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Tether Fined $41M for Lying About Reserves

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Re: Tether Fined $41M for Lying About Reserves

#81

Post by 35fbe7d3d5b9 »

delecti wrote: post #66
boole1854 wrote: post #60

Earlier quoted context omitted.

Correction: it is 2/3rds of what their reserves were back in 2017. The amount of Tether in circulation has increased over 150-fold since then, so presumably their reserves have increased as well.

> The amount of Tether in circulation has increased over 150-fold since then, so presumably their reserves have increased as well. They just got punished for not having actual reserves match their circulation. What basis is there to presume that their reserve is matching their circulation now?

https://tether.to/wp-content/uploads/2021/08/tether_assuranc...

This all boils down to two questions in my mind:

1) Do you trust the unsigned report from the auditor, who appears to be a fairly unknown entity?

2) Do you trust the asserted quality of the commercial paper, which makes up 50% of the putative reserves?

Re: Tether Fined $41M for Lying About Reserves

#82

Post by jameshart »

lazaroclapp wrote: post #73
dylan604 wrote: post #58

Earlier quoted context omitted.

> their mandate is make money for its owners, Isn't this pretty much the description of every company? I understand feduciary responsibilities blah blah, but if the company didn't think they could do both then they wouldn't be running the legitimate buisness. If it was started to intentionally dupe people that's an entirely different thing.

> Isn't this pretty much the description of every company? For the most part, sure. But that's the parent's point, I think. Central banks are not companies, they are part of the public financial infrastructure of a nation (or, in the EU case, group of nations).

> Central banks are not companies

Actually... it's complicated. The Bank of England, for example, was nationalized only in 1946, and it remains technically a company which is owned by the state, not actually part of the government.

In the US, the Fed is... well, it's not a company, but it's also not not a company... or group of companies...

See https://en.wikipedia.org/wiki/Federal_Reserve_Bank

Re: Tether Fined $41M for Lying About Reserves

#83

Post by dragonwriter »

dylan604 wrote: post #58
pfisherman wrote: post #13

Earlier quoted context omitted.

fiat debasing the currency. What I find ironic is that the crypto ecosystem still ended up with something like central banks, only in this case their mandate is make money for its owners, and they have no accountability or obligation to serve the general public.

> their mandate is make money for its owners, Isn't this pretty much the description of every company? I understand feduciary responsibilities blah blah, but if the company didn't think they could do both then they wouldn't be running the legitimate buisness. If it was started to intentionally dupe people that's an entirely different thing.

> Isn't this pretty much the description of every company?

Which is why we don't let private companies create currency willy-nilly anymore.

Re: Tether Fined $41M for Lying About Reserves

#84

Post by jyrkesh »

delecti wrote: post #66
boole1854 wrote: post #60

Earlier quoted context omitted.

Correction: it is 2/3rds of what their reserves were back in 2017. The amount of Tether in circulation has increased over 150-fold since then, so presumably their reserves have increased as well.

> The amount of Tether in circulation has increased over 150-fold since then, so presumably their reserves have increased as well. They just got punished for not having actual reserves match their circulation. What basis is there to presume that their reserve is matching their circulation now?

Even worse, they just took the opportunity to pay off the govt to avoid disclosing exactly to what extent they lied.

At this point, what basis is there to presume that their reserve is non-zero?

Re: Tether Fined $41M for Lying About Reserves

#85

Post by 35fbe7d3d5b9 »

AlexanderTheGr8 wrote: post #79
tdeck wrote: post #4

I don't understand why this is something they can settle rather than something that gets them completely shut down.

Tether is not a US-based company. So does US have the authority to shut them down?

There is an entire branch of the Department of Treasury designed to enforce stiff sanctions and financial penalties against people, companies, and even countries that defy US regulations.

If the federal government decides Tether needs shut down, it won't be a struggle.

Re: Tether Fined $41M for Lying About Reserves

#86

Post by sdhfjgjh »

gammarator wrote: post #52
sdhfjgjh wrote: post #45

Earlier quoted context omitted.

The lending rates are higher because lenders are paid a premium for owning a potentially worthless (USDT denominated) credit. The idiom that comes to mind is "picking up pennies in front of a steamroller".

Basic question: why doesn't this affect the currency pair exchange rate? If lending rates reflect the (realistic!) idea that holding 1 USDT is less valuable than holding 1 USD, how does 1 USDT trade at par?

If the price is under $1, the backer can purchase the coins with reserves and pocket the difference. The price will only depart from the peg if selling forces the market price down and the backer doesn't have enough reserves to purchase tokens sold beneath the peg. This scenario is similar to a bank run and would require high selling volume to set if off.

The lending rates are determined by a separate mechanism and reflect the probability of a future departure from the peg.

Re: Tether Fined $41M for Lying About Reserves

#87

Post by Hamuko »

zardo wrote: post #9
adflux wrote: post #3

Earlier quoted context omitted.

Perfect haha. Tether has figured out how to print money and nobody seems to care.

They just printed $440 Million in technically not counterfeit USD

Where can I apply to get this silk glove treatment by the authorities when I start making "untrue or misleading" bank notes?

Re: Tether Fined $41M for Lying About Reserves

#88

Post by bko »

pfisherman wrote: post #13
danuker wrote: post #11

> there was never more than $61.5 million backing Tether, even as more 442 million coins were circulating at one point. Ah, pulling the classic "fractional reserve" I see.

fiat debasing the currency. What I find ironic is that the crypto ecosystem still ended up with something like central banks, only in this case their mandate is make money for its owners, and they have no accountability or obligation to serve the general public.

The difference is I can choose not to hold Tether. Removing my exposure to dollars as a US citizen is a lot harder. Not to mention people that are on a fixed income like my parents. So debasing fiat is a lot worse

Re: Tether Fined $41M for Lying About Reserves

#89

Post by bluecalm »

gammarator wrote: post #52
sdhfjgjh wrote: post #45

Earlier quoted context omitted.

The lending rates are higher because lenders are paid a premium for owning a potentially worthless (USDT denominated) credit. The idiom that comes to mind is "picking up pennies in front of a steamroller".

Basic question: why doesn't this affect the currency pair exchange rate? If lending rates reflect the (realistic!) idea that holding 1 USDT is less valuable than holding 1 USD, how does 1 USDT trade at par?

Once the peg is broken it will collapse quickly. That means it's in their interest to keep the peg. If they have enough reserves (hard to imagine they have even 5% in cash but maybe they managed to buy enough BTC with their tokens to keep afloat for a while) they can keep the facade going for a very long time (until some kind of bank run is triggered).

Re: Tether Fined $41M for Lying About Reserves

#90

Post by usrusr »

AlexandrB wrote: post #29
SandB0x wrote: post #28

Earlier quoted context omitted.

This is simply insolvency, not fractional reserve.

And yet, they're still operating. This is the kind of thing that makes me think the whole cryptocurrency ecosystem is a house of cards. Cryptocurrency advocates seem to be really bad at spotting and punishing incompetent and malicious actors in their markets.

While they are not completely divested, self-interest mandates that they still hype what they try to get out of. And after that, they simply don't care and pride discourages them from being vocal about their apparent change of heart. Some might be good at spotting, but they will be excellent at staying quiet about their conclusions.
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