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

Re: Tether Fined $41M for Lying About Reserves

#41

Post by OneLeggedCat » Fri, Oct 15, 2021, 6:53 PM 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.

> crypto ecosystem still ended up

It's decades from its final form.

Re: Tether Fined $41M for Lying About Reserves

#42

Post by tdeck » Fri, Oct 15, 2021, 6:55 PM UTC

nickff wrote: post #23

The CFTC claims to be helping end-customers by doing this kind of thing, but it is really taking money that could have been distributed off the table. Fining (and perhaps requiring the dismissal of) Tether's corporate officers would likely instill more discipline, but fining the company just hurts the customer.

It would be better to confiscate Tether's entire reserve, force them to allow tether holders to cash out (for fractional amounts), and punish the execs directly.

Re: Tether Fined $41M for Lying About Reserves

#43

Post by JumpCrisscross » Fri, Oct 15, 2021, 6:57 PM UTC

tdeck wrote: post #4

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

> why this is something they can settle rather than something that gets them completely shut down

I'm a Tether sceptic. I wouldn't want to be the regulator (note: not prosecutor, different standards) to shut it down.

There was a moment when I suspected Tether may hold U.S. dollar money market securities. That would mean a collapse could spill to our financial markets. But that doesn't seem to be the case. The only people who would get hurt in its wake seems to be those who choose to keep using Tether despite the screaming warnings.

Those same people would make you public enemy No. 1 for bringing down the house of cards. So given the problem is contained to the people who oppose its solution, there isn't a great argument for allocating regulatory resources to this over anything else.

Re: Tether Fined $41M for Lying About Reserves

#44

Post by nickff » Fri, Oct 15, 2021, 6:59 PM UTC

tdeck wrote: post #42

nickff wrote: post #23

The CFTC claims to be helping end-customers by doing this kind of thing, but it is really taking money that could have been distributed off the table. Fining (and perhaps requiring the dismissal of) Tether's corporate officers would likely instill more discipline, but fining the company just hurts the customer.

It would be better to confiscate Tether's entire reserve, force them to allow tether holders to cash out (for fractional amounts), and punish the execs directly.

That would make sense to me, though it may be possible (and less disruptive) to allow tether to continue under new management.

Re: Tether Fined $41M for Lying About Reserves

#45

Post by sdhfjgjh » Fri, Oct 15, 2021, 7:01 PM UTC

knownjorbist wrote: post #31

paulgb wrote: post #20

Earlier quoted context omitted.

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.

Lending rates for USDT on the major decentralized lending platforms are more favorable than other stablecoins.

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".

Re: Tether Fined $41M for Lying About Reserves

#46

Post by klyrs » Fri, Oct 15, 2021, 7:02 PM UTC

nickff wrote: post #40

klyrs wrote: post #38

Earlier quoted context omitted.

No. This teaches scammers and customers alike that this is a risky business. Fining the corporate officers is almost certainly off the table, because Tether appears to be some form of limited liability corporation (but I don't know anything about the law in HK). Play stupid games, win stupid prizes. I'd hope the founders end up in jail for what appears to be blatant fraud... but chances are, they'll just move on to t…

The CFTC mission statement is: > "The mission of the Commodity Futures Trading Commission is to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation." I don't see how punishing customers accomplishes that goal.

Let's read that carefully, now.

The CFTC provides "sound regulation," not insurance. Insurance protects customers. Regulation by the CFTC is meant to protect "the U.S. derivatives markets." They aren't there to protect customers.

If the customers wanted a safe investment, they should have used an insured vehicle for that.

Re: Tether Fined $41M for Lying About Reserves

#47

Post by CryptoPunk » Fri, Oct 15, 2021, 7:05 PM UTC

wbsss4412 wrote: post #33

AlexandrB wrote: post #29

Earlier quoted context omitted.

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.

It’s really an amazing case study in what happens when* you take libertarian ideology to its conclusion. Edit: typo*

Libertarian ideology has resulted in Tether being replaced by USDC in Ethereum DeFi. Your claim is based on the bizarre premise that people are only intelligent when formulating mandates for otherd, while they can only exercis if formulating a course of action for themselves

Re: Tether Fined $41M for Lying About Reserves

#48

Post by BbzzbB » Fri, Oct 15, 2021, 7:06 PM UTC

WalterSear wrote: post #27

BbzzbB wrote: post #19

Earlier quoted context omitted.

More than 7x ("at one point")

That was then. This is now: https://pbs.twimg.com/media/FBwhKnmXEAE1whT?format=jpg&name=...

The fact the number of Tethers in circulation basically never goes down even when the crypto market gets more then halved says it all as far as I'm concerned, but without an investigation it is speculation. I was referring to the ratio highlighted by the article.

Re: Tether Fined $41M for Lying About Reserves

#49

Post by TameAntelope » Fri, Oct 15, 2021, 7:06 PM UTC

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.

I think if you got a few beers in even the most adamant crypto advocate, you'd discover their thinking is more along the lines of, "The house of cards is out in the open with crypto, vs. hidden behind bureaucracy and obfuscation in traditional banking".

With crypto, the "average" person gets to feel "in on it" in a way usually reserved for coked up Goldman associates. That is possibly not a good thing, as you're pointing out.

Re: Tether Fined $41M for Lying About Reserves

#50

Post by FireBeyond » Fri, Oct 15, 2021, 7:07 PM UTC

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.

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).