Tether Fined $41M for Lying About Reserves • Hacker News Board

Re: Tether Fined $41M for Lying About Reserves

#171

Post by chrononaut » Fri, Oct 15, 2021, 11:55 PM UTC

zomglings wrote: post #68

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).

There has always been a healthy amount of skepticism about Tether in the crypto community. Your cryptofans narrative does not accurately reflect reality.

Isn't the trouble that Tether substantially influences the solvency of all other stabletokens and the value of cryptocurrencies themselves (in relation to X fiat)?

For example (admittedly this is probably way off-base here), let's say there were only two stablecoins (USDT and USDC), and only one of which had true 1:1 buyback (USDC) where >=1 entity would exchange one USDC for 1 USD (I know the reality of USDC is muddle too). Let's also say the amount of USDT in circulation was $10b and the amount of USDC in circulation was $1b. If there's a well-established "distrust" of USDT, where people only "temporarily" keep it on hand or use it as an intermediary, they're still using it to acquire other cryptocurrency, and thus inflating prices, right? If everyone attempts to exit onto the USDC, the available supply will dry quickly, causing the /USDC price to plummet (?).

Thus even if you thought Tether was intolerable I feel like it's an implossible belief to simultaneously think (1) that Tether is a scam, and (2) cryptocurrency can be seen a store of value. (I know there are others who recognize and highlight other utilities of cryptocurrencies).

(I am super interested in the flaws in this logic because as an aside, if there's any general reading material regarding these kind of economic thought experiments, doesn't have to even be crypto-related, I will certainly take any recommendations! I find them really fascinating. Someone mentioned a Darknet Diaries episode on counterfeit currency; Probably the first thing I have to look into.)

Re: Tether Fined $41M for Lying About Reserves

#172

Post by matheusmoreira » Fri, Oct 15, 2021, 11:56 PM UTC

system2 wrote: post #136

I am blown away. 61.5 million dollars for $68,536,825,819 (68 billion dollars.) Maybe not the same in 2017 but damn, how does this even work without anyone panicking?

Banks do the same thing. How do banks work without anybody panicking? Liquidity injections. The government will literally print money and give it to banks so they can fulfill withdrawals during bank runs. If the governments didn't bail them out, they'd be insolvent.

They should just do the same for Tether.

Re: Tether Fined $41M for Lying About Reserves

#173

Post by 908087 » Fri, Oct 15, 2021, 11:56 PM UTC

paulgb wrote: post #20

tdeck wrote: post #4

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

I'm more surprised that anyone still holds Tether, unless they're stuck with it. The company has been caught in lies several times before, it's not as if a $41M fine will turn them honest.

I'm not going to give them the pleasure of linking it here, but even their own press release about this settlement is full of easily disprovable lies. They claim the CFTC concluded exactly the opposite of what the CFTC concluded.

But their executives / general counsel and crypto cultists are out on Twitter celebrating it as a win anyway, and repeating Tether's lies verbatim.

Re: Tether Fined $41M for Lying About Reserves

#174

Post by matheusmoreira » Fri, Oct 15, 2021, 11:59 PM UTC

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-...

Yeah. The truth is the entire banking system is running the exact same scam ad Tether. The only difference is the governments think banks are too important to allow the consequences of their actions to catch up with them. So whenever there's a bank run and there's no money in the bank, the government bails them out.

They should just bail Tether out too.

Re: Tether Fined $41M for Lying About Reserves

#175

Post by chrononaut » Sat, Oct 16, 2021, 12:01 AM UTC

gws wrote: post #128

tootie wrote: post #118

Earlier quoted context omitted.

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

Bernie Madoff was also able to handle withdrawls from his fund to a limited extent prior to its collapse.

Also, are there entities redeeming USDT into USD? Or does it always involve intermediary crypto? (I am not actually familiar with the extent of cryptoexchanges out there that deal with fiat, so genuinely curious.)

Re: Tether Fined $41M for Lying About Reserves

#176

Post by matheusmoreira » Sat, Oct 16, 2021, 12:04 AM UTC

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.

Yeah, it sucks. The problem is USD though. It taints everything it touches but people are still forced to use it. People use cryptocurrencies as an investment and convert to fiat in order to transact. They refuse to transact directly in cryptocurrencies.

They would work if some country was crazy enough to sell barrels of oil for cryptocurrency, indirectly setting the price of everything else. That will probably get them invaded and destroyed by the US military for threatening the hegemony of the petrodollar.

Re: Tether Fined $41M for Lying About Reserves

#177

Post by jakeinspace » Sat, Oct 16, 2021, 12:05 AM UTC

mindslight wrote: post #156

orthecreedence wrote: post #147

Earlier quoted context omitted.

This is really interesting. I've long thought of as the US' empire being a primarily financial one (as opposed to military, like many other past empires) and I didn't even realize OFAC existed until reading your comment, much less the types of activities they engage in. This certainly cements my suspicions even more about the financial empire of the US and how they exercise that power. Thanks for the post.

What is the difference between a financial empire, a military empire, and a resource empire (eg petrodollar) ? Each aspect reinforces the others. If the US didn't have the military, it couldn't enforce financial laws outside of its borders. If the US didn't have energy, it couldn't run its military. If the US didn't have a reserve currency, then it wouldn't be able to obtain as many resources.

Without taking a moral/ethical stand, it really is an amazing thing how much subtle power the US government wields.

Re: Tether Fined $41M for Lying About Reserves

#178

Post by toofy » Sat, Oct 16, 2021, 12:09 AM UTC

_3u10 wrote: post #18

tdeck wrote: post #4

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

The SEC is in the business of protecting investors not destroying peoples savings over a few inaccuracies. Why would misleading statements ever result in a shutdown of a company instead of a fine?

“Misleading statements” is doing a lot work here.

When we’re talking about organizations who exist solely in the realm of toying with people’s finances, a “misleading statement” is nothing more than a lie. They were misleading people. There is a reason some things come along with incredibly complex language to explain the nuances of what is actually happening as accurately as possible.

We can’t attempt to downplay “misleading statement” in an effort to misdirect away from why they were misleading people.

Re: Tether Fined $41M for Lying About Reserves

#179

Post by jakeinspace » Sat, Oct 16, 2021, 12:10 AM UTC

matheusmoreira wrote: post #172

system2 wrote: post #136

I am blown away. 61.5 million dollars for $68,536,825,819 (68 billion dollars.) Maybe not the same in 2017 but damn, how does this even work without anyone panicking?

Banks do the same thing. How do banks work without anybody panicking? Liquidity injections. The government will literally print money and give it to banks so they can fulfill withdrawals during bank runs. If the governments didn't bail them out, they'd be insolvent. They should just do the same for Tether.

Banks do not have enough cash on hand to meet their liabilities (deposits), but they are for the most part net-positive over all assets and liabilities. They aren't just burning depositor's money, they're putting it into mortgages and riskier loans. So while they cannot afford a quick payout above 10% of total deposits, the assets are there in the form of loans and securities.

Re: Tether Fined $41M for Lying About Reserves

#180

Post by AnthonyMouse » Sat, Oct 16, 2021, 12:10 AM UTC

Retric wrote: post #159

AnthonyMouse wrote: post #140

Earlier quoted context omitted.

Making it illegal doesn't affect its utility for illegal activity. Criminals already break the law. It would cause a one-time decline in value but that only matters to speculators. The value would still be non-zero because it's global and there exist places where it isn't illegal. Even if it was somehow illegal everywhere, the value still wouldn't be zero because of black markets. The drug user uses it to buy drugs,…

Making it illegal makes it vastly less useful for illegal purposes. Legitimate transactions provide cover, it’s like the difference between a sniper in a forest or an empty parking lot. If your factory selling a truck full of AK-47’s you want to actually be able to buy steel to make more AK-47’s. If bitcoin’s illegal you now need to find a buyer for the guns and another buyer for the bitcoins.

The steel mill was probably going to want dollars instead of Bitcoin regardless, so the only difference is that they do the trade for dollars on a black market exchange. This is likely to get folded into the money laundering process anyway -- the Bitcoin goes to unspecified offshore location to get turned into dollars that come back as a clean payment for "consulting services" or what have you.

There is no need for additional "cover" at that point because the illicit transaction is already illicit. If someone just took that Bitcoin and bought a house, the IRS would have questions. It would have to be laundered first. The output of the money laundering process is clean dollars regardless of whether the input is illegal because of the illegal source or illegal because of the illegal source and currency.