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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

#181

Post by jcranmer »

josh2600 wrote: post #108

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.

Or in simpler terms, Tether is a crypto money market fund, combining the convenience of money market funds with the transparency of a Ponzi scheme. If you read even the little transparency they do provide very carefully, it doesn't exclude the possibility that they're lying through their teeth about their backing: the commercial paper is described as being valued at face value, which, combined with the extreme reluctance to even hint out which industry the commercial paper is in, is not reassuring at all.

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

#182

Post by throw_m239339 »

yawaworht1978 wrote: post #159

Aren't many executives Italian? So, whatever the US justice department does, as long they stay in Italy, they will not see jail time, or am I wrong? The company sure can be shut down and blacklisted globally, as well as the current executives. It looks like a shift to USDC is happening, why is that not stopped? It looks like a tether fork with different board, but backing etc look all the same.

> Aren't many executives Italian? So, whatever the US justice department does, as long they stay in Italy, they will not see jail time, or am I wrong?

I don't think these people live in Italy, more like Hong Kong or countries where extradition to US is difficult.

I want to say this, because a lot of people think that people suspicious of Tether hate bitcoin, quite the contrary, if one values Bitcoin, then one should be very skeptical of everything around Tether and Bitfinex, for Bitcoin's sake.

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

#183

Post by JumpCrisscross »

jpmattia wrote: post #168
JumpCrisscross wrote: post #153

Earlier quoted context omitted.

> Do you think she would just let go of a criminal prosecution? Yes? Those are my tax dollars at work. There are better places to prosecute. Let the Feds do the international heavy lifting such a prosecution will require.

> Yes? Those are my tax dollars at work. There are better places to prosecute. Let the Feds do the international heavy lifting such a prosecution will require. So you believe Leticia James has documentation saying that USDT is not backed 1:1 with any dollar-based securities, and didn't even say so? And let investors continue to be defrauded, and she'll let the Fed AGs to get the credit? That sounds laughable to me, b…

> let investors continue to be defrauded

She is the Attorney General of New York. Tether is banned from New York. No need to launch a criminal probe against an overseas firm led by overseas founders harming out-of-state residents.

> let the Fed AGs to get the credit

This isn't a case with obvious political upside. Tether getting blown out will cost millions of Americans on both sides of the aisle. There isn't a sympathetic party being harmed who will be grateful for enforcement. (To say nothing of the money printer cryptos have been for traditional finance.)

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

#184

Post by arcticbull »

pwned1 wrote: 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...

I highly recommend the first five Cas Piancey and Bennett Tomlin podcasts [1] and the (albit a little bit dated) Kalzumeus post [2]. I also really enjoyed the Calacanis podcast with Bitfinex'ed [3] and the Coffeezilla [4].

[1] https://cryptocriticscorner.com/

[2] https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/

[3] https://www.youtube.com/watch?v=5fgv4DJ0VAI

[4] https://www.youtube.com/watch?v=-whuXHSL1Pg

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

#185

Post by arcticbull »

lottin wrote: post #128
deepvibrations wrote: post #43

Earlier quoted context omitted.

We don't truly know the severity of it yet, but we do know that money has been moving over to other stablecoins such as USDC over the past year or so and so risk is slowly decreasing. There is a huge amount of innovation in the space and i think to gloss over it as a 'house of cards' is a bit naive - there is no denying it is a volatile market, but it is here to stay, so best to embrace it and see if there are actual…

There is literally no innovation in the crypto "space".

Sure there is! Innovating new ways to separate suckers from their money. It's a tough pill to swallow for the laser-eyed, I know.

The problem is there's a lot for the HN community to like in it, if you're willfully blind to it's hypercapitalist and manipulative nature: fun technical challenges, little-guy-vs-the-world. I get it, I really do.

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

#186

Post by jpmattia »

arcticbull wrote: post #180
jpmattia wrote: post #101

Earlier quoted context omitted.

> Or more likely tether isn’t backed by anything at all. In order to believe this, you have to believe that Leticia James got the data from the NYAG subpoenas, and then ignored the fact that Tether has no backing. So no, not "more likely".

Did you read the settlement? [1] > New York Attorney General Letitia James’ office says it found that Tether sometimes held no reserves to back its cryptocurrency’s dollar peg. It said that, from mid-2017, the company had no access to banking and misled clients about liquidity issues. [2] It also depends on what you believe the role of that settlement was. Some speculated it was a trial balloon for a federal suit. [1…

> Did you read the settlement?

Yes. It says that tether held securities/receivables denominated in dollars rather than actual dollars, despite Tether's claim that they held dollars.

I could not find anywhere that the settlement claimed "no reserves", despite CNBC's quote. [edit: It came out of the AG press release, not the settlement. As near as I can tell the settlement makes no representation that tether is unbacked, only that it is unbacked directly by US dollars, which was the Tether advertising up until 2017.]

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

#187

Post by JumpCrisscross »

legutierr wrote: post #169

One thing from the article that people should probably pay more attention to: > 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.…

> What happens if there is a precipitous sale of the assets that currently back the Tether token?

If Tether is thusly backed, it's a non-interest bearing money market fund. We saw how those break down in the last crisis. In reality, Tether would just halt redemptions. (Unlike a money market fund, there is nothing holding them to convertibility.)

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

#188

Post by FireBeyond »

user-the-name wrote: post #141
graeme wrote: post #82

Earlier quoted context omitted.

The whales can redeem, in minimum chunks of $100,000. Mostly these are exchanges. Thus the peg is supported by the reserves in a roundabout way. If Tether can’t redeem, and trades break the peg, then ultimately either exchanges go insolves or anyone holding tether has to write off their holdings. Or both.

They can redeem, but not necessarily in dollars. The terms of service specifically give Tether the option of redeeming in basically whatever they want. Also, I say "they can", but we have zero proof of this ever happening.

Indeed, people have posted bounties for anyone willing to come forth with evidence that they have redeemed Tether for USD.

No-one has claimed them (and, IIRC, some are in the order of $5K USD, so not too trivial).

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

#189

Post by arcticbull »

jpmattia wrote: post #186
arcticbull wrote: post #180

Earlier quoted context omitted.

Did you read the settlement? [1] > New York Attorney General Letitia James’ office says it found that Tether sometimes held no reserves to back its cryptocurrency’s dollar peg. It said that, from mid-2017, the company had no access to banking and misled clients about liquidity issues. [2] It also depends on what you believe the role of that settlement was. Some speculated it was a trial balloon for a federal suit. [1…

> Did you read the settlement? Yes. It says that tether held securities/receivables denominated in dollars rather than actual dollars, despite Tether's claim that they held dollars. I could not find anywhere that the settlement claimed "no reserves", despite CNBC's quote. [edit: It came out of the AG press release, not the settlement. As near as I can tell the settlement makes no representation that tether is unbacke…

They lost all access to banking meaning that there was no physical way for them to create redeem Tethers. That makes it de facto un-backed. This is addressed in 14/ through 18/. They lost access to banking, and continued to issue Tethers.

> 18/ Because Tether did not have a significant bank relationship in its name from at least March 2017 until September 15, 2017, it could not directly process any fiat deposits for purchases of Tethers by customers on either the Tether website or via the Bitfinex trading platform.

And yet in that period they issued some 400M tethers.

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

#190

Post by leppr »

arcticbull wrote: post #165
graeme wrote: post #82

Earlier quoted context omitted.

The whales can redeem, in minimum chunks of $100,000. Mostly these are exchanges. Thus the peg is supported by the reserves in a roundabout way. If Tether can’t redeem, and trades break the peg, then ultimately either exchanges go insolves or anyone holding tether has to write off their holdings. Or both.

Can they though? (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 y…

> Roughly speaking nobody has tried to redeem any - for obvious reasons. They know they can't.

Usually you at least come up with FUD that sounds reasonable to an outsider.

Obviously many people (some that I know personally) have "redeemed" USDT for a USD wire via Tether. Tether may be fraudulent but it wouldn't have held up until now without some aspect of credibility. There are many 8 figures+ redemptions going on, sometimes multiple times a day.

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