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Federal investigators probe Tether

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Re: Federal investigators probe Tether

#41

Post by roenxi »

alchemist1e9 wrote: post #26
cool_dude85 wrote: post #24

Earlier quoted context omitted.

Can you link one of these investigations that show that tether is backed more than 1:1 with the USD?

I will try to find it. I would also point out they hold excess reserves in Bitcoin. My guess is nobody can get them on not being 1:1 but this idea of AML violations as the attack vector makes a lot of sense.

> I would also point out they hold excess reserves in Bitcoin.

Regardless of whether that is true or not, seems like a terrible idea. Tether doesn't need backing on the crypto side of the ledger - they can create new tether there. If there is a depeg, it'll be from a large amount of money flowing from Bitcoin -> USD or the like. It is highly likely that will correlate to the price of bitcoin dropping (possibly substantially in the event of a Tether depeg). So I'd expect the valuation of their reserves to correlate in a bad way with the chance of them needing to sell those reserves.

Presumably they're doing this for operational reasons but I wouldn't put much weight to it in a discussion on Tether's resilience.

Plus, being a cynic I'd treat that as evidence against Tether being fully backed. Crypto that Tether owns directly could easily have been purchased without any fiat money entering the crypto ecosystem.

Re: Federal investigators probe Tether

#42

Post by BLKNSLVR »

Good timing, along with the election. Going by history there's the likelihood of a ~20% dip in the BTC price before it takes a couple of big steps up in the last few months of the bull run part of the 4-year cycle.

If it happens, accumulate.

Re: Federal investigators probe Tether

#43

Post by timssopomo »

alchemist1e9 wrote: post #26
cool_dude85 wrote: post #24

Earlier quoted context omitted.

Can you link one of these investigations that show that tether is backed more than 1:1 with the USD?

I will try to find it. I would also point out they hold excess reserves in Bitcoin. My guess is nobody can get them on not being 1:1 but this idea of AML violations as the attack vector makes a lot of sense.

The issue is that "stablecoin" doesn't mean anything legally. US regulators have collectively abdicated their responsibility to create fair rules that encourage innovation while protecting investors and creditors.

Tether publishes their reserves [1], only 4% are Bitcoin. 84% is "cash & cash equivalents & other short-term deposits", 3% is precious metals, 5.55% is "secured loans". They report $5B in net equity, ~4.2%. So basically, if their collection of assets declines in value by 4.2%, they become unable to redeem every coin. There are a _lot_ of ways for that to happen with 87% of their assets in T-bills and money market funds. If the shortest T-bill is 4 weeks to maturity, they have plenty of time to incur interest rate risk (e.g.: Silicon Valley Bank).

[1]: https://tether.to/en/transparency/?tab=reports

Re: Federal investigators probe Tether

#45

Post by from-nibly »

jujube3 wrote: post #38
alchemist1e9 wrote: post #18

Earlier quoted context omitted.

> 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…

It would be very simple for Tether to just hold $1 for each 1 Tether coin. They could invest their cash in safe assets like treasury bills that yield 4% or more. Meanwhile, they pay no interest in Tethers. So they get a 4% return for doing nothing at all. As far as I know, there is no evidence that they are doing anything else. (There is some evidence that they did something else in the past, when interest rates were…

If it was that easy then we'd probably see more banks that do just that.

Re: Federal investigators probe Tether

#47

Post by llamaimperative »

TheAlchemist wrote: post #30
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…

Exactly - a massive failure of regulatory bodies. I wonder why. It was similar with Madoff - there were people literally sending documents showing it's a fraud, and they did nothing for years. I don't follow crypto lately, but it seems that Tether is printing money in high interest rate period. But back before that, it was a complete joke - it was so apparent that they published only made up numbers that didn't reall…

> Exactly - a massive failure of regulatory bodies. I wonder why. It was similar with Madoff - there were people literally sending documents showing it's a fraud, and they did nothing for years.

For this to mean much (unfortunately), we have to know how many legitimate companies are being constantly reported as fraudulent. Similar to the FBI's flawless "they were on our radar" after every mass shooting event... if everyone is on the radar then it's not that informative that this person was too.

Madoff's returns were so egregious that they definitely should've been looked into despite any of this^ though. Arguably Tether should be looked into if only because of the systemic risk it (allegedly?) produces for the crypto universe more broadly. But then again... no one seems to eager to spend a bunch of investigative resources to bail out an economy of anti-government gamblers/degenerates.

Re: Federal investigators probe Tether

#48

Post by [deleted] »

alchemist1e9 wrote: post #32
JumpCrisscross wrote: post #27

Earlier quoted context omitted.

> they hold excess reserves in Bitcoin We had precisely the same amount of information about FTX's Bitcoins as we do for Tether, for what it's worth.

bc1qjasf9z3h7w3jspkhtgatgpyvvzgpa2wwd2lr0eh5tx44reyn2k7sfc27a4 Isn’t that the public Tether bitcoin address with over 75K coins? https://platform.arkhamintelligence.com/explorer/address/bc1... That's precisely A LOT more than anyone knew about FTX's non-existent Bitcoin.

[deleted]

Re: Federal investigators probe Tether

#49

Post by JumpCrisscross »

alchemist1e9 wrote: post #32
JumpCrisscross wrote: post #27

Earlier quoted context omitted.

> they hold excess reserves in Bitcoin We had precisely the same amount of information about FTX's Bitcoins as we do for Tether, for what it's worth.

bc1qjasf9z3h7w3jspkhtgatgpyvvzgpa2wwd2lr0eh5tx44reyn2k7sfc27a4 Isn’t that the public Tether bitcoin address with over 75K coins? https://platform.arkhamintelligence.com/explorer/address/bc1... That's precisely A LOT more than anyone knew about FTX's non-existent Bitcoin.

That is a wallet with a lot of Bitcoins in it. We don't know to what degree it's controlled by Tether. We don't know the degree to which it's otherwise encumbered. If I recall correctly, FTX also pointed to wallets with Bitcoins in them from time to time.

To be clear, I am not saying Tether is committing fraud. Just that to the extent there have been investigations, they came up short, and that them being short is not even among the main risks to their existence.

Re: Federal investigators probe Tether

#50

Post by JumpCrisscross »

jujube3 wrote: post #38
alchemist1e9 wrote: post #18

Earlier quoted context omitted.

> 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…

It would be very simple for Tether to just hold $1 for each 1 Tether coin. They could invest their cash in safe assets like treasury bills that yield 4% or more. Meanwhile, they pay no interest in Tethers. So they get a 4% return for doing nothing at all. As far as I know, there is no evidence that they are doing anything else. (There is some evidence that they did something else in the past, when interest rates were…

> there is no evidence that they are doing anything else

There is a lot of evidence they aren't just buying Treasuries. The only times people looked, the money was being held in weird stuff, including frozen deposits at non-FDIC insured banks and private loans [1].

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

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