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Comment by ceejayoz | Hacker News Reader

> You can just print money, that's the business model.

That is not Tether's stated business model. To issue 1 USDT, Tether is supposed to take in 1 USD from someone, and hold it safely in an account.

Their stated business model is taking a 10 basis point or $20 fee (whichever one is higher) when someone buys USDT with USD. https://tether.to/fees/

The likely fraudulent business model would be printing USDT that aren't backed by USD, purchasing cryptocurrencies with it, and then pumping up the value of that cryptocurrency to realize gains.

Done right, they might even make enough money with such fraudulent trading to eventually have the cash reserves they claim to have. Maybe at that point they'll finally complete their first audit. Their site still makes the shocking claim "subject to frequent professional audits" despite having been fired by their auditor.

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> Done right, they might even make enough money with such fraudulent trading to eventually have the cash reserves they claim to have.

This is the long-term history of sucessful organized crime: Obtain $X illegally, use that as seed investment for a legitimate business that generates $X legally, and then (if necessary) repay the original $X. Casino, Waste hauling business, and governments are often owned by organized crime families.

> The likely fraudulent business model would be printing USDT that aren't backed by USD, purchasing cryptocurrencies with it, and then pumping up the value of that cryptocurrency to realize gains.

If Tether prints, say, $100M USDT, and buys Bitcoin with it, they'll move the market up. But then when they cash out their gains, they'll move the market down.

It's still a profitable business model, because they can get ~100M (minus market impact costs) for basically nothing, but the money isn't from manipulating the market, it's from printing $100M USDT from nothing.

> If Tether prints, say, $100M USDT, and buys Bitcoin with it, they'll move the market up. But then when they cash out their gains, they'll move the market down.

The hysteria generated by Bitcoin's skyrocketing price likely allowed them to cash out quietly without crashing the market.

Now that the excitement has worn off, that's no longer true, and hey, look... they're suddenly not printing USDT so much.

If you create a $100 million dollar lie and convert it to $5 million real dollars, in the end you have...$5 million real dollars.

So someone could run a pretty big grift without crashing a market.

They had a relationship with Bitfinex, so they could easily convert to other shit coins and dump those to avoid tanking the BTC price when they dumped it.

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