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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

#231

Post by anonymoushn »

spookthesunset wrote: post #31
gammarator wrote: post #28

Earlier quoted context omitted.

This thread speculates that Tether’s commercial paper may be in Chinese real estate, which is currently suffering huge losses… https://twitter.com/TheLastBearSta1/status/14183024655571107...

Or more likely tether isn’t backed by anything at all. The auditor they hired quit before completing their audit. Seems legit to me. These dudes are a complete scam but as long as BTC goes to the moon nobody seems to care.

The Tether attestation earlier this year is by my fund's auditor, and they seem in my experience to be sufficiently diligent.

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

#232

Post by anonymoushn »

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…

One reason that roughly nobody tries to redeem, other than the operational issues, opportunity cost of waiting for bank wires, need for a non-US entity, etc. is that Tether is usually trading at a premium to $1. So when there's profit to be had, it's usually by creating Tethers, not redeeming them.

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

#233

Post by paulgb »

graeme wrote: post #208
csomar wrote: post #204

Earlier quoted context omitted.

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.

For something more recent, Archegos was a $10bn fund and something close to $200bn in asset devaluation was associated with its collapse.

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

#234

Post by rwiggum »

WalterSear wrote: post #224
cosmojg wrote: post #222

Why do people still use Tether? Alternatives like USDC and Dai are plenty liquid. I don't understand why anyone would put up with this level of unnecessary risk.

USDC isn't audited either. And the risk is systemic. Either you put up with it, or you get out of crypto.

USDC is audited monthly https://www.centre.io/usdc-transparency

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

#235

Post by phyalow »

JumpCrisscross wrote: post #218
ulzeraj wrote: post #174

Earlier quoted context omitted.

I think there is a possibility of things going the other way around of what grand parent is expecting. Once USDT implodes there will be a bank run to sell those tokens for fiat, bitcoin, Ethereum or even other stable coins. That until exchanges cease accepting those or doing trades at all. Some might become insolvent. In the end people who leave their funds at exchanges will be the one with the short end of the stick…

> Some might become insolvent. Why should an exchange go broke because something they trade falls in value?

Because the leverage extended to customers is greater than the value of collateral the exchange holds. It is certainly possible if Tether dropped to 0.8 or something this would cause even automated liquidation and margining engines to fail then causing a systemic shock across all posted liquidity on the venue.

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

#236

Post by rglullis »

rubyist5eva wrote: post #138

Cryptocurrency pegged to fiat is quite possibly the dumbest possible use of a cryptocurrency I can think of, except for Tether which was an obvious scam from the get go.

- Are you a merchant selling digital goods online and you want a zero-risk chance of dealing with chargebacks? You can accept stabletokens. No credit card fees as well.

- Are you hodling a good amount of BTC/ETH/BAT tokens but you would like to get some liquidity, perhaps for a large purchase? Put your crypto as collateralized loan on MakerDAO, get DAI with very low interest and spend that: bonus point, if the crypto you were holding loses value and your loan gets liquidated, you get a tax write-off.

- Do you live in some third-world country with poor countries and strong capital controls (e.g, Argentina)? It is a lot easier to buy crypto-pegged to the USD and EUR than it is to buy actual dollars and euros.

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

#237

Post by fnordfnordfnord »

spookthesunset wrote: post #31
gammarator wrote: post #28

Earlier quoted context omitted.

This thread speculates that Tether’s commercial paper may be in Chinese real estate, which is currently suffering huge losses… https://twitter.com/TheLastBearSta1/status/14183024655571107...

Or more likely tether isn’t backed by anything at all. The auditor they hired quit before completing their audit. Seems legit to me. These dudes are a complete scam but as long as BTC goes to the moon nobody seems to care.

>These dudes are a complete scam but as long as BTC goes to the moon nobody seems to care.

Chuckles... I'm in danger.

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

#238

Post by CryptoPunk »

arcticbull wrote: post #189
jpmattia wrote: post #186

Earlier quoted context omitted.

> 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…

>>They lost all access to banking meaning that there was no physical way for them to create redeem Tethers.

Temporarily being unable to transfer USD to fulfill redemption requests is not the same thing as being unbacked. Having USD-denonimated commercial paper backing the tether is still having something of value backing it, which is in a different universe from tether being unbacked.

People need to be more careful to not make inflammatory accusations, that are not substantiated, about an operation. This is true even if there are numerous red flags associated with the operation.

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

#239

Post by WalterSear »

rwiggum wrote: post #234
WalterSear wrote: post #224

Earlier quoted context omitted.

USDC isn't audited either. And the risk is systemic. Either you put up with it, or you get out of crypto.

USDC is audited monthly https://www.centre.io/usdc-transparency

USDC is attested monthly. It is not audited.

> Top five accounting services firm Grant Thornton LLP issues attestations each month on the US dollar reserves that back the USDC tokens in circulation.

Attestations were never intended to be used in this way, and are, in this situation, meaningless. The only reasonable purpose for these attestations is to confuse people who mistakenly conflate them with audits.

The fact that USDC is resorting to this behaviour rather than performing audits is not meaningless, however: it's a substantial red flag.

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

#240

Post by deepvibrations »

NicoJuicy wrote: post #135
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…

Calling it innovation seems pretty naive. - defi: images hosted on url's that can disappear - eth sites: exists since 1970? - eth auth: a step back, lose keys, lose account. No recovery possible. ... Can you say what exactly was "innovated"?

Sure - some problems being solved right now: What problems does DeFi solve? There are a few straightforward ones when looking at financial systems -

Inefficiency - Banks and financial institutions spend billions on opex (ex. BoA spent $53 billion on SG&A and occupancy/equipment in 2020). Well written protocols and decentralized trust can increase efficiency and collapse this number

Permissioned access - For better or for worse, anyone can create financial products and a whole market for it without asking the SEC

Opacity - Instead of using paper/hidden digital ledgers, open source contracts lets one easily follow money flow through code and transactions

Access - Turns out the world is very big and lots of people are either locked out from traditional financial institutions or their preexisting ones just really suck.

(some examples taken from article https://parthchopra.substack.com/p/part-2-why-defi-is-not-a-...)

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