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U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

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Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#281

Post by zaroth »

notyourday wrote: post #280
0wing wrote: post #263

Earlier quoted context omitted.

You're assuming the severity of this news would not cause Tether to devalue while BTC holders exit into real USD or fiat instead of Tether.

I keep reading about these magical places. Say that I have a 1000 BTC. What is the exchange that would allow me to sell 500 BTC and wire money to my account in: a) Chase Manhattan Bank in New York City ( USD ) b) National Westminster Bank in London ( GBP ) c) HSBC ( Paris ), account in Euros. The wire must show up live in 72 business hours and post to the account within 72 * 2 hours.

Presumably GDAX...? I’m sure it wouldn’t be as smooth as pushing buttons and they would likely want something stating where you got the coins.

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#282

Post by blibble »

jandrese wrote: post #75
ceejayoz wrote: post #36

Earlier quoted context omitted.

Another key bit: Tether's website claims "frequent audits", but their auditor a) never completed their first audit and b) just severed their relationship. https://www.coindesk.com/tether-confirms-relationship-audito...

I'm guessing the auditors weren't happy with "out of thin air" when they asked where the the backing currency came from. The Tether folks were like "Our balance sheet is really simple! We just add numbers to this column until it evens out, what's the problem?!?" and the auditors are like "that's just fraud".

that's more or less what happens when you go and get a loan or a mortgage from the bank

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#283

Post by mancerayder »

jonknee wrote: post #59
JumpCrisscross wrote: post #48

Earlier quoted context omitted.

> Ponzi schemes also only harm those who inflict it on themselves Ponzi schemers lie to their investors. (Madoff purported to run a reputable shop.) It’s harder to argue, to the broader public, that someone buying Tether with Bitcoin could reasonably think they made a legitimate investment.

A lot of exchanges don't give you the choice and just give you Tether when you sell Bitcoin. What are the odds that a lot of people don't know the difference between USDT and USD?

When I first started some time last year, I wasn't sure what "USDT" was but I didn't care terribly because a) it's easier to calculate things mentally versus the BTC worth of a coin which looks like .000003456 which is a nightmare to picture; b) I trusted the exchange.

So yeah, I'd absolutely smack the exchanges for passively perpetuating a fraud which has been talked about for months now.

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#284

Post by Nition »

jandrese wrote: post #75
ceejayoz wrote: post #36

Earlier quoted context omitted.

Another key bit: Tether's website claims "frequent audits", but their auditor a) never completed their first audit and b) just severed their relationship. https://www.coindesk.com/tether-confirms-relationship-audito...

I'm guessing the auditors weren't happy with "out of thin air" when they asked where the the backing currency came from. The Tether folks were like "Our balance sheet is really simple! We just add numbers to this column until it evens out, what's the problem?!?" and the auditors are like "that's just fraud".

It's ridiculous; surely they could have made tons of money with USDT legally if they'd just been less greedy:

- Create Tether out of thin air

- Sell it to people for $1USD each

- Put that USD in a bank account to earn interest

Hell, there's probably still an opening for someone else to do it right.

- Create MyTetheredCrypto out of thin air

- Convince people & exchanges to accept it ???

- Sell it for $1USD each

- Unlike Tether, let your company be checked and audited frequently

- Get rich off the interest

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#285

Post by rmrm »

ShorsHammer wrote: post #262
jonknee wrote: post #53

Earlier quoted context omitted.

You're missing the point, OP is suggesting that Tether isn't really backed by USD. So instead of trading something backed by USD for BTC, they're just creating worthless IOUs and buying BTC (typically bidding it up on down days). It smells a lot like fraud.

So you are saying instead of cashing out the btc into usd holdings they simply held onto bitcoin? Wouldn't that make them filthy rich?

It would make them "bitcoin rich". They still would need to convert to USD at some point. Which, if their buying and holding is what drove the price higher, would subsequently crash the price.

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#286

Post by seppel »

spookthesunset wrote: post #105
andrewla wrote: post #88

Earlier quoted context omitted.

You can exchange USDT for fiat, on demand, for exactly 1 USD/USDT, but only at Bitfinex. For bank wires, they charge a .1% fee, so technically I guess 0.999 USD for each 1 USDT. For verified customers, there is no withdrawal limit. Kraken offers a USD/USDT market that allows you to obtain fiat for your USDT, and the price stays fairly stable but the liquidity is low (thus slippage is high). It's currently trading at…

> You can exchange USDT for fiat, on demand, for exactly 1 USD/USDT, but only at Bitfinex My understanding is this isn't the case. My understanding is Bitfinex will take your USD and convert to USDT which you can then use to buy crypto. But it won't take your USDT and turn it back into dollars. In fact, my understanding is the only way to turn USDT back into USD is either directly through Kraken or indirectly through…

> My understanding is Bitfinex will take your USD and convert to USDT which you can then use to buy crypto.

So, who is selling BTC for USDT and why? Who is selling so many BTCs for USDT that they have to print 100 million USDT every other week?

I'd really like to understand that (see also my parallel discussion).

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#287

Post by rmrm »

rhino369 wrote: post #228
drcode wrote: post #60

Earlier quoted context omitted.

I'm being 100% pedantic here (I fully agree tethers are ridiculously shady) but if tether one day rises to 1.05 USD, and the tether company then sells more for BTC to bring it back to 1.00 USD, and the tether company subsequently converts the BTC to USD, how is that fraud?

That wouldn't be fraud (as long as they quickly converted from BTC to USD), but why would anyone do that?

Because its exactly equivalent to selling Tether for USD, which we know they do. There are arguments that they couldnt have liquidated so much BTC, but I don't see any specific argument that leads on to assume that they wouldnt have. Unless one puts fraud as the entire goal. Which can't be discounted, but its just not obvious, to me.

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#288

Post by [deleted] »

blibble wrote: post #282
jandrese wrote: post #75

Earlier quoted context omitted.

I'm guessing the auditors weren't happy with "out of thin air" when they asked where the the backing currency came from. The Tether folks were like "Our balance sheet is really simple! We just add numbers to this column until it evens out, what's the problem?!?" and the auditors are like "that's just fraud".

that's more or less what happens when you go and get a loan or a mortgage from the bank

[deleted]

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#289

Post by jonknee »

ShorsHammer wrote: post #262
jonknee wrote: post #53

Earlier quoted context omitted.

You're missing the point, OP is suggesting that Tether isn't really backed by USD. So instead of trading something backed by USD for BTC, they're just creating worthless IOUs and buying BTC (typically bidding it up on down days). It smells a lot like fraud.

So you are saying instead of cashing out the btc into usd holdings they simply held onto bitcoin? Wouldn't that make them filthy rich?

No, I'm saying that when people on exchanges like Bitfinex "cash out" they're really getting freshly issued Tether that isn't backed by anything. It's fraud. The scam works as long as you can keep the price pumped up (new Tether issues seem to occur like clockwork during BTC sell offs), but if the price plunges they'll be insolvent in a hurry. Let's say they bought BTC with $100m of freshly minted USDT back when the price was $20,000 (round numbers are easier)... Instead of $100m in USD backing that issue they would now have ~$50m in BTC. Tough luck for anyone who wants to exchange their USDT for USD.

This would be something like a run on a bank, except without the FDIC to step in and make sure everyone gets their money out.

Accepting USDT is akin to giving Bitfinex an interest free loan with a high chance of default--no possible upside and lots of possible downside. No one should use any exchange that deals with USDT in any way.

Re: U.S. Regulators to Subpoena Crypto Exchange Bitfinex, Tether

#290

Post by kot-behemoth »

HockeyPlayer wrote: post #81

How trustworthy is Kraken? Tether looks like a good short since if it is a fraud it will go way down and if it isn't a fraud it will stay right where it is. I'm in the US and would like to short Tether. But I want to get paid if I'm right.

Kraken allows wash trading (proof: https://twitter.com/Bitfinexed/status/957757842852806657), so really untrustworthy.
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