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Tether executives said to face criminal probe into bank fraud

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Re: Tether executives said to face criminal probe into bank fraud

#111

As someone who doesn't really care about the virtues of crypto, but has a small investment in btc that has grown into several thousand dollars, I'm feeling that if I want some casual investment in crypto I should move it into eth to avoid regulatory risk from bitcoin's environmental cost and tether collapsing and destroying bitcoin's value. I'm sure eth would tumble down with btc for a while but feel it might diverge…

I got out at the previous peak of 20 k. When banks could short it.

Before the pandemic, it went to 4k. And I forgot to do it again. I would have sold everything by now, i don't think it will hold, just like it didn't hold in the past ( pre-covid).

Re: Tether executives said to face criminal probe into bank fraud

#112

Quick summary: The investigation relates to whether Tether misrepresented transactions for crypto in 2014. The statute of limitations for fraud is 5 years, but because it involves a financial org the SoL is 10 years. Note that the lawsuit has nothing to do with Tether backing (despite the majority of HN comments as of this writing). As I've said elsewhere: In order to believe that Tether lacks backing, you have to be…

"Tether's claims that its virtual currency was fully backed by U.S. dollars at all times was a lie." -- NYAG Letitia James

... which is consistent with having sufficient backing. Again: She did not open a criminal prosecution for fraud. Do you think she would just let go of a criminal prosecution?

Re: Tether executives said to face criminal probe into bank fraud

#113

As someone who doesn't really care about the virtues of crypto, but has a small investment in btc that has grown into several thousand dollars, I'm feeling that if I want some casual investment in crypto I should move it into eth to avoid regulatory risk from bitcoin's environmental cost and tether collapsing and destroying bitcoin's value. I'm sure eth would tumble down with btc for a while but feel it might diverge…

DeFi, generally on Ethereum, would be severely impacted from a Tether fallout. Curve’s largest pool, which is the basis for a lot of yield in other services, can be drained to zero if Tether has even a minor sustained depeg. Tether backed loans at a variety of services would likely default sending liquidation events across all the major tokens on Uniswap and Sushi. Bitcoin wouldn’t do great but it is insulated from a DeFi ecosystem collapse that would undermine Ethereum’s value.

As for regulatory risk, I think privacy coins are the biggest target.

Re: Tether executives said to face criminal probe into bank fraud

#114

Earlier quoted context omitted.

Some people being ignorant about how it works makes it (probably) a scam? That ZH article's ifs, possiblies, and maybes are doing a lot of heavy lifting. Is the Bitcoin price up? Queue the Tether FUD.

Unlike Bitcoin, Eth, and other coins, Tether was always claimed to be backed by something which ensured it's stable value. Tether the company claims that their tether coins are each worth $1. There are now >$60Bn worth of Tether coin issued. With that much money they'd be a very serious private financial institution, and yet they only have 13 employee's. They have never been audited by any independent third party. Th…

>(the same people who own Binance, the world's largest crypto exchange own Tether, and yet did not disclose that until it was found out)

I thought Tether & BitFinex were the two partners? Am I wrong?

Re: Tether executives said to face criminal probe into bank fraud

#115

Earlier quoted context omitted.

The reason this happens is that the bar for proving criminal intent on the part of a corporation- which would lead to jail for executives and could lead to dissolution of the corp- is very very high. Getting the evidence related to "mindset" and linking it to action and doing so in a way that sufficiently resists various defense strategies is almost impossible, and extremely expensive and time consuming to litigate.…

So what I’m hearing is, governments world prefer criminal enterprises stay in business so long as they get a cut of profits via settlements

Non-snarky response to snarky comment:

There is corruption everywhere, of course. The sort of transaction you talk about is common but also inefficient. Many jurisdiction governments just take direct equity stakes in successful or well positioned "commercial" endeavors, often after they become successful, in addition to collecting supra-level "taxes" of various kinds.

That's not what's happening here, referring to Tish James' work against Tether as NY AG. My personal view, having both engaged with her office asking for help on one project and responding to queries from her office on another (neither related to crypto)- she's probably the best case/ideal state attorney general. Her heart and motivations are in the right place- working for the public interest- she's very politically savvy, and she's a very good chess player.

She has some resources- probably has 1000 lawyers working for her, which in law firm terms would be huge. But these are public servants with public servant salaries and budgets without much room for all of the support team and expertise infrastructure that back law firms themselves. The number of matters they are dealing with is probably in the 5-6 figures- dozens to hundreds per lawyer- and the breadth of expertise required spans the entirely of the legal system. Housing, education, finance, commerce, local to global- you name it.

In every case they have to understand the leverage they have, and use it carefully and deftly. This is what was done with tether. A relatively small settlement, but arrived at relatively quickly- has sent an extremely powerful signal. It is like striking a very precise blow with an extremely sharp axe, carving off a key part of the defensive bark on what was likely a wholly corrupt- but until then impenetrable- tree.

Watch as over time more of the bark falls, more documents leak, more complaints arise.

Re: Tether executives said to face criminal probe into bank fraud

#116
post #19

Earlier quoted context omitted.

>Tether usually has 2-3x the volume of bitcoin in any given day. And no one seems to know anything about how it works. I think these are both bad arguments. If the most used stablecoin is used for most BTC volume as well as other crypto trades, you'd expect it to be more. >. And no one seems to know anything about how it works What? People do know how it works, or at least as much as with many other projects.

Nobody knows where the USD supposedly backing it goes. Most of it is in “commercial paper” they said, but the investors who work in that industry say they’ve never heard of them. This seems impossible because at their scale, that would make them, like, the 5th largest commercial paper investor on Wall Street. How could commercial paper investors not heard of them?

I dont think it matters to people who really use tether. If you cant buy usd due to capital controls, usdt is your other accissible option. As such its seemed to retain its user's opinion that it continues to track the dollar, even when its not backed directly and or backed insufficiently by other assets. Its a tool that has value, beyond its intrinsic value.

Re: Tether executives said to face criminal probe into bank fraud

#117
post #2

> But the Justice Department investigation is focused on conduct that occurred years ago, when Tether was in its more nascent stages. Specifically, federal prosecutors are scrutinizing whether Tether concealed from banks that transactions were linked to crypto, said three people with direct knowledge of the matter who asked not to be named because the probe is confidential. Notably this is for events some time ago. I…

Update. Tether has replied here. This site is down, but this tweet has it: https://mobile.twitter.com/bitcoinsguide/status/141969423526...

URL for if their site comes back online: https://tether.to/tether-responds-to-bloomberg-article/

Re: Tether executives said to face criminal probe into bank fraud

#118

I have thought tether was a scam for years. I am very deep in the industry. I now think tether is neither a scam nor a Ponzi scheme in the classic sense of the word (they’re not borrowing from Peter to pay Paul). What tether is doing is reframing what 1:1 collateralization means. Typically when we think of a fully collateralized stablecoin, we think a 1:1 mapping of dollars to synthetics. Tether is backed by ‘dollars…

> What tether is doing is reframing what 1:1 collateralization means.

Which is, to be clear, fraudulent. Their website long claimed that for every 1 USDT, that they held $1 in USD. This claim fell apart years ago, as did their claim to regular audits (they still never completed one).

It may indeed be that they are collateralized now, but they got there via fraud.

Re: Tether executives said to face criminal probe into bank fraud

#119

As someone who doesn't really care about the virtues of crypto, but has a small investment in btc that has grown into several thousand dollars, I'm feeling that if I want some casual investment in crypto I should move it into eth to avoid regulatory risk from bitcoin's environmental cost and tether collapsing and destroying bitcoin's value. I'm sure eth would tumble down with btc for a while but feel it might diverge…

Ive moved everything to eth over the last few months. It retains the ability to store value like btc, but fuels a defi ecosystem that is providing an automated financial services economy. As traditional financial institutions dive into the crypto assets, im thinking they can feel more comfortable about eth investments due to how they can compare defi to cefi and traditional finance and have good tools for valuing the asset. Wall street loves recurring revenue.

Comparing eth to other smart contract platforms, eth has strongest ecosystem of block chain developers, and the most mature smart contract tooling.

As for regulatory risk, it seems to me like pulling off a really attached bandaid, it will shock and hurt, but ultimately regulation allows a framework for traditional finance to bring crypto based products to its consumers without stepping into legal issues.

I am concerned that regulation around tether and stable coins could be very hurtful to anyone who is currently invested. For less risky investors, I would consider waiting until regulatory murkyness has been clarified.

Re: Tether executives said to face criminal probe into bank fraud

#120
post #10

An interesting primer on Tether, and whether it is a scam: https://www.zerohedge.com/crypto/what-effect-would-tether-be... (Yes, I know it's zerohedge, but this is a decent article) Tether usually has 2-3x the volume of bitcoin in any given day. And no one seems to know anything about how it works. So in my estimation, it probably is a scam...

USD is the real scam. It's not backed by anything either. Tether only exists because nobody else wants to touch the USD and its annoying regulations. I find it hard to care about Tether printing billions when the US government prints trillions. Wish we could have a 100% XMR world without even a single dollar in sight. Won't happen until the end of the petrodollar which won't happen until the end of the US military.

So what you’re saying is it’s backed by the US military.
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