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Federal investigators probe Tether

wsj.com

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Re: Federal investigators probe Tether

#11

Post by JumpCrisscross »

daft_pink wrote: post #8

deleted. I have to figure out the exact agency and repost sorry. I thought it was the sec, but I am wrong.

> Tether effectively evaded future SEC oversight by withdrawing from the U.S. market and operating outside U.S. jurisdiction

U.S. "jurisdiction is triggered when a payment in U.S. dollars [takes] place and the U.S. financial system [is] used" [1].

EDIT: Tether withdrew from New York State's jurisdiction as part of its settlement with the New York AG [2], not to be confused with the U.S. attorney based in Manhattan.

[1] https://www.ziv.unibe.ch/unibe/portal/fak_rechtwis/c_dep_pri...

[2] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...

Re: Federal investigators probe Tether

#12

Post by JumpCrisscross »

SheinhardtWigCo wrote: post #10
JumpCrisscross wrote: post #4

Tether was launched in 2014 [1]. It has over $120bn in outstanding liabilities against unknown assets [2]. When it fails, it will rival the fourth-largest 'bank' failure in U.S. history [3]. This has been a complete failure of U.S. regulatory bodies. [1] https://www.investopedia.com/terms/t/tether-usdt.asp [2] https://coinmarketcap.com/currencies/tether/ [3] https://en.wikipedia.org/wiki/List_of_largest_bank_failures…

It really is just a bank without any of the regulatory safeguards. A disastrous outcome is inevitable.

> really is just a bank without any of the regulatory safeguards

A "bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans" [1]. Tether doesn't offer demand deposits--withdrawals are subject to a minimum and fee [2]. It's thus not a bank, but a bank-like shadow bank [3].

[1] https://en.wikipedia.org/wiki/Bank

[2] https://tether.to/en/redeem-tethers-to-fiat-currency/

[3] https://en.wikipedia.org/wiki/Shadow_banking_system

Re: Federal investigators probe Tether

#16

Post by JumpCrisscross »

alchemist1e9 wrote: post #13

https://x.com/paoloardoino/status/1849876338573799912 CEO of Tether - “As we told to WSJ there is no indication that Tether is under investigation. WSJ is regurgitating old noise. Full stop.”

U.S. attorneys are under no obligation to tell people they are investigating that they are under investigation. That doesn't prove the Journal's assertion. But it's nonsense to the point of suspicion to conclude from not having been noticed that there is no investigation.

Re: Federal investigators probe Tether

#18

Post by alchemist1e9 »

satvikpendem wrote: post #5

Ah, finally, will Tether get its day in the litigious sun? It's well known in cryptocurrency circles that their coin is not backed 1:1 to USD, similar to FTX, only that FTX crashed and this was found out the easy way. Cracking Tether will be much harder as they resist audits.

> It's well known in cryptocurrency circles that their coin is not backed 1:1 to USD, similar to FTX, only that FTX crashed and this was found out the easy way.

Being speculated about is not the same as “known”. In fact every tether investigation seems to end up showing they are even over capitalize and hold more than 1:1!

My understanding of the audit situation was that the big accounting firms have refused to do it, presumably due to pressure from someone to not get involved.

Re: Federal investigators probe Tether

#20

Post by JumpCrisscross »

qqqult wrote: post #17
JumpCrisscross wrote: post #15

Earlier quoted context omitted.

> Tether obituary thread Timing its collapse is foolhardy. Concluding it must collapse isn't. It's a shadow bank run without deposit insurance nor AML.

Why must it collapse?

> Why must it collapse?

One, because the consequences of an AML failure are immediately catastrophic: a dollar stablecoin can't reasonably survive without access to the dollar financial system. Tether's unregulated status means enforcement options are zero or ban. (Banks can be fined and put under compliance regimes.) Running a perfect AML programme indefinitely is impossible. There is no indication Tether runs much of an AML programme at all.

Two, because bank-like structures are inherently unstable. Asset values fluctuate. The banks they hold cash or assets at will fail, sometimes beyond deposit insurance limits. Unlike banks, Tether has the benefit of being able to block redemptions. But they can only do that so many times before a regulator takes notice.

In summary, Tether exists at the pleasure of American regulators and the consequences of losing favour are collapse. They're compliance-wise and financially unstable. The consequences of a single failure won't be catastrophic. But eventually they will fail for the same reason every bank without deposit insurance will, eventually, fail.

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