Tether executives said to face criminal probe into bank fraud • Hacker News Board

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

#201

Post by jpmattia » Mon, Jul 26, 2021, 7:30 PM UTC

JumpCrisscross wrote: post #183

jpmattia wrote: post #168

Earlier quoted context omitted.

> 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 sympa…

> No need to launch a criminal probe against an overseas firm led by overseas founders harming out-of-state residents.

There is definite need to launch a criminal probe against an overseas firm that defrauded NY state residents, which she did not do.

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

#202

Post by jpmattia » Mon, Jul 26, 2021, 7:33 PM UTC

arcticbull wrote: post #196

jpmattia wrote: post #192

Earlier quoted context omitted.

> That makes it de facto un-backed. It makes them un-backed by US Dollars in a bank account. It does not make them un-backed by securities denominated in US dollars, which was my point. It's also likely why she never pursued a fraud case.

That was a settlement for fraud under the Martin act. Fraud was the charge settled.

Fine, a criminal fraud case. Nobody went to jail.

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

#203

Post by dcolkitt » Mon, Jul 26, 2021, 7:38 PM UTC

defaultprimate wrote: post #145

dcolkitt wrote: post #94

Earlier quoted context omitted.

People said the same thing about Mt. Gox. Tether only represents 4% of the market cap in crypto. About the same fraction of the US stock market represented by Amazon.

It's not about "market cap", which is a myth in the crypto space anyway: I made 1 billion of my proprietary tokens, and sold .001 to myself in another wallet for $1. Therefore my token's market cap is $1 trillion. I'm sure banks will let me buy a hundred million dollar mansion now since my net worth is verfiably gigantic. It's about cash "equivalent" in flow and out flow that tether/stable coins make up. Currently th…

Volume is not synonymous with flows. For example ~50% of US equity market volume is HFT. Yet this trading has virtually no impact on the large-scale direction of the market. That's because they don't accumulate sizable positions. Most of the volume is very high turnover, so there's no large aggregate impact.

Similarly, most of crypto volume is Tether, because Tether is used to arbitrage between exchanges. Tether is a way to transfer money significantly faster than the fiat banking system. Particularly for exchanges in segmented banking markets. It's much cheaper/faster to get USDT from Coinbase to ByBit than it is to send an ACH wire.

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

#204

Post by csomar » Mon, Jul 26, 2021, 7:49 PM UTC

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.…

Tether has a $60bn market cap. That's a drop in the ocean for the international markets.

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

#205

Post by smoldesu » Mon, Jul 26, 2021, 7:50 PM UTC

Who's surprised here?

Disclosure: I know nothing about crypto. I've maybe transacted $300 of it, maximum, in my lifetime. But Tether was obviously shady from the start. The insane social-media pushes, the "thought guards" who would scour crypto hashtags to spam whitepapers at Tether detractors, it all seemed way too sensational from the start.

As a side-note, I really do feel bad for the people who have poured their lives into becoming full-time cryptocurrency advocates when Bitcoin took off. I've always thought the technology had potential, it's obviously not a one-size-fits-all solution. It's basically binary search with a sex factor, which makes it all the more fascinating to watch it take off with wild, unfounded speculation pouring in from the finance sector.

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

#206

Post by bluecalm » Mon, Jul 26, 2021, 7:52 PM UTC

deepvibrations wrote: post #43

spookthesunset wrote: post #30

Earlier quoted context omitted.

And yet people are so bought into crypto hype they look the other way. These dudes have been running this scam in plain sight for years now. It always amazes me that the whole house of cards continues to stand and hasn’t completely blown up.

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…

Any evidence of that happening? I mean there is still about the same amount of Tether in circulation (granted they stopped printing it). For the money to really move out it we would need to either see Tether supply shrinking or being moved to Tether own (or Bitfinex or any other of their sister companies) accounts. I am not following closely enough to know if that's the case, do you?

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

#207

Post by csomar » Mon, Jul 26, 2021, 7:53 PM UTC

jazzyjackson wrote: post #55

jonahbenton wrote: post #26

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

> criminal enterprises

Define criminal enterprises? Because smoking can be considered one of them (it's harmful, addictive and heavily taxed). Only recently western governments started to crack on smoking (probably because they foot the bill for healthcare now?) but booze and tobacco where the way to tax people before.

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

#208

Post by graeme » Mon, Jul 26, 2021, 8:00 PM UTC

csomar wrote: post #204

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.…

Tether has a $60bn market cap. That's a drop in the ocean for the international markets.

Lehman was quite small by the time it collapsed.

Doesn’t mean Tether will have a ripple effect but you’re ignoring leverage.

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

#209

Post by xenadu02 » Mon, Jul 26, 2021, 8:04 PM UTC

spookthesunset wrote: post #30

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...

And yet people are so bought into crypto hype they look the other way. These dudes have been running this scam in plain sight for years now. It always amazes me that the whole house of cards continues to stand and hasn’t completely blown up.

Game theory predicts that market participants who discover Tether is a scam would publicly praise it while simultaneously moving away from it slowly and quietly to avoid spooking the market - leave some other sucker holding the bag.

We also know people can be irrational so those who depend on Tether to operate simply cannot acknowledge it is a scam.

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

#210

Post by xenadu02 » Mon, Jul 26, 2021, 8:11 PM UTC

rich_sasha wrote: post #25

machinecontrol wrote: post #8

Earlier quoted context omitted.

This is very common in the US, especially for banks and financial institutions. They settle without admitting any wrongdoing, and agree to pay a fine and promise to change their procedures to avoid doing this in the future. It is exceedingly rare for financial executives to go to jail for crimes committed by a corporation.

There’s a weird game-theoretic angle to it too. US regulators tend to mostly hammer down when they are confident they can win, they don’t like fighting and losing. So in a way, being told to pay a fine is seen as “pay the fine or else we’re going to court and winning ”. It saves the regulators the hassle of actually proving they are right. But of course there is then a second-order effect. If you are defending yourse…

From a societal perspective if the threat of investigation and fines is enough to scare most people into following the law most of the time then it's a fairly cheap return on investment. It sucks that some people "get away with it" but over-zealous prosecution can have its own negative side-effects.

FWIW I do wish we'd see more prosecutions of the big cases like the financial crash or the many instances of criminal fraud in the crypto space. Like Madoff you need to catch some big fish to remind everyone that your threats are not entirely empty.