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“When systems require novel accounting methods the reason is usually fraud”
- uoaei 4y agoCausality seems backward, but the sentiment holds. Grifters and fraudsters have an eye for recognizing settings and circumstances where their exploits may go unnoticed until they're off with the goods. It's what makes them good at their trades. Novel accounting methods -- and more broadly the financialization of financialization that defines modern speculative finance -- especially obscure and technical ones, are great venues for fraud.
- jandrese 4y agoI find it plausible that Tether was forced to create their own accounting system because GAAP would have exposed their lies. They can't find an accounting firm that "understands" that they need to ignore the lies and only report what Tether wants them to report.
- oldgradstudent 4y agoThey should consider Friehling & Horowitz. A reliable firm with a lot of auditing experience.
- IX-103 4y agoEspecially if they have unfortunate names, like iFAP. I about had a stroke or two when I saw that. Either someone dropped the balls on marketing or there's some serious trolling going on for them to be swinging this around in our faces like that.
- jrvarela56 4y agoI agree with these examples, but to avoid taking the principle too far: EBIDTA was once a made up metric. Sometimes new views of a system do enrich our understanding. Check the "John Malone and the Invention of EBITDA" section in this post for the story of how it was created: https://commoncog.com/blog/cash-flow-games/ https://commoncog.com/blog/cash-flow-games/
- hammock 4y agoThe timing (1972) of the invention of EBITDA is interesting. It would seem EBITDA was not used for thousands of years and was not useful until the end of the gold standard in 1971 and the beginning of a new era of central bank currency manipulation Edit: bring on the downvotes without context. Or, engage meaningfully: what conditions existed that enabled EBITDA to emerge as an invention and gain traction?
- cuteboy19 4y agoI choose to believe EBITDA exists because of Bangladesh, which also came into existence in 1971. In fact if you track the prominence of EBITDA and the GDP of Bangladesh, the correlation is crystal clear In any case crypto is far more manipulated than any normal currency thanks to BitfinexTether.
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- AlexandrB 4y agoCan you elaborate? How are these things connected? Why wouldn't EBITDA be a useful financial framing for "growth" companies while the country was on the gold standard? Just because it happened around the same time, doesn't mean there's any causal relationship here.
- hammock 4y agoWall Street newly accepting EBITDA (cash flows) over DTI or net income, as told in the link above about the cable utility, is logical in an environment of a rapidly expanding money supply driven by unencumbered Federal Reserve. In the loose/free money era, financing cash flows with more and more debt is incentivized and in some respects the default mode of operation. Growth over value. Alternately, when the credit environment tightens, you see moves back to value and away from growth
- woodpanel 4y agoThoughts on Tether calling their accounting method “iFAP” of all choices: There’s a saying amongst investigators that some criminals, as ever more time passes with them not getting caught, start to behave as if they were taunting police to finally catch them.
- jstarfish 4y agoAcademics do this stuff too though. SATAN was a network security tool. Linnaeus himself abused the taxonomy system he invented to name pest species after people he didn't like.
- Animats 4y agoThere's a white collar crime investigator who has a sign in his interrogation room: "If you're here, you're not as smart as you thought you were."
- throwaway0a5e 4y ago> There's a white collar crime investigator who has a sign in his interrogation room: "If you're here, you're not as smart as you thought you were." Sounds like typical bullshit that you get in a profession where everyone kisses your ass because you can ruin their life on a whim even if they didn't do anything wrong. I'm sure the boot-licking "everyone accused is probably guilty of something" crowd loves it.
- monkeydreams 4y ago> There's a white collar crime investigator who has a sign in his interrogation room: "If you're here, you're not as smart as you thought you were." There's a white collar crime investigator who believes that everyone is guilty until proven how guilty.
- multjoy 4y agoThat's pretty much how investigators work. Obviously you can't discount the fact that someone isn't guilty, but if you have got as far as to get them in front of you then you're onto something. Just because I can't prove something to the criminal burden of proof doesn't mean that they didn't do it, it just means I can't get the job over the line.
- jandrese 4y agoDid these techbros seriously call their accounting system "iFAP"?
- wly_cdgr 4y ago
- defterGoose 4y agoYeah, my immediate thought was, "You've gotta be jerking me..."
- puranjay 4y agoHow to audit a USD stablecoin: 1. Calculate all current circulating supply of said stablecoin across all chains 2. Calculate value of deposits across issuer’s bank accounts in USD. If both number are equal, congrats, your stablecoin passed the audit. It really should be that simple. I’m oversimplifying, of course. But a stablecoin should really not be an investment fund and shouldn’t have its deposits in illiquid assets at all, not even t bills. The issuer should only charge a small fee when the stablecoin is created or redeemed. Given the sheer volume and scale of stablecoin trades, this fee can easily run into tens of millions of dollars in revenue.
- bhouston 4y agoThe issue is figuring out which assets they have and are they the true owner. If you have assets distributed across dozens of banks and other parties who are holding them for you, this becomes incredibly difficult and rife for abuse, especially when you have other non-professional/non-traditional intermediaries holding assets for you, or for whom you are exchanging favors with. Basically compiling the list of the assets they hold and verifying it is the biggest issue here. It is definitely not at all simple -- in fact it may be deliberately obfuscated for "reasons."
- audleman 4y agoI don't understand your point. If a stablecoin issuer has trouble compiling a list of their assets that's a red flag. If a competitor comes out with simpler accounting I'll switch to them.
- bhouston 4y ago> If a stablecoin issuer has trouble compiling a list of their assets that's a red flag. I agree.
- salawat 4y ago>in fact it may be deliberately obfuscated for "reasons." In accounting/auditing, the words "it's complicated" is generally the first place you look for detailed documentation and process. If it is not there... Red flag.
- Animats 4y agoThat Tether's assets are being questioned in so many places means it's time to get out of USDT. After all, there is zero upside and a huge downside.
- cowtools 4y agoI don't even understand what the purpose of USDT is. Why use it over a stablecoin that is backed by your crypto exchange?
- baq 4y agoEdit: misread. Usdt is the common coin to transfer between exchanges and exchange coins. Tax avoidance in some countries and bypassing KYC rules.
- mike_d 4y agoThink of an exchange issued stablecoin as a gift card, it is issued by one store and only good as long as that store is in business. Tether is more like a dollar or euro and good across multiple stores. I have USDT that is in my own wallet and not on an exchange that I could send directly to you if I wanted.
- cowtools 4y agoOkay, but you already have a business relationship with your exchange. so there are fewer points of failure. >I have USDT that is in my own wallet and not on an exchange that I could send directly to you if I wanted. I suppose, but this "Tether" currency is still minted by a centralized entity. It could be worthless tomorrow. I don't see how self-custodialship of this centralized monopoly money matters. You might as well just use a centralized currency if you trust this centralized entity not to inflate the currency. When I use an exchange-backed currency like BUSD, USDC or Kraken's USD, I don't intend to exchange it peer-to-peer at all. The whole point of exchange in the first place is that you use the cryptocurrencies for peer-to-peer transfers. The only thing a stablecoin has to do is: 1) Accept (cash, bank, CC) deposits 2) Allow (cash, bank, CC) withdrawls 3) Allow me to exchange it for cryptocurrency with others 4) Don't lose my money in the process If you trust some institution to do #1-3, why would you want to have some other, less credible institution to handle #4 as well?
- asah 4y agoIMHO the key is whether the novel accounting is used for forecasting the future (ok) or explaining the past (not ok).
- hoseja 4y agoiFAP? Seriously? Are we not doing phrasing anymore?
- SMAAART 4y agoIFAP? really? They could not come up with a better acronym? I tried to google ifap and ifap accounting but no meaningful results. Anyone got a link or two?