Tether releases law firm report attesting to $2.55 billion USD reserves | Hacker News Reader

Tether releases law firm report attesting to $2.55 billion USD reserves

uk.reuters.com

85 pointsneom38 comments

This only raises more questions.

The law firm is seriously sketchy. https://www.reddit.com/r/Buttcoin/comments/8slnho/freeh_spor...

And... they didn't actually verify anything. Look at these disclaimers! https://twitter.com/Bitfinexed/status/1009433789456666627

Heh, so it's like they had to search far and wide to find someone shady enough to sign off on them having the money, and even then the form would only do so after adding disclaimers that amount to, "we didn't do a real audit, we assumed that the employees were providing valid information, we haven't checked compliance with any law".

Interesting context on the law firm: looks like one of the partners is a former head of the FBI under Bill Clinton. Another partner is a former head of the SEC enforcement division.

This is so interesting to me. A curiosity.

Usually, when you want your financials vetted you go to an accounting firm. I find it curious that they chose a law firm — with some PR-value name like Louis Freeh attached to it. Celebrity endorsement?

Why not get a proper audit by Ernst & Young, Deloitte or PwC?

We don’t see mutual fund financials vetted by law firms. Tether is a type of money-market fund.

It doesn’t add up. People behaving strangely . . . .

It is weird. And really this report comes down to them getting a couple of signed letters from third parties. Why do it this way rather than a normal audit?

A positive interpretation is that Tether is solvent and wants to prove solvency but does not want to deal with non-solvency related audit issues. That's assuming some goodwill... If you don't assume goodwill, what you should conclude from this is anyone's guess.

It’s a goodwill gesture without letting too much known. (Worked for companies that did similar when dealing with big banks and were privately held)

Designed to distract and deflect. Goodwill on financial solvency matters was completely destroyed after they suspiciously "dissolved" their relationship with audit firm:

https://www.coindesk.com/tether-confirms-relationship-audito...

This is somewhat reminiscent of Michael Cohen's "proof" that "[he has] never been to Prague in [his] life." (in his case, a picture of a cover of a US passport). It is not actually proof of anything useful, but does manage to help control the narrative in a specific way

https://twitter.com/MichaelCohen212/status/81899127768556748...

Friedman LLP fiasco is consistent with my positive interpretation.

When there's $2B+ at stake, people expect something a little more definitive than "goodwill".

I think accounting firms generally have requirements to disclose or rather no covenants of privilege... whereas law firms don’t. Attorney client privilege.

Usually, when you want your financials vetted you go to an accounting firm. I find it curious that they chose a law firm

This was already mentioned in replies a few levels down. But I think it's important enough to repeat:

Earlier this year an accounting firm walked away from them: https://www.coindesk.com/tether-confirms-relationship-audito....

That comes under the category of "things that make you say hmmm ..."

> Why not get a proper audit by Ernst & Young, Deloitte or PwC?

I think the reason is quite obvious, it's simply that traditional auditing firms don't have procedures in place for actually auditing crypto.

It should be obvious to anyone familiar with the situation that Tether is fully backed and that the FUD is manufactured.

https://medium.com/@Austerity_Sucks/bitfinexed-is-a-sensatio...

Tether releases law firm report confirming existence of a declaration from unnamed bank that attests to 2.5 billion USD in reserves. Oh, and members of said law firm are on the advisory board of said unnamed bank.

> Eugene Sullivan, a former federal judge and FSS cofounder, is an advisory board member of one of Tether’s banks, the report said.

So the unnamed bank sent documents confirming deposits. The law firm confirmed receipt of those documents.

So - the exchange (bitfinex) and tether are in cahoots. The law firm and at least one of the banks are in cahoots. It's just so strange that no legitimate proof of accounting has been provided, and that people are still putting their trust into tether.

One of these things is correct:

  1. Tether and all claims made are legitimate.  

  2. Tether don't actually have the money, but are trying desperately to make it all up before any kind of audit is begun. This is currently fraud but hoping not to be fraud in the future.  

  3. Fraud.

If 1. is true, then you would have to imagine some kind of proof would have been provided by now.

Why does Tether need the money? The tokens aren't redeemable for USD, are they?

I think legally they are in the clear, but if what I suspect is true and they gambled the backing money on the crypto markets and now have less than the amount of tether circulating, a discovery of that fact will likely instantly evaporate any liquid assets they have, and they are likely trying like hell to get into the green so they can do an audit and start pulling in more money. Assuming I’m right, it’s kind of like if you somehow managed to loan a couple of billion dollars and then lost 10%, you still have billions of liquid funds available to you, so what do you do? Declare bankruptcy or start putting chunks of it on black hoping to score a potential million dollar surplus for yourself before you close the loan?

That’s called fraud.

Tether asserts that they are redeemable for USD.

It took the Paradise papers to show that Bitfinex and Tether were connected and it will likely take a lawsuit to show how their banking is too. My guess is they proved their reserves by borrowing from their customers for a short period of time.

Couldnt they simply borrow $2.55 billion for a day, put it in a bank account, show lawyer, then transfer it out? Such as borrow from the company founders who have made a fortune selling tether?

Yeah without a full audit, it’s impossible to say. This is only one part of their balance sheet, aka the assets. The liabilities and owners equity are still a mystery. As are the names of their banks. None of that is very reassuring.

On the other hand, the report does state balance is unencumbered. So if you trust the report (if you don't, anything goes), it is not the case that Tether borrowed $2.55B for a day. At least it's not that simple.

I actually spent the last few weeks preparing an audit for a company within an order of magnitude of assets. I’ll give the report a more thorough read later on.

As a side note though, the organization I work for takes in client funds and then grants them out to nonprofits. Technically all of our assets are legally unencumbered but our clients absolutely expect to have access to them. The definition of unencumbered depends on the internal lawyers’ views of their commitment to any clients and investors.

> as of June 1st, 2018

Is repeated multiple times in the articles and the lawyers statements.

Smells like a case of an idea getting ahead of the legal requirements and trying to catch up after the fact.

Are there any reporting requirements around large loans/investments? I wonder if someone can publicly trace where these $2B came from and when.

To generalize the issues is not 'the reserves' it's the terms attached to them.

When, from whom, for what period, under what conditions yada yada.

A single sentence in a contract from a lender could nullify everything effectively making it all for show.

The reason the report was from a 'high profile firm' might be because they are trying to make a political/news/pop-culture statement to the masses of users, investors and techies, as opposed to a strictly legal one to would be SEC or auditors or whatever.

I dunno who gets a loan for $2.55 billion without showing sizable assets... somewhere, but the fact that the money is in separate accounts reminds me of a story.

There was a car-maker (I wish I could remember who -- I want to say Audi, but that feels wrong) who was trying to get their car entered into a race. The requirements for the race was that the car had to be a production car, and of course there's wasn't, so they made just enough (I think it was 50) to get classified as production.

Well, they didn't meet the production quota, and when the inspectors came by to check, they showed them the 30 or so cars they had made, but told them the other cars were at a different lot. "Let's go there now, only maybe we'll stop off for lunch on the way," while every employee they had was tasked with moving one of the 30 cars to the second lot so that when the inspectors arrivd, the first 30 + the second 30 was definitely greater than 60.

Edit: If anyone remembers the story better, I'd love a refresher on it. I can't remember where I heard it from, but it was probably either a Netflix documentary or The Grand Tour on Amazon.

I don't know that story, but it reminds me of one I heard about Theranos where they would demo their technology for investors, partners, etc. Supposedly they would take the blood sample then say let's tour the facility, meet Elizabeth, etc. while the machine does it's work... the rest of the story is the same as yours.

Its Lancia you are thinking of:

https://www.facebook.com/thegrandtour/videos/732926230239254...

Indeed it is. I can't thank you enough!

https://historicdb.fia.com/sites/default/files/car_attachmen...

There is the paperwork for you from the FIA database. If you like your cars then you could be there for a while.

https://historicdb.fia.com/

> I dunno who gets a loan for $2.55 billion without showing sizable assets

Exchanges repurposing customer deposits.

I do think customer deposits is the most likely explanation, but it does not necessarily mean Tether is insolvent. My leading hypothesis is that all Bitfinex deposits are on Tether's accounts and Bitfinex holds Tethers for those deposits. If my hypothesis is true, Tether wouldn't be a fraud, although its legality is in question.

This was their way around US banking regulations right?

Rather than holding dollars for you, they instead sell you tethers.

Now they aren't holding client money's, but instead valueless tokens with a 'promise' to maybe redeem them for dollars later.

> Eugene Sullivan, a former federal judge and FSS cofounder, is an advisory board member of one of Tether’s banks, the report said.

Wow, how can anyone believe in this? Massive conflict of interest there.

No accounting firm was ready to vouch for them ? This sounds like Theranos all over again

Discussed earlier today:

https://news.ycombinator.com/item?id=17355171

Just wondering, if you've got 2,55 billion laying around, would you use it to solve a real-world problem or invest it, or will you burn it in some sketchy, potentially-illegal cryptocurrency bullshit with no real-world purpose?

I would be more concerned if they really DID have 2.5 billion of reserves. What would be the source of that money, drug cartels?

I'd love to find out who is propping up Tether!

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