Tether executives said to face criminal probe into bank fraud

Yes. But importantly, it's a house of cards guaranteed by all the money and force of the government of $major_power.

> Do your own research, make your own decisions...

The vast majority of people are not capable of understanding either the economics or technology involved without investing an unreasonable amount of time. (I'm not ashamed to admit that I don't, and I certainly understand more of the tech and probably understand more of the economics than 99% of the US population...)

(1) US persons and entities cannot redeem, period, so that leaves out all of Coinbase doesn't it? [edit] originally I mentioned FTX but of course they're based on Antigua and Barbuda and Hong Kong. [1 - Section 3/ and 3/3].

(2) Only individuals Tether deems as customers at their sole discretion are permitted to redeem. [1 - Section 9/ - "Tether in its absolute and sole discretion may determine that you are a customer of TIL or TLTD"]

(3) Tether may delay redemptions arbitrarily at their sole discretion. [1 - Section 3/]

(4) Tether may substitute whatever is in their reserves in lieu of cash at their sole discretion, and themselves admit to only having 3% of the cash needed to satisfy the "obligations" (and I air-quote say that because ... [1 - Section 3/]

(5) Holding tether tokens is not a claim to any backing assets. Any redemptions are strictly goodwill.

(6) Tether has identified their absconding with all the funds as a risk in their white paper [2 page 10].

This is all on their website. [1] Roughly speaking nobody has tried to redeem any - for obvious reasons. They know they can't.

To your point it's the largest exchanges with their hands in this particular cookie jar, and their fates are entwined. The exchanges are holding the bags, Binance alone has 17,000,000,000 USDT. They won't do anything to potentially upset the peg, and are incentivized to do whatever they can to maintain it. Otherwise, to your point, RIP.

[1] tether.to/legal

[2] https://tether.to/wp-content/uploads/2016/06/TetherWhitePape...

There is a lot of circumstantial evidence though. To wit:

* Tether was previously caught lying, in a manner that is attuned to how many big frauds start (you hit a small road bump, so you lie to cover up the road bump, figuring you'll be able to make up the shortfall before too long. But now your lying projections are going faster than your ability to catch up, so what was originally a "small" lie is now a "big" lie). Tether had had the cash, until it was stolen from them, and they started lying to pretend that it wasn't stolen.

* Notably, Tether has yet to provide any audited statement of their claimed finances, in over 4 years. Even the attestations that they have come out with don't actually provide much in the way of reassurance.

* Their claimed asset breakdown, the closest thing any of us have to being able to being able to validate their claims, is presented in the form of 2 pie charts with vague labels, one of which is so bad that no one knows what it's supposed to mean ("reverse repo notes").

* Doing the math in the above point, they claim to be one of the largest consumers of commercial paper. They haven't said whose commercial paper they're buying, and no one has reported transacting with them. Supposedly this is for privacy, but it is the standard in the entire industry to just list all of your holdings for transparency's sake [1].

* Also, Tether has increased its issuance to the tune of several billion dollars a month. That's the kind of extraordinary claim that requires extraordinary evidence to back it up.

[1] Unless you're Bernie Madoff and you're promising awesome financial returns with your secretive trading strategy. Except it also turned out that said strategy was a literal Ponzi scheme. Note that "we're not telling you what we're investing in" is generally one of the red flags for a fraud.

> A hallmark of Tether is that its creators have said each token is backed by one U.S. dollar, either through actual money or holdings that include commercial paper, corporate bonds and precious metals. That has triggered concerns that if lots of traders sold stable coins all at once, there could be a run on assets backstopping the tokens. Fitch Ratings has warned that such a scenario could destabilize short-term credit markets.

Even if Tether is 100% backed and not fraudulent at all, a bank-run scenario could result in Tether needing to sell off billions of dollars of its assets very quickly.

What happens if there is a precipitous sale of the assets that currently back the Tether token? Would there be ripple effects across the rest of the economy if additional volatility creeps into the commercial paper market as a result?

Regardless as to the actual risk, concern over this specific scenario is animating much of the regulatory interest into stablecoins. One would expect restrictions to be imposed on what types of assets may be used to back stablecoins, and for explicit reporting requirements to be imposed as well.