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What's interesting is how little scrutiny was applied to FTX and they're the one who lost people's money. Tether has been under intense scrutiny for years and i

by memish 4y ago

What's interesting is how little scrutiny was applied to FTX and they're the one who lost people's money. Tether has been under intense scrutiny for years and is still working just fine. No one has lost their money in Tether despite huge outflow events. There's a lesson in here.

PragmaticPulp 4y ago
FTX is younger than Tether and it was actually subject to scrutiny. Tether has also been subject to scrutiny and was found, at the time, to be lying about their reserves and backing. And this was before they printed a lot more! It doesn’t make sense to write them off as having withstood the test of time when they literally failed to stand up to the first legal scrutiny that got access to their books.
- camjohnson26 4y ago
  The lesson learned is that frauds can go on for a long time. It took decades and a once in a generation market crash to expose Bernie Madoff. Enron spent years running their sketchy accounting. Wirecard was only finally exposed after the German government essentially lobbied on their behalf against the journalists trying to expose the fraud.
  - jandrese 4y ago
    These frauds can continue so long as they can continue to grow or at least maintain a steady state. Since they promise higher returns than can be achieved through honest means the liabilities grow faster than assets over time, but so long as nobody tries to realize their gains it's fine. FTX only came down because they pissed off the Binance guy who dumped his position all at once and exposed the fraud. I'm dubious Tether could survive a similar attack. I also think that at least some people investing in these are completely aware of the situation and are ok with it because it means they can beat the market so long as they get out before the whole thing suddenly collapses. Basically playing financial chicken.
    - anonymoushn 4y ago
      > These frauds can continue so long as they can continue to grow or at least maintain a steady state. Since they promise higher returns than can be achieved through honest means the liabilities grow faster than assets over time, but so long as nobody tries to realize their gains it's fine. Honestly this sort of comment makes me want to stop reading hacker news comments sections altogether. Could you explain what returns are promised for depositors of USD at FTX international and holders of USDT?
      - jandrese 4y ago
        It didn't matter if those holdings weren't making returns, because they were all connected to a Ponzi scheme that was siphoning off the money from the rest of the company. https://www.theblock.co/post/186187/alameda-promised-high-returns-with-no-risk-in-2018-pitch https://www.theblock.co/post/186187/alameda-promised-high-re... 15% returns, guaranteed, no risk.
        anonymoushn 4y ago
        It didn't matter that my comment was completely wrong and irrelevant because some other facts I omitted from my comment!
- spaceman_2020 4y ago
  > FTX is younger than Tether and it was actually subject to scrutiny. What due diligence did Blackrock and SoftBank did before investing in FTX? Half the people I know trusted FTX just because "Blackrock and SoftBank must have done their homework".
TheAlchemist 4y ago
They are under scrutiny, and here are some facts: - they lied about the reserves and weren't backed at 100% - they did fraudulent attestations wiring money for the 'snapshot' of accounts for the attestation then moving it back to owners (from Bitfinex exchange if I remember - which is the same people - see a pattern here ?) - held money in their personal accounts the above were proven without doubt by the NY AG. - promised an audit for several years (it's always just a few months away) - publish attestations that are obviously false. some red flags - in the first one, they claimed to have so much money in commercial paper that would put them in top 10 players - yet, among desks trading those papers, nobody ever heard of them ! In the last 2, if what they published was true, they would already be under water, given the decline of all coins - yet, somehow they are all okay. - each time an exchange / scam goes down - they publish those papers saying they have 0 exposure to them (recently FTX, Genesis) - this despite findings that Alameda (FTX affiliated hedge found) was on the recepient of >30% of all Tethers - last I checked, their CEO wasn't seen publicly for several years. Most of their financial 'communication' is done by their AG and 'the IT guy' There are many more. In case of doubt, watch this interview and judge yourself if this feels like guys legitimately managing 70B real dollars: https://www.youtube.com/watch?v=ZBEqyiO35cQ https://www.youtube.com/watch?v=ZBEqyiO35cQ It's all scam - it's so obvious that it's amazing. It will collapse - we just don't know when.
- saurik 4y ago
  > - each time an exchange / scam goes down - they publish those papers saying they have 0 exposure to them (recently FTX, Genesis) - this despite findings that Alameda (FTX affiliated hedge found) was on the recepient of >30% of all Tethers Why would this matter? Tether gives out USDT to (almost) anyone who wants it in exchange for cash, and only redeems it for cash if you give them back the USDT... 100% of their USDT could be held by FTX and that would not suddenly cause them to have any exposure to FTX.
  - TheAlchemist 4y ago
    It was proven and admitted that they are also issuing Tethers against loans - for example Mashinsky (the guy from Celcius - that collapsed) said in an interview that Tether loaned them 1B.
dahdum 4y ago
If Tether is a fraud (likely), it appears to be a simple one that's rather difficult to implode. Because of their widespread use in trading and limitations on fiat trading / capital controls around the world, it would be a challenge to start a run they couldn't cover by just honoring redemption requests. If they only held 10% it could happen, but if it's ~70% as often claimed, I don't see it happening. I'm not sure what could collapse Tether other than Tether itself saying they're broke and refusing to honor redemptions.

by memish 4y ago

PragmaticPulp 4y ago

FTX is younger than Tether and it was actually subject to scrutiny. Tether has also been subject to scrutiny and was found, at the time, to be lying about their reserves and backing. And this was before they printed a lot more! It doesn’t make sense to write them off as having withstood the test of time when they literally failed to stand up to the first legal scrutiny that got access to their books.

camjohnson26 4y ago
The lesson learned is that frauds can go on for a long time. It took decades and a once in a generation market crash to expose Bernie Madoff. Enron spent years running their sketchy accounting. Wirecard was only finally exposed after the German government essentially lobbied on their behalf against the journalists trying to expose the fraud.
- jandrese 4y ago
  These frauds can continue so long as they can continue to grow or at least maintain a steady state. Since they promise higher returns than can be achieved through honest means the liabilities grow faster than assets over time, but so long as nobody tries to realize their gains it's fine. FTX only came down because they pissed off the Binance guy who dumped his position all at once and exposed the fraud. I'm dubious Tether could survive a similar attack. I also think that at least some people investing in these are completely aware of the situation and are ok with it because it means they can beat the market so long as they get out before the whole thing suddenly collapses. Basically playing financial chicken.
  - anonymoushn 4y ago
    > These frauds can continue so long as they can continue to grow or at least maintain a steady state. Since they promise higher returns than can be achieved through honest means the liabilities grow faster than assets over time, but so long as nobody tries to realize their gains it's fine. Honestly this sort of comment makes me want to stop reading hacker news comments sections altogether. Could you explain what returns are promised for depositors of USD at FTX international and holders of USDT?
    - jandrese 4y ago
      It didn't matter if those holdings weren't making returns, because they were all connected to a Ponzi scheme that was siphoning off the money from the rest of the company. https://www.theblock.co/post/186187/alameda-promised-high-returns-with-no-risk-in-2018-pitch https://www.theblock.co/post/186187/alameda-promised-high-re... 15% returns, guaranteed, no risk.
      - anonymoushn 4y ago
        It didn't matter that my comment was completely wrong and irrelevant because some other facts I omitted from my comment!
spaceman_2020 4y ago
> FTX is younger than Tether and it was actually subject to scrutiny. What due diligence did Blackrock and SoftBank did before investing in FTX? Half the people I know trusted FTX just because "Blackrock and SoftBank must have done their homework".

TheAlchemist 4y ago

They are under scrutiny, and here are some facts: - they lied about the reserves and weren't backed at 100% - they did fraudulent attestations wiring money for the 'snapshot' of accounts for the attestation then moving it back to owners (from Bitfinex exchange if I remember - which is the same people - see a pattern here ?) - held money in their personal accounts the above were proven without doubt by the NY AG. - promised an audit for several years (it's always just a few months away) - publish attestations that are obviously false. some red flags - in the first one, they claimed to have so much money in commercial paper that would put them in top 10 players - yet, among desks trading those papers, nobody ever heard of them ! In the last 2, if what they published was true, they would already be under water, given the decline of all coins - yet, somehow they are all okay. - each time an exchange / scam goes down - they publish those papers saying they have 0 exposure to them (recently FTX, Genesis) - this despite findings that Alameda (FTX affiliated hedge found) was on the recepient of >30% of all Tethers - last I checked, their CEO wasn't seen publicly for several years. Most of their financial 'communication' is done by their AG and 'the IT guy' There are many more. In case of doubt, watch this interview and judge yourself if this feels like guys legitimately managing 70B real dollars: https://www.youtube.com/watch?v=ZBEqyiO35cQ https://www.youtube.com/watch?v=ZBEqyiO35cQ It's all scam - it's so obvious that it's amazing. It will collapse - we just don't know when.

saurik 4y ago
> - each time an exchange / scam goes down - they publish those papers saying they have 0 exposure to them (recently FTX, Genesis) - this despite findings that Alameda (FTX affiliated hedge found) was on the recepient of >30% of all Tethers Why would this matter? Tether gives out USDT to (almost) anyone who wants it in exchange for cash, and only redeems it for cash if you give them back the USDT... 100% of their USDT could be held by FTX and that would not suddenly cause them to have any exposure to FTX.
- TheAlchemist 4y ago
  It was proven and admitted that they are also issuing Tethers against loans - for example Mashinsky (the guy from Celcius - that collapsed) said in an interview that Tether loaned them 1B.

dahdum 4y ago

If Tether is a fraud (likely), it appears to be a simple one that's rather difficult to implode. Because of their widespread use in trading and limitations on fiat trading / capital controls around the world, it would be a challenge to start a run they couldn't cover by just honoring redemption requests. If they only held 10% it could happen, but if it's ~70% as often claimed, I don't see it happening. I'm not sure what could collapse Tether other than Tether itself saying they're broke and refusing to honor redemptions.