Yes, that is the scenario I am describing. I have a billion dollars of liabilities in the ScamStableCoins I issued and a billion dollar in "Assets" from the IOU I wrote myself.
THus I am perfectly fully backed.
THus I am perfectly fully backed.
There have been precisely 0 (zero, none) completed audits of Tether's holdings
So the answer to your question is it would happen in crypto where there is no regulator and people trust ‘audits’ which verify nothing.