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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

#241

Post by deepvibrations »

arcticbull wrote: post #185
lottin wrote: post #128

Earlier quoted context omitted.

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.

I agree there is a lot of this in the space, but if you look past the laser eyes, there is some really awesome stuff happening in defi.

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

#242

Post by perl4ever »

zozin wrote: post #139

Oh, gee, another excessively dramatic article about crypto/Tether (see “… a potential criminal case that would have broad implications for the cryptocurrency market.”) My gut tells me that the Tether team did break some laws when trying to find a bank to hold their hundreds of millions/billions of dollars, but I don’t think Tether is a scam, since I think they do have the cash reserves to back the stable coin. Their…

>I think they do have the cash reserves to back the stable coin

They haven't completed an audit, have they? If someone starts an audit, they're admitting that it's necessary, and if they quit halfway with some lame excuse, how is there any chance they are legit and actually have the reserves they claim? There is just no innocent explanation I can imagine.

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

#243

Post by dom96 »

gruez wrote: post #42
jasonlaramburu wrote: post #14

Edit: Isn't it a huge red flag that Tether doesn't make any money off transaction fees? Their daily volume is almost 2x that of BTC. They could fully support the company with a tiny transaction fee and avoid all the regulatory uncertainty/FUD. How does tether make money (aside from potential fraud)? Is there a transaction fee that supports the people and cost of running tether (the company)?

If I were running it as a 100% legal/safe operation I'd invest the balance in short term treasuries. If you multiply tether's liabilities ($61.9B) by the current 1 year treasury rate (0.09%), you get $55.7M, which seems like plenty of money to run such an operation.

Why has nobody done this in a legit/safe way yet? How hard is it to create the equivalent of Tether with 100% independent auditors from the start that verify the coins are backed by real fiat?

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

#244

Post by arcticbull »

deepvibrations wrote: post #241
arcticbull wrote: post #185

Earlier quoted context omitted.

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.

I agree there is a lot of this in the space, but if you look past the laser eyes, there is some really awesome stuff happening in defi.

I don't disagree there's some cool technology, and in particular in the DeFi space - the problem is it's all fruit of the poison tree at the moment. It's all dependent on price action and the price action is dependent on Tether, on sketchy exchanges, on crime and criminality, on 125X leverage, on manipulation.

And of course, there's so many problems with smart contracts - even the core idea of permanent, irrevocable transactions where bugs can leave you destitute and without anyone to speak to. And no way to unwind them. [1] Unless you're big enough, I guess, and can just fork the chain like Vitalik did with the DAO.

[1] https://www.rekt.news/

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

#245

Post by arcticbull »

CryptoPunk wrote: post #238
arcticbull wrote: post #189

Earlier quoted context omitted.

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 t…

They were also unable to receive deposits, and issued Tethers anyways. Ones they claimed on their website for years were backed 1:1 with dollars in a bank account they controlled. This is the substantiated fraud outlined in the settlement.

The fraud was they said, on their website, for years, that they had 1 USD in their bank accounts as liquid currency for every USDT outstanding. They unequivocally did not - at numerous times.

> “Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie. These companies obscured the true risk investors faced and were operated by unlicensed and unregulated individuals and entities dealing in the darkest corners of the financial system." - Letita James, NYAG.

Their new wording about 'reserves' was not in place at the time. They changed the wording in March of 2019. The wording at the time was:

> "Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USDT is always equivalent to 1 USD."

This was also the wording at the time Bitfinex grabbed $800M out of their bank account and left them an IOU.

That was a lie, and it's not my claim, it's Letitia James'

Finally re: commercial paper, I haven't seen a shred of evidence they own a single scrap of it. In fact the FT seems to be unable to find anyone else who has seen evidence of it either, despite their being ostensibly the 6th or 7th largest holder of commercial paper in the world sandwiched up between Vanguard and JP Morgan. Could they be? I guess. On a scale of 1 to 10 how likely do I think that is? About a zero.

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

#246

Post by onlyrealcuzzo »

Marazan wrote: post #52
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…

Yes, money started moving over to USDC at exactly the same time they reduced transparency over their reserves and stopped being fully dollar backed. The risk is still right there.

Is there an article about USDC that describes what/when the major changes happened.

My understanding was that Coinbase was 1:1 dollars, and they actually had that money in banks, etc. Then, they ended transparency and the 1:1 peg. This is when people suspect they started getting debt to buy BTC - but this is presumably legal, right?

Do they have any obligation to be transparent - being a publicly traded company?

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

#247

Post by stickfigure »

nostrademons wrote: post #132
phpnode wrote: post #24

Earlier quoted context omitted.

Any rational person can see that Tether poses an existential risk to the crypto economy - but the market is highly irrational. There was an interview with tether's CTO and GC the other day that was an absolute car crash[0] and should be sounding deafening warning bells for anyone invested in crypto, but instead we see the BTC price shoot up by 15% in the days since it aired. It is utter madness. [0] https://www.youtu…

BTC shot up (by about 250%) the last time Tether was nearly shut down as well, as the NY AG was investigating them from Apr - Jun 2019. It makes sense when you consider that the population holding cryptocurrencies generally considers the USD worthless (you see that in some of the other posts here). USD are not an option. If Tether goes under, the next most stable reserve currency of the crypto economy is Bitcoin, so…

According to this article [1], about 70% of the current buy pressure on BTC comes from USDT. If tether value collapses, that tether won't be able to afford any BTC, so it won't matter where it flies to. And 70% of the buy pressure on BTC will disappear.

[1] https://crypto-anonymous-2021.medium.com/the-bit-short-insid...

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

#248

Post by wmf »

leppr wrote: post #190
arcticbull wrote: post #165

Earlier quoted context omitted.

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,…

What bank did the wires come from?

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

#249

Post by user-the-name »

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?

It wouldn't, if they handled funds correctly.

(They don't.)

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

#250

Post by user-the-name »

scsilver wrote: post #149
user-the-name wrote: post #143

Earlier quoted context omitted.

The thing is, it does not matter only to those who use it. Basically all trading of Bitcoin is not actually in USD, it is in Tethers. The polite fiction is that this is the same thing, but there are a million red flags saying that this is not the case. Once Tether implodes, it takes the entire bitcoin market with it.

I was looking at the usdc, vs tether, vs dai market caps over the last few weeks. Tether seemed to have stopped printing as usdc has continued to grow. https://coinmarketcap.com/currencies/tether/ https://coinmarketcap.com/currencies/usd-coin/ https://coinmarketcap.com/currencies/multi-collateral-dai/ Tether is at 60billion market cap compared to Usdc 30 billion and dai around 5 billion. Should probably look at volum…

USDC is rapidly shedding legitimacy in order to grow this quickly. Do not expect it to be much different than Tether ultimately.
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