$100M in deposits is $5M/yr in returns on float, just as your bank and insurance companies do with your deposits and premiums. It's technically not risk-free (FDIC notwithstanding) but that doesn't stop anyone.
Can you point me in their direction?
It’s what every insurance company and bank does.
Or if you don’t want to do that, put it in treasuries or something and take your 1,2,3% of whatever it may be.
Tether could have replicated either strategy, but seems to not have.
They could also have profited from those that lost their keys (it happens).
In addition you have to keep in mind that it is also about absolute numbers. No one invested these billions with them, no one is charging them some kind of relative rent. Every dollar is profit. If you could make 0.001% off storing 5 billion, that would still be an attractive business model.
“[...] each tetherUSD in circulation represents one US dollar held in our reserves (i.e. a onetoone ratio) which means the system is fully reserved when the sum of all tethers in existence (at any point in time) is exactly equal to the balance of USD held in our reserve.”
Where does the 5% come from?
If all their customers decide to withdraw their money, this is a "run on the bank" and generally dooms the bank.
Presumably Tether planned to do the same: a percentage of the money they held would be invested, based on the assumption that not everyone who held Tether would want USD at any one point in time.
Of course, this stretches the meaning of "reserve", and utterly fails if they mismanaged the investment bit and lost the money they invested