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Crypto Market Roiled by New Allegations Against Tether, Bitfinex

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Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#81

Post by Scoundreller »

ShorsHammer wrote: post #67

Everyone agree's that tether should have a 1-to-1 backing. The delicious irony in it all is that the money in your bank is backed by about $0.10 for every dollar they owe savers. I hope for the day when people expect the same of the banking system that underpins the whole economy.

You fail to understand how bank reserves work.

> your bank is backed by about $0.10 for every dollar they owe savers.

And the bank has the other $0.90 in long-term assets.

While no bank can survive every depositor wanting every dollar out of their chequing account on the same day, there is something auditable backing each dollar of deposit.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#82

Post by arcticfox »

loeg wrote: post #62
FireBeyond wrote: post #53

Earlier quoted context omitted.

The only way it could get even more interesting (though probably unlikely) is if the same people behind Bitfinex and Tether (who are indeed the same people - Tether offered a Line of Credit to Tether, and the same two people signed the documents for both sides - wasn't that another of their lies, that they had no relation to each other??), are also behind Crypto Capital?

Wouldn't it be surprising if the same people weren't behind Crypto Capital? Like, if you were going to embezzle your own exchange with vaguely plausible deniability, how would you do it differently from exactly as done here?

I'm curious who these Merlin and Oz fellows are, does anyone know more about them?

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#84

Post by nonbel »

nlh wrote: post #70
ShorsHammer wrote: post #67

Everyone agree's that tether should have a 1-to-1 backing. The delicious irony in it all is that the money in your bank is backed by about $0.10 for every dollar they owe savers. I hope for the day when people expect the same of the banking system that underpins the whole economy.

There's a huge difference: Yes, the bank only holds $0.10 in cash, but at least in the US, the F.D.I.C. backs up every dollar in your bank account up to $250,000. That's a major reason the reserve banking system functions. If there were an F.D.I.C. for tether then I'm sure people would have different expectations (and likewise, if there were no F.D.I.C. for the US banking system).

The FDIC is more a feel-good measure:

>"Currently, the Deposit Insurance Fund (DIF), which is a fund set aside to cover the insurance obligations of the FDIC, has a required reserve ratio of only 1.35%. And that is only after a decision was made in October of 2015 to raise it, from its original level of 1.15%. Even more daunting, the DIF has until 2020 to reach this new 1.35% required reserve level. This means that, using the newly designated 1.35%, the DIF is only required by law to have $3375 on hand for every $250,000 it is currently insuring. Feeling secure? And, sadly, the reality is even less reassuring.

On a macro scale, the FDIC currently “insures” $10.8 trillion of deposits, yet the DIF only has $52 billion of actual cash with which to insure that massive amount of money. Quite a massive shortfall, and well below the measly 1.35% that it is required by law to maintain." http://www.escapeartist.com/assetprotection/what-does-fdic-i...

In the end the fed can print the dollars too, at the expense of inflation... but who knows what schemes they have come up with.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#86

Post by woah »

wmf wrote: post #38
tim333 wrote: post #35

Earlier quoted context omitted.

It must be tempting to transfer the assets to some account you control as there's almost no way to prove who did it or catch you.

Just ask Trendon Shavers, Charlie Shrem, or Ross Ulbricht.

Don’t ask Ross Ulbricht. You’ll have to ask the DEA agents who embezzled money while making unsubstantiated accusations of murder for hire. https://arstechnica.com/tech-policy/2016/08/stealing-bitcoin...

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#87

Post by wmf »

nwj wrote: post #63

From paragraph 60 in the filing (emphasis is mine): "As explained to OAG attorneys by Respondents' counsel. Bitfinex and Tether have also used a number of other third party payment processors to handle client withdrawal requests, including various companies owned by Bitfinex/Tether executives, as well as other 'friends' of Bitfinex - meaning, human being friends of Bitfinex employees that were willing to use their ba…

This was rumored pretty heavily when Bitfinex said "Divulging [bank account] info could damage not just yourself and Bitfinex but the entire digital token ecosystem … you are cautioned that there may be serious negative effects with this information becoming public." LOL https://news.bitcoin.com/bitfinex-introduces-top-secret-bank...

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#88

Post by dragonwriter »

jpmattia wrote: post #33
chx wrote: post #20

Earlier quoted context omitted.

> For all the noise about Tether being insolvent, it turns out that it was completely solvent? what makes you think so?

1. The primary suspicion about tether was lack of solvency, and the subpoena [edit: from CFTC] went out in late 2017. It would not have taken more than some weeks to determine if the assets were not present. Moreover, the NY AG would have hammered the point in the document if she knew. 2. It's hard to imagine bitfinex draining 100% of the tether reserves and thinking it wouldn't blow up. So I'd hazard a guess that th…

> It would not have taken more than some weeks to determine if the assets were not present.

The CFTC and DoJ were (and to all appearances still are, the latest news I can find on it is toward the end of 2018) conducting a wide ranging coordinated civil and criminal investigation of Bitfinex/Tether; there's no reason they would publicly release information before being prepared to take action, which wouldn't usually be when they first identify irregularities, but when they've chased down the responsibility and context issues enough to know the full range of charges they expect to file.

The idea that the NY AG not saying something about he results of an ongoing federal investigation in a state filing implies that the federal investigation immediately found everything to be just fine even though it continued for at least a year afterward and hasn't visibly ended is...not warranted.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#89

Post by nostrademons »

eunoia wrote: post #75
nostrademons wrote: post #65

Earlier quoted context omitted.

Tether functions as sort of the reserve currency of crypto. Many exchanges don't even offer fiat money or banking connections - to use them, you have to send Bitcoin in from another exchange or a personal wallet, then you can convert it into Tether or other altcoins. People who are "getting out of crypto" by selling Bitcoins because they think the price is gonna drop oftentimes are actually buying Tethers. When 80% o…

> We'd expect to see a rise in the price of BTC at USDT-based exchanges as Tether holders need to convert to Bitcoin to get out, along with a fall in BTC at fiat exchanges as they sell that Bitcoin. To some extent this is happening (Coinbase Pro's BTC price is almost $100 less than Tether-only exchanges like Binance or Bitfinex), but it's less severe than I would expect from a true run on the bank. The small spread i…

Bitfinex reports their prices in USD but I'm pretty sure that's bullshit. It's like saying "Each Tether is worth $1 because we say so." The Kraken price is much more accurate.

I suspect the price is holding up because most holders of Tether don't consider this a big problem. Either they believe that the NY AG will find that there are adequate reserves backing Tether after all, or they believe the reserves don't matter at this stage and other holders of Tether will continue to believe it's worth a dollar. Comments on this HN thread seem to support that. It's unlikely to change unless some exchanges go under entirely, and authorities in the U.S. don't really have the jurisdiction to do this.

I've been following coinmarketcap.com and openmarketcap.com, and also have a Coinbase Pro account that I'm using to track the Coinbase price (which actually diverged pretty significantly from the CMC prices this afternoon...must be a time lag). I don't have enough invested in crypto to get particularly emotionally attached either way.

Re: Crypto Market Roiled by New Allegations Against Tether, Bitfinex

#90

Post by bhaak »

MadSudaca wrote: post #69
peterlk wrote: post #8

It's almost like unregulated financial institutions have a tendency to screw over their customers... No one could have predicted this in the consistently solvent, regulated, and trustworthy cryptocurrency market. It's too bad bitfinex got ripped off by a surely unrelated entity. /s Have we learned our lesson yet?

As long as there's value in a 1-to-1 USD-backed crypto, more tethers will created. The barriers of entry are relatively low and someone is bound to get it right eventually.

There are other, better audited stablecoins now that have been growing for a while now.

The trust in tether has always been questionable, this will hopefully accelerate the move away from tether.

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