Bitcoin tumbles 17% as doubts grow over valuations

3. The next day, November 2, 2018, Tether made the first of five transfers ultimately totaling $475 million from its bank account at Deltec Bank to Bitfinex’s account at Deltec Bank. At the same time, a corresponding transfer was made from Bitfinex’s account at Crypto Capital to Tether’s account at Crypto Capital via ledger entry Bitfinex also “purchased” 150 million tethers by transferring $150 million in funds held at Bitfinex’s Crypto Capital account to Tether’s account at Crypto Capital. These transfers were not disclosed.

44. And so, as of November 2, 2018, tethers were again no longer backed 1-to-1 by U.S. dollars in a Tether bank account, because a substantial portion of the backing in the Deltec account had been transferred to Bitfinex to make up for the funds taken by Crypto Capital, while the corresponding funds transferred from Bitfinex’s Crypto Capital account to Tether’s Crypto Capital account were impaired by Crypto Capital’s actions.

45. Tether’s misrepresentation would continue until late February 2019, at which time Tether updated its website to note that “[e]very tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, ‘reserves’).” Tether did not announce that it had changed its disclosure, and indeed there were no media reports about the change until several weeks later on March 14, 2019

Read the settlement...

https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...

Doesn't that have all the same failure modes as a bank?

Audits sometimes don't uncover faults; insurers sometimes don't make good on their obligations, regulatory agencies sometimes freeze funds, etc.

I think so too.

(However, the largest single day drop in BTC history must be pointing at something, and that cannot be ignored ...)