4 ms·

Ah, finally, will Tether get its day in the litigious sun? It's well known in cryptocurrency circles that their coin is not backed 1:1 to USD, similar to FTX, o

Ah, finally, will Tether get its day in the litigious sun? It's well known in cryptocurrency circles that their coin is not backed 1:1 to USD, similar to FTX, only that FTX crashed and this was found out the easy way. Cracking Tether will be much harder as they resist audits.

JumpCrisscross 2y ago
> Cracking Tether will be much harder as they resist audits If Tether is sanctioned, they can't hold most dollar-denominated assets. Certainly none of the safe or liquid ones. Figuring out why it failed may take some digging. But causing it to fail is trivial.
alchemist1e9 2y ago
> It's well known in cryptocurrency circles that their coin is not backed 1:1 to USD, similar to FTX, only that FTX crashed and this was found out the easy way. Being speculated about is not the same as “known”. In fact every tether investigation seems to end up showing they are even over capitalize and hold more than 1:1! My understanding of the audit situation was that the big accounting firms have refused to do it, presumably due to pressure from someone to not get involved.
- JumpCrisscross 2y ago
  > every tether investigation seems to end up showing they are even over capitalize and hold more than 1:1 The one adversarial investigation I know of found the opposite [1]. > presumably due to pressure from someone to not get involved Not how audit works. [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...
  - alchemist1e9 2y ago
    The NYAG settlement you keep posting didn’t find that Tether was unbacked or below 1:1. It focused on transparency issues and the fact that funds were not always properly segregated. There were periods when reserves included assets like receivables or funds temporarily seized by authorities (e.g., Crypto Capital), but there was NO finding that USDT wasn’t fully backed. In fact, Tether has often shown it holds more than the necessary reserves, as evidenced in various attestations and reports post-settlement, and even in the report you keep posting NEVER they claim USDT isn’t fully solevent! It’s funny how the no-coiner crowd keeps pushing the idea that Tether is some crypto scam destined to collapse, yet every single investigation, including the NYAG’s, has failed to back up that narrative. The reality is Tether has proven time and again that their USDT is fully backed and their business is profitable. The desperation to prove otherwise is just not supported by the facts.
- cool_dude85 2y ago
  Can you link one of these investigations that show that tether is backed more than 1:1 with the USD?
  - alchemist1e9 2y ago
    I will try to find it. I would also point out they hold excess reserves in Bitcoin. My guess is nobody can get them on not being 1:1 but this idea of AML violations as the attack vector makes a lot of sense.
    - JumpCrisscross 2y ago
      > they hold excess reserves in Bitcoin We had precisely the same amount of information about FTX's Bitcoins as we do for Tether, for what it's worth.
      - alchemist1e9 2y ago
        bc1qjasf9z3h7w3jspkhtgatgpyvvzgpa2wwd2lr0eh5tx44reyn2k7sfc27a4 Isn’t that the public Tether bitcoin address with over 75K coins? https://platform.arkhamintelligence.com/explorer/address/bc1qjasf9z3h7w3jspkhtgatgpyvvzgpa2wwd2lr0eh5tx44reyn2k7sfc27a4 https://platform.arkhamintelligence.com/explorer/address/bc1... That's precisely A LOT more than anyone knew about FTX's non-existent Bitcoin.
        deleted 2y ago
        [deleted]
        JumpCrisscross 2y ago
        That is a wallet with a lot of Bitcoins in it. We don't know to what degree it's controlled by Tether. We don't know the degree to which it's otherwise encumbered. If I recall correctly, FTX also pointed to wallets with Bitcoins in them from time to time. To be clear, I am not saying Tether is committing fraud. Just that to the extent there have been investigations, they came up short, and that them being short is not even among the main risks to their existence.
- jujube3 2y ago
  It would be very simple for Tether to just hold $1 for each 1 Tether coin. They could invest their cash in safe assets like treasury bills that yield 4% or more. Meanwhile, they pay no interest in Tethers. So they get a 4% return for doing nothing at all. As far as I know, there is no evidence that they are doing anything else. (There is some evidence that they did something else in the past, when interest rates were way lower.) But this hasn't stopped tons of people from speculating that they are.
  - from-nibly 2y ago
    If it was that easy then we'd probably see more banks that do just that.
    - pavlov 2y ago
      That is what banks do. But it’s more complicated because the current trading value of a bond is not the same as the expected return you’d get if you hold it to maturity. Last year Silicon Valley Bank and others got into trouble for this reason. Let’s say you invested $100M into a 10-year bond when interest rates were at 2%. With interest, you’ll be getting back about $122M in ten years. Nice. But what if you’re a bank and suddenly every depositor wants to withdraw that $100M? You can’t wait ten years. You need to sell the bond. Now you face the problem that interest rates are at 4%. Somebody with $100M can invest it in a 10-year bond that will return $148M instead of your measly $122M. So nobody will pay full price for your 2% bond because they can get a better return elsewhere.
      - from-nibly 2y ago
        But banks also make loans, and do fractional reserve banking, so obviously owning bonds isn't enough.
        jujube3 2y ago
        The Fed doesn't let banks do this because it would be "too safe" https://en.wikipedia.org/wiki/Narrow_banking https://en.wikipedia.org/wiki/Narrow_banking
yieldcrv 2y ago
> It's well known in cryptocurrency circles that their coin is not backed 1:1 to USD Its well known in the legal space and has already been addressed by multiple US courts. They're not looking for that and this isn't controversial. Those court cases already happened in 2018-2020. Tether just needed to update its language. A financial institution not backed 1:1 to USD isn't a problem in any part of the banking sector, they just need a disclaimer that says that, and Tether updated their's and moved on. Those court cases were also about specific periods of time and were very intelligent and more nuanced than the Tether discourse in crypto spaces. Tether has periodically had more assets available, and its only controversy was about whether those were USD and US Treasuries amongst other things. This is a probe about violating AML laws and sanctions. Which would likely only involve specific addresses in crypto and some onramps. But otherwise crypto-crypto trading won't be a part of this.
- deleted 2y ago
  [deleted]
- JumpCrisscross 2y ago
  > a probe about violating AML laws and sanctions. Which would likely only involve specific addresses in crypto and some onramps. But otherwise crypto-crypto trading won't be a part of this. You think a dollar stablecoin won't be affected by being prohibited from touching dollars or the dollar financial system?
  - yieldcrv 2y ago
    I didn't say that, that statement doesn't imply that or suggest that. The result of this probe likely won't be that as the DOJ is just emboldened by their Binance and CZ conviction, where the founder spent a couple months at a Southern California Federalbsummer camp and the DOJ got a few billion dollars, and Binance continues to operate as before and no further regulatory overhang is above them and all the money coming in and out is magically seen as clean.
    - JumpCrisscross 2y ago
fallinditch 2y ago
Here's a fascinating piece of history that sheds light on the Bitfinex/FTX/Tether shenanigans. Originally a Medium post that was removed at some point, here's an archived copy. It details how Bitfinex/Tether manipulated BTC to make serious $$. I think the article also points to the origins of the FTX fraud: was Sam Bankman Fried involved in these BTC manipulations? Or inspired by it to create his own exchange? https://web.archive.org/web/20180620111632/https://medium.com/thedailydose/tether-bitcoin-manipulation-and-its-relationship-with-btc-futures-1bd01b1c540e https://web.archive.org/web/20180620111632/https://medium.co...
- fallinditch 2y ago
  TL:DR "USDT was used to pump other traded pairs in order to avoid raising the price of BTC directly. Once BTC was obtained from the pumps of these currencies, it was then sold immediately for USD, which ‘flooded’ the market and depressed the price of BTC."
  - earnesti 2y ago
    As the article states, nothing has been proven. Didn't read further than that. Tether is an operation that is a money printing machine on its own. They absolutely don't need to play pump'n'dump tricks to make money. It doesn't make any sense. Pump'n'dump schemes are risky. Tether has many options to make money with way less risk.
    - popcalc 2y ago
      Pump'n'dumps are far less risky than running a massive ponzi?
moat 2y ago
It was formerly understood that Tether was not backed 1:1. My people in the space now believe that they have made up the hole thanks to juicy interest rates (where Tether keeps all the yield).
- jiggawatts 2y ago
  How is that possible? They were thought to have less than half of the dollars they’re supposed to be holding!
  - earnesti 2y ago
    Banks have like 10% or even less the dollars that they are supposed to be holding, but still are doing all fine. Personally I don't think these tether conspiracy theories were ever true. Maybe they aren't 1:1 backed, but they have always been financially well off enough to keep the company running. And after the interest rates went up, they are probably making a killing. Typical bank has minimal reserves compared to them, and everyone is fine with that.
    - whamlastxmas 2y ago
      Banks have extreme requirements on that ratio though, and have been regulated to death (for good reason) for a hundred years
    - sgammon 2y ago
      > Banks have like 10% or even less… That’s completely untrue, and Tether isn’t a bank.
      - Spivak 2y ago
        Yeah, banks hold much less than 10%, as of 2020 the reserve requirement is 0%.
        tfehring 2y ago

JumpCrisscross 2y ago

> Cracking Tether will be much harder as they resist audits If Tether is sanctioned, they can't hold most dollar-denominated assets. Certainly none of the safe or liquid ones. Figuring out why it failed may take some digging. But causing it to fail is trivial.

alchemist1e9 2y ago

> It's well known in cryptocurrency circles that their coin is not backed 1:1 to USD, similar to FTX, only that FTX crashed and this was found out the easy way. Being speculated about is not the same as “known”. In fact every tether investigation seems to end up showing they are even over capitalize and hold more than 1:1! My understanding of the audit situation was that the big accounting firms have refused to do it, presumably due to pressure from someone to not get involved.

JumpCrisscross 2y ago
> every tether investigation seems to end up showing they are even over capitalize and hold more than 1:1 The one adversarial investigation I know of found the opposite [1]. > presumably due to pressure from someone to not get involved Not how audit works. [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...
- alchemist1e9 2y ago
  The NYAG settlement you keep posting didn’t find that Tether was unbacked or below 1:1. It focused on transparency issues and the fact that funds were not always properly segregated. There were periods when reserves included assets like receivables or funds temporarily seized by authorities (e.g., Crypto Capital), but there was NO finding that USDT wasn’t fully backed. In fact, Tether has often shown it holds more than the necessary reserves, as evidenced in various attestations and reports post-settlement, and even in the report you keep posting NEVER they claim USDT isn’t fully solevent! It’s funny how the no-coiner crowd keeps pushing the idea that Tether is some crypto scam destined to collapse, yet every single investigation, including the NYAG’s, has failed to back up that narrative. The reality is Tether has proven time and again that their USDT is fully backed and their business is profitable. The desperation to prove otherwise is just not supported by the facts.
cool_dude85 2y ago
Can you link one of these investigations that show that tether is backed more than 1:1 with the USD?
- alchemist1e9 2y ago
  I will try to find it. I would also point out they hold excess reserves in Bitcoin. My guess is nobody can get them on not being 1:1 but this idea of AML violations as the attack vector makes a lot of sense.
  - JumpCrisscross 2y ago
    > they hold excess reserves in Bitcoin We had precisely the same amount of information about FTX's Bitcoins as we do for Tether, for what it's worth.
    - alchemist1e9 2y ago
      bc1qjasf9z3h7w3jspkhtgatgpyvvzgpa2wwd2lr0eh5tx44reyn2k7sfc27a4 Isn’t that the public Tether bitcoin address with over 75K coins? https://platform.arkhamintelligence.com/explorer/address/bc1qjasf9z3h7w3jspkhtgatgpyvvzgpa2wwd2lr0eh5tx44reyn2k7sfc27a4 https://platform.arkhamintelligence.com/explorer/address/bc1... That's precisely A LOT more than anyone knew about FTX's non-existent Bitcoin.
      - deleted 2y ago
        [deleted]
      - JumpCrisscross 2y ago
        That is a wallet with a lot of Bitcoins in it. We don't know to what degree it's controlled by Tether. We don't know the degree to which it's otherwise encumbered. If I recall correctly, FTX also pointed to wallets with Bitcoins in them from time to time. To be clear, I am not saying Tether is committing fraud. Just that to the extent there have been investigations, they came up short, and that them being short is not even among the main risks to their existence.
jujube3 2y ago
It would be very simple for Tether to just hold $1 for each 1 Tether coin. They could invest their cash in safe assets like treasury bills that yield 4% or more. Meanwhile, they pay no interest in Tethers. So they get a 4% return for doing nothing at all. As far as I know, there is no evidence that they are doing anything else. (There is some evidence that they did something else in the past, when interest rates were way lower.) But this hasn't stopped tons of people from speculating that they are.
- from-nibly 2y ago
  If it was that easy then we'd probably see more banks that do just that.
  - pavlov 2y ago
    That is what banks do. But it’s more complicated because the current trading value of a bond is not the same as the expected return you’d get if you hold it to maturity. Last year Silicon Valley Bank and others got into trouble for this reason. Let’s say you invested $100M into a 10-year bond when interest rates were at 2%. With interest, you’ll be getting back about $122M in ten years. Nice. But what if you’re a bank and suddenly every depositor wants to withdraw that $100M? You can’t wait ten years. You need to sell the bond. Now you face the problem that interest rates are at 4%. Somebody with $100M can invest it in a 10-year bond that will return $148M instead of your measly $122M. So nobody will pay full price for your 2% bond because they can get a better return elsewhere.
    - from-nibly 2y ago
      But banks also make loans, and do fractional reserve banking, so obviously owning bonds isn't enough.
      - jujube3 2y ago
        The Fed doesn't let banks do this because it would be "too safe" https://en.wikipedia.org/wiki/Narrow_banking https://en.wikipedia.org/wiki/Narrow_banking

yieldcrv 2y ago

> It's well known in cryptocurrency circles that their coin is not backed 1:1 to USD Its well known in the legal space and has already been addressed by multiple US courts. They're not looking for that and this isn't controversial. Those court cases already happened in 2018-2020. Tether just needed to update its language. A financial institution not backed 1:1 to USD isn't a problem in any part of the banking sector, they just need a disclaimer that says that, and Tether updated their's and moved on. Those court cases were also about specific periods of time and were very intelligent and more nuanced than the Tether discourse in crypto spaces. Tether has periodically had more assets available, and its only controversy was about whether those were USD and US Treasuries amongst other things. This is a probe about violating AML laws and sanctions. Which would likely only involve specific addresses in crypto and some onramps. But otherwise crypto-crypto trading won't be a part of this.

deleted 2y ago
[deleted]
JumpCrisscross 2y ago
> a probe about violating AML laws and sanctions. Which would likely only involve specific addresses in crypto and some onramps. But otherwise crypto-crypto trading won't be a part of this. You think a dollar stablecoin won't be affected by being prohibited from touching dollars or the dollar financial system?
- yieldcrv 2y ago
  I didn't say that, that statement doesn't imply that or suggest that. The result of this probe likely won't be that as the DOJ is just emboldened by their Binance and CZ conviction, where the founder spent a couple months at a Southern California Federalbsummer camp and the DOJ got a few billion dollars, and Binance continues to operate as before and no further regulatory overhang is above them and all the money coming in and out is magically seen as clean.
  - JumpCrisscross 2y ago

fallinditch 2y ago

Here's a fascinating piece of history that sheds light on the Bitfinex/FTX/Tether shenanigans. Originally a Medium post that was removed at some point, here's an archived copy. It details how Bitfinex/Tether manipulated BTC to make serious $$. I think the article also points to the origins of the FTX fraud: was Sam Bankman Fried involved in these BTC manipulations? Or inspired by it to create his own exchange? https://web.archive.org/web/20180620111632/https://medium.com/thedailydose/tether-bitcoin-manipulation-and-its-relationship-with-btc-futures-1bd01b1c540e https://web.archive.org/web/20180620111632/https://medium.co...

fallinditch 2y ago
TL:DR "USDT was used to pump other traded pairs in order to avoid raising the price of BTC directly. Once BTC was obtained from the pumps of these currencies, it was then sold immediately for USD, which ‘flooded’ the market and depressed the price of BTC."
- earnesti 2y ago
  As the article states, nothing has been proven. Didn't read further than that. Tether is an operation that is a money printing machine on its own. They absolutely don't need to play pump'n'dump tricks to make money. It doesn't make any sense. Pump'n'dump schemes are risky. Tether has many options to make money with way less risk.
  - popcalc 2y ago
    Pump'n'dumps are far less risky than running a massive ponzi?

moat 2y ago

It was formerly understood that Tether was not backed 1:1. My people in the space now believe that they have made up the hole thanks to juicy interest rates (where Tether keeps all the yield).

jiggawatts 2y ago
How is that possible? They were thought to have less than half of the dollars they’re supposed to be holding!
- earnesti 2y ago
  Banks have like 10% or even less the dollars that they are supposed to be holding, but still are doing all fine. Personally I don't think these tether conspiracy theories were ever true. Maybe they aren't 1:1 backed, but they have always been financially well off enough to keep the company running. And after the interest rates went up, they are probably making a killing. Typical bank has minimal reserves compared to them, and everyone is fine with that.
  - whamlastxmas 2y ago
    Banks have extreme requirements on that ratio though, and have been regulated to death (for good reason) for a hundred years
  - sgammon 2y ago
    > Banks have like 10% or even less… That’s completely untrue, and Tether isn’t a bank.
    - Spivak 2y ago
      Yeah, banks hold much less than 10%, as of 2020 the reserve requirement is 0%.
      - tfehring 2y ago