The trillion-dollar lawsuit against Tether
danco.substack.com
danco.substack.com
Or is there some kind of problem with doing that transaction that I'm not aware of? Maybe some limitation that's not reflected in the price charts?
Edit: I see that this is not actually about Tether's liquidity at all. Instead, the accusation is that Tether was used to pump and dump Bitcoin, and those who suffered damages under this theory are people who bought Bitcoin at the top.
A New York State court filing [1]. (They’re under criminal investigation by the U.S. and New York.)
[1] https://www.bloomberg.com/news/articles/2019-04-30/tether-sa...
If they are parking it in other cryptocurrencies, then they have to ensure that the value of that particular cryptocurrency does not fall below the average price they had to buy it at (to ensure they can redeem).
So if, for example, Tether has had to buy Bitcoin and the average of all those purchases came out to $7,500/BTC, they have to ensure that BTC doesn't fall below $7,500 now because otherwise they end up net-negative.
At least from what I can gather.
As I understand it, the issue isn’t with a stablecoin. There would be nothing wrong with backing a token to a currency.
Unfortunately, it looks like Tether didn’t tell the truth. They claimed that they would have one US dollar in their bank account per token in circulation. This was a lie and they release an enormous number of unbanked tokens into the market. The class action claims they created 2.8 billion USDT between 2017 and 2018. At the time, the market believed the tokens had implicit value (as one was backed by a dollar) so the theory is that this made buying crypto a more compelling investment.
I don't know about that. Isn't the entire point of stablecoin to skirt existing regulations? Moving fiat currency isn't hard in and of itself. There is no technical challenge in Paypal sending $100,000 to my friend in Iran.
What makes it hard are the regulations combating money laundering, criminal and terrorism funding and enforcement of sanctions.
The key to a stablecoin however, is trust. Users have to trust that their holdings are actually backed by real fiat currency as that's the promise of the stablecoin.
That trust can typically be bolstered by things like 3rd party audits, which is something Tether promised for many years and did not deliver.
With Tether the problems are that they have avoided scrutiny and audit, made statements on their website that subsequently turned out to be false and have a somewhat murky corporate structure. None of these, should , engender trust.
There are some trust issues that are still problematic like for example someone needs to provide a price feed against which the value will be stabilized. Whoever is in control of that price feed could of course damage the system to the point where people loose all their money.
But in the real world such a price feed could come from a DEX so its not controlled by someone but instead by what people buy and sell. In a closed system this could however cause a "runaway" of the price due to price feedback loops.
Here is an interesting talk about a crypt collateralized stablecoin proposal https://www.youtube.com/watch?v=Se2CDsmMqvE again this does NOT yet exist!
Traditional currencies are mostly backed by things that are very unlikely to crash like real estate, profit share in companies and other ressources with value besides speculation.
What would happen if BTC crashed to 1/10 of its price, and all other coins followed?
If you had a coin backed by a basket of other cryptocurrencies, it would likely be relatively stable in that the distinct individual volatility of each of the backing coins would be mitigated. OTOH, the overall volatility of the cryptocurrency market (which often moves rapidly and in the same direction) would not, so it wouldn't be very stable.
Traditional banking services are hostile to crypto, so they cut off Tether's ability to trade in USD. And Tethers own interest (widespread use of USDT) is at odds with their inability to provide adequate backing USD. Exchanges all wanted more USDT to provide more liquidity, and so Tether just printed USDT without backing.
A crypto backed 1:1 by USD is a great idea, the trick is finding a way to actually guarantee the backing currency & exchange rate.
But the same old tropes about crypto always get the upvotes.
It's similar to Google's "make the web faster" efforts (Chrome, V8, AMP, mod_pagespeed, hosting JQuery & other AJAX libs, developer education). If the web is faster, you visit more pages. If you visit more pages, you search more. If you search more, you click on more ads, which makes Google more money.
It's actually pretty lousy idea, because in practice it's exactly what we already have in normal banking system, where the "bank-USD crypto", that is, the numbers in your bank accounts, are already backed 1:1 by actual government USD, with government regulations backing the companies and the exchange rate.
If you can freely exchange cryptocoins to USD, there's absolutely no reason to ever consider a stablecoin, unless your goal is to evade money laundering, KYC, etc regulations, hence Tether.
Although Tether's purpose has largely been to avoid regulation, and participate in cryptocurrency speculation, a stablecoin would be superior for actual commerce. Bitcoin has failed for commerce, to some extent because of instability and speculation.
Being able to use something equivalent to cash to transact digitally, with client-side security seems like a desirable technology to me.
Superior to bitcoin, surely, but no superior to dollars. I have absolutely no difficulty with using my dollars to pay for anything I want.
The biggest reason one might not want to use dollars is to conceal one's identity, and while I admit that there exist valid uses for that, most of the market for anonymous commerce is illegal activity.
The currency exchange rate is a minor price to pay for such a convenience.
Meanwhile with <insert literally any cryptocurrency here> it’s just a simple <convoluted 20-step process not even guaranteed to work and with no consumer protection>.
Furthermore, even in a fractional reserve banking scenario, your bank will have 1:1 assets backing it up, since the money it loans out is counted as an asset, although it needs to be recognized that the loan is valued at less than par because of the risk of default. There is quite a lot of legal regulations on what capital can back up accounts, and the minimum ratios of various kinds of quality of capital.
Only a fraction of those reserves are cash. Hence fractional reserve. The remainder aren't liquid, but they are worth enough to cover the reserves, under best accepted accounting practices.
Tether's non-cash reserves largely consist of "A money launderer stole our money, but pinky swears that they'll give it back." It's not like a fractional reserve bank, it's just a straight up fraud. It's why despite many assurances from Tether, it has still not been independently audited.
Thanks for saying so. I see so much hype about digital money from people that apparently have never used direct deposit and a debit card, which is exactly digital money.
That's an important and needed service.
More generally, cryptocurrency carries with it a whiff of KYC/AML regulatory evasion. With the purpose of stablecoins is generally stated as pretending you're trading in USD without actually doing so (and the financial regulations implied by actually doing so kicking in), it is not hard to infer that many, if not most, users are interested solely in evading this rules, which is going to cause banks' compliance officers to look at it very skeptically.
In Tether/iFinex's case, you have a situation where there was a "pseudo-bank" (Tether) and a crypto exchange (iFinex) that were highly intertwined. Because Tether was more or less controlled by iFinex, which also controlled one of the largest cryptocurrency exchanges by volume, this provided a unique cover for fraud, and different profit motives than a traditional bank would have. Tether did its business by exchanging USD for Tethers. iFinex did its business by pocketing spreads and fees from crypto to crypto trades. Meaning, Tether had a bunch of USD on hand, and iFinex had a bunch of crypto (primarily Bitcoin) on hand. What likely happened in Tether's case was that iFinex instructed Tether to create unbacked Tethers out of thin air, and used these Tethers to pump up the value of iFinex's own Bitcoin holdings. For example, suppose issuing $1M of Tether and spending it on Bitcoin moved the spot price up enough to increase the value of iFinex's Bitcoin holdings by more than $1M. Isn't that basically free money? You've spent $1M and created more than $1M in paper value. All you have to do is sell those Bitcoins at the new, higher price for real USD, and you've made relatively risk-free profit.
Why the hell did this work for so long? First, the market believed Tethers were backed 1:1 with USD and treated the two as functionally equivalent. Some traders would see the Bitcoin price increase on a Tether exchange like Bitfinex, and then buy Bitcoin at nominally "cheaper" prices on non-Tether exchanges like Coinbase, so that they could transfer the coins over to Bitfinex and sell them for a tidy profit. In this way, the Tether exchanges could impact Bitcoin's price even on exchanges that didn't use Tether due to the natural incentive for arbitrage. Second, the crypto markets are quite illiquid, and because orderbooks are thin it only takes a small amount of buying or selling firepower to push prices pretty drastically. The alleged fraud is that iFinex did exactly that, and progressively pushed prices up. Third, as prices swelled, Bitcoin attracted more _real_ investors, and many such investors then spent actual USD on Bitcoin, creating a self-fulfilling prophecy that in theory would have enabled iFinex to totally get away with it - all they had to do was sell off enough Bitcoin to cover for all of those unbacked Tethers they'd issued, and they would essentially become whole.
Now, things get interesting when it comes to how iFinex ran its business. iFinex refused to implement KYC/AML checks on their exchange, because nominally they were "crypto-to-crypto" and thus considered themselves to be outside of the US financial system's jurisdiction. In practice they used an indirect relationship via one of Wells Fargo's affiliates for a long period of time until they were found out, and then the US financial system more or less put a moratorium on doing business with them. It turns out that being locked out of the US financial system is extremely damaging when your customers want to withdraw US dollars, so for a period of time, iFinex tried jumping around from bank to bank, trying to stay ahead of regulators who had effectively blacklisted them by having customers making deposits wire their money to pay off other customers looking to withdraw money, and all kinds of other shady practices. Eventually they ran out of options and started doing business with what looks to have been a money laundering shadow bank, Crypto Capital Corp, who then promptly stole a bunch of their money, which then led to the current debacle.
All told, it's one of the most interesting stories in the financial markets by a long shot. It will be fascinating to watch it continue to play out.
Tether sold tokens on the promise that 1 USDT would be backed by U.S. dollars. They didn't keep one U.S. dollar for each USDT sold. If they did (or concealed) that willfully, it's fraud.
> Why is it not possible to back cryptos to a stabilized "1:1" "medium/currency" (which itself is another crypto it seems) and finally the USD dollar ?
U.S. dollars can be held as hard cash or in bank accounts. Holding $4 billion physically is bonkers. Banks holding U.S. dollars, meanwhile, have to follow U.S. anti-money laundering law. That requires, among other things, knowing who beneficially owns their deposits.
If an LLC opens a bank account, the bank will ask about its owners. With Tether, the beneficial owners are USDT holders. Since Tether can't identify them, they can't satisfy any bank's compliance questions.
So either (a) Tether's banks are violating U.S. AML law, (b) Tether is lying or (c) Tether is silently restricting and keeping records on who owns every USDT. Given we have contrevidence for (c), one can conclude–based solely on Tether's claims–that there's fraud afoot.
Disclaimer: I am not a lawyer. This is neither legal nor trading advice.
As far as the bank is concerned, USDT is a valueless token and potentially empty promise by Tether Inc.
The beneficial owner of the money is Tether Inc, not the USDT holders.
People bought, and Tether sold, USDT on assurances of being 100% backed by U.S. dollars. Tether is now admitting that not only is it not 100% backed, it isn't even entirely backed by U.S. dollars [1]. That's enough to allege fraud.
> The latest price charts still have tether at $1~=1USDT
Tether is under criminal investigation by the United States and New York State for, among other things, market manipulation. Taking Bitfinex's word that one's USDT has suffered no losses, all while they delay and unreasonably condition withdrawals [2], is like trusting Adam Neumann's on WeWork being worth $47bn.
[1] https://www.bloomberg.com/news/articles/2019-04-30/tether-sa...
Also, am I taking Bitfinex's word when I look at the exchange-derived price of Tether? I'm not sure. I would have thought that I was trusting the price discovery mechanism in general. If I'm trusting Bitfinex on this at all, it's only to the extent that Bitfinex would be backstopping the price of Tether on all other exchanges. Right? I mean, they can lie about how much a Tether is worth, but they can't lie about how much it's trading for on exchanges they don't own.
Or at least it was this way last time I was really active in cryptos, which I‘m not really at the moment. But a quick scan of Coinmarketcap didn’t really indicate that this has changed.
The confusion is because in theory, the market price should be tracking Tether reserves. Bitfinex admitted in a court filing that only 73% of outstanding Tether was backed by dollars. In an efficient market, that should imply that the price of Tether would fall to $0.73. Instead, it went back up to about $1. The implication is that traders either figured Tether would somehow be able to make up the shortfall, or that it just didn't matter.
Interestingly, people who shorted Tether expecting the market to be efficient got rekt, and the people who were actually correct (so far, at least) were the ones who were irrational. I wonder what this says about rationality and efficient markets today.
Nothing new. Markets are more heavily dominated by those with more resources. If these players decide to act irrationally, then you'll go bankrupt faster than they will.
This is why you don't short industries, you only short companies. Industry will eat you alive. There are also strategy and tactics. Musk can fend off the short siege even though they might collectively have more resources than he does. If you want to beat someone in the market, your better bet is to enter it yourself than to try to bet they're going to fail.
Trying to use a short maneuver to expose market irrationality is not for the faint of heart. It never was. Shorts were only ever really useful to try to profit off of stupidity, not irrationality.
There isn't an efficient market around Tether.
The exchanges that trade it are predominantly controlled by its backer. Fraud investigations in play make a short's gains at risk for clawback. (Or at the very least, creating a legal headache for their owner.)
There is no assurance that the end game isn't a crash in value, but no value, which makes closing out a short position difficult or even impossible.
I have traded securities my entire career. It's been pretty obvious, from the start, that Tether is a scam. I wouldn't short it.
Disclaimer: This is not securities advice. Don't buy or sell securities or currencies based on Internet comments.
The more important metric is comparing what it costs to buy BTC on Coinbase with cold hard USD, and what it costs to buy and then transfer out BTC with Tether anywhere else.
If you can buy large quantities of BTC with your Tether at close to the USD:BTC rate, then you can exit your Tether holdings at or close to the effective peg.
Start send X from a bank account USD to trading spot. Do USD->Tether->BTC
Immediately follow up with:
Take BTC received and do BTC->Tether->USD (Y) => fire to the bank account
The complaint [1] seeks to certify precisely this class.
"Plaintiffs and members of the Class have suffered actual damages and injury in fact due to artificial prices to which they would not have been subject but for the unlawful conduct of the Defendants as alleged herein" (¶ 260). This is par for the course when it comes to "part-fraud, part-pump-and-dump, and part-money laundering" (¶ 2) schemes.
Note that the defendants are various, from Tether to its affiliates, including Bitfinex.
[1] https://www.courtlistener.com/recap/gov.uscourts.nysd.524076...
Dollar amounts in a litigation complaint and headlines about "sued for $X million!" are not usually that meaningful; remember your Gell-Mann amnesia.
That just suggests that "audited" and "100% reserve" are not the most important features to people using stablecoins. What is more important is having a deep market on Binance, which is where most BTC <-> stablecoin trading happens.
Despite these terrible news articles, which are indeed reporting accurately that there are terrible flaws in Tether, you can still trade Tether for $1 right now. A hundred dollars worth of Tether is still more valuable than a hundred dollar payment made via a credit card.
It sounds like you are arguing that being popular is what matters more to being popular
Let's go for a more specific example. Let's say that you hold one bitcoin on Binance, and you believe the price of bitcoin will go down today. You would like to exchange your bitcoin for dollars, and then tomorrow, exchange your dollars back into bitcoin.
Ideally you would just use plain old US dollars. But since it's crypto, you can't. What you can have is a stablecoin.
So which stablecoin should you use? There are two costs to using a stablecoin.
Cost #1 is that when you exchange, you won't get the perfect rate. You'll have to pay some fee, and the precise exchange rate you get will depend on the liquidity of the market.
Cost #2 is the chance that this stablecoin collapses in value while you're using it.
For Tether, in my opinion cost #2 is high. All these dubious stories about the underpinning of Tether are true. That means the risk it collapses tomorrow are higher than the risks that other stablecoins collapse tomorrow.
However, cost #1 is probably lower for Tether than it is for any other stablecoin. Because there are more traders operating in Tether, you get a better exchange rate.
This is why Tether isn't just hype, it is providing real value to people through being the most popular stablecoin.
Would we be better off in a world where the most popular stablecoin also had a solid financial backing? Yeah, I think so. But that isn't the same as saying that Tether has no utility today.
Because unbanked cryptocurrency exchanges are essentially in the business of money laundering. A service that facilitates illegal transactions has obvious value to any libertarian or criminal, but I’m not sure that counts as “providing real value to people.”
I understand why a money launderer wants to trade on an exchange which does not let them withdraw USD. But why would a normie (who, at some point, wants USD) want to do so?
Aren't stories [1] about withdrawals being delayed or unreasonably conditioned abundant?
Exchange it for what?
If you exchange it for a record entry for anything (whether dollars or Bitcoin) in a Binance (or affiliate's) account, you're exchanging one IOU for another. Given most USDT trades on Binance and its affiliated entities, this loops right back to the withdrawal problem.
A "stable" coin that cannot be readily redeemed and is not fully reserved is a Ponzi scheme with extra steps.
Extra steps, and the delay they introduce, may be all a ponzi needs to sustain itself sufficiently to permit quiet exits. That the market will eventually be consistent is, alas, not the current manipulators' problem.
There are plenty of valid criticisms of USDT. Saying that it is hard to exchange 1 USDT for a dollar's worth of Bitcoin that you control is not one of them.
Until it's in your wallet, it's an IOU. And Binance has had issues with Bitcoin withdrawals, too. (Not to mention, they seem to lose their cash and coins to hackers [1] and fraudsters once a quarter.)
There is no independent, trusted marketplace where USDT trades in material volumes. And we now know that Tether previously lied about its dollar reserves. Continuing to trust them is delusional at best.
[1] https://www.bloomberg.com/news/articles/2019-05-08/crypto-ex...
The hard part is exchanging USDT (or bitcoin) for actual money since banks don't want to touch crypto with a 10-mile pole.
People here seem to misunderstand what USDT is used for. It's not to invest in.
It's used to trade against BTC at exchanges which do not have access to USD markets. The gambl^Wtraders there probably couldn't care less about how collaterized it is. The threat model is and has always been that Binance or Poloniex or whatever they're called disappears with your money, tethered or otherwise.
If you had 5M USDT, how much USD do you think you'd get if you tried to liquidate that position on that exchange right now?
If you push the price down with $5M, it will jump right back up.
100 units of USDT is worth $100 only if you can get someone to trade it to for that. For the moment, you actually cannot -- you have to trade it through BTC or one of the other crypto coins that are actually paired with USD first.
That is a San Francisco based exchange with USD deposits and withdrawals. There's been a couple times where tether has been under a dollar during times of high uncertainty (and I think relatively low liquidity of this trading pair), but generally you can trade tether for USD and withdraw here.
How then do you explain DAI?
It seems to me that people don't want an "audited, 100% reserve stablecoin", they want an algorithmic, decentralized stablecoin that can't be screwed up because somebody seized the "100% reserve."
Second: The claim that the they are liable for the damages of the loss from the peak is a bit weird. IF it was a pump and dump scheme, and I at least agree with the pump side of things, then the values were all inflated falsely anyhow. There should be punishment, but basing it on the losses from peak is very strange and not realistic.
I'm not sure what a better way to compute the "volume" of the manipulation would be, however.
Isn't this the usual protocol for damage suits in general?
As I understand it, plaintiffs should plan for a 10x or even 100x reduction in damages awarded even under ideal suit outcomes, so you put as big a number on the table as possible (as big as can plausibly be derived from discovered metrics), as it is likely to be decimated anyway.
The ICO boom had an interesting triple-pyramid-scheme structure that accelerated both the rise and the fall. If you bought into Ethereum in the early days, you probably paid with Bitcoin; it wasn't possible to buy ETH direct until ~2017. And similarly, if you bought into ICOs in 2017, you bought with ETH. That meant that the folks investing their money in ICOs weren't actually putting $200M into Filecoin; they were putting ETH that they had spent maybe $20M (in aggregate) in, which was likely purchased from someone who had bought it with $2M in Bitcoin. The eye-popping ICO valuations attracted more people into the market, which allowed smart ICOs to unload their ETH immediately at inflated prices and convert it into a big corporate war chest. Once the bubble popped, this mechanism worked in reverse (a bunch of dumb ICOs that had held onto their ETH all try to sell to capture the tiny pool of inflowing capital, which does nothing except force down the price of ETH), leaving folks who bought at the top of the bubble and ICOs that forgot to sell holding the bag.
Ironically, this mechanism holds the basics of a functioning financial system: money was transferred from people who weren't doing anything with it to pay salaries of people doing productive but speculative work. It was transferred pretty clumsily, with a lot of people losing their shirt and a fair bit of waste and scams in the receiving projects, but if any of the receiving projects deliver, it succeeded.
not even with paper wallets? I realize this would be uncommon given the late start of, ahem, intheoreum, but this should have still been common at meetups and such. Also, mining is essentially paying for ETH with only one layer of indirection, but without passing through Bitcoin.
ETH didn't really get listed on exchanges that also handled fiat currency until around 2016, though.
Coinbase added ETH support in 2016: https://blog.coinbase.com/coinbase-adds-support-for-ethereum...
Pump up BTC price with Tether. Use Tether to buy BTC. Sell BTC for USD (or hold onto it - it's free!). Doesn't matter that the Tether either never actually existed or were seized by governments.
Look at who holds the most crypto holdings AND has the ability to manipulate the market due to sheer size of operations. China. This isn't really a big secret, either. Anyone that can read/write/speak Mandarin knows about this. Just watch their crypto boards and you'll find the manipulation very, VERY easily.
Answer solved.
I think all internet-based stock boards contain scams and minor pump and dumps. I am sort of doubtful that any large scale pump and dumb would be coordinated out in the open, even if it was in Mandarin.
Proof isn't exactly a requirement in a civil lawsuit as this is demonstrated to be, given the lawsuit title and the demand for a jury trial. In this case, more of a preponderance of the evidence, circumstantial or not, oddball or not, is what is weighed instead of factual elements of any crime (although those are also considered.)
It is up purely to the jury to decide unless they asked for Bench Trial. Proving anything in this case is moot, it depends upon the jury and their thoughts, not what they interpret as law by required element-based prosecution.
Do people try to manipulate price? Of course they do. Sometimes it works, retail investors get excited and pile in. Sometimes it doesn't, and whales get rekt. Markets are messy.
How do we fix this? Stop barring Bitcoin companies from working with mainstream banks, and USDT volume will dry up.
https://www.forbes.com/sites/heatherfarmbrough/2019/03/29/sw...
Yes, Bitfinex lead the market a lot of the time in the 2017 Bitcoin bull run.
Yes, Bitfinex "printed" hundreds of millions of dollars worth of tether, which was initially distributed to large players on Bitfinex and Bittrex exchanges, also poloniex I believe was in on the issuance contracts.
But that doesn't mean that Bitfinex fraudulently pumped up the price of Bitcoin.
In fact, that would be impossible, even if they tried to fake the price higher... as they would lose tons of real money to arbitrageurs in the process...
The (nano)second that any one single exchange gets out of line in terms of price, there are trading bots out there that notice that, immediately buy up as much BTC as they can on every other exchange that is below that price, and then immediately dump 100% of what they just bought on the exchange that is out of whack (Bitfinex).
And if they weren't losing real money to the arbitrageurs, (presumably because they restricted USDT withdrawals which has never happened for more than a few days straight at most), then the arbitrageurs wouldn't be buying up Bitcoin on every other exchange that is not Bitfinex and selling it for USDT or USD fiat... they would simply ignore bitfinex as a fake volume exchange.. like 50% of the exchanges listed on coinmarketcap currently are.
There is a reason that Bitfinex was leading the price pumps... they were the main gateway to millionaires the world over buying into the crypto ecosystem.
You had to give iFinex at least $100,000 cash wire in exchange for USDT to get into the game, and there was a waiting list for that "privilege".
Some exchanges shut down their registration page for months because the KYC processing backup was so severe.
There was real demand for Bitcoin back in 2017.
Finance is difficult for most people to understand.
High frequecy traded crypto finance ecosystem with synthetic-USD, USDT, USD, TUSD, USDC, etc. is especially so.
They created money out of thin air and handed this out to players to buy BTC with. Those players then bought BTC in quantities that drove the price up. They created price-inelastic demand out of nothing (you don't care about the price as much if you're buying them for free).
Rather, as is stated fairly early on:
> Working with partners, flood those Tethers onto crypto exchanges all around the world
I spoke with the exchanges personally, and the delays in being able to register to the exchanges and purchase massive amounts of tether were indeed real.
I've no idea if this is true. But interesting nonetheless.
Hard time seeing a court awarding the loss to the entire peak to trough market to market, especially if the fraud was part of the money that inflated the bubble, but who knows.
Yeah...no, that's exactly what this is.
And in spite, it is not widely accepted in most major exchanges https://www.coingecko.com/en/coins/dai
But tether strength sound to be due to recognition and deep order which is what makes a currency getting value from "nothing"
This makes no sense. The money has to come from somewhere. Sure it can be fake money in Tether $$ but once you cashed out somewhere (in cash or your bank account) then the money should be real.
Tether market cap right now is $4bn. The proclaimed value created/destroyed is $450bn. The market cap of all crypto at the beginning of 2017 is $18.3bn and the market cap right now is $246bn. The difference is massive (around $220bn).
Now let's look at the market depth, because this is something everyone likes to claim: The order books are thin. This is far from being true. Looking at Gdax, the market bids to a 10% discount is around $12m. From my experience, trading crypto markets, it'll take around three times that much dollars to take the price to these levels. Many things kick off: 1. Hidden buy orders and 2. Bots arbing with other exchanges and 3. Fast bid makers who use neither visible or hidden bids.
That's around $35m that you can dump on a single exchange for a 10% discount. That doesn't take into account: 1. You can use multiple exchanges 2. You can use private sales or OTC and 3. If you are selling $100m of crypto (or even stocks), you'll probably do it over the course of a few days unless you think the instant discount is less than the stretched one.
If Tether created a $300bn market from a $4bn of cash, then that's genius, no? But wait, that's not what the author saying. The OP is saying that these $4bn don't even exist. Then Bitfinex/Tether created a $300bn market out of nothing. Uhh, no. I'm having a hard time believing that.
tl;dr: Dude goes on a lengthy non-sense rant and has no real proof backing his facts.
It's sort of like an uncovered short of USDT - they take a negative position, buy BTC, sell BTC, then cover the negative position. (Except "cover" in this case really means "collateralize the USDT that someone else is holding".)
EDIT: I have no idea if that's what they were actually doing, but that's my interpretation of the author's interpretation of the lawsuit.
https://www.popehat.com/2016/06/14/lawsplainer-its-not-rico-...
"Dupes play along by describing RICO claims as "charges," and generally by acting like a RICO claim suggests that there's already been a finding that someone did something wrong."
Just like that - leveraging their platform and influence they have minted 4 billion USD worth of new kind of money. Out of thin air.
What will be the ultimate kicker if it ends up working - in the sense that there is a need for a stable coin, and it fills that need.
Are we obliged to believe that each of these independent events must have had an identical trigger?
That was caused by very similar scamming by different people at MtGox.
"Allegation #1: The 2017 Bitcoin Bubble was market manipulation, and Tether was how they did it
Allegation #3: They might’ve gotten away with it, too, if they hadn’t gotten robbed while busy scamming"
But the big Bitfinex hack was in 2016, while the bubble in 2017. What do I miss here?
Bitfinex currently claims that the IOUs they have from Crypto Capital are worth the paper they are printed on. I have strong doubts about the accuracy of this claim.
Will SEC have a good case that it is a security, if it’s proven to be a stablecoin? No expectation of profit.
If USD works this way, why shouldn’t USDT?
Holding a US dollar is a bet on the US economy, the US government, and the US banking system. Those have their flaws, but there's a lot of built-in checks and balances that keep them reasonably accountable.
The other is that the Fed does all of its currency management very much in the public view. Whereas the USDT management has been somewhere between needlessly opaque and flat-out fraudulent.
2) Tether claimed in the beginning that they had $1 USD in the bank for every 1 Tether issued.
3) Given (2), printing Tether out of thin air that isn't backed by USD deposits is fraud.