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Tether Fined $41M for Lying About Reserves

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Re: Tether Fined $41M for Lying About Reserves

#121

Post by onlyrealcuzzo »

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.

Why would they? If you're invested in Crypto - you don't want it to go down. It's better to look the other way while someone is pumping and hope they never start dumping.

Re: Tether Fined $41M for Lying About Reserves

#122

Post by humaniania »

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?

The platforms that deal in USDT have a very strongly vested interest in seeing its continuation. To the long term detriment of nearly everyone else.

Re: Tether Fined $41M for Lying About Reserves

#123

Post by humaniania »

bluecalm wrote: post #89
gammarator wrote: post #52

Earlier quoted context omitted.

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).

Many people are also assuming that unlicensed unregulated offshore exchanges keep 100% of client funds in reserve. LOL.

Re: Tether Fined $41M for Lying About Reserves

#124

Post by lupire »

bko wrote: post #88
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.

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

Sure but "not holding Tether" is just "Tether not existing" but with extra wasteful steps.

Re: Tether Fined $41M for Lying About Reserves

#125

Post by kaashif »

frankbreetz wrote: post #108
bko wrote: post #88

Earlier quoted context omitted.

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

I believe a tether collapse would have a significant effect on the entire cryptocurrency ecosystem

It would at least open the door to more regulation, not to mention prudence on the parts of investors. I can't escape the feeling some of these risks aren't being priced in properly.

I don't think very many average people are invested in crypto significantly, if at all, despite the hype, so hopefully the harm would be limited.

Re: Tether Fined $41M for Lying About Reserves

#126

Post by sgpl »

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?

While I wouldn't say that their reserve is matching now ( I do not know) there were a few threads on twitter that I read a while back that stated that the folks behind tether were increasing the supply (of tether) to artificially inflate the value of their bitcoin holdings - which is something that they could have liquidated in exchange for more fiat since then. Obviously this is all conjecture.

This is the best reference I could find in relation to what I've said above:

In newly published research, with Amin Shams of Ohio State University, he finds evidence that Bitcoin’s 2017–2018 bubble was inflated by a lesser-known digital currency called Tether. [0]

[0] https://medium.com/texas-mccombs/tether-connection-puts-bitc...

Re: Tether Fined $41M for Lying About Reserves

#127

Post by gws »

ceejayoz wrote: post #116
gws wrote: post #110

Don’t really get you guys saying Tether should be shut down… the big banks get routinely fined with much bigger fines for much bigger crimes, are we gonna shut them all down then? At least Tether did not steal from nor defraud anyone. Just as a random example: https://www.justice.gov/opa/pr/jpmorgan-chase-co-agrees-pay-...

Tether did defraud people. They lied on their website, claiming a) audits (which they never completed a single one of) and b) 1:1 backing of each Tether with a dollar in the bank (which they didn't have).

You are right, they lied, and people could have been harmed if there were a “bank run” on Tether. But in practice there was not and nobody suffered any damage, zero, nada, nicht. While big banks got fined for actually taking money illegally out of people’s pockets and nobody said let’s shut them down

Re: Tether Fined $41M for Lying About Reserves

#128

Post by gws »

tootie wrote: post #118
gws wrote: post #110

Don’t really get you guys saying Tether should be shut down… the big banks get routinely fined with much bigger fines for much bigger crimes, are we gonna shut them all down then? At least Tether did not steal from nor defraud anyone. Just as a random example: https://www.justice.gov/opa/pr/jpmorgan-chase-co-agrees-pay-...

I think the difference is this is Tether's entire reason for existence. It's equivalent to Bernie Madoff.

Still there have been zero redemption issues in getting USD back from USDT

Re: Tether Fined $41M for Lying About Reserves

#129

Post by headmelted »

frankbreetz wrote: post #108
bko wrote: post #88

Earlier quoted context omitted.

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

I believe a tether collapse would have a significant effect on the entire cryptocurrency ecosystem

This is the big question mark, and why I sigh when people shrug it off.

How much of the demand for these tokens is being driven by money that never really existed? 100%? 50%? 0.02%?

There’s no way of knowing until it crashes - then what? e.g. if the price dives by 50%, and that really equates to 200% of the actual capital ever invested, what happens then?

I was listening to Darknet Diaries episode 102 today about the Canadian money printer, and I was thinking the entire way through it that it was basically describing tether but with paper and ink.

It got especially eye-opening when he talked about having to manage how it was released into circulation slowly so as no-one could track where it was coming from.

Re: Tether Fined $41M for Lying About Reserves

#130

Post by leppr »

Kiro wrote: post #71
FireBeyond wrote: post #50

Earlier quoted context omitted.

Hah. At one point Tether was claiming, during the days where they were holding on to the "1:1 backing!" that they were banking $2 billion A WEEK. And yet the cryptofans were telling us we were curmudgeons for not buying into the hype (or in this case, the bullshit).

I've never seen a cryptofan defend Tether.

Most of the big Bitcoin talking heads did.
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