Coffeezilla (on YouTube) has been exposing the Tether scam for almost two years now [1]. Even as a crypto believer (long-term), it’s been fascinating to see this scam survive this long despite being repeatedly exposed.
> Keeping the Tether delusion going is an existential matter for everyone with a stake in crypto.
First, all money is delusion, that's a documented fact (or to put it nicely, currencies rely on user's faith/belief to function).
Second I do agree with you, but I believe it's only part of the story.
I think tether also does actually provide a tangibly useful service to the crypto world, specifically high-speed liquidity to exchanges which is why the scam is allowed to continue.
My bet is that the day a legitimate (as in: transparent, properly audited by both traditional accounting firms and blockchain techniques), incorporated in non-banana-republic jurisdiction, etc ...) competitor comes around, Tether will die in an instant dumpster fire.
> transparent, properly audited by both traditional accounting firms and blockchain techniques), incorporated in non-banana-republic jurisdiction
You can't square that circle because the money laundering controls aren't solvable enough to be in a regular jurisdiction and have psudonymous permissionless blockchain transfers.
Part of it is self-perpetuating. When you see Bitfinex'ed yell about the impending collapse of Tether for half a decade, and it still hasn't collapsed, the doom-sayers become less and less credible.
The crazy thing is, tether skeptics have repeatedly been proven right on the facts. The initially-denied bitfinex/tether relationship was revealed in the paradise papers. The fact that it was not 1:1 cash backed was confirmed by the NYAG investigation.
The thing that they didn’t anticipate is that the market wouldn’t care.
The reason why it isn't collapsing is because of the long term crypto believers. This is a cult and those can last a very long time. The cultists will keep on tithing their pay checks.
They really haven’t had a run on the pyramid to deal with issues. Each broken exchange has been bought by the next bigger one. Most big crypto money has cashed and just holding so I feel they haven’t seen the bankrun to break them where funds need to redeem Tether for real currency.
The tether agreement says they don't have to redeem your tether and if you're a US person you're totally ineligible in any case.
It's not a pyramid because it was always made explicitly clear it was exchangeable for nothing, like if I sold you pieces of paper with my signature on it.
I honestly don't understand how anyone could read the terms of tether and possibly believe they have the right to demand real money for their tether. Tether is up front that it is monopoly money.
until they got sued by the new york attorney general they explicitly said on their website that tethers were backed 1:1 by dollars (which was a lie). that doesn’t sound like they are being up front about being monopoly money.
There's two other comments in this thread that were posted before yours, with links outlining Tether's restrictive ToS. You should probably read them instead of doubling down on a weird half-position.
What is my half position? My position is that it's disingenuous to pretend that Tether has always presented itself as "monopoly money". They are knowingly engaging in fraudulent behavior.
Here. They can redeem with the reserve assets instead of with dollars, and are not liable if the reserve assets decline in value due to illiquidity etc
They also refuse to disclose the nature of their reserves beyond unaudited attestations, and are known to have lied regarding their reserves multiple times before and admitted as such in a settlement.
> Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves. Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all.
> 14.8. any delay in withdrawal or redemption, or loss of value of Tether Tokens or the Reserves backing such Tether Tokens resulting from failure or insolvency of any bank, depository, custodian, borrower, or payment processor holding or processing the assets backing Tether Tokens, or from the theft of such assets, or from freezes, seizures, or other legal process asserted by a Government; or
In addition to that, here's the section on consequences for prohibited use:
> Any use, whether actual or suspected, as described in this paragraph shall constitute a “Prohibited Use”. If Tether determines that you have engaged in any Prohibited Use, Tether may address such Prohibited Use through an appropriate sanction, in its sole and absolute discretion. Such sanction may include, but is not limited to, making a report to any Government, law enforcement, or other authorities, without providing any notice of you about any such report; confiscation of any Fiat, funds, property, proceeds, or Digital Tokens in any Digital Tokens Wallet that you have on the Site; and, suspending or terminating your access to any Services or Fiat, funds, property, or Digital Tokens from any Digital Tokens Address.
So they can confiscate all of your funds if you engage in prohibited use. What might that entail? In addition to the normal money laundering, committing crimes, etc, they count such dastardly things as:
> 8.8. use the Site or any Services to engage in conduct that is detrimental to Tether or to any other Site user or any other third party;
> 8.14. where you are subject to prohibitions or restrictions as set forth in paragraph 3 [Identifying yourself as being from the US], access the Site or use any Services utilizing any virtual private network, proxy service, or any other third party service, network, or product with the effect of disguising your IP address or location, or access the Site or use any Services using a Digital Tokens Address in or subject to the jurisdiction of any Prohibited Jurisdiction or Government or Government Official thereof; or,
> 8.15. violate, cause a violation of, or conspire or attempt to violate these Terms of Service or applicable Laws.
So if you break their TOS, lie about being from the US, or engage in conduct that's detrimental to Tether, they can just take all of your money and tokens per their TOS.
> I’m going to predict that the crypto markets will suffer much more compared to even FTX
How have the crypto markets suffered from FTX's collapses?
There was a temporary dip at best.
FTX and other exchanges are the very negation of what makes crypto interesting:
- centralized
- not transparent
- customer abandon custody of their money
Everything that something like FTX is (and all the Coinbases and Krakens of the world fall in the same category) is the exact antithesis of what crypto stands for.
Tether is an altogether different beast.
It's indeed very likely a scam, but it seems that it is filling such a huge and legitimate need in the market that has allowed it to survive for so long.
I would bet around $5k/BTC when it falls, as the crypto isn't fundamentally dead but a large portion of the cash value in circulation could turn out to be scam.
Tether is fascinating for sure. Tether is currently the heart of the cryptocurrency space, it provides liquidity and risk management (via a stable coin) "on-chain" without relying in a fiat currency. Tether has more daily volume than Bitcoin. Tether is accepted in mosts places and there is local liquidity available. Tether could fail surely, if it failed then all crypto will go deep down. And it is important to note that the people behind Tether are deep incumbents too, not just random project.
USDC which is more scrutinized is 1/10 of the Tether volume. BUSD 1/4 (not bad!) [1]
Coffeezilla really is miles ahead of the MSM in reporting on this. To such an extent that his video from over a year ago covers the same territory as this article.
Here's one hypothesis: USDT is used to trade a lot but (hopefully) not a lot of retail investors are holding large amounts of USDT.
But like the CEL (Celsius) a lot of the "market cap" of the coin is held in companies that are essentially insolvent. Like CEL, they use their big balance sheet and the relatively thin amount of trading to prop up the value of USDT when necessary.
That's just an idea. I am not someone who would know. One thing I have learned in life is that people can know there is a problem in a market but the chickens don't come to roost until the last person is convinced they can't make money. Mortgage backed securities were like that. For a couple years people thought it was a problem, then probably most financial people thought it was a problem, and then a long time later it crashed. It really was waiting for the last person to think they couldn't make any money by trading them.
This is actually a quite correct hypothesis. Tether has an insane velocity (at least comparing to a Central Bank coin). Tether trade volume sits at $40 billion in the last 24 hours. There are only $68bn. This figure does not include futures, and P2P trades. Tether probably trades itself in a single day.
Most people exposure to Tether is temporary. The market cap is the tip of the iceberg. Since if you trade 68bn everyday, that's around $25Trillion per year. Purely insane.
Bitcoin price is at $23,530 right now. Imagine Alice wants to buy 1 bitcoin and sell it a few minutes later for some profit. In that case Alice can apply a 10x leverage since it is short term, and needs only $2,400 as collateral. 10 minutes later she sold the coin at $24,000, netting a profit of $470. This makes $47,530 of trade volume with just $2,400 collateral and $47 in tx fees (assuming that tx fee is 1/2000 for both buyer and seller).
For some illiquid exchanges, buying a bitcoin may cause a huge price impact such that there is room for arbitrage. Someone would buy a bitcoin at a cheaper price at another exchange and sell it to Alice at a higher price for profit. In this case, the trade volume is doubled (i.e. 1 bitcoin at this exchange and 1 bitcoin at another exchange).
So while trade volume is very high, only a very small percentage of it is customers' own money.
>> Tether trade volume sits at $40 billion in the last 24 hours.
The problem for me is that I can't tell how much of that is wash trades. Maybe very little, but maybe a lot. That is one place where a regulator would help.
Binance, the largest crypto exchange of them all, has huge USDT holdings and is widely reckoned to be in deep trouble. However, they can't dump it without wrecking the market in the process.
One of the famous SBF screenshots showed Binance's CEO deeply concerned about someone selling US$250k (not M! K!) USDT, because they were afraid that might upset the apple cart, even though USDT is notionally backed by $68B of assets.
> One of the famous SBF screenshots showed Binance's CEO deeply concerned about someone selling US$250k (not M! K!) USDT,
I mean, i've read those chats and that's not at all what CZ is saying. He even clarifies that selling 100x that amount would do nothing to depeg tether.
he just said a particular trader and one specific trade was a pain for his exchange.
And that doesn't in anyway change what I said that if someone was holding tether then they could still mark it at par and be fine with selling the entire amount.
No interest in questioning your/their sources, but $250k is an order of microbusiness’s hourly amount. It can barely even move a spread on any exchange, unless dropped into an order book as is*. I worked few years ago as a trading bot developer for a company of 3-5 people who traded EUR and USD stablecoins for a local currency as part of their ops. $100k amount was a lazy morning.
If an exchange worries about $250k, it’s dead in milliseconds. There must be some huge context missing in that post.
* and even in this case a book will just swallow it at the expense of a market-order side and drift back in under a second.
I still don’t get how this could be interpreted as a “deeply concerned about someone selling $250k”, when the answer is “no I don’t think 100x that size would succeed”. From this I see one guy (C Z) who’s probably concerned about a supposedly systemic action with unclear goals, and another one (blue) fooling around a specific transaction.
I mean they could be deeply concerned as a person about whatever they projected about it, but it’s technically impossible with $250k which they admit right away. The way it was stated in the comment above is editorial, to say the least.
Looking through the chat, it doesn't seem to me that CZ is suspecting SBF with just this $250k trade. To me it looks like he is suspecting that SBF is doing something shady, and the $250k trade is just a tiny example of that activity. You have to intrepret this quite strongly to have the view that CZ seriously would think 250k would move the market. Additionally, CZ was right that SBF is a crook.
Exchanging $250k into USDC, DAI, BTC, or ETH is practically nothing compared to the daily volume, and exchanging one of those to USD in a bank account through an exchange is also not a big deal at all. 250k is a small amount.
As long as the websites are up, publish "quotes" that appear to represent alleged "gains" and the amount of withdrawals remains reasonably low. Like any Ponzi scheme.
NB. "Withdrawals" here means what the article calls "redemptions". It means recovering the fiat currency that one surrendered in order to participate in the Ponzi scheme.
Bitcoin could have "collapsed" weeks, months or years ago, but how would anyone know. A Ponzi scheme can be undetectable until the victims try to withdraw their funds.
As long as websites publish a purported "quote" then people reading may continue to believe it. People can argue about the "value" of BTC until they are blue in the face (watch for the replies to this comment) but until they actually withdraw the funds they committed in real money to participate, let alone any purported gains, it is all speculation. There are no guarantees because crypto is unregulated.1
These crypto entities are not required by law to disclose anything. How does anyone verify if what they disclose is actually true. If someone believes BTC is truly worth what is published on CoinMarketCap, then they should try cashing out and prove it.2 The ones who cash out early will get their money, but if enough people try to cash out in a short period, then the Ponzi scheme will be exposed. The schemers cannot cover the withdrawals. Most BTC owners will lose their real money.
But then, who wants money when one has BTC. If one believes in crypto then perhaps one believes money (fiat currency) is ultimately useless.
Tether had to be sued by the NY Attorney General for it to release basic information. Ths sad reality is that the only effective means to getting information about what crypto schemers are doing has been to bring civil or criminal proceedings against them.
1. With respect to the US, crypto is unlike shares of stock, the issuance and trading of which must comply with securities laws. Tether is not registered with the SEC.
2. "Cash out" here means convert to real money (fiat currency). The article refers to this as "redemptions".
"Like other stablecoins, its value depends on a simple notion: Investors expect that Tether the company will swap $1 for one tether, or one tether for $1. Central to that is the assertion that Tether has enough reserves to redeem all the roughly 68 billion tethers in existence."
Or "withdrawal" could mean "exchanage", e.g.,
"3. Putting your savings in Tether
Tether is usually worth $1, and you can earn far more interest lending it than you would with the best high-yield savings accounts. Based on that, doesn't it make sense to put your savings in Tether instead of the bank?
Not quite. While they may seem safe, Tether and other stablecoins are a much riskier place for your money than a bank account.
Tether makes no legal guarantee that 1 Tether can be exchanged for $1. Most banks offer FDIC insurance that protects up to $250,000 per account in the event of a bank failure. Tether isn't FDIC-insured, so if the company behind it fails, you'd have no protection.
There have also been controversies with Tether and its reserves in the past. Tether Limited used to claim that every Tether was backed by a U.S. dollar, but that turned out to be false. In a recent reserves breakdown, Tether Limited revealed that 2.9% of Tether was backed by cash.
Also "withdrawals" could mean withdrawals by the Tether company from their own bank accounts to cover redemption requests from Tether customers.
"As long as people believe that Tether is fully backed, or that Tether and Bitfinex probes won't impact the price of bitcoin, the game can continue. But if too many people start dumping bitcoin in a panic and rushing toward the fiat exits, the truth - that there isn't enough cash left in the system to support a tsunami of withdrawals - will be revealed, and that would be especially bad news for Tether execs."
Not sure what you mean here. Do you mean conversion?
With BTC, 99% of users could withdraw their BTC from the exchange and it would have relatively little effect on price (although there might be volatility). Trading for USD would impact the price, and I'm suspecting that's what you mean by "withdrawal".
But trading anything into anything else devalues it relative to the other thing. You could say the same thing about a stock. If everyone holding Alphabet decided to try to sell it tomorrow, the price would crater, because that's how markets work. This not the same thing as a Ponzi scheme.
They claim to but nobody has posted proof that they got their money. Their terms of service at tether.to/legal says they can basically deny or indefinitely delay redemptions arbitrarily, and the only people who backed up Tether's claims publicly are SBF and Trabucco and I'm not sure I believe them anymore.
They're simply not incentivized to do that. If they did their USDT would actually become worthless. If they said nothing and simply exchanged it to the next fool, they get their money.
Contractually, Tether doesn't allow redemptions from most people. New Yorkers are excluded thanks to the NYAG settlement. US persons are (or were when I checked) blanket excluded in their terms. Of the remainder, only their 'customers' as defined at their sole discretion are eligible for redemptions. Then, you have to meet minimum transaction size requirements ($100K I believe) and also pay their fees.
What individual would bother doing all that when they can hit 'sell' on Coinbase?
So once the retail rubes are ruled out, you've really only got gigaholders whose fate is so tied to USDT's continued existence and value that pantsing the emperor leaves them rekt.
Okay. So your argument requires no one to ever pull the trigger for mutually assured destruction in his case, over a broad universe of non-cooperating actors, and even if they had another way to benefit from the collapse of crypto that they would be causing. That still leaves it in a tenuous position.
Edit: for your later addition:
>What individual would bother doing all that when they can hit 'sell' on Coinbase?
In addition to the above, someone doing an arb play during any one of tether’s many “it’s gonna die this time for real” depeggings.
The thing is it's not really speculation. The CFTC and NYAG statements said in no uncertain terms that there were long periods of time where Tether did not have the money to cover their obligations.
Letitia James says:
> The OAG’s investigation found that, starting no later than mid-2017, Tether had no access to banking, anywhere in the world, and so for periods of time held no reserves to back tethers in circulation at the rate of one dollar for every tether, contrary to its representations.
The CFTC says:
> As found in the order, Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018.
I don't personally think that it's impossible to redeem, I think they're almost guaranteed not to be good for all outstanding Tethers. I think they keep some small pool of liquidity to satisfy certain key partners, and gamble with the rest of it hoping for yield they can take off the table for themselves. I strongly suspect they got ruined during the downturn. They had a ton of Celsius equity, for instance.
I think they loan tethers to institutional players in the space without collateral, too.
[edit] I'm not sure BFX actually arbs the peg, I think they stopped? I'm trying to find my source. However, I do know Alameda arbed the peg.
What's not really speculation? The new goal post you moved to, or the point I was originally contesting, before you retreated to an unrelated argument for which you could dump piles of (also unrelated) evidence?
You were claiming[1] that Tether isn't honoring redemptions, based on the fact that no one's screaming "Hey, look at me, I just got some USD back for my tethers, 1:1" -- even though people could also point to tether's failure to redeem, and even profit from advance knowledge of the imminent crypto collapse it would trigger.
Now, with no acknowledgement of what just happened, you're moving to this argument:
>>I don't personally think that it's impossible to redeem, I think they're almost guaranteed not to be good for all outstanding Tethers.
It looks like you have no aversion to making a baseless claim, and then firehosing evidence of a different one when called on it. I don't think that makes for a productive exchange of ideas.
I mean, if you really believed that Tether was honoring at least some redemptions[2], why would you casually make the argument that, gosh, we don't have reports of successful redemptions, they must not be doing any at all?
Sorry maybe I was just a little confused, I'm trying to do a few things at a time. Let me try and clarify. I'm approaching this from a good faith position.
> You were claiming[1] that Tether isn't honoring redemptions, based on the fact that no one's screaming "Hey, look at me, I just got some USD back for my tethers, 1:1" -- even though people could also point to tether's failure to redeem, and even profit from advance knowledge of the imminent crypto collapse it would trigger
I was trying to say they claim to (or have in the recent past claimed to) allow redemptions, but in reality, they don't honor all redemptions. They don't, because their terms of service say so. They don't honor redemptions to NY residents, any US persons, to anyone requesting less than $100K, etc. This is all on their tether.to/legal site. They've updated this wording many times.
I don't think in [1] I said they don't honor any redemptions.
Yes, nobody's screaming about it. I think once you exclude the above group (who sell at exchanges), then the remaining are either going to be taken care of out of a small pool of liquidity, or know not to ask for cash.
There's a ton we don't know. We don't know if Tethers are actually being issued in exchange for deposits. They could be issued to institutional players on faith, in which case a 'redemption' wouldn't be a cash withdrawal but instead they tear up the promisory note and return the USDT to the treasury. That seems within their capability.
I further maintain no big players but Trabucco and SBF have said 'they were good for our redemption requests' so I have no reason to believe they are, given their legal issues, questionable track record, and the suspicious folks in charge.
> I think they're almost guaranteed not to be good for all outstanding Tethers.
There's nothing baseless about this, they have a history as detailed by the CFTC and NYAG settlements. I have no reason to trust they're suddenly good for it. So I have no reason to believe they'd be good for all redemptions in the future.
If your argued in good faith, you wouldn't t need to constantly "clarify a position", and you wouldn't "get confused". You made a comment doubting that Tether was honoring redemptions at all -- directly contrary to the position you now hold.
That makes it a very unforced error. If you had come into the discussion in good faith, you wouldn't have to remember which ridiculous, over-the-top claim you made, in which subthread, and you wouldn't be addressing arguments someone never made (like about the NYAG stuff). You would have one model, one truth, and you could just argue from that.
Re-read [1] and the two levels above. Can you honestly imagine anyone going away from that believing (or believing it's your opinion) that Tether is regularly honoring withdrawals?
Even now, you don't look like you're arguing in good faith: your "proof" that Tether doesn't honor withdrawals is ... what? That their ToS has long said they don't honor certain types? Okay, but by that definition, Wal-mart isn't honoring gift cards either, simply because their ToS reserves the right not to in some cases (e.g. old card, belligerent customer). No one would seriously try to cite that has proof that no one has been buying goods with Wal-mart gift guards.
In a good discussion, the claim that Tether "isn't honoring withdrawals" would be that they aren't honoring ones that, on the face of it, meet their criteria. Using a few long-standing caveats as your "out" is dishonest.
> If your argued in good faith, you wouldn't t need to constantly "clarify a position", and you wouldn't "get confused". You made a comment doubting that Tether was honoring redemptions at all -- directly contrary to the position you now hold.
Don't be silly, you're just being argumentative and trying to read something into my replies that isn't there. You failed to get my point. That's on both of us. Pretty much end of story.
I'm sorry but I'm not going to continue this because you are not having a conversation in good faith. Enjoy your weekend.
You argued Tether wasn't honoring withdrawals, saying there was no evidence of it. I disputed that claim as being over-the-top. That wasn't "being argumentative", that was calling out an obviously wrong claim, and then you trying to pretend I was disputing a different claim that you're better prepared to defend.
If you don't want people to dispute that "Tether hasn't honored withdrawals", then don't make that argument!
Good faith = honest attempt to reply to what someone actually said, not changing the topic, not talking about weekends.
Where, specifically, did you think I broke that?
I strongly encourage you to re-read what you wrote in [1] again and see if you can find any reasonable interpretation whereby someone would think you were saying Tether was regularly honoring redemption (as you now claim you meant after being called out). It just isn't there.
It doesn't matter that your general conclusions about Tether might be correct. "Good faith" means not saying things like, "They claim to [have redeemed USDT for USD] but nobody has posted proof that they got their money."
If you want to have a good-faith discussion you can't just recklessly spray negative remarks about the villain. You have to stick to things you actually believe -- or at least, recognize when you were out of line and acknowledge the moved goal posts. It's really not a big ask.
> They're simply not incentivized to do that. If they did their USDT would actually become worthless. If they said nothing and simply exchanged it to the next fool, they get their money.
If they knew that Tether wasn't honoring redemptions, they could take out a large amount of Tether-denominated loans backed by their own collateral. Then they could go public with their information and profit.
> People have been screaming about Tether being a scam for almost a decade now and it hasn’t crashed.
In this hypothetical situation, you have information that would apparently "crash the market" if it were to become public, so what happened for the last decade isn't really relevant. Remember, this conversation started talking about Tether redemptions failing to go through and whether or not people would go public with that information. Someone said they wouldn't go public because it would crash the value of their assets, but I was pointing out that you could profit from the crash in value as well.
As pointed out elsewhere in this thread, the counterparty risk to these shorts makes it nearly impossible to do.
And this information has been public for years, including the NYAG evidence which is very damning, but no one seems to actually care - or it’s being propped up successfully regardless.
Even in this thread there are folks who refuse to believe things Tether themselves have admitted to under oath and things Tether says in their own TOS now.
At this point, even if you had authenticated video of the Tether founders admitting it was all a giant scam, would it change the market behavior? I kind of doubt it.
It’ll keep going until it doesn’t, then who knows.
We're talking about a hypothetical situation where people have attempted to withdraw Tether and failed to do so. And the assertion was that no one would "spill the beans" about Tether's inability to redeem USDT because they'd risk harming their own investment. That would not happen because of what I outlined above. There will be at least one person willing to make a bet on this. It's in the DNA of people who trade. The appeal of exploiting information asymmetry is too great, at least for one of the participants. And all it takes is one person to reveal Tether's inability to pay.
When Tether crashes, the whole crypto market will crash with it. So, unless they convince some crazy bank to give them real money loans for more than the "hundreds of millions of dollars" worth of crypto tokens that would drop to near zero if Tether were exposed, they really can't.
How is that irrelevant? People who trade want to make money. If you could control crashing the market, you could make so much more by crashing the market than you could otherwise.
They claim to, if you meet their verification requirements, and if you're requesting enough. What's the betting that their account verification would happen to have some technical issues during any crisis?
Except stocks don't claim to be pegged to, or backed by, anything. If Tether isn't backed 1-to-1 then it looks more like a bank, and may be subject to a lot more regulation.
Of course, I wasn't claiming Tether works the same way. I was merely responding to the idea that bitcoin "gains" aren't real because people haven't "withdrawn"
> If everyone holding Alphabet decided to try to sell it tomorrow, the price would crater, because that's how markets work.
Not necessarily - Alphabet could prop up the price by using its cash and taking out loans on the company itself, if the price of the shares is truly in line with the value of the company.
Tether (and the others) don't have to make redemptions. People attempting to repeated find there are sudden issues with the network, or the oddly need to re-verify themselves (and fail) repeatedly, or some other random issue occurs. Binance is doing this heavily right now (and recommending people use P2P, which also fails).
Do you have a source for this? The idea that Bitfinex consistently uses technical issues as an excuse to prevent redemptions is speculation and hearsay. You'd think the anti-Tether conspiracy theorists could provide solid evidence for an alleged $68 billion scam.
But of course, the large numbers of users on reddit, twitter etc complaining of such issues is just a bot army organised by anti-Tether 'FUDders' to spread mistruths. Bitfinex don't do that because you can't withdraw directly from them...
Can you give me some examples of people complaining about this? And I'm not talking about people sharing hearsay. I mean people reporting that they can't redeem their USDT for USD.
For the US Treasury market, the players are not small. Maybe that was believable for the commercial paper dealings for Tether, but you can just directly buy from the US Treasury at auction, or go through a banking partner like Deltec Bank, and none of "the players" will know anything about you.
> You can’t roll billions in treasuries without all the major players knowing who you are.
Of course you can. Direct and indirect bidders for US Treasury bills are routinely in the dozens of billions. No need to go through a primary dealer.
> And if they did they would release their cusips and put this to bed as there is only downside for them by withholding the cusips
Would you honestly be convinced if their attestation reports included CUSIPs? Do you think that people would still clamor for an audit and just move the goalposts to "anyone can look up CUSIPs for US Treasuries. Why aren't the primary dealers confirming their purchases?"
> Would you honestly be convinced if their attestation reports included CUSIPs?
Yes because that would be verifiable and we could know the counterparty holding them and ask for verification. If they verified they are holding those cusips for Tether then we're good.
And I don't' think you understand the treasury market as well as you think you do. Its a very transparent market. Everyone knows all the players, especially at the 10's of billions size.
If they honestly were buying treasuries through Deltec then we would know, I assure they they are not as Deltec doesn't really participate in this market
That's not exactly how it works. You can't make 4.75% of $67B if you never had $67B in real dollars. They could have as well never received any USD / fiat.
They mean there is no proof they issued tether for real money, and instead they could have issued it for collateral in crypto or IOU by other crypto entities.
Which would explain why nobody in the financial industry knows them even if they supposedly manage 60B$.
Why would you exchange tether for crypto or IOUs that are super risky and have no cash flow instead of risk free dollars that you get to keep the interest? First one sounds like suicide while the second is a very lucrative business.
Because it costs them nothing to "create" 1M USDT and exchange it for nothing. So, they create 1M USDT out of thin air, and "sell" it to some crypto exchange that wants to claim it can redeem 1M$, in exchange for some other crypto or IOUs or whatever. The exchange is happy because it can now sell 1M more USDT. Tether is happy because they got something that is nominally worth 1M$ at no cost to them.
Of course, someone somewhere in the future will be left holding the bag. But if they can keep it going, and if they do manage to sell some USDT for real money (which they certainly did), then they can still make a load of profit.
Because no banks will work with them and the US gov’t is constantly trying to track them down - and has a stranglehold on USD banking in the world. Read the NYAG report, it’s pretty crazy.
> Launched in 2014, Tether (USDT) came to extraordinary success with a current market capitalization exceeding 67 billion USD.
> This stablecoin fixes the issues inherent in the previous three. It relies not upon volatile reserves or the idea of persistent arbitrage trading, but on hard reserves of fiat currency. For every Tether coin in existence, there is one US dollar in a vault backing its existence.
> In this way, the stablecoin handles a complete theoretical rout with ease. Tether continues to serve the burgeoning digital asset space while garnering the implicit affection of regulators.
That's not as concerning as a bank that lent money to FTX, though, right? If you take a loan from someone that goes bankrupt, you pay them back through whatever process is established by the bankruptcy court. If you loan money to someone that goes bankrupt, you're most likely sitting on a loss.
Deltec's response is that they're awaiting instructions on how to repay the loan:
It’s quite concerning because it seemed to be off the books/hidden originally, SBF is one of the few who claims he’s been able to issue or redeem tether, it’s ‘Tethers bank’, and SBF is implicated in one of the largest crypto frauds in history.
Can anyone chime in as to what the fiduciary responsibility is if you have a liability but no responsibility to pay it? If I promise to store $1 for every $1 taken but also don't agree to actually ever pay out, is it illegal to not actually store the $1, or is it just dishonest?
The article doesn't actually say anything bad about tether.
The worse parts are that they were once fined. But it's a tiny amount and most banks get fined regularly by all sorts of regulators.
Other than that, is it meant to collapse because one of the founders once played hockey in a movie as a kid? Or because another one is asian?
Go back and read it. It's not factually wrong, it just couches facts negatively ( eg Jean-Louis van der Velde is also known as Jan Ludovicus van der Velde, but who cares? So he anglosized his name? Teddy Roosevelt was actually called Theodore you know, Ted Cruz is actually Rafael Edward Cruz)
None of this would put me off investing in any given company outside for crypto. Would you refuse to buy shares in a company with a CEO who was asian or a CFO who used an anglosized name? I assume not.
They were forbidden from doing business in NY because they flat out lied about pretty much everything they were doing or were. including that they had cash reserves, when for years (and maybe still), they didn’t even have bank accounts.
Because no one cares about random wild speculation and rumors spread across the Internet for almost a decade. What people care about is whether they can take 1 USDT and exchange it for 1 USD, plain and simple.
Currently Bitfinex will exchange 1 USDT for 1 USD and they hold a substantial about of USDT, they also buy up USDT when it falls below 1 USD. I'm sure Bitfinex is happy to see reports about Tether's demise spread, because it's free money for them.
If at some point it's not possible to redeem 1 USDT for 1 USD, then Tether will collapse like the other stable coins and that's really all there is to it.
It's literally been covered in CFTC and NYAG settlements. It's not wild speculation, it's not rumors. It's all here. [1, 2]
> Currently Bitfinex will exchange 1 USDT for 1 USD and they hold a substantial about of USDT, they also buy up USDT when it falls below 1 USD. I'm sure Bitfinex is happy to see reports about Tether's demise spread, because it's free money for them.
No, that's what they say they do. We have no evidence. The last people who stuck up for them in this regard, SBF and Trabucco, are in some pretty hot water. It could be Tether/Bitfinex, but it could be anyone else with an interest in perpetuating the ecosystem. Some exchanges mortally locked in perhaps?
> If at some point it's not possible to redeem 1 USDT for 1 USD, then Tether will collapse like the other stable coins and that's really all there is to it.
It may not be possible right now. Their terms of service say they can deny basically any redemption at their sole discretion. Anyone denied would not be incentivized to declare the emperor naked.
No one has complained about being unable to convert their USDT to USD. This is baseless speculation.
It's entirely fair to say there is no basis for trusting the company behind Tether, and by extension Tether. It's unfounded FUD to definitively claim that it's a scam.
The CFTC and NYAG statements said in no uncertain terms that there were long periods of time where Tether did not have the money to cover their obligations. You have lowered the standard to the point where it is significantly easier to meet. All they need to meet your standard is to have inflows in excess of outflows - outflows lower than inflows plus marketable securities.
Letitia James says:
> The OAG’s investigation found that, starting no later than mid-2017, Tether had no access to banking, anywhere in the world, and so for periods of time held no reserves to back tethers in circulation at the rate of one dollar for every tether, contrary to its representations.
The CFTC says:
> As found in the order, Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018.
It's literally not FUD, it's something they paid significant quantities of penalties over.
No access to banking is not the same thing as not having the reserves. If there was this massive shortfall/scam that you are alleging, those press releases would have spared no details in describing them.
>>> As found in the order, Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018.
You're leaving out critically important context, which is that Tether held other assets as reserves:
>>The order further finds that Tether failed to disclose that it included unsecured receivables and non-fiat assets in its reserves
Reading your comment without this context would lead a casual observer to conclude that the assets backing the issued USDT held a value of 27.6% of the USDT's face value, which is entirely different than reserves equalling ~100% of USDT in value, but with a significant fraction of assets constituting those reserves not being of zero-risk fiat as the marketing arguably implied.
> ... reserves not being of zero-risk fiat as the marketing arguably implied.
Not arguably implied. Literally and directly stated.
Their website at the time said: "every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USDT is always equivalent to 1 USD." The lie detector test determined that was a lie.
Please I'm begging you, I'd love you to reply to this but only after you read the entire NYAG settlement PDF I linked you. It is actually something of a crime thriller so I promise you'll enjoy it.
I'm not sure why you're quibbling. At one point Bitfinex reached in and took out hundreds of millions of dollars from the reserves Tether had to cover the money they had lost to Crypto Capital Corp. At the time they had a market cap of about $2B, so that was ~25% of reserves wired out. [4, S. III pages 6-9].
That's just one example.
There is, and I can't stress this enough, literally no reason for you or anyone else to trust these people. They've never published audits, one of their auditors (Friedman LLP) literally walked away once they saw their books.
Then for some of the attestations, they literally wired money in the same day from Bitfinex, then wired it out the next to make it look like they had the reserves.
> If there was this massive shortfall/scam that you are alleging, those press releases would have spared no details in describing them.
They did. [1] Also, it was covered in the NYAG settlement and the CFTC settlement I linked. I strongly suggest you give them an actual read-through. The entirety of the section III of the PDF covers it in painstaking detail.
> Reading your comment without this context would lead a casual observer to conclude that the assets backing the issued USDT held a value of 27.6% of the USDT's face value, which is entirely different than reserves equalling ~100% of USDT in value, but with a significant fraction of assets constituting those reserves not being of zero-risk fiat as the marketing arguably implied.
Not only is that is than an obvious misreading of the comment, it wasn't my comment, it was a direct quote from the CFTC website - but then you go on to claim something I never claimed.
Let me be clear then:
1. There periods they were physically unable to fulfill demands because they had no bank account access [4].
2. At other times, their peer organization raided the kitty and literally took the money (because the same executives gave almost a billion dollars to a company indicted for laundering money for - among others - the Colombian cartels, without a contract, and whose execs are in prison or on trial). [2,3]
3. At other times, they invested in illiquid securities and got rekt (they invested in Celsius for instance).
Stop giving these people a lick of credit, stop apologizing for them, and demand some proof.
By "your comment", I'm not referring to the excerpt you quoted from the report. I'm talking about your comment as a whole, which includes the quote about only 27.6% of reserves being fiat, but doesn't include the portion that indicates the shortfall was covered by other assets.
And like I said from the beginning:
>>It's entirely fair to say there is no basis for trusting the company behind Tether, and by extension Tether. It's unfounded FUD to definitively claim that it's a scam.
I will concede that some of the evidence you provided shows a company behaving suspiciously, and at times dishonestly, but this impression one gets from the Tether critics, that USDT is a total scam backed by nothing looks like baseless FUD at the moment, no matter how valid your claims that the company behind Tether shouldn't be trusted.
Having Bitfinex convert it for you would mean that you deposit the USDt to Bitfinex and exchange it for 1 USD. Having Tether convert it for you would mean you have an account with Tether and redeem your USDt. Are you saying you can't redeem your 1 USDt for 1 USD because you don't meet the minimum $100,000 conversion?
Correct, you cannot redeem USDT via Tether, Inc. unless you meet the minimum deposit. You can trade it on various platforms for dollars from other non-Tether-inc participants. This is all on https://tether.to/legal and/or https://tether.to/en/fees
Also you can't redeem USDT if you're a U.S. Person, or if you don't meet their definition of customer, at their sole discretion.
> In order to cause Tether Tokens to be issued or redeemed directly by Tether, you must be a verified customer of Tether. No exceptions will be made to this provision. The right to have Tether Tokens redeemed or issued is a contractual right personal to you. Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves. Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all.
The only sensible comment here. HN has been predicting Tether's collapse for nearly 5 years now and it's simply not happening, people purchasing tether have been taking a short against bitcoin, historically that a very bad bet and certainly one you want to be on the other side of.
Now they've been through very significant bear markets, some theft of funds and still are solvent.
I don't understand the criticism about high amounts and verification for directly redeeming it either. If they did neither of those things it would be a money-laundering haven and they'd have men with guns raiding their homes tomorrow. You can redeem it through kraken and other domestic exchanges for cold hard cash, it's working perfectly fine.
Tether will be looked back as an example of how dramatically wrong "common knowledge" can be in internet communities, some people are so mentally obstinate and committed to the idea that it is simply too hard to admit they might be wrong, this is fed by others in the community with the same affliction.
> Now they've been through very significant bear markets, some theft of funds and still are solvent.
How did you determine they are solvent?
Note that even a literal Ponzi scheme could honor withdrawals for a time, so producing $1 for 1 USDT (or even several billion) is not proof.
The only reports I'm aware of are either paid for by Tether (e.g. the latest report from BDO--whom I know nothing about) or from governments (e.g. the NYAG and CFTC reports--which I trust--and show that Tether was, in fact, not telling the truth about reserves).
Solvent usually means being able to pay ALL of your obligation in the LONG term so your claim that they are solvent because they manage to cover SOME obligations in the SHORT term doesn't mean anything.
Where can I find the info on billions that they exchange yearly?
Shows a decline in market cap from $83B in May 2022 to $66B in July 2022. That represents $17B in redemptions over a few months. That represents Tether net paying USD to USDt holders.
The article makes clear that Tether is actually more like a Special Drawing Right (SDR) on overcollateralized derivatives of the crypto ecosystem. Which is to say that Tether is more like a derivative of rainbows and unicorns-- actually it's basically the IMF of rainbows and unicorns.
Is Tether the equivalent of USD? No. It is not USD.
Why is Tether valued at 1 USD per coin? I'm not sure. But it almost certainly will not be if the value of crypto broadly falls enough to compromise Tether's collateral. The value of that "paper" is a nonlinear function. The "collapse" would happen so very slowly... and then all at once. Good luck.
Crypto to me is a Ponzi scheme analogous to an almost perfect pathogen - doesn’t kill the host and comes back every fall. Greed ensures we always forget.
Interesting analogy. It is highly adapted to its host for sure. In fact, it's quite impressive how evolved it is, always morphing and camouflaging, keeping the immune system at bay.
My understanding is that lack of trust in Tether actually makes Tether money. First a few things to note:
- Tether sells 1 USDT for 1 USD
- Tether will buy back 1 USDT for 1 USD
- Tether is also traded on crypto exchanges
When people start to lose trust in USDT, the price of USDT on the crypto exhanges drops. Lets say 1 USDT becomes worth $0.99 on the market. Tether then buys USDT on the exchanges for $0.99, even though they had previously sold that USDT for $1. They have just earned $0.01 on every USDT bought.
This accomplishes two things:
1. This pumps the price up so Tether doesn't fully collapse on the market
2. Tether makes money
Tether doesn't need to keep one USD in reserve for every USDT out there, they just need to keep enough that if the prices start to drop they can buy back USDT for cheaper than they sold it for and prevent a full bank run.
As long as there's a cycle of people periodically losing trust in USDT, Tether skims cents off of the trading market at high enough volume to pay their employees and make a tidy profit.
Tether loses money when buying USDT back, at whatever price. Sure, as long as they are buying it back at a smaller price than they originally sold it, they're still ok - but it's not in Tether's interest to give away its cash for USDT (since there are much better ways to make money off of cash than trading it for less than 1 cent). Especially since Tether can just print more USDT whenever they feel like it - it's not like they need to buy USDT before they can sell it again for 1$.
Because it’s in no one’s interest to see Tether collapse. The damage to the crypto “ecosystem” would be profound. So the major players work together to make sure the music doesn’t stop.
This is the correct answer. In regular markets, price discovery happens because people can take both long and short positions on an asset, and thus the equilibrium price reflects something close to the true price (theoretically anyway.)
In tether, there is no real way to short it because of the counterparty risk -- if you short Tether and win, when the time comes for the payout your counterparty would have gone the way of Tether itself, and you will have no one to collect payouts off of.
You can short it on a decentralized exchange if you want to avoid counterparty risk
You then have a different risk though, protocol (smart contract) risk. As long as the smart contracts don't have exploits, you'll be able to withdraw your collateral after repaying your borrowed Tether.
Of course, this also means you have to be fairly overcollateralized. If you want to short say $100 of Tether you'd do well to deposit $200 of funds as collateral, because each asset has its own collateralization ratio that's not 1:1 to protect against liquidity crunches.
Aave and Compound (v2) would be safe places to execute a strategy like this, as they've been battle-tested for years at this point and have received multiple audits.
There's always risk of course, but I don't think this is any more risky shorting through a centralized exchange, and much more transparent than something like shorting traditional securities
I am incredibly tired of hearing this same argument, especially because DEXes like AAVE and Compound does not have anywhere close to the liquidity it is needed to short Tether to the point it causes any trouble (or even slight discomfort) for them. I just checked, and it seems like the total size of the borrowing pool of USDT there is about $500MM (~$330MM AAVE, $170MM Compound v2), which, together, makes 0.73% of their total market cap. That could probably cause trouble if Tether was, say 0.5% capitalized? But we know that number is probably above at least 20%, as in, Tether may have ~$13.6B in cash that they can and will spend to defend their peg.
So the liquidity is enough for small fishes to take bets that they don't know is actually swindling them out of their money. However, it is not large enough for an institutional/activist investor with a few billion in capital to take up a real position against Tether/Bitfinex.
I'm sure getting to tens of billions of USDT is more difficult, but in general, if borrow interest flows in, supply will chase it, as the supply rate automatically adjusts according to the ratio of the pool which is being borrowed.
More people borrowing drives up the supply rate, until more suppliers come in.
You can probably only get so much Tether into the protocols that way, maybe $5-10B
I didn't realize you were talking about shorts of larger size though. I think you'd have a hard time shorting, say, 20% of the supply of a stock also
The point being made is that no one can profit by shorting USDT to the point where they would be shown not to have anywhere close to the reserves they claim. So the argument "no one has successfully shorted USDT, so Tether must actually hold the needed reserves" is false.
This of course doesn't prove that they don't the reserves, it's just that this is a bad argument.
DEXs don't trade money, they trade crypto. So, if you believe that USDT crashing will bring down the value of all other crypto near 0, DEXs are just as bad a place to short Tether as any other part of the ecosystem.
any yet, back in the GFC, people shorted mortgage bonds so much that paying out would've bankrupted the banks (as they are the counterparty). So why doesn't that apply here? As long as you are the first to collect the short, you will still win.
In the GFC, most people expected the system of rules, trade settlements, and, at last resort, lawsuits to probably make them whole when they trade in a volatile environment against counterparties that they believe are likely to go bust.
(There are still ways to guess right, but lose big on a trade, like shorting a company, whose stock collapses, and then gets delisted!)
In the crypto world, your counterparties might, quite literally, run off to Singapore, leaving you holding a worthless bag of toxic garbage.
Unlike the GFC, the first evidence of any weakness will be your counterparty being bankrupt. With the GFC, it was based on available information that the specific trades were going bad. In this case it will be "redeem for a dollar, redeem for a dollar, I cannot redeem/am broke so obviously your short is now good".
Because the US government doesn't want the US economy to go up in flames, and thus stepped in to make sure the bank's debtors are made (somewhat) whole. Who would be the "lender of last resort" in crypto?
>> Because it’s in no one’s interest to see Tether collapse.
That kind of sounds like magical thinking. On the other hand trying to short USDT sounds insane from a practical point of view.
I think the reality is that we talk and think about all crypto way more than they actually are going to matter, particularly relative to the amount they are actually used. Not the BS "market cap" which is phoney in so many ways. Can we admit that maybe this isn't very important?
There were major players involved in other cryptocurrencies/stable coins that ultimately failed. There's absolutely no shortage (pun intended) of people who want to see Bitcoin and/or Tether collapse and have a vested financial interest in seeing it fall. If there were a verifiable reason for either of these to fail, it would.
Tether continues to survive for one simple reason, up to this point anyone has been able to redeem 1 USDT for 1 USD through Bitfinex and that ultimately is what holds the peg. Bitfinex themselves buy up USDT when it dips below 1 USD which is actually one of their sources of revenue and about 60% of all USDT is held on Bitfinex.
> up to this point anyone has been able to redeem 1 USDT for 1 USD through Bitfinex
What do you mean "up to this point anyone"?
For several years Bitfinex (who also assured everyone that they had NOTHING to do with Tether) or Tether would only let you redeem if you were a "whale" with over $30K in holdings, were a non US-national, were subject to a six month waiting period. Random people absolutely could not redeem say 10 USDT.
Also during that period people would post bounties, some of which were a couple of thousand dollars, for -anyone- to demonstrate that they'd been able to redeem, and none of those bounties were ever claimed.
Things might be different now, but let's not try to claim that it's all been all good so far.
> and have a vested financial interest in seeing it fall
Who can actually profit from it falling? The problem with shorting it is that you have to find someone who will remain solvent when Tether collapses to take the other side of the bet.
Why would Bitcoin collapse as a consequence of Tether collapsing? I would expect to see a temporary drop due to market instability and low investors' confidence amid fear, but surely not a collapse.
Each Tether, on paper, represents a single US dollar locked into the crypto ecosystem.
It's kind of like a company's war chest bank account: no matter what happens, the value of the asset is worth at least that much.
But it's a little more pernicious than that. Tethers are typically emmited conveniently at times where the price of crypto is going down, propping the value up. If the current value of BTC exists because of artificial upwards pressure, it's likely that the value should settle back down to where it would have been if not for said pressure when released from it.
FYI - Tether stopped even pretending it actually represented that anymore, and NYAG dig up plenty of evidence that it was never actually even close to representing real money. They didn’t even have bank accounts back in ‘17!
I don't believe I've ever seen any such evidence. The only attempt I've seen about supporting that is a time series analysis that showed that the total tether issued increased at times when Bitcoin's price increased-- which is exactly what you'd expect to see happen without any funny business: 'crypto' mania fuels demand for both Bitcoin and tether.
I don't have any doubt that tether is up to all manner of funny business (e.g. printing unbacked coins and loaning them out for people to 'invest' in defi ponzis), but mostly its used to trade against varrious altcoins that are only traded on off-shore exchanges not used to trade against Bitcoin. The arguments that it plays some major role with bitcoin from what I see appear to be conjecture and logically unsound reasoning rather than clear and convincing evidence.
If you're aware of something better-- I'd love to see it.
Absent that kind of connection I wouldn't be surprised to see demand for Bitcoin _rise_ once the instability fear cleared: prior to tether being used to purchase sketch-coins at offshore exchanges Bitcoin was the exclusive option for that purpose.
So long as you can buy drugs with Bitcoin it will maintain a certain minimum value, regardless of what happens with these scam companies. If tether where to completely collapse I estimate Bitcoin would fall to to no less then 30% of it’s current value.
The price of bitcoin will never fall faster then the time it takes to login to a darknet market and update a listing.
Oh, yeah, bitcoin is actually quite transparent for the outside so most darknet exchange use Monero last time I checked. Bitcoin is a whole different beast at this point.
Theoretically…yes. In actuality governments can make it impossible to exchange Monero for USD/fiat which would render it fairly useless (at scale, anyways).
This is already being frameworked. “Coffee shop” sales of cryptocurrency (even BTC) is now de facto illegal in the USA. You can’t post a Craigslist ad saying “hey I have 100 BTC willing to exchange for USD”. The feds will (and have!!) arrest you for violating AML/KYC.
XMR is currently being considered for an “asset non-grata” classification where any exchange doing USD/XMR transactions would be held accountable for facilitating money laundering because participation in XMR inherently assists in laundering money.
Suppose I buy a bored ape or whatever, and then I sell it, and then the person I sold it to uses one of those non-KYC exchanges to buy XMR. How are the feds going to know whether it was me on both sides or not?
Are they going to correlate my IP to McDonalds wifi and subpoena the security footage and get me via facial recognition? At some point it's just too expensive to chase down.
The feds will simply sanction any institution which allows XMR to be converted to fiat. The US government has ultimate control over global finance for now, although that iron grip is being weakened with Russia/China's alternative to SWIFT/etc. However, China has already banned XMR domestically.
US financial sanctions are very intense. The bank/instution that is converting fiat to XMR would be a complete pariah, unable to participate in any global banking or have any transactions with any bank which needs to participate with other global banks.
If you are an institution selling XMR and taking peoples fiat, you would have nowhere to store the fiat. You would have no one (Stripe/Visa/SWIFT/ACH/PayPal/etc) who would process those payments. You would be unable to travel to any western country. Anyone who does business with you could also get similar sanctions.
You could perhaps trade XMR<->ETH or something like that...but eventually someone with the XMR will want to convert it to fiat, and that would not be possible. Anyone doing a lot of BTC/ETH<->XMR trades could be found via blockchain analysis, and similarly investigated and prosecuted for participating in XMR, because XMR facilitates money laundering.
They could easily ban any BTC traded by a DEX that offers BTC/XMR exchanges, and any BTC that comes from a pool that also contains money that participated in this etc.
If the US government wants to ban an XMR, it can ban XMR.
I don't think it would be so easy. How does the government figure out which addresses go with the DEX offering BTC/XMR?
I suppose if they could buy XMR with BTC and see which output addresses were involved with that transaction--those would be addresses controlled by users of the DEX. And then they could buy BTC with XMR, harvesting a few more addresses.
But if they run analysis like that continually they're going to end up paying a lot of money to the DEX in fees.
In fact, the exchange might not even need real users at all. They can just generate enough noise to attract the government's attention, and then soak up the government's money while letting the government spy on a bunch of robot activity.
It's gotta be one of these:
- ban crypto entirely
- give up on drug prohibition
- burden taxpayers with an endless game of whack-a-mole which slowly transfers value out of the US economy without achieving meaningful enforcement goals
Doesn't the DEX have a specific wallet (or several) that you send/receive crypto to/from, on the ETH or BTC chains? If so, then it's easy to ban anyone from interacting with a DEX which advertises XMR. You don't just ban those who traded XMR with the DEX (which is costly), you ban anyone interacting with it at all (which should be easy to check on the classical block chains).
A "wallet" is a client side concept, all the blockchain sees is "addresses" (we're talking BTC here, but it's common elsewhere too). Most wallet software will create many separate addresses for a user and the "wallet balance" will be their sum. Which addresses can be correlated with each other by an adversary will depend on usage patterns.
For instance if you receive $5 and then later send $5, your wallet can just send it from a single address, so none of the other addresses in your wallet can be correlated (via chain analysis) with that transaction. On the other hand, if you have addresses with $2 and $4 and you wand to send $5 then both will be involved in the transaction, plus you'll be getting a new address where you get the change ($1) back.
It would be the same for an exchange. A single address (or a hard-coded list of them) would be a centralizing feature, if it has that, it's not a DEX (because whoever controls the keys for those addresses controls the exchange). A DEX would have to make buy/sell orders happen based on some set of addresses that were not around for the founding of the exchange. Likely, those addresses would also not stay around for its lifetime. You'd generate them as needed and forget them when they no longer served you (I suppose "you" are a DEX node in this scenario).
What's uncertain is just how interconnected they'd have to be. On one hand, you want to keep the list of known associates small so that token taint doesn't spread to all users of the exchange (which is what you described in your previous post). On the other hand, maybe you want the list of participants to be large enough that it's not practical to send an agent to kick down each door in the list.
If anybody can find the maximally infuriating size here, I'd trust that it's the kind of person who would write a DEX.
Lol so if I send BTC to a friend overseas and they use it on their ancapworld exchange or whatever that is legal in their 3rd world shithole, then suddenly that BTC is banned from ever entering the first world again?
The only way I see this kind of works is if they ban crypto in general, and then ban cash in the mail too. Oh yeah and ban foreign trade, because as long as it's legal somewhere else you can spend XMR in THAT country in the form of importing goods to the US and then sell those goods for cash. We're talking about bits in the ether, and unlike with bitcoin at least to our knowledge the public ledger is not traceable. Seems like a tall order.
Yes, they could declare any exchange that offers XMR to customers as banned, and no financial institution that trades with that exchange would be allowed to trade with a US bank. That's how US sanctions typically work. Most likely, that exchange would quickly stop offering XMR trades itself.
And even if they didn't, that BTC could indeed no longer be allowed in the US controlled banking system (which is far larger than the West).
Of course, if your friend were able to redeem buy actual goods for XMR and send those back to you, great. But what goods vendor would want to own XMR in a world where no institution that does business with banks would want it?
Note that what I'm saying is not purely theoretical - this is the status of Tornado Cash - where they went so far as to arrest developers of that. And banned BTC also exist - there are BTC that are illegal to own, and wallet addresses that are illegal to trade with.
Your points are taken, may rebuttal would be that monero is only worth at most about $3B and that much value is easily captured outside the banking system. It seems like one of those scenarios that will require a gargantuan effort in practice and at best you end up with drug-war style penalties without even choking out the lions share of the value, and even if you do something else just takes its place. It would really pain me to see my country going down that path again, but history does have a way of repeating itself.
I mean, yeah this is already done. Over $10,000 requires you to file a FinCEN Form 105. The point isn't "you can't send money" its "The US government only wants to allow systems to exist in which it knows who/what/when/where about any non-trivial sized transaction."
If there's an auditable/subpoenable record, they're happy. If not, they're not. Right now they're "not happy" about XMR. Some day they'll ban it.
As for ETH/BTC<-> XMR they'll probably ban that too. Not from a technical perspective but more like "if we catch you sending ETH to that Russian XMR exchange we'll prosecute you."
Honestly banning cash would be one of the easier things to do, but I don't think what you've said is necessarily true.
I cannot offer legal advice here, but my understanding is if Bob in NY has the fantastically idiotic idea to send $100k through the mail to cousin Suzy in CA, he wouldn't be violating in laws by not filling out the 105 or IRS 8300. He's not engaging in a trade/business and the money is not leaving the borders.
I meant internationally, domestic cash transactions don't currently have reporting requirements per se. Most domestic cash mails would eventually reach a magnitude large enough to meet a reporting requirement for sales tax, 1099-MISC, gift tax, etc.
Sure, you've gotta have one exchange that knows your bank account, and then move it through a non-KYC exchange to XMR--which means you'll pay an extra fee or two--but unless something has changed in the last year or so that's not a difficult thing to do.
Way way back I had Chinese acquaintances who were using it to get their money out of China and to Canada. No longer in communication with those people and I know China has since come down hard on it but is that still part of it's use?
You're question is the correct one to ask. You are bring down voted because people want to pretend one possible crypto scam discredits all crypto and can't comprehend that crypto is more complex than that.
> why are these types of articles not causing Tether
It is indeed a very interesting question.
The scamminess of Tether is pretty much obvious to everyone in the crypto world at this point (this article brings fairly little that's new to light).
As I mentioned somewhere else in the thread, I believe the explanation might be that Tether fills an absolutely essential role in providing liquidity to Cryto markets.
So fundamental that everyone allows it to continue to operate in spite of knowing how rotten to the core the whole thing is.
Tether does not need perfect 1-1 backing to work. If there are enough funds for everyone who wants to convert to dollars or to sell on the market, it's fine. There has never bene a situation in which all the reserves are needed. The market depth is big enough that it works. I think this is part of why it has proven so resilient.
It's an insanely profitable business. Tether made lots of mistakes but they got bailed by the high yield of the market. The business will collapse when that stops or maybe they got better after all these years?
1. It took one twitter post by CZ to bring down FTX and it had one of the cleanest images around. Maybe people just "ran to the bank" and were able to get their funds back at the expected rate so the panic went down.
2. There's one major FUD about USDT every month published by major sites. If a bank run stemming from a news post was gonna crash it would have happened already.
FTX was perhaps uniquely bad at what it was actually doing. I would bet few institutions in the history of the world have ever misplaced 10B$ worth of value, for example. If Tether is somewhat more competent, then they can be far more reliable.
If I have this straight, Brock Pierce is one of the people running tether.
This means that potentially one of histories biggest ponzi schemes is being run by someone who has an entire documentary (An Open Secret) about them running a child prostitution ring and whose roommate was convicted of child prostitution and was also named in the related civil suit.
Pierce also has (had?) big ties with Steve Bannon, the dude who played World of Warcraft, came to the conclusion that there’s an absolutely excessive amount of angry lonely men in the world with absolutely nothing in their life but videogames & hate, & proceeded to get a little bag of $60,000,000 from Goldman Sachs(?) in an attempt to exploit these men via large scale real world trading of in-game currency. I believe he moved to Hong Kong to try to start a slave farm of ultra-poor Chinese to acquire said in-game currency to then sell it to aforementioned angry lonely men that had some trickle of $USD to be reaped.
It’s all kind of insane if you go down the entire rabbithole surrounding these people, though sadly, also a bit undeniably hilarious. A lot of money is to be made with sufficient hatred & absolute lack of morality.
You don’t find anything interesting about one of the main people behind tether, one of the shadiest enigmas in crypto, having formerly been one of the main people within a company founded around real world trading & exploitation of virtual in game currencies? Where they literally tried to create slave farms to obtain these in game currencies?
Reeks of a lifelong grifter. If you can’t put the 2+2 together of a lifelong grifter & immoral individual being at the top of tether…
Anyways, I patiently await the collapse of it all as somebody who’s been around since the near beginning of blockchain cryptocurrency.
> Where they literally tried to create slave farms to obtain these in game currencies?
None of this was convicted.
Lots of people are accused of all types of things. Some people get convicted of stuff they didn't do, but this happens much less often than wild accusations.
When things related to things are so easy to find with a pretty serious paper trail behind it, I can only imagine your saying this to try to defend the perpetrator in some way.
I don’t think that’s the case, so I digress.
Company IGE tried to make virtual in-game currency sweatshops. IGE was headed by Pierce & Bannon. This is something that happened and there is not much more to it.
If you’re simply unfamiliar with MMORPG & related videogames - I can perhaps understand. In short - I assure you, there is a near endless amount of people who shove very large amounts of $USD into virtual trinkets in these games. Always have been, hence their exploitation since the early 2000’s
Employing people at market rates is not remotely comparable to slavery, and it's pretty gross to equate them (indeed it likely does far more to help lift those people out of poverty than any number of more reputable charities). Pouring scorn on what sounds like normal legitimate business and equating it to fraud or child prostitution undermines the point you're trying to make.
Not to minimize the evils of child sex abuse at all, but I think many more rich and powerful people are involved with children than one might imagine. Just look at the number of people who were associated with Epstein, or the various scandals in the British government in the 1980s and 2010s.
This is my face of shock and dismay. It's wild how one could, at one time, watch the influx of tether into the system and relate it directly to the price of BTC. It really makes you wonder how much tether is a necessary parasite, subsuming the scaffold of the organism's body beyond what the brain intended.
This is expected. Tether is pegged to $1, BTC is not. In short, higher crypto prices means more tether.
Perpetual futures contracts are also a big part of the market. They are the most common derivatives on crypto assets. It isn't always BTC, but BTC is the biggest asset in the space.
Derivatives in general need to be denominated in something. Tether is the most accessible on exchanges outside the US (e.g. Binance). These contracts settle in the Tether stablecoin, not the contract's underlying. As all crypto asset prices go up, those contracts need to be settled in more Tether.
When one party shorts a derivative, a counter-party needs to long the same derivative. Same thing happens with non-crypto derivatives. In the end, they cancel each other out, but the total amount of Tether would increase as the asset value increases. That money could come from other assets or USD.
On the exchange-side something like this might happen...
party 1 sends USD to Exchange > longs BTC contract > USD collateralizes contract
party 2 sends ETH to Exchange > shorts BTC contarct > ETH collateralizes contract
If ETH drops in value as it relates to USD or party 2's contract expires out of the money, the exchange would likely give party 1 the value of the contract in tether.
Similar misunderstandings happen in the stock market. People will point to the notional value (amount in $) of margin debt, but ignore the total value of the market. Of course, higher debt would be needed to collateralize a more expensive asset (e.g. SPX).
Also, when sending non-USD currencies to an exchange, I would guess the exchange is likely to convert them to Tether, or at least gives the option. I wouldn't want to have YEN in my account as the value sinks when I have a Tether backed contracts. That may be another source of new Tether.
> This is expected. Tether is pegged to $1, BTC is not. In short, higher crypto prices means more tether.
What? Tether is supposedly minted in response to fiat deposits. They accept real dollars and give Tether IOUs in return.
The concern is that Tether minting seems to generate BTC price spikes. The story goes that investors are giving their money to Tether, which gives them Tethers, and then they take the Tethers and buy BTC. Nobody can seem to explain why these people aren’t just giving their money to exchanges and buying BTC without the extra steps, though.
This is all very hand-wavey. Never concrete statements.
The minting happens at the portal (eg Binance). There's no sense for an exchange to mint a liability without collateral.
I gave an example of liquidations resulting in new Tether. I don't know what you count as a spike, but liquidations happen all the time. The exchanges report liquidations publicly. A lot happened recently with BTC's move up. You can also see open interest increase or decrease on liquidations depending on if a short or long position is liquidated. Again, those contracts are settled in Tether, so it would make sense for Tether market cap to increase on asset price increases.
There are also funding requirements at different times. The more people short a contract, the more they pay to their counter-party until they close the position. Same is true for longs. One side or the other are incentivized with higher or lower rates to keep the contract in line with spot price. This is an ongoing cost. It fluctuates throughout the day.
It's a well known signal to watch stablecoin market caps as a ratio of total crypto market cap - (USDC+USDT)/Total. This ratio is currently at the midpoint. Leverage increasing means stablecoin MC increases. Leverage decreasing, means stablecoin MC decreases. It doesn't go down 100%. You will see it trend up.
Even when it was down 77% from its high in Nov. 2021, people were saying this. Still down 64%. Of all the assets in the world Tether could buy with their "IOUs", I don't know why people keep saying they're buying BTC. I don't know where this idea came from, or how it possibly makes sense.
FYI - USDC market cap increased more than USDT in 2022. Where are the "Circle is buying BTC with IOUs" conspiracies?
It amazes me every time I look at $USDT and see it hasn't collapsed to zero yet. The flow of Tether inbound is the only thing keeping Bitcoin from its natural price of about $5. (3 BTC for a Pizza was the price back in the day at PS:1 in Chicago)
Tether prevails because betting against tether is not profitable. It could be, but the people you could bet against would go bankrupt if tether collapsed so you'd have no way to collect on your winning bet.
So I read this explanation from Matt Levine a few weeks ago and it sounded convincing.
But now I’m wondering, that was because the collateral you post against your short was assumed to be posted with the entity you borrowed the Tether from.
But can’t people make deals where they post collateral with a proper bank, and then if the counterparty goes bankrupt you just pay the estate back worthless Tether and keep the dollars posted with the reputable bank?
I’m not involved in these types of dealings so perhaps this is a silly question but I would have thought this was how things were done.
You’re gonna have a real hard time finding someone to take the opposite side of that bet using fiat money in any size. Crypto insiders generally know Tether is a fraud and further haven’t got the fiat liquidity to make such a bet
No, Tether has prevailed because 1 USDT has remained redeemable for approximately 1 USD since inception. That's it. More entities shorting USDT would not change that fact.
So, by all means, find a venue to short USDT. Build one if it doesn't exist. If lucrative enough, you will likely find parties willing to take the other side of that bet.
Ah yes, "I've personally not seen any _credible_ evidence of anyone withdrawing funds from Wells Fargo, so that means it's never happened". How do you think exchanges are able to function if they can't redeem USDT for USD?
Pretty easily, if they match a buyer/sellers. That’s literally what exchanges do.
Redemption is when Tether the entity is the buyer - aka someone takes USDT and goes to Tether the entity and gets dollars for it, 1-1. That’s what seems to never happen, except perhaps for specific Tether insiders. Though the ones I’ve seen claiming they’ve done so (SBF being the prominent one), are far from credible sources now.
If some random person wants to give me $1 for my nominal $1 of USDT, that’s cool - and that happens on exchanges regularly right now.
That depends on market perception, etc. though and has only the potential connection to perceived ability to redeem. Which has been kept sustained, as you can see by this thread.
By comparison, Verifying someone can deposit and withdraw cash from Wells Fargo is pretty easy. Just stand in any of their branches for an hour or two, and you’ll have tons of evidence. Something no one has of Tether still, after all this time.
When there's bear market in crypto dollars flow away from the whole ecosystem. The fact that tether keeps price in such condition means that they must be buying back tether. There's no other mechanism that could prop up its price in such conditions.
The market cares not what you think the value of an asset should be. By default, at some instant, the market is right. If you disagree, there are instruments with which you can express said disagreement and earn a profit for being correct.
By the way, the flow of Tether inbound is the flow of market participants purchasing USDT with cash equivalents. So sure, "the flow of dollars into the stock market is the only thing keeping META from its natural price of $5" is a statement anyone can make.
Maybe this is a good learning experience, and you could use it to update your beliefs about financial markets? If you're directionally and quantitatively wrong about some prediction for many years, it's very likely you are missing something.
How have I been wrong? The NYAG and the CFTC have now definitively proven me right.
Letitia James says:
> The OAG’s investigation found that, starting no later than mid-2017, Tether had no access to banking, anywhere in the world, and so for periods of time held no reserves to back tethers in circulation at the rate of one dollar for every tether, contrary to its representations.
The CFTC says:
> As found in the order, Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018.
How exactly am I wrong? And please be specific. It's something they paid significant quantities of penalties over.
The shit I've been saying is literally in government PDF form now.
Actually a good example, you should look at the actual losses incurred by investors in Madoff's fund. It would probably be educational if you think tether could "go to zero".
Here's Terra Luna price today: https://www.coinbase.com/price/terra-luna. Clearly, it is above zero (it's $0.000170 for those curious.) I think I would be happy to concede one USDT is worth definitely above $0.000170 while also maintaining it's worth definitely below $1.
Another important lesson is to look at Luna and understand the difference between it and tether. Luna was highly leveraged and had essentially no collateral with exogenous value. Tether is sketchy and potentially fraudulently under collateralized, but clearly has substantial USD collateral.
Terra was an algorithmic stablecoin (ie not really a stablecoin). It can't be compared to Tether.
There were fundamental flaws with how Terra worked. A reductive way to describe it is, Terra was backed by Luna. Luna's price was determined by the market. Luna's supply was infinite. The price would go down if market demand didn't keep up with supply increases. Doomed from the beginning.
But demand and buying with dollars is still real. No exchange is giving out tethers for free. Unbacked Tether is just not a real problem (yet). It is only going to be a problem when multiple exchanges are trying to collect, why would they? They have been given cheap merch to sell..
Of course.
You can short tether on every crypto exchange, both centralized and decentralized (DEXes, DeFi apps)
The only counterparty risk is the collateral that you use. Ether, BTC, usdc, etc.
Some exchanges also support fiat currencies (eur, usd)
Some hedge funds have been running tether shorts for a long time, maybe they cashed out when the rates spiked, if not they're just losing money.
There's nothing new in this report. Tether/Finex's founders are well known for many years
Also FYI, tether has been able to redeem > 20 billion$ in a few days, something that I am not aware of ANY other company, not even banks, being able to do - and def without CB/govt support
> The only counterparty risk is the collateral that you use.
That's not really painting an accurate picture. If Tether goes to 0 (you win the short) there's a strong possibility your counterparty cannot pay you. So, you're either wrong and lose it, or, you're correct and lose it. That's not the making of a good trade.
Bet against Grayscale, MicroStrategy or any other publicly traded crypto company. Hell, even Coinbase is good enough. All will face very difficult times once Tether collapses and takes most of the crypto "economy" with it.
That's the only way I can think of to avoid crazy counter party risk.
Yes short a company that just today their stock went up 24% as a substitute for shorting tether that can never go up above $1 that should lower your risk.
Don't short it. Buy long term put options and roll it. It's a better way to bet on a collapse.
As to it going up today, it's still a 20b company with huge operational costs and no profits operating in funny money world full of scams, regulatory risk and having very little growth potential (after 13 years of crypto there is still no use case other than going around or breaking the law and it already reached its Super Bowl ads state so it's not like any more adoption is likely).
Yes, you already missed the biggest gain as it's already worth about 25% of what naive public paid but there is still one way to go.
A tether collapse would instantly reduce the USD market cap of crypto by 80 billion, and that's without any investor behavior added on top.
On top of that, Coinbase needs a stable coin to operate at any non-trivial scale.
I'd say the impact would be severe. That is unless crypto investors just pretend nothing happened, and some other bullshit stable coin immediately takes care of the liquidity issue, which I'd call likely.
Shorting Coinbase won't force anyone to exchange USDT for USD, so it doesn't help control the time-line. Also, if Tether collapses, these companies could end up in such a bad place that they get delisted, so I still may not be able to make money off my short position.
There are 2 main ways I can think of right now, but they each differ:
1) Deposit any other stablecoin into AAVE/(a decentralized lending platform) as collateral, borrow USDT from there, & sell USDT for another stablecoin.
This method (semi-unfortunately) allows for rehypothecation: If you're ultra-convinced USDT will fail, it makes sense to do the above sequence again, this time using the received stablecoins that you now have from selling USDT. The risk is massively increased with each iteration of that sequence.
2) Insurance contracts, wherein you deposit funds into a pool that watches USDT's price. If the peg breaks, the funds from the other pool that bet against you will be used to pay for the rewards, and vice versa.
Y2K finance has this in place, wherein there are 2 pools to choose from for each stableasset: One that pays out if the peg stays stable, and another if the peg breaks. This method is great for insuring stableasset values, & helps to provide downside protection.
Tether got fined a tiny amount, much less than any tier 1 bank pays in a year. And one of their investors was once in a movie. Who gives a shit?
Meanwhile they have a brilliant business model for the current market: take dollar deposits, invest them and keep the interest, then return them with no interest or adjustment for inflation. Who wouldn't like a 4% profit on $86bn?
Clearly you didn’t read the actual evidence in the indictment. They had (and likely still don’t have) any actual banking infrastructure. It’s all smoke and mirrors.
> a group of four men has controlled 86% of Tether Holdings
So of Tether's $68bn "market cap", no more than $10bn was actually bought? Which means some subset of that are bag holders, with the rest being affiliated exchange obligations? (EDIT: Nvm.)
Maybe it's not a deal if it's banned and collapses.
Tether Holdings Ltd is the company that operates Tether. The article says that group of 4 men owns 86% of the shares in Tether Holdings Ltd, not 86% of the Tether tokens.
I do wonder which powers are really behind (i.e. supporting/owning) Tether and their related cartels, because most of this is well documented and obvious now and yet they carry on as they wish.
Many retail investors probably have. But the big Tether holders can't liquidate their large positions because it would likely cause a market collapse. Many holdings are on public addresses, so if for example a big exchange liquidated their Tether, everyone would know and start panic selling, leading more big holders to sell, and so on. And even if they liquidated through OTC or centralized parties that are not publicly known, the volume would still obvious.
Hence it's in the best interest of many parties to keep Tether up to avoid a market collapse.
Because it's incredibly convenient. It will keep being convenient until it crashes (I think it's position isn't as tenuous as people think tho') or a better competition arises, maybe the US government will print some crypto dollars or something.
That's buying and selling. So, whoever is facilitating the buying and selling needs to keep Tether inventory on hand so their customers can trade crypto generally. Those holders of Tether inventory -- exchanges -- will be "free" to redeem their Tether when crypto transaction volumes decline on their exchanges. So when the crypto ecosystem broadly loses cachet, beyond a certain threshold, exchanges that hold Tether inventory will be "free" to liquidate.
The issue at that point will be that exchange volume is the business value behind the "paper" that justifies Tether's USD peg. So declining crypto trade will generate sell volume against Tether and also pressure the peg.
Which is all another way of saying-- this is like when Enron or whatever other financial scandal you pick-- gave shares to an off-balance-sheet vehicle and loaned itself money from the vehicle. It's designed to fool someone into injecting real money into a funny system. Thus, an alternate mode of failure is that whoever did the injection wakes up and calls the bluff, notwithstanding the technical quasi-market-based peg.
Tether is typically used on non-US centralized exchanges, where they don't have access to USDC.
People could still use USDC on-chain. According to https://ultrasound.money/, on the Ethereum network, there's $39.277B USDC and $32.35B Tether. Tether's popularity might be different on other networks.
Self plug, but for most chains you can check out https://stablewars.xyz/ to track stablecoin market caps across different chains. We show $29B tether, but difference in values for Ethereum are likely because we discount uncirculated funds, e.g. bridged assets.
It's not necessarily up to the individual. It's the centralized exchange's decision to offer it.
I could be wrong, but I think the exchange needs to work with a US-based bank to process USDC redemptions/withdrawals. I know this was the case for Binance recently.
Any stablecoin is just a company that holds the denominated value in some form, and provides the ability to get that value back. Circle manages USDC. They have to bee more willing to work with partners abroad. Is that because of KYC/AML laws? Not sure.
Tether has been willing to work outside the US before Circle, and they did it back when crypto was demonized by all banks, more-so than today.
Also, I mentioned in another comment how Tether is used for settlement on derivatives. I don't know of that happening with USDC anywhere.
... Tether made loans with tether. Instead of exchanging one tether for another currency worth $1, it lent tether to entities that promised to pay $1 for each tether. If borrowers can’t pay back their loans, tether wouldn’t be able to trade all tethers in circulation for dollars.
In May 2021, Tether had lent Celsius tether worth $1.8 billion, collateralized by $2.6 billion of Celsius’s crypto assets, the report said. Tether had to manage the risk of the loan as crypto prices fell. Eventually the loan was liquidated and Celsius suffered a loss. In addition to lending to Celsius, Tether received loans from the company that were twice its credit limit while owning 7.73% of its equity, the report said.
Yup. "Commercial paper" claimed by Tether as backing of their token was long known to just be IOUs from various buddies of the scam company that runs it (online poker cheat, child molester and proven fraudster if I remember right).
Who could have known. Other than folks who read the CFTC settlement [1] and the NYAG settlement [2].
And their org chart.
1. Tether and Bitfinex CEO J. L. van der Velve used to sell a product he claimed could transform the nicotine in cigarettes into vitamins - and suggested it allowed you to smoke 300 per day.
2. Their chief council, Stuart Hoegner, once held all of the Tether backing reserves in his personal Bank of Montreal account co-mingled with his lunch money, one assumes. He was also director of compliance at Excapsa, parent company of Ultimate Bet, where they had a backdoor interface allowing their friends to see their opponents cards. [3]
3. Giancarlo Devasini, their CFO, is a former plastic surgeon (for about a week) who had to pay a $65,000 fine for pirating Microsoft software in 1996 and was then sued by Toshiba for infringing some of their DVD patents. [4]
[edit] Tether was co-founded by former Mighty Ducks cast member Brock Pierce, the guy who fled to Spain with Mark Collins-Rector while he was an indicted fugitive on child sex trafficking charges. They were then both arrested in a villa full of child pornography. [3]
[edit2] Also note that none of the leadership team wanted to admit they were involved in Tether until it came out in the paradise papers because they used Appleby. Because of course they used Appleby. [5]
[edit3] Almost forgot, the guy who runs their banking partner, Deltec (and Moonstone!), was the creator of Inspector Gadget - Jean Chalopin. [6]
> Almost forgot, the guy who runs their banking partner, Deltec
Ahh, Deltec. At the start of 2021, according to their website, it was a 55 year old bank. By the end, it was a 70 year old bank!
Their "Deputy CEO" gave a hilariously inept interview from his gaming rig. Their 33 year old Deputy CEO, who by his LinkedIn claimed to have graduated HEC Lausanne in Switzerland with a Master of Science at the age 15... celebrating his graduation by immediately being named Professor of Finance at a university in Lebanon. While dividing his spare time between running hedge funds in Switzerland and uhh... Jacksonville, FL.
The name of his fund? Indepedance [sic] Weath [sic] Management. Yeah...
In this hilariously inept interview, he claimed that people's claims about Deltec's money movements being several times larger than all the banking in their country was due to them misunderstanding the country's two banking licenses, the names of which he "couldn't remember right now" (the Deputy CEO of a bank who can't remember the name of the banking licenses), and he "wasn't sure which one they had, but they might have both".
Once the ridicule and all this started piling on, within 24 hours, he was removed from the bank's website leadership page. When people pointed out how suspicious that looked, he was -re-added-.
The bank then deleted the company's entire website and replaced it with a minimally edited WordPress site, where most of the links and buttons were non-functional and remained so for months thereafter.
I mean fuck it, if the cryptobros want to look at all that and say "seems legit to me", alright, let em.
> Tether and Bitfinex CEO J. L. van der Velve used to sell a product he claimed could transform the nicotine in cigarettes into vitamins - and suggested it allowed you to smoke 300 per day.
>They were arrested by Interpol in 2002 in Marbella, Spain. Pierce was released without being charged.[78] Rector eventually pleaded guilty and left the United States.
The three plaintiffs voluntarily dismissed all charges against Pierce without receiving any compensation.[81] Court records show that Pierce paid $21,600 to one of the plaintiff's attorneys because said attorney refused to file the order of dismissal requested by his client until the attorney's expenses were reimbursed.[82]
Left out some pretty major details there. Looks like he’s a free man now and never convicted of any of this?
Maybe I was unclear, but I did not mean to imply that the Mighty Duck in question was involved or guilty of anything other than keeping very questionable company. The majority of that sentence was about Collins-Rector.
Bravo, this is all well known stuff but great job citing sources, the internet has such a short memory. Brock did a stint as the Bitcoin foundation president IIRC in year two of that defunct org
