7 ms·

My conspiracy theory is that USDT is actually well backed, but the Tether people intentionally make it look shady so they can buy the dip and arbitrage against

by ummonk 4y ago

My conspiracy theory is that USDT is actually well backed, but the Tether people intentionally make it look shady so they can buy the dip and arbitrage against panic selling. Some volatility would actually increase their ability to profit.

roland35 4y ago
That's crazy. I'm thinking Hanlon's razor applies here, there is absolutely no evidence that tether is legit.
- 323 4y ago
  Where are all the Tether holders complaining that they can't convert it into dollars?
  - arcticbull 4y ago
    To answer that question you first have to figure out who they are. Tether mostly moves around, people don't hold it. That is to say, exchanges like Binance are heavily dependent on USDT. Those are the only venues you as an individual have to exchange tethers for USD (of course this is not the same as a redemption which is solely at Tether's discretion). Why would the exchanges ever come to Tether for the cash knowing they weren't good for it when revealing the pantslessness of the emperor would take them down too? It is my opinion that Tether succeeded in doing what the Luna Foundation Guard was trying to do - they made all the 'industry' players so dependent on their continued existence that anyone blowing the whistle would take out the whole space. This in turn makes sure nobody gets within a few hundred yards of a whistle.
    - 323 4y ago
      HN has been talking about how Tether is a scam and how it will blow up AnyMomentNow(TM) for two years. Meanwhile, there was no talk on HN about Luna or FTX being a scam before they imploded. In finance, when everybody "knows" something, it's 99% likely to be false. Because there is a lot of money to be made knowing actual facts in finance.
      - arcticbull 4y ago
        Two years is nothing. It took the government 20 years to end the Madoff scam and for many of those years Markopolos was screaming about it at the top of his lungs. It wasn't until his family turned him in that the government acted in earnest - and only because he was about to close up shop and give whatever was left to his family a few days later. These things go on for a long time, often in plain sight, so if that's what is making you feel better about it, stop. On the other hand the Tether folks signed off on the NYAG settlement where they admitted among other things that basically their entire bankroll was in Hoegner's personal Bank of Montreal account for a while, and that for many years the numbers didn't add up in the slightest. Here, give 'er a skim. [1] And when you're done with that there's always the CTFC settlement. [2] To quote the CFTC settlement: > In fact Tether reserves were not “fully-backed” the majority of the time. [2] If this is a witch hunt we found ourselves a coven. > Meanwhile, there was no talk on HN about Luna or FTX being a scam before they imploded. Maybe not on HN but among the crypto skeptics, they called it outright far in advance. Everyone here was too busy 'making money' to listen. > In finance, when everybody "knows" something, it's 99% likely to be false. Because there is a lot of money to be made knowing actual facts in finance. I mean basically all the things that were alleged for years were admitted in [1] and [2]. You're confused, crypto isn't finance. Crypto is a mob casino. There is no money to be made in a mob casino by knowing 'actual facts.' Not any more than there was at Ultimate Bet by knowing that people could see your cards while Hoegner was director of compliance at their parent entity. Unless you're the one looking at the cards that knowledge is purely entertainment value. [1] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlement_agreement_-_execution_version.b-t_signed-c2_oag_signed.pdf https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen... [2] https://www.cftc.gov/PressRoom/PressReleases/8450-21 https://www.cftc.gov/PressRoom/PressReleases/8450-21
        323 4y ago
        So why doesn't the NYAG charge them with the most obvious scam in history according to HN? If it's so clear from outside that Tether is not backed by actual dollars, how come the NYAG which has subpoena power and so one doesn't latch on such an easy and infamous case?
- maxbond 4y ago
  We need a razor that says, "if you think someone is playing chess with additional dimensions, they're probably just making a series of blunders and the consequences haven't yet manifested." A lesson I've taken from the last few years is that consequences can take a very, very long time, but that doesn't mean their strategy is working even if the tactics seem to be succeeding in the short term.
  - hanklazard 4y ago
    That’s Maxbond’s Razor
- 55555 4y ago
  The NYAG seems to think they kinda are.
arcticbull 4y ago
Their general council, Stuart Hoegner, was head of compliance at Excapsa. Excapsa was the parent company of Ultimate Bet, an online poker site where they created a backdoor so that some favored parties could see their opponents cards. There's a lot of analogs here.
- TacticalCoder 4y ago
  I don't know why someone downvoted you. It doesn't stop there: that lawyer at Bitfinex you mentioned was working back then at Excapsa with Dan Friedberg, the top lawyer at FTX.
- vgt 4y ago
  I wonder why anyone would downvote this factual information...
ReaLNero 4y ago
I mean if they're going to act (or rather, seem) malicious then they might as steal the backed assets they have right now rather than hope to pump-and-dump enough to make more money. It's not like either is more legal than the other.
- ummonk 4y ago
  Just arbitraging ensures this scheme never blows up in their faces and they can never get charged with a crime. Acting shady (but not actually stealing anything) isn't illegal.
  - ReaLNero 4y ago
    If your ability to make money off something is based on a pump-and-dump (or more fittingly, dump-and-pump) scheme, then you are either committing securities fraud or ending up in a lengthy legal battle over securities fraud.
xur17 4y ago
My current theory is that they are not fully backed, but they are backed enough for it to not really matter (ex: if they are 95% backed with highly liquid assets, it's very unlikely that they'll ever breach that). And given the current interest rates, they could just be parking it all in short term US treasuries, and slowly fixing the issue. If they play their cards right, they can migrate to something that is both fully backed, and highly profitable.
- bnralt 4y ago
  Agreed, I wouldn't be surprised if that were the case. In order to find yourself insolvent, you not only need to have losses in the principle greater than your gains, but you also need to have people trying to pull out enough money that you can't cover it. IE, if 50% of the principal was spent on crypto gambling and Tether lost ~80% of it (so they lost 40% of the total principal), and the other 50% was put in safe assets and they got 20% of that (10% of the principal), they'd be down to 70% of the principal. But they're only going to be insolvent if people try to cash out 70% of the Tether in circulation at once. And like you said, just putting that into fairly safe investments is going to undo a lot of the damage. Heck, even just getting the returns an online savings account is giving now would have them make back the principal in about a decade. Which isn't to say they won't fall apart. But I think a lot of people go to far assuming that their collapse is inevitable.
- nradov 4y ago
  There are rumors that a significant fraction of Tether assets are in Chinese commercial paper. Fine for now, but a serious recession or political turmoil in China would impair the value of those assets.
55555 4y ago
They normally make hundreds of millions to 1+ billion a year in profit. But if tether depegs and they buy a billion worth for 98 cents and redeem the backing from themselves they make an extra 20 million USD. OTOH this would result in outflows and they’d likely lose more than 20 million in interest on AUM over the following period. I like the theory but idk. Likewise they could redeem them at spot value in order to gradually plug their hole —- but again the interest on the AUM should gradually plug the hole anyway. Now, a big depeg is indeed an opportunity for them to make billions within minutes.

by ummonk 4y ago

roland35 4y ago

That's crazy. I'm thinking Hanlon's razor applies here, there is absolutely no evidence that tether is legit.

323 4y ago
Where are all the Tether holders complaining that they can't convert it into dollars?
- arcticbull 4y ago
  To answer that question you first have to figure out who they are. Tether mostly moves around, people don't hold it. That is to say, exchanges like Binance are heavily dependent on USDT. Those are the only venues you as an individual have to exchange tethers for USD (of course this is not the same as a redemption which is solely at Tether's discretion). Why would the exchanges ever come to Tether for the cash knowing they weren't good for it when revealing the pantslessness of the emperor would take them down too? It is my opinion that Tether succeeded in doing what the Luna Foundation Guard was trying to do - they made all the 'industry' players so dependent on their continued existence that anyone blowing the whistle would take out the whole space. This in turn makes sure nobody gets within a few hundred yards of a whistle.
  - 323 4y ago
    HN has been talking about how Tether is a scam and how it will blow up AnyMomentNow(TM) for two years. Meanwhile, there was no talk on HN about Luna or FTX being a scam before they imploded. In finance, when everybody "knows" something, it's 99% likely to be false. Because there is a lot of money to be made knowing actual facts in finance.
    - arcticbull 4y ago
      Two years is nothing. It took the government 20 years to end the Madoff scam and for many of those years Markopolos was screaming about it at the top of his lungs. It wasn't until his family turned him in that the government acted in earnest - and only because he was about to close up shop and give whatever was left to his family a few days later. These things go on for a long time, often in plain sight, so if that's what is making you feel better about it, stop. On the other hand the Tether folks signed off on the NYAG settlement where they admitted among other things that basically their entire bankroll was in Hoegner's personal Bank of Montreal account for a while, and that for many years the numbers didn't add up in the slightest. Here, give 'er a skim. [1] And when you're done with that there's always the CTFC settlement. [2] To quote the CFTC settlement: > In fact Tether reserves were not “fully-backed” the majority of the time. [2] If this is a witch hunt we found ourselves a coven. > Meanwhile, there was no talk on HN about Luna or FTX being a scam before they imploded. Maybe not on HN but among the crypto skeptics, they called it outright far in advance. Everyone here was too busy 'making money' to listen. > In finance, when everybody "knows" something, it's 99% likely to be false. Because there is a lot of money to be made knowing actual facts in finance. I mean basically all the things that were alleged for years were admitted in [1] and [2]. You're confused, crypto isn't finance. Crypto is a mob casino. There is no money to be made in a mob casino by knowing 'actual facts.' Not any more than there was at Ultimate Bet by knowing that people could see your cards while Hoegner was director of compliance at their parent entity. Unless you're the one looking at the cards that knowledge is purely entertainment value. [1] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlement_agreement_-_execution_version.b-t_signed-c2_oag_signed.pdf https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen... [2] https://www.cftc.gov/PressRoom/PressReleases/8450-21 https://www.cftc.gov/PressRoom/PressReleases/8450-21
      - 323 4y ago
        So why doesn't the NYAG charge them with the most obvious scam in history according to HN? If it's so clear from outside that Tether is not backed by actual dollars, how come the NYAG which has subpoena power and so one doesn't latch on such an easy and infamous case?
maxbond 4y ago
We need a razor that says, "if you think someone is playing chess with additional dimensions, they're probably just making a series of blunders and the consequences haven't yet manifested." A lesson I've taken from the last few years is that consequences can take a very, very long time, but that doesn't mean their strategy is working even if the tactics seem to be succeeding in the short term.
- hanklazard 4y ago
  That’s Maxbond’s Razor
55555 4y ago
The NYAG seems to think they kinda are.

arcticbull 4y ago

Their general council, Stuart Hoegner, was head of compliance at Excapsa. Excapsa was the parent company of Ultimate Bet, an online poker site where they created a backdoor so that some favored parties could see their opponents cards. There's a lot of analogs here.

TacticalCoder 4y ago
I don't know why someone downvoted you. It doesn't stop there: that lawyer at Bitfinex you mentioned was working back then at Excapsa with Dan Friedberg, the top lawyer at FTX.
vgt 4y ago
I wonder why anyone would downvote this factual information...

ReaLNero 4y ago

I mean if they're going to act (or rather, seem) malicious then they might as steal the backed assets they have right now rather than hope to pump-and-dump enough to make more money. It's not like either is more legal than the other.

ummonk 4y ago
Just arbitraging ensures this scheme never blows up in their faces and they can never get charged with a crime. Acting shady (but not actually stealing anything) isn't illegal.
- ReaLNero 4y ago
  If your ability to make money off something is based on a pump-and-dump (or more fittingly, dump-and-pump) scheme, then you are either committing securities fraud or ending up in a lengthy legal battle over securities fraud.

xur17 4y ago

My current theory is that they are not fully backed, but they are backed enough for it to not really matter (ex: if they are 95% backed with highly liquid assets, it's very unlikely that they'll ever breach that). And given the current interest rates, they could just be parking it all in short term US treasuries, and slowly fixing the issue. If they play their cards right, they can migrate to something that is both fully backed, and highly profitable.

bnralt 4y ago
Agreed, I wouldn't be surprised if that were the case. In order to find yourself insolvent, you not only need to have losses in the principle greater than your gains, but you also need to have people trying to pull out enough money that you can't cover it. IE, if 50% of the principal was spent on crypto gambling and Tether lost ~80% of it (so they lost 40% of the total principal), and the other 50% was put in safe assets and they got 20% of that (10% of the principal), they'd be down to 70% of the principal. But they're only going to be insolvent if people try to cash out 70% of the Tether in circulation at once. And like you said, just putting that into fairly safe investments is going to undo a lot of the damage. Heck, even just getting the returns an online savings account is giving now would have them make back the principal in about a decade. Which isn't to say they won't fall apart. But I think a lot of people go to far assuming that their collapse is inevitable.
nradov 4y ago
There are rumors that a significant fraction of Tether assets are in Chinese commercial paper. Fine for now, but a serious recession or political turmoil in China would impair the value of those assets.

55555 4y ago

They normally make hundreds of millions to 1+ billion a year in profit. But if tether depegs and they buy a billion worth for 98 cents and redeem the backing from themselves they make an extra 20 million USD. OTOH this would result in outflows and they’d likely lose more than 20 million in interest on AUM over the following period. I like the theory but idk. Likewise they could redeem them at spot value in order to gradually plug their hole —- but again the interest on the AUM should gradually plug the hole anyway. Now, a big depeg is indeed an opportunity for them to make billions within minutes.