I've been following Tether for quite a long time. I have no absolute proof it is a scam but the writing is on the wall. Here are some facts.
- The current Market Cap of USDT is 34 Billion Dollars. It was 4B this time last year. Since the value is pegged this means there has been an influx of cash of 30 B into this shady company in the last year alone. Who invested this money? We have no idea since Tether doesn't disclose, but we're supposed to believe all this money entered USDT even with the red flags we see.
- There's a correlation between Tether printing new USDT and the Bitcoin Price.
- There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try.
- Daily volume of transaction is in the 100 B mark. Twice that of Bitcoin and 3 times Tether daily volume this time last year.
- BitFinex is included in the NY decision because it's proven now that Bitfinex and Tether are operated by the same people. Note that a few years ago this was not only undisclosed but actively denied by Tether.
- Tether initially told its investors it was 100% backed by dollar reserves and that it would be subjected to constant audits. The audits never happened, and they eventually conceded only ~70% was backed by "short term cash reserves".
My conclusion is that the folks at BitFinex came up with a new currency, printed billions of it and used it to wash trade against itself and other crypto, creating an artificial demand that drove the prices up. It's textbook Ponzi scheme and will inevitably come crashing down, killing Tether, BitFinex and a chunk of the Crypto Market.
Crypto folks will counter argue that people has been saying this for years but Tether is still chugging along and crypto is healthier than ever.
Personally I won't touch any crypto with a 10 foot pole until this thing blows over. If that means missing out on a lot of possible gains so be it.
Almost all fiat deposits into Bitfinex create USDT.
Thats an additional fact that the amount is in line with the amounts that would be deposited into any big exchange.
If Coinbase minted USDC whenever someone deposited, you would see the same kind of growth.
The basis of your entire post is assuming impropriety based on pretty normal behavior with the addition of the business quirk of when USDT is created.
The ability for impropriety is a good enough reason to avoid it, and their unilateral willingness to do so without any discussion can reinforce that. But people thought everything you thought since the beginning of Tether in like 2014 or so, but the reality is that it “only went fractional reserve” in 2018. Its kind of like they threw up their hands and said “well people think its a ponzi anyway might as well cover this business debt!” The irony being that the NY AG investigation actually proved that prior to 2018 it functioned exactly as promised, barring their 2017 distress by having nowhere to put their fiat deposits.
But if you assume that it hasnt come crashing down because Bitfinex does what they said, then it still does make sense: crypto prices pump after Tether mints because it is people depositing into the exchange and then buying crypto.
Any way glad USDC and DAI are growing a lot now, which have grown by the same orders of magnitude.
Is 'pretty normal business behavior' pretending two entities (bitfinex and Tether) are arms lengths entities with no relationship to each other to hide the conflict of interest, along with the provably lying about the actual backing of the coin, and using what were supposed to be customer trust funds to bail out what was supposed to be an explicitly stated unrelated business?
If so - be aware those are felonies in many industries and are probably criminal in most jurisdictions (fraud at a minimum). For very good reasons.
> Almost all fiat deposits into Bitfinex create USDT.
As a matter of fact that is NOT true. (speaking as a crypto hedge fund manager, active since 2013, and trading > $1B/month on all major exchanges). It used to be like that in the past (when USD and USDT where one just represented as "USD" on Bitfinex), but this changed a year or two ago. Now, USD wires are being credited as USD and USDT deposits are being credited as USDT. And there is a USDT/USD market on Bitfinex to exchange between the two.
If everything is fine and dandy with them why are they stopping trading in NY? Why is the AG claiming they lied about reserves, the one thing they really-really shouldn't have been? (Insert "you had one job" meme.)
How come you just come here telling that deposits in bitfinex creates USDT
But Paolo himself post that all the usdt minted is 'tron replenish' everytime whale alert tweets about 800,000,000 USDT frwshly minted
So, basically, in your intentions to defend USDT you are even contradicting what its own CEO says...
It's also funny how tesla 1.5b investment and microstrategy few millions buy are to be 'celebrated' as big and huge, yet you are trying to convince us there is people depositing 800m daily into bitfinex?
Their post doesn't describe normal behavior. It describes what would be illegal behavior elsewhere. It may be somewhat legal depending on the underlying reasons due to the quirks of not being regulated but renegading on promises to investors is not normal behavior when it comes to things like audits.
> Almost all fiat deposits into Bitfinex create USDT.
Which is insane. Those are customer funds, that Bitfinex owes to their customers, if they choose to withdraw from their ecosystem.
They aren't a personal piggybank for them to dip into as they please.
This is not at all like fractional reserve banking, where a financial liability (customer deposts) are used to print dollars (in the form of loans), because customer deposits can be called back anytime, while loans cannot.
With Tether, if Bitfinex takes a dollar a customer deposits, and then prints and sells a USDT, and the customer withdraws their deposit, they have to destroy a USDT, in order to maintain the 1:1 peg. There is zero evidence that they are doing this at anywhere near the rate they claim.
Ironically, what they are doing is very similar to a double-spend.
> There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try.
There is an easy way. Swap USDT to USDC on Curve. Deposit USDC on Coinbase. Convert USDC to USD on Coinbase. Withdraw USD.
I'm not saying I disagree with your overall thesis. But this specific point makes it sound like USDT is some sort of roach motel ("you can get in, but you can't get out"). That's not true, it's fairly easy to get back to USD at low cost. The fact that USDT is trading at near parity with USDC on Curve indicates that most of the market doesn't perceive a risk.
That's fairly easy?!?! That's a textbook yak shaving exercise if I heard of one, and seems like it would have to involve multiple parties during the exercise.
Many exchanges have pretended for a long time that USDT is 'the same' as dollars, and there are going to be a lot of folks pissed that it isn't actually the same thing.
There was a similar situation the last time the NYC AG tried to shut down Tether and withdrawals from Bitfinex were blocked (June 2019). What happened was that Tether started trading at about $0.93 and USDC/DAI started trading around $1.04, as the supply of other stablecoins wasn't quite adequate to accommodate all the people fleeing Tether. Bitcoin actually ended up being the reserve currency instead: the price of Bitcoin spiked from $5200 -> $8700 over the course of a couple weeks as Tether holders dumped it to buy Bitcoin and move it to other exchanges.
Personally I'm surprised the risk premium wasn't more, but Tether is still around today despite both Bitfinex and Binance blocking withdrawals and the NYC AG initiating fraud charges against them, so ultimately the folks who decided it was nothing were right. Then, at least.
How many fees have you paid through the 3 or 4 steps to get to this "easy" solution? Is that solution available to everyone worldwide? (I'm not familiar with Curve or Coinbase and whether they're US only or something of that nature)
> There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try.
It's perfectly possible to exchange USDT for USD and withdraw USD to your bank account; it does not involve complicated steps nor outrageous fees. Kraken, for example, has a very liquid USDT/USD market, is a well respected exchange, and processes USD withdrawals that arrive within minutes to US bank accounts. I'am speaking as an industry insider and hedge fund manager that trades ~$1B/month on the crypto markets.
What will happen to NY AG which investigated Tether for 2 years, went through 2.5 mil pages of documentation, yet missed such an obvious scam that a lot of people, including on this forum, can clearly see?
If Tether implodes, is this proof that NY AG is incompetent or even worse, somehow implicated in this giant scam by covering it up?
In the NY AG settlement PDF it clearly states that they will not indict Tether in the future for the investigated crimes, including not being backed up by assets, which happened before the date of the payment of the fine:
> 56. Within five (5) days of the receipt of the penalty ... and agrees not to bring any claims or causes of action against Bitfinex or Tether ... for matters relating to the conduct set forth in the Findings and the Petition ... arising out of Bitfinex or Tether’s representations concerning the backing of tethers during the time period January 1, 2014 to the effective date of this Settlement Agreement; transfers of a portion of the cash reserves backing tethers to Bitfinex pursuant to the line of credit
Doesn't mean the DOJ or any other State AG can't bring action. NY also doesnt remove themselves from prosecuting over any future action, like being unable to provide the agreed upon transparency reports.
This is the confusing part to me. Everything I read online talks about Tether being fraudulent. Shouldn't the price of Tether reflect a discount based on that? If it doesn't, does that mean the market is okay with a Tether being 1 USD even if it is not backed by anything?
I've also been following Tether a while. I even shorted a bit back in 2018 but I'm starting to think maybe they are basically legit apart from maybe not dotting all the Is on the money launder regs. Here's Gregory Pepin "Deputy Chief Executive Officer at Deltec Bank & Trust", Tether's bankers, saying they have the money: https://youtu.be/rQ3nQ8-KY28?t=281
Did you exchange USDT for USD through the exchange or did you trade USDT for USD, there is a difference.
In the first instance the exchange is on the hook for the USDT and they have to go to Tether to get USD to cover it.
In the second instance the other user you traded with is on the hook for the USDT and they will probably just trade it for USD in the future or another crypto.
Even the 70% backing number is too high. According to the findings of the NYAG:
"Because of Tether’s inability to conduct significant banking activity during this
time, it could not itself hold dollars sufficient to back the hundreds of millions of new tethers that
had entered the market. Until September 15, 2017, the only U.S. dollars held by Tether
ostensibly backing the approximately 442 million tethers in circulation was the approximately
$61 million on deposit at the Bank of Montreal."
> There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try.
So what actually happens when people sell Bitcoin? They get USDT on an exchange and then can never get cash out? Is there some convoluted series of trades you can make from USDT -> ??? -> USD or something instead? And people selling Bitcoin have made enough profit to just ignore the overhead of those trades I guess?
In addition to all of this they claim to bank in the Bahamas. Bahamas discloses total banked assets and the amount of Tether issued far outpaces the rate at which the whole nation of the Bahamas' assets have been increasing.
> Personally I won't touch any crypto with a 10 foot pole
if you dont mind explaining to a relative newbie - how does any of this affect Bitcoin? it clearly has had some effect, but I just dont understand the causal chain.
Seems to me they couldn’t prove malicious intent, so they suggested they stop trading. Frankly this seems a bit of a click-bait title with the whole “illegal activities”.
Sure, tether wasn’t backed at all times (probably is now), due to governments seizing their funds. Also banks do this all the time, every time they issue a loan for instance. The bank only keeps 10-30% collateral on your home.
This kind of argumentation makes cryptocurrency proponents so insufferable. There’s no evidence Tether is backed, but somehow we can just assume in a parenthesis that they probably are, and then go on a tangential rant about banks or fiat or digital gold or something.
Tether is Tether. Bitcoin is Bitcoin. The fact that exchanges exist which allow you to trade one for the other does not make them the same kind of thing.
Seems logical they would given the investigations and the reason they supposedly didn’t have the funds at the time. I don’t think tether is necessary or a good idea, simply stating what I see.
Frankly, the AG admitted it was backed, just not “the entire time”.
>This kind of argumentation makes cryptocurrency proponents so insufferable. There’s no evidence Tether is backed, but somehow we can just assume in a parenthesis that they probably are, and then go on a tangential rant about banks or fiat or digital gold or something.
Ah yes, because all cryptocurrency proponents are pro-tether.
You can take redemption from tether and they will wire you the money, they are in fact registered and regulated. on several exchanges it can be exchanged into fiat, for smaller participant.s
It would collapse a long time ago, if it weren't backed.
I don’t understand why anyone would be in a rush to take them at their word when every new piece of evidence demonstrates that Tether’s operators are not interested in behaving honestly.
> Also banks do this all the time, every time they issue a loan for instance. The bank only keeps 10-30% collateral on your home.
Fractional reserve banking doesn’t mean banks can simply print more money than they have on the books.
Regardless, if a bank loses funds due to fraud or government intervention or whatever, they can’t simply continue pretending they had the money all along.
I don’t understand the desire to pretend that what Tether is doing is normal or good for the crypto community. It’s not.
I think it has a pretty simple explanation. The crypto community started with a few dedicated idealists. But it quickly attracted loons, fantasists, scammers, and get-rich-quick dreamers, along with some reasonable people interested in the hype.
Over time, as the space has produced almost no actual utility and generated billions in theft, fraud, and losses, the reasonable people generally got out, often with fingers burned. A few idealists remain. But by now the dominant group are the people low on sense and scruples who are hoping to Make Money Fast, so anything that keeps the industry aloft is great by them.
That's how bubbles work, alas. The dot-com bubble was less extreme, but still at the end there was all sorts chicanery that made no sense to a vaguely rational actor. We saw it again in the mortgage bubble. There was one bank CEO who stayed out of the more dubious mortgages; when questioned, he said, "If something grows too fast, it's a weed." But there were plenty of hucksters saying that everything was normal and good.
The good news is that bubbles eventually pop. I loved the post dot-com bubble period! Most of the MBA-holding locusts who had rushed in went away again. I hope the people truly interested in digital financial innovation enjoy a similar period of quiet soon.
The issue is that if it isn’t backed they can print more at any time. But they claim it is backed to avoid inflation devaluation of the currency. Banks are not lower to print currency but tether can at any time. The potential for fraud sufrounding tether is huge and no one is checking over them. Do you trust them? They are already known for lying. This is why banking regulations exist.
> The issue is that if it isn’t backed they can print more at any time.
That’s how all banking works. China, for instance, never even publish how much money they click into existence.
Not saying it’s correct, just explaining how the system really works. They really do “create” money. Even synthetic shares are created on the stock market (largely when creating ETF blocks), see “naked shorts”. It happens all the time.
I thought it hilarious that 1) Bitfinex/Tether (when they were still pretending they were two completely unrelated entities, remember that?) thought that handing an auditor the front summary page of a bank account would be sufficient to 'verify holdings', and 2) when they told the public they had another audit done, but were unable to release it because it would be in Mandarin...
> Sure, tether wasn’t backed at all times (probably is now), due to governments seizing their funds. Also banks do this all the time, every time they issue a loan for instance. The bank only keeps 10-30% collateral on your home.
Exactly. Tether has made no claims about the quality of the collateral they use to back Tethers, so they can probably get away with some very questionable accounting. Anyone who actually has skin in the game understands this about Tether. If you want to take the risk, go right ahead. I've traded at least $50M in notional volume over the past 3 years and never, not once, have I touched Tether.
You’re ignoring the systemic issues that come from having Tether printing drive the price action.
You may not have touched Tether, but Tether’s influence on asset prices can’t be understated. You are at risk by trading assets that are inflated by Tether.
The strangest part of the Tether story is how much of it was obvious or even out in the open. Cryptocurrency proponents were happy to look the other way as long as prices were only going up. I suspect cryptocurrency proponents and Bitfinex are working hard to spin this as a win for Tether right.
no the strangest thing isn't how it was out in the open - that's precisely how to get away with fraud...the message and the reality aren't the same but the message is pumped into echo chamber
The market doesn't care. Hasn't cared for years now, just look at the Kraken USDT/USD market which is freely tradable. Tethers are mostly backed by USD - no 100% but that's because some funds were seized due to regulatory scrutiny, not because they disappeared.
I am not sure why I should trust kraken, but even if I trusted them completely, this only proves tether has enough liquidity to maintain their peg, not that they are "mostly backed." That is to say, it only puts a relatively small bound on their reserve ratio.
I'm not convinced your argument works. Bubbles exist until they suddenly don't.
This isn't a strong argument that it's a bubble, but the burden of proof is solidly on the tether folks to show that they're 100% backed, not the other way around.
Honestly, this is kind of a nothingburger. The press release seems to merely reinforce what was an open secret in the cryptocurrency world, which is that Bitfinex and Tether have played fast and loose with whatever reserves they received for their Tether issuance. Which is, of course, utterly unremarkable to anyone who knows anything about how financial sausage is really made.
Bitfinex and Tether are shady. Caveat emptor, and carry on hodling.
It’s more important than that. Cryptocurrency proponents have been trying to downplay the Tether situation for years.
One of the common dismissals was the idea that if what Tether was doing was truly fraudulent, some government institution would step in to intervene. Proponents pointed to the lack of intervention as a signal that Tether was operating above board.
This also reveals new facts and numbers about the scale of what has been going on. We still don’t know the full story, but it’s clear that reality is even worse than we thought.
I don't disagree that Tether is likely a big fraud, but my point is that even the regulated financial system is full of questionable accounting and long-running, undiscovered fraud. Remember Bernie Madoff? His fraud lasted 17 years before falling apart.
It would be nice if Tether eventually falls apart too, but the world will never run out of fraudsters and hucksters.
I did not see any data in that post that is new. The latest news this-year is that Tether paid-off the remaining balances of borrows/loans from other asset classes to make the USD holdings whole. The only way to tell is an independent 3rd-party audit, which would bring some finality to this discussion.
This is not "utterly unremarkable". Rational investors don't buy investments whose very basis is a lie. It's only unremarkable to cryptocurrency gamblers who've already accepted everything they're doing is a slow motion scam.
Considering the meteoric rise of BTC is tied so deeply to Tether issuances, it sounds an awful lot like you’re trying to convince us the emperor really has clothes.
Correlation is not causation. And your mental model of how the cryptocurrency markets work is likely way too simplistic--did you know that cryptocurrency perpetual swap derivatives clear over $350B in daily volume?
Pretend for a moment that Tether pulls a Nixon, and closes the "dollar window" ending redeemability. Then what would be the difference between Tether and e.g. the BitMEX XBTUSD perpetual swap contract? Just think about it for a while.
If they are shady, then it's high time to employ and enforce regulations - if they can't regulate themselves, then someone else has to.
Arguing that this is old news, and that a small minority has been "in the know" doesn't hold much water either - the crypto scene has long since become mainstream, and as such, attracted regular masses.
"Contrary to online speculation, there was no finding that Tether ever issued tethers [USDT] without backing, or to manipulate crypto prices"
I hope that ends the spreading of FUD - claiming that bitcoin and other cryptos are propped up by the printing of fake tethers - which seems to spread here every time there is a sharp rise in prices.
> 20. Because of Tether’s inability to conduct significant banking activity during this time, it could not itself hold dollars sufficient to back the hundreds of millions of new tethers that had entered the market. Until September 15, 2017, the only U.S. dollars held by Tether ostensibly backing the approximately 442 million tethers in circulation was the approximately $61 million on deposit at the Bank of Montreal.
That's 14% of the cash required to back the issued Tether.
"there was no finding" means that they did not show that that happened, not that they showed it didn't. You're reading something into that quote it very carefully does not say.
This lawsuit only covers up to 2019, when the Tether supply was only a fraction of what it is now.
It shows that Tether had no desire to correct the situation with the unbacked Tethers. Why does it matter why the Tethers were unbacked? The fact is that they were unbacked and Tether continued operating as if they were.
Why would anyone trust an institution that has already demonstrated they don’t care about backing and, moreover, that they’d rather hide that fact as much as possible until forced to reveal it.
The most damning detail I've seen comes from US treasury TIC reports, which fail to reveal matching bond ownership inflow to the country that is the reputed host of Tether's segregated bank account.
It is possible that Tether holds funds in some kind of strange non-interest-bearing account, but that seems highly unlikely. Another possibility is that the primary bank is actually a wrapper around some overseas correspondent bank where the funds are really held.
Occam's razor: a company selling a 1:1 hedged coin should have absolutely no difficulty whatsoever proving on a daily or hourly basis that all coins are verifiably fully hedged. It should literally be the company's prime directive, and in this particular case, especially following the endless stream of controversy. The fact they haven't managed to convincingly achieve this even once in 7 years is all I need to know.
The whole thing stinks terribly. Good luck for those who invest in it, but I'll be there if/when it blows up to quietly feel smug about it all
The NYAG investigation is about what happened up to 2019 or so. What has happened since (which includes printing 33 of those 34 billion) is a separate matter, and NYAG is basically saying it's irrelevant because nobody in NY should be able to use Tether/Bitfinex anymore.
What's confusing is that in addition to the slap on the wrist of 18.5m and the prohibition for BitFinex to operate in NY, it is written:
"agreement with iFinex, Tether, and their related entities will require them to cease any further trading activity with New Yorkers, as well as force the companies to pay $18.5 million in penalties, in addition to requiring a number of steps to increase transparency."
What are these steps to "increase transparency"? On activities related to these 850m or on the 33 bn+ printed since then?
To benefit whom? New Yorkers cannot use BitFinex anymore. If it's now irrelevant to the NYAG because from NY's point of view BitFinex is out, why ask for "a number of steps to increase transparency"?
Feels like the NYAG preferred to take an easy win over fully exposing the fraudulent scheme. But I guess in the grand scheme of things it's better to get $18M for state coffers now than be another bag holder when Tether inevitably combusts.
"Contrary to online speculation, there was no finding that Tether ever issued tethers [USDT] without backing, or to manipulate crypto prices," said Weinstein, a former federal prosecutor. [0]
EDIT:
For some reason I'm being downvoted, but I'm genuinely curious to understand why this news is being simultaneously interpreted in two opposite ways.
Huh? The NYAG press release literally says: "Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie."
Edit: The difference between the two statements is that Tether can still be "backed" by something other than USD, notably crypto. And the PR is silent on what exactly Tether is backed by. This saga isn't over yet.
> 20. Because of Tether’s inability to conduct significant banking activity during this time, it could not itself hold dollars sufficient to back the hundreds of millions of new tethers that had entered the market. Until September 15, 2017, the only U.S. dollars held by Tether ostensibly backing the approximately 442 million tethers in circulation was the approximately $61 million on deposit at the Bank of Montreal.
That's 14% of the cash required to back the issued Tether.
That's a really good point, this settlement is extremely favorable to Tether and Bitfinex. It's odd to see people persist in pinning Bitcoin's market performance on Tether issuance after reading this settlement from NYAG. Chunks of Tether collateral weren't fully liquid but my takeaway is that they operated on a genuine best-effort basis. As another comment put it, Tether definitely operated in a grey area legally - they hacked the system, but they're not the fraudsters some media, comments, or rumors made them out to be.
"The USDT stablecoin is only about 74 percent backed by fiat equivalents as of April 30, says its issuer’s general counsel.
Tether, the company behind USDT, holds about $2.1 billion in cash and short-term securities, wrote its general counsel Stuart Hoegner in an affidavit Tuesday. Hoegner is also general counsel to Bitfinex, a crypto exchange which shares executives and has overlapping owners with Tether.
The two companies are at the heart of allegations by the New York Attorney General, who says Bitfinex borrowed more than $600 million from Tether after losing as much as $850 million to a currency converter."
A "finding", in legal terms, is a specific, explicit statement with the supporting rationale behind it.
You can make statements in a legal document, even a settlement, without classifying them as "findings" (that have specific legal ramifications).
Indeed, the AG says in the documents that absolutely Tether did not always have backing. However, it doesn't address -issuance- without backing.
So the attorney for Tether is doing as attorneys do, making a carefully crafted statement that will paint a specific impression to the world, whilst being entirely aware (and maintaining plausible deniability) that he is artfully weaving through several other "inconvenient truths".
It also documents all their attempts to verify the peg required mixing funds with an exchange known to have a running $500m+ hole in their balance sheet
Readit News
- The current Market Cap of USDT is 34 Billion Dollars. It was 4B this time last year. Since the value is pegged this means there has been an influx of cash of 30 B into this shady company in the last year alone. Who invested this money? We have no idea since Tether doesn't disclose, but we're supposed to believe all this money entered USDT even with the red flags we see.
- There's a correlation between Tether printing new USDT and the Bitcoin Price.
- There's no way to transfer USDT into USD. The few exchanges that say they offer withdraws actually don't if you go and try.
- Daily volume of transaction is in the 100 B mark. Twice that of Bitcoin and 3 times Tether daily volume this time last year.
- BitFinex is included in the NY decision because it's proven now that Bitfinex and Tether are operated by the same people. Note that a few years ago this was not only undisclosed but actively denied by Tether.
- Tether initially told its investors it was 100% backed by dollar reserves and that it would be subjected to constant audits. The audits never happened, and they eventually conceded only ~70% was backed by "short term cash reserves".
My conclusion is that the folks at BitFinex came up with a new currency, printed billions of it and used it to wash trade against itself and other crypto, creating an artificial demand that drove the prices up. It's textbook Ponzi scheme and will inevitably come crashing down, killing Tether, BitFinex and a chunk of the Crypto Market.
Crypto folks will counter argue that people has been saying this for years but Tether is still chugging along and crypto is healthier than ever.
Personally I won't touch any crypto with a 10 foot pole until this thing blows over. If that means missing out on a lot of possible gains so be it.
Thats an additional fact that the amount is in line with the amounts that would be deposited into any big exchange.
If Coinbase minted USDC whenever someone deposited, you would see the same kind of growth.
The basis of your entire post is assuming impropriety based on pretty normal behavior with the addition of the business quirk of when USDT is created.
The ability for impropriety is a good enough reason to avoid it, and their unilateral willingness to do so without any discussion can reinforce that. But people thought everything you thought since the beginning of Tether in like 2014 or so, but the reality is that it “only went fractional reserve” in 2018. Its kind of like they threw up their hands and said “well people think its a ponzi anyway might as well cover this business debt!” The irony being that the NY AG investigation actually proved that prior to 2018 it functioned exactly as promised, barring their 2017 distress by having nowhere to put their fiat deposits.
But if you assume that it hasnt come crashing down because Bitfinex does what they said, then it still does make sense: crypto prices pump after Tether mints because it is people depositing into the exchange and then buying crypto.
Any way glad USDC and DAI are growing a lot now, which have grown by the same orders of magnitude.
If so - be aware those are felonies in many industries and are probably criminal in most jurisdictions (fraud at a minimum). For very good reasons.
I'm having trouble to find comprehensive data on USDT burns but https://coinmarketcap.com/headlines/news/tether-just-burned-... seems to suggest that one billion is extraordinary (and those weren't removed from circulation but swapped to another chain), and Tether finds it Twitter-worthy when they burn 100 million: https://twitter.com/Tether_to/status/1225088948243968005
For sure I don't expect Bitfinex fiat withdrawals to match fiat deposits, but 100 million USD withdrawn vs 30 billion deposited seems unordinary?
As a matter of fact that is NOT true. (speaking as a crypto hedge fund manager, active since 2013, and trading > $1B/month on all major exchanges). It used to be like that in the past (when USD and USDT where one just represented as "USD" on Bitfinex), but this changed a year or two ago. Now, USD wires are being credited as USD and USDT deposits are being credited as USDT. And there is a USDT/USD market on Bitfinex to exchange between the two.
But Paolo himself post that all the usdt minted is 'tron replenish' everytime whale alert tweets about 800,000,000 USDT frwshly minted
So, basically, in your intentions to defend USDT you are even contradicting what its own CEO says...
It's also funny how tesla 1.5b investment and microstrategy few millions buy are to be 'celebrated' as big and huge, yet you are trying to convince us there is people depositing 800m daily into bitfinex?
Which is insane. Those are customer funds, that Bitfinex owes to their customers, if they choose to withdraw from their ecosystem.
They aren't a personal piggybank for them to dip into as they please.
This is not at all like fractional reserve banking, where a financial liability (customer deposts) are used to print dollars (in the form of loans), because customer deposits can be called back anytime, while loans cannot.
With Tether, if Bitfinex takes a dollar a customer deposits, and then prints and sells a USDT, and the customer withdraws their deposit, they have to destroy a USDT, in order to maintain the 1:1 peg. There is zero evidence that they are doing this at anywhere near the rate they claim.
Ironically, what they are doing is very similar to a double-spend.
There is an easy way. Swap USDT to USDC on Curve. Deposit USDC on Coinbase. Convert USDC to USD on Coinbase. Withdraw USD.
I'm not saying I disagree with your overall thesis. But this specific point makes it sound like USDT is some sort of roach motel ("you can get in, but you can't get out"). That's not true, it's fairly easy to get back to USD at low cost. The fact that USDT is trading at near parity with USDC on Curve indicates that most of the market doesn't perceive a risk.
Then what is your explanation for why it is not possible to directly exchange USDT for USD, there must be a reason that no exchange wants to do that.
> that most of the market doesn't perceive a risk.
That is absolutely no indicator for safety.
Many exchanges have pretended for a long time that USDT is 'the same' as dollars, and there are going to be a lot of folks pissed that it isn't actually the same thing.
Personally I'm surprised the risk premium wasn't more, but Tether is still around today despite both Bitfinex and Binance blocking withdrawals and the NYC AG initiating fraud charges against them, so ultimately the folks who decided it was nothing were right. Then, at least.
How many fees have you paid through the 3 or 4 steps to get to this "easy" solution? Is that solution available to everyone worldwide? (I'm not familiar with Curve or Coinbase and whether they're US only or something of that nature)
Why don’t more people use USDC anyway?
It's perfectly possible to exchange USDT for USD and withdraw USD to your bank account; it does not involve complicated steps nor outrageous fees. Kraken, for example, has a very liquid USDT/USD market, is a well respected exchange, and processes USD withdrawals that arrive within minutes to US bank accounts. I'am speaking as an industry insider and hedge fund manager that trades ~$1B/month on the crypto markets.
If Tether implodes, is this proof that NY AG is incompetent or even worse, somehow implicated in this giant scam by covering it up?
In the NY AG settlement PDF it clearly states that they will not indict Tether in the future for the investigated crimes, including not being backed up by assets, which happened before the date of the payment of the fine:
> 56. Within five (5) days of the receipt of the penalty ... and agrees not to bring any claims or causes of action against Bitfinex or Tether ... for matters relating to the conduct set forth in the Findings and the Petition ... arising out of Bitfinex or Tether’s representations concerning the backing of tethers during the time period January 1, 2014 to the effective date of this Settlement Agreement; transfers of a portion of the cash reserves backing tethers to Bitfinex pursuant to the line of credit
The real world isn't a nice place and police show...
Use Kraken. You can change USDT to USD and withdraw money. I've done both.
In the first instance the exchange is on the hook for the USDT and they have to go to Tether to get USD to cover it.
In the second instance the other user you traded with is on the hook for the USDT and they will probably just trade it for USD in the future or another crypto.
"Because of Tether’s inability to conduct significant banking activity during this time, it could not itself hold dollars sufficient to back the hundreds of millions of new tethers that had entered the market. Until September 15, 2017, the only U.S. dollars held by Tether ostensibly backing the approximately 442 million tethers in circulation was the approximately $61 million on deposit at the Bank of Montreal."
https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
So what actually happens when people sell Bitcoin? They get USDT on an exchange and then can never get cash out? Is there some convoluted series of trades you can make from USDT -> ??? -> USD or something instead? And people selling Bitcoin have made enough profit to just ignore the overhead of those trades I guess?
Strangely USDT sells at a premium to USDC (audited) for years now.
My guess is it will slowly be replaced by an audited stable token if the market wants that.
How about Bitfinex? I had some problems with withdrawals there in the past - but now it seems to work.
if you dont mind explaining to a relative newbie - how does any of this affect Bitcoin? it clearly has had some effect, but I just dont understand the causal chain.
https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
Tether wasn’t backed at all times. The argument was that this happened due to asset seizures in Poland and Portugal in 2017-2018.
https://www.theblockcrypto.com/post/95207/bitfinex-tether-ne...
Seems to me they couldn’t prove malicious intent, so they suggested they stop trading. Frankly this seems a bit of a click-bait title with the whole “illegal activities”.
Sure, tether wasn’t backed at all times (probably is now), due to governments seizing their funds. Also banks do this all the time, every time they issue a loan for instance. The bank only keeps 10-30% collateral on your home.
This kind of argumentation makes cryptocurrency proponents so insufferable. There’s no evidence Tether is backed, but somehow we can just assume in a parenthesis that they probably are, and then go on a tangential rant about banks or fiat or digital gold or something.
We've traded confidence in centralized, old world financial institutions, for decentralized, techno-utopian...financial institutions.
Same s**, different marketing.
Tether is not a cryptocurrency.
It's a cargo cult: A plain old centralized system which got the word "cryptocurrency" slapped onto it to attract dumb money.
Frankly, the AG admitted it was backed, just not “the entire time”.
Ah yes, because all cryptocurrency proponents are pro-tether.
It would collapse a long time ago, if it weren't backed.
Even Tether admitted that they weren’t backed by funds, and that was before they printed most of their current supply: https://www.coindesk.com/tether-lawyer-confirms-stablecoin-7...
I don’t understand why anyone would be in a rush to take them at their word when every new piece of evidence demonstrates that Tether’s operators are not interested in behaving honestly.
> Also banks do this all the time, every time they issue a loan for instance. The bank only keeps 10-30% collateral on your home.
Fractional reserve banking doesn’t mean banks can simply print more money than they have on the books.
Regardless, if a bank loses funds due to fraud or government intervention or whatever, they can’t simply continue pretending they had the money all along.
I don’t understand the desire to pretend that what Tether is doing is normal or good for the crypto community. It’s not.
Over time, as the space has produced almost no actual utility and generated billions in theft, fraud, and losses, the reasonable people generally got out, often with fingers burned. A few idealists remain. But by now the dominant group are the people low on sense and scruples who are hoping to Make Money Fast, so anything that keeps the industry aloft is great by them.
That's how bubbles work, alas. The dot-com bubble was less extreme, but still at the end there was all sorts chicanery that made no sense to a vaguely rational actor. We saw it again in the mortgage bubble. There was one bank CEO who stayed out of the more dubious mortgages; when questioned, he said, "If something grows too fast, it's a weed." But there were plenty of hucksters saying that everything was normal and good.
The good news is that bubbles eventually pop. I loved the post dot-com bubble period! Most of the MBA-holding locusts who had rushed in went away again. I hope the people truly interested in digital financial innovation enjoy a similar period of quiet soon.
That’s how all banking works. China, for instance, never even publish how much money they click into existence.
Not saying it’s correct, just explaining how the system really works. They really do “create” money. Even synthetic shares are created on the stock market (largely when creating ETF blocks), see “naked shorts”. It happens all the time.
Here’s an explanation on how banking & interest work in a digestible way: http://anuparty.org/on-interest-slavery/
Here are the facts we know about Tether being backed:
1. They used to say they were backed 1 to 1 by cash.
2. This was a direct lie.
3. They now say they are backed 1 to 1 by cash and "cash equivalents", not otherwise specified.
Which one of these facts is it that you are basing your claim that they "probably are now" on?
Exactly. Tether has made no claims about the quality of the collateral they use to back Tethers, so they can probably get away with some very questionable accounting. Anyone who actually has skin in the game understands this about Tether. If you want to take the risk, go right ahead. I've traded at least $50M in notional volume over the past 3 years and never, not once, have I touched Tether.
You may not have touched Tether, but Tether’s influence on asset prices can’t be understated. You are at risk by trading assets that are inflated by Tether.
These things aren’t uncoupled.
The bank doesn't lie about it's capitalization.
That has long been speculated, but if this is the first official verification how does that affect the Market.
Especially the self dealing of Bitfinex.
The strangest part of the Tether story is how much of it was obvious or even out in the open. Cryptocurrency proponents were happy to look the other way as long as prices were only going up. I suspect cryptocurrency proponents and Bitfinex are working hard to spin this as a win for Tether right.
I have honestly been surprised how long this obvious tether saga has gone on.
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This isn't a strong argument that it's a bubble, but the burden of proof is solidly on the tether folks to show that they're 100% backed, not the other way around.
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Bitfinex and Tether are shady. Caveat emptor, and carry on hodling.
One of the common dismissals was the idea that if what Tether was doing was truly fraudulent, some government institution would step in to intervene. Proponents pointed to the lack of intervention as a signal that Tether was operating above board.
This also reveals new facts and numbers about the scale of what has been going on. We still don’t know the full story, but it’s clear that reality is even worse than we thought.
It would be nice if Tether eventually falls apart too, but the world will never run out of fraudsters and hucksters.
Got evidence for that? Because printing USDT after BTC went up is not a manipulation, but a liquidity boost.
Let's not forget that USDT isn't the only stablecoin in town, it's ratio is actually decreasing, all the way from 3k to 50k.
Pretend for a moment that Tether pulls a Nixon, and closes the "dollar window" ending redeemability. Then what would be the difference between Tether and e.g. the BitMEX XBTUSD perpetual swap contract? Just think about it for a while.
Arguing that this is old news, and that a small minority has been "in the know" doesn't hold much water either - the crypto scene has long since become mainstream, and as such, attracted regular masses.
In the end, it boils down to consumer protection.
I hope that ends the spreading of FUD - claiming that bitcoin and other cryptos are propped up by the printing of fake tethers - which seems to spread here every time there is a sharp rise in prices.
Page 4 of the agreement:
> 20. Because of Tether’s inability to conduct significant banking activity during this time, it could not itself hold dollars sufficient to back the hundreds of millions of new tethers that had entered the market. Until September 15, 2017, the only U.S. dollars held by Tether ostensibly backing the approximately 442 million tethers in circulation was the approximately $61 million on deposit at the Bank of Montreal.
That's 14% of the cash required to back the issued Tether.
It shows that Tether had no desire to correct the situation with the unbacked Tethers. Why does it matter why the Tethers were unbacked? The fact is that they were unbacked and Tether continued operating as if they were.
Why would anyone trust an institution that has already demonstrated they don’t care about backing and, moreover, that they’d rather hide that fact as much as possible until forced to reveal it.
> Jason Weinstein, a partner at Steptoe & Johnson and counsel to Bitfinex and Tether
Will we only know that on the first report they obliged to do each quarter? Will those reports be made public?
I'm confused what to make of this.
It is possible that Tether holds funds in some kind of strange non-interest-bearing account, but that seems highly unlikely. Another possibility is that the primary bank is actually a wrapper around some overseas correspondent bank where the funds are really held.
Occam's razor: a company selling a 1:1 hedged coin should have absolutely no difficulty whatsoever proving on a daily or hourly basis that all coins are verifiably fully hedged. It should literally be the company's prime directive, and in this particular case, especially following the endless stream of controversy. The fact they haven't managed to convincingly achieve this even once in 7 years is all I need to know.
The whole thing stinks terribly. Good luck for those who invest in it, but I'll be there if/when it blows up to quietly feel smug about it all
"agreement with iFinex, Tether, and their related entities will require them to cease any further trading activity with New Yorkers, as well as force the companies to pay $18.5 million in penalties, in addition to requiring a number of steps to increase transparency."
What are these steps to "increase transparency"? On activities related to these 850m or on the 33 bn+ printed since then?
To benefit whom? New Yorkers cannot use BitFinex anymore. If it's now irrelevant to the NYAG because from NY's point of view BitFinex is out, why ask for "a number of steps to increase transparency"?
https://www.coindesk.com/tether-mints-record-2b-usdt-in-one-...
[0] https://www.theblockcrypto.com/post/95207/bitfinex-tether-ne...
EDIT: For some reason I'm being downvoted, but I'm genuinely curious to understand why this news is being simultaneously interpreted in two opposite ways.
Edit: The difference between the two statements is that Tether can still be "backed" by something other than USD, notably crypto. And the PR is silent on what exactly Tether is backed by. This saga isn't over yet.
Page 4 of the agreement:
> 20. Because of Tether’s inability to conduct significant banking activity during this time, it could not itself hold dollars sufficient to back the hundreds of millions of new tethers that had entered the market. Until September 15, 2017, the only U.S. dollars held by Tether ostensibly backing the approximately 442 million tethers in circulation was the approximately $61 million on deposit at the Bank of Montreal.
That's 14% of the cash required to back the issued Tether.
How it that extremely favorable?
If someone sells something they don’t have under false pretenses, that’s fraud. It’s not a simple liquidity issue.
https://www.coindesk.com/tether-lawyer-confirms-stablecoin-7...
"The USDT stablecoin is only about 74 percent backed by fiat equivalents as of April 30, says its issuer’s general counsel.
Tether, the company behind USDT, holds about $2.1 billion in cash and short-term securities, wrote its general counsel Stuart Hoegner in an affidavit Tuesday. Hoegner is also general counsel to Bitfinex, a crypto exchange which shares executives and has overlapping owners with Tether.
The two companies are at the heart of allegations by the New York Attorney General, who says Bitfinex borrowed more than $600 million from Tether after losing as much as $850 million to a currency converter."
A "finding", in legal terms, is a specific, explicit statement with the supporting rationale behind it.
You can make statements in a legal document, even a settlement, without classifying them as "findings" (that have specific legal ramifications).
Indeed, the AG says in the documents that absolutely Tether did not always have backing. However, it doesn't address -issuance- without backing.
So the attorney for Tether is doing as attorneys do, making a carefully crafted statement that will paint a specific impression to the world, whilst being entirely aware (and maintaining plausible deniability) that he is artfully weaving through several other "inconvenient truths".