bitcoin halving cycle, but always comes back stronger than before. If Tether did somehow implode and users left in droves, something else would come along to take its place and within a year or two and the entire Bitcoin ecosystem would come roaring back stronger than ever.
- ur-whale 5y ago> It may be counterintuitive, but the best thing that could happen to Bitcoin would be for Tether to collapse in a cloud of dust. I share your opinion, and especially true if you have a ~5 year horizon on BTCUSD.
- ryanSrich 5y ago> If Tether did somehow implode and users left in droves, something else would come along to take its place and within a year or two and the entire Bitcoin ecosystem would come roaring back stronger than ever Pick any of the already existing stable coins. We don't even need new technology to replace Tether. We just need international exchanges to support existing stables.
- zionic 5y agoExactly. Tether has some amazing alternatives. DAI for example.
- graeme 5y agoDAI is critically dependent on USDC. USDC recently received a Wells notice from SEC and had to amend their reserves. Still weird behaviour from them overall: they don’t disclose what their short term commercial paper is, its rating or how much of their cash equivalents it us. Just today in the financial times Tether claimed USDC also issues USDCs backed by crypto. And they have funny printing patterns: whenever Tether stops printing, USDC starts.
- schleck8 5y agoCrypto twitter's mature response, as expected https://twitter.com/HindenburgRes/status/1450562266919841798 https://twitter.com/HindenburgRes/status/1450562266919841798 https://twitter.com/HindenburgRes/status/1450562260993298433 https://twitter.com/HindenburgRes/status/1450562260993298433
- fidesomnes 5y agoTether is why I don't hold cryptos. The whole market would collapse with their arrest.
- garyclarke27 5y agoTether is obviously not backed 1:1 by USD as previously claimed. Now the dodgy piechart informs us that it is backed mainly by corporate bonds and loans - if true I would guess mostly to related companies. A recent Bloomberg article says they have been lending Billions to Chinese property companies! Eventually enough of the gullible fools will realise that the Emperor has no clothes, then there will be a run on Tether which will collapse its price, this will also crash the whole crypto market and people will finally realise that a random number (no matter how cleverly generated) is not worth $64k, not even $1k.
- rvz 5y agoCorrect. Tether is a giant scam as I and many others have said before: [0] Won't be surprised to see the scam finally unveiled and to cause a seismic crash in the crypto markets. I would start packing my crypto holdings out of the market real soon™... Things are getting quite, unstable and euphoric once again. [0] https://news.ycombinator.com/item?id=27960613 https://news.ycombinator.com/item?id=27960613
- tenuousemphasis 5y agoWhy would a collapse of tether cause a crash in the crypto markets?
- jzymbaluk 5y agoIt could spark a liquidity crisis. Tether is a mechanism for converting crypto to USD, and if there's a run on Tether and they run out of USD for whatever reason, it'll spiral into a run on other exchanges, if people aren't able to change their crypto back into USD, the value of that crypto suddenly vanishes
- jzymbaluk 5y agoPart of me is trying to come up with ways I could short this incredibly irrational market™, but I'm reminded of the saying that the markets can stay irrational longer than you can stay solvent
- smoyer 5y agoGiven the way this is worded and the fact that many crypto fans are also "highly technical", does anyone else feel like this is a request to compromise the Tether organization's infrastructure?
- NelsonMinar 5y agoFor anyone looking for context on Tether's finances: "With estimated leverage of 383-to-1, Tether would be unable to honour all its tokens after losses of just 0.26%—a safety cushion that regulators would never allow at a bank." https://www.economist.com/leaders/2021/08/07/why-regulators-should-treat-stablecoins-like-banks https://www.economist.com/leaders/2021/08/07/why-regulators-...
- gitfan86 5y agoBut Tether doesn't have to honor redemptions like a bank does. They can mint Tether, buy BTC with that, and give you that BTC as a redemption.
- arcticbull 5y agoBanks usually allow depositors to withdraw. Tether's terms and conditions state that they: (1) do not ever have to honor redemptions for US persons (2) do not have to honor redemptions except to authorized customers (3) only they decide who authorized customers are (4) even for them they can delay withdrawals indefinitely, arbitrarily (5) and even then they can offer whatever they happen to have in reserves in lieu So there's bigger issues than their composition, like the fact they can just sail off and keep the backing, and they don't have to honor withdrawals for anyone ever. You give them $1 (maybe, someone does, probably, honestly its not clear) and you get 1 USDT. That's it. Hope its worth $1 to you because you're not entitled to ever see that dollar again. All this hand wringing over backing doesn't mean much if you're not entitled to it you know? [edit] You don't really need a $1M bounty this is all in their T&Cs, it's just that it is difficult to get a man to understand something when his salary depends upon his not understanding it. [1] tether.to/legal
- 41b696ef1113 5y agoLet's say Hindenburg gathers definitive proof that Tether is a scam. Tether (and crypto generally) will have an enormous crash. What is the money making position they take in all of this? Short crypto exchanges? Assume the fallout spreads to the wider market?
- tsujp 5y agoBack in 2019 Tether was proven to NOT be backed 1:1 in USD. Rather it is backed 74% by fiat AND cash-equivalents. So that 74% is not even 74 literal cents. Article: https://www.coindesk.com/markets/2019/04/30/tether-lawyer-admits-stablecoin-now-74-backed-by-cash-and-equivalents/ https://www.coindesk.com/markets/2019/04/30/tether-lawyer-ad...