CFTC Orders Tether and Bitfinex to Pay Fines Totaling $42.5M | Hacker News Reader

CFTC Orders Tether and Bitfinex to Pay Fines Totaling $42.5M

cftc.gov

200 pointsVHRanger197 comments

This settlement only covers up until February 2018. At that time they only had $2B-ish in issued Tethers (as compared to $65B ish now). $850M of their assets were seized in an AML sting shortly after that, in mid 2018 [1], they've been fined $42.5M [this article and 2] by the CFTC and another $18.5M by the NYAG [3].

Basically they've had to forfeit almost half of their assets up to [edit] Mid-2018.

They remain under investigation for bank fraud by the DOJ [4] and for something unspecified by the SEC. [5]

I suspect this party is just beginning.

[edit] By the way, I love how each party here is framing this.

> Tether: "As to the Tether reserves, there is no finding that tether tokens were not fully backed at all times—simply that the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times."

> CFTC: "In fact Tether reserves were not “fully-backed” the majority of the time."

[1] https://fortune.com/2019/05/03/cryptocurrency-new-york-attor...

[2] https://www.coindesk.com/policy/2021/10/15/cftc-fines-tether...

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

[4] https://www.cnbc.com/2021/07/26/doj-reportedly-probes-crypto...

[5] https://www.coindesk.com/policy/2021/09/24/sec-hints-at-teth...

> reserves were not all in cash and all in a bank account titled in Tether’s name, at all times

Truly a bizarre statement for Tether to make. are they counting bank accounts in other people’s names? How would that affect the question at hand.

This sounds like junkie logic.

> are they counting bank accounts in other people’s names?

yes, it was a personal account in the name of iFinex general counsel Stuart Hoegner.

And various holdings at non-banks, e.g. the $850m that disappeared at Crypto Capital Corp.

"All[1] of our[2] coins are backed[3] one-to-one[4] by USD[5]".

[1] Not really though

[2] Yours really

[3] Not in a way you'd think

[4] Approx but we can't tell you exactly how much

[5] ish

[6] also it doesn't matter because we get to decide who, if anyone, is allowed to redeem - and on what schedule - and should we feel like it, what we give you. Also US persons are never allowed to redeem. This is all in their terms of service. Their backing really doesn't matter because they're not obligated by anyone to ever give it out.

If I recall, one Tether executive was holding a good portion of the “reserves” in his personal bank account.

How it is that Tether trades on par with trustworthy alternatives like USDC, Paxos and Gemini, I have no idea.

Yeah, it's in the NYAG settlement I linked as [3]. At one point, all their money was in Stuart Hoegner's personal Bank of Montreal account (#17 in [3]).

Hoegner (their GC) was the director of compliance at Excapsa, the parent company of the wildly non-compliant Ultimate Bet. That online poker site had a back door where some of their friends could see other poker players cards [1]

[1] https://bennettftomlin.com/2021/03/27/before-bitfinex-and-te...

In their defense, they probably thought this whole Tether thing would have imploded by now, and they needed to be ready to make their getaway.

I think it's strange as well. There's all this uncertainty surrounding USDT. Why won't people switch to the other stable coins? Makes no sense. USDT markets still have the most liquidity and the peg remains unbroken.

the $850M number you're talking about is the amount that Bitfenix gave Tether through Crypto Capital to cover for losses and/or missing money. the $18.5M was the fine they paid the NYAG for covering up that transaction.

That's the amount that Bitfinex took from Tether to remain solvent after the $850M was seized from Crypto Capital Corp in the money laundering sting. Bitfinex wrote them an IOU for it. But of course that money didn't exist anymore, it was taken by various world governments, and BFX and Tether have the same owners.

Bitfinex and Tether are the same company, roughly speaking, and I do believe they co-mingled their funds at times.

This is covered in section III of the NYAG settlement [3].

Depends how you slice it I guess.

Have there been any updates on where the $850m that’s been seized is sitting?

Do we know the money was actually seized? Last I’d heard the Tether (or maybe Bitfinex?) CEO had told the NYAG office the missing $850 million kept in a Panama(?) bank had been seized in an AML sting but I’m not sure whether that story was ever corroborated?

$371m was seized by Poland: https://www.financemagnates.com/cryptocurrency/news/bitfinex...

Haven't heard much specific about the rest, but there's supposed to be some tied up in Portugal, UK and USA.

So, they were fully backed by dollars, except some of those dollars were not-dollars, and some of those dollars and not-dollars were not actually owned by the entity that was supposedly backing tether?

This was my favorite part, just wow:

> Further, at least until 2018, Respondent’s internal accounting system for tracking fiat balances, including bank balances for USDt reserves, primarily consisted of a spreadsheet (the “Reserve Spreadsheet”). The Tether executive team was ultimately responsible for the Reserve Spreadsheet. The Reserve Spreadsheet required manual updates and was not always kept up to date in real time. Respondents were aware of the limitations of the Reserve Spreadsheet. For example, in an internal chat on June 15, 2016, Tether’s then-Chief Strategy Officer informed Respondents’ CFO and other employees stated that the: “transparency page needs to be dealt with ASAP . . . I am surprised the issuance address is not updated dynamically, btw . . . and how often does the bank balance get updated?”

Have you ever heard of "The Narcissist's Prayer"? It goes like this:

That didn't happen.

And if it did, it wasn't that bad.

And if it was, that's not a big deal.

And if it is, that's not my fault.

And if it was, I didn't mean it.

And if I did...

You deserved it.

Tether defenders are really working their way through the steps here.

18 months ago, it was "That didn't happen." (Tether is 100% backed by USD cash.)

6 months ago, it "wasn't that bad." (It might not be 100% USD cash, but it's cash-equivalent assets like short-term commercial paper.)

Now that there's strong evidence the commercial paper is just fake money shuffling between Tether/Binfinex/other shady crypto investments we get "that's not a big deal." (Look at the way banks work! They only need 4% collateral! Tether's probably got at least that much...)

Next step is finding out that their actual liquidity isn't capable of holding up under a real-life stress test, and the defenders will be talking about "not my fault." (This was a once-in-a-lifetime crash, they couldn't have foreseen it, crypto's still way better than the fiat banking system!)

When thousands of people lose their retirements in a gigantic defi crash, it'll be "you deserved it." (Everyone knows crypto is risky, you shouldn't have believed Tether was the same as USD.)

> It is difficult to get a man to understand something when his salary depends on his not understanding it.

I am commenting here, because I want to save this "And if.." list, because it is beautiful in its simplicity and yet we see it played out over and over again.

HN also has a "favorite" button you can use to save things for later.

Just fyi that favorites are public.

...I did not know this. So thank you for letting us know.

By default..? Oh dear.

Where is that favorite button? I have never seen that functionality.

Found it: just click on the comments’s time, and you will see the “favorite” option underneath the link.

You have to click through to the comment’s page to use it - it’s not on the main page.

Click on the "n minutes ago" time stamp next to the user name.

For example, it's on this page:

https://news.ycombinator.com/item?id=28880280

That's the perma link for that comment. The favoriting action should maybe exist in the thread as well.

I also just learned that by visiting one's own profile, one can see which submissions and comments they've upvoted—which is private, unlike favorites[1].

[1]: https://news.ycombinator.com/item?id=28880623

You can favorite a comment

Just upvote or favorite it and you can find it in your profile.

My stance has always been "Tether is a scam, but no worse than the US dollar and normal banking fractional reserves... and even if it collapses, who cares, there are other stablecoins not built on a house of cards."

I don't see that stance changing.

2 differences: 1. You have to have USD to pay taxes, which most Americans have to do. 2. The feds will bail out depositors in banks that have screwed up badly.

Also fractional reserve lending is both how new money is created and how it's backed. When you borrow money from the bank, they create a positive balance in your account and a negative balance in theirs. As you repay the loan, the new money disappears. The money in circulation is backed by the demand created for that dollar at issuance (in that the loan must be repaid).

Banks also take hard assets as collateral. They can send guys with guns to collect if need be.

And yet, during the recession of 2008 the M2 went up by a 1000 billion dollars, despite the fact that there were millions of houses foreclosed on, their assets tanked, and millions of loans defaulted. Curious how that works.

Tether is much worse than the Fed(or would be if equivalent scale), but the Fed is no sweetheart.

The money supply is protected by the Fed, yes - that's kind of the point. The supply is adjusted to maintain the 2% inflation target. Generally in big financial crises, velocity of money drops so the supply is increased to offset it - and avoid a deflationary spiral.

It's pretty logical right? If the economy is imploding around you, your natural response is to save your money - out of fear - and not spend it. However, that has knock-on effects. If everyone starts saving, prices go down to tempt people to buy, which means less revenue for the business, which means salary cuts and layoffs, which means folks have less money to spend - and so on.

To avoid this situation, the Fed increases the money supply. This happened in COVID too. The fed IMO deserves a ton of credit for saving the American economy from a massive depression - twice so far since 2008.

By the way those bailouts earned a $15B profit for the government [1].

[1] https://en.wikipedia.org/wiki/Emergency_Economic_Stabilizati...

I know you know about Moral Hazard. I know you know about small bubbles allowed to get bigger getting out of control. I'm sure you know the phrase "Privatized gains and Socialized losses." These all apply here.

The mark of a successful Fed is in reducing not just the frequency of banking issues but also the amplitudes. Every time the Fed is forced to step in, the interest rate cuts get bigger, the debt they create gets bigger, the Congressional action larger.

The mark of a successful Fed is in stepping in ahead of time before the bubble gets out of control. If a Fed needs to take drastic action, they've already failed. CO-VID, being the first non-financially caused recession in 50 years, is a special case, and for that I give them leniency.

I agree with all that broadly, but I would push back and say the Fed's responsibility wasn't to stop the subprime crisis. That was Congress' responsibility. It's not the fire fighters job to stop people building houses made of paper. That's the fire marshal, the city planning department, the inspectors, and so on.

They stepped into the repo market when secured overnight rates blew up to 10% in sept 2019, they get no leniency from me (should have blew up instead of engaging in moral hazard).

That and getting into corporate debt were extremely harmful.

Agreed (I was long tail risk on HY and IG corp bonds from dec 2018 which still payed out alot in feb/march 2020, was watching the slow motion train wreck with SOFR-UST yield spreads before sept 2019), that combined with all the other shenanigans last year with exchanges and their custodians (I used IB and robinhood), made me sell everything and move into defi and dex only.

Now time to watch the slow leverage build up of stablecoins on chain with the decentralized non custodial derivatives protocols :D

> The fed IMO deserves a ton of credit for saving the American economy from a massive depression - twice so far since 2008.

I'm not sure I agree with this. I think The Fed stepping in after the stock market crashed in March 2020 gave stock investors an unreasonable expectation that stocks are safe. Stocks are a risk-on asset and should be treated as such. Right now many people treat them like a savings account. IMO we should've let the stock market crash lower so people understand that stocks are not risk free.

Also, we may not know all the consequences from all that money that The Fed printed yet. So far we are seeing increased inflation, which hopefully will go down when / if they raise interest rates again, but we'll have to see what happens. I think, if anything, The Fed having to step in showed that the traditional markets are a house of cards as well. Just like in crypto, people just want the of price of stocks to go up, but that isn't reasonable. Volatility is normal and sometimes there should be crashes in markets so that people understand the risks.

I agree 100%, and not letting stocks crash is a severe policy error.

Regarding 2, if crytocurrencies fire up all cylinders and get not only many traditional market makers, hedge funds, but also FOF involvement and with-hold tens of millions people's savings. They can potentially get buyout like traditional banks do.

Maybe someday.

> 1. You have to have USD to pay taxes, which most Americans have to do.

61% of Americans paid no federal income taxes in 2020[0], up from 47%[1] in 2019 and the long term chart seems like the non paying number will get higher regardless of what people "have to have" and "have to do".

> 2. The feds will bail out depositors in banks that have screwed up badly.

Ignoring the moral hazards at play, this really only considers on shore dollar denominated deposits, not dollar denominated deposits held overseas and will only work if its only a few banks and not something systemic.

So none of this really means anything to in the tail risk scenarios people are opining about because its all just SSDD at the margins, crypto or non crypto (because everything is connected and getting more so everyday).

[0] https://taxfoundation.org/us-households-paying-no-income-tax...

[1] https://www.forbes.com/sites/howardgleckman/2019/08/06/remem...

I gave a breakdown of why that statement belies a lack of understanding of fractional reserve lending here: (https://news.ycombinator.com/item?id=28880063)

> Tether is a scam, but no worse than the US dollar and normal banking fractional reserves...

So tether insures up to $100,000 for every depositor?

The U.S. government insures its own currency using its own currency or security.

Tether can’t do that without hurting the stability guarantee.

Tether can absolutely insure its own currency by printing more Tether as needed -- it's identical to what the US government will do to protect bank deposits, by printing more dollars!

That's actually out of date.. a decade ago, the US FDIC upped the limit to $250k per depositor.

I really would like to see an attempt to defend Tether (and by extension most of the cryptocurrency ecosystem in practice) that doesn't require me to buy into ultra-libertarian ideology. Most people, including me, do not in fact believe that the US dollar is a scam.

The point re: tether directly is that it doesn't matter if tether is backed 1-1 or .05-1 or .01-1 as long as people trust it as a stablecoin.

The point re: the ecosystem is that there are a lot of stablecoins and you can pick the one that isn't a scam. You can use crypto and not touch tether at all. There's no need to tie the ecosystem to it.

I don't think that the US dollar is a scam but I think The Fed is struggling to keep it afloat. Also, the ever increasing debt of the US concerns me, as well as all the money printing. I just wonder, where does it end? How does it end? Just borrow more and print more? Drop rates to 0%, and then go negative if there's no further to go? Does all that seem sustainable? I do hope inflation will drop when / if The Fed raises rates again. Maybe that will bring some sort of balance. We'll have to see what happens. I don't think the US debt could ever possibly be paid off now though, and we'll have to keep raising the debt ceiling or remove it. There's also some absurd ideas like minting a trillion dollar platinum coin [1]. I just don't think this ends well.

[1] https://en.wikipedia.org/wiki/Trillion-dollar_coin

I think it's mostly because it fits their views.

Not sure if it's bots or hackernews sentiment changing but pretty much this. I guess that's what happens when the disruptors become the corporate. But yes it's like the classic democracy quote about it being the worst but better than all the other alternatives. If this is the slap for running an unregulated exchange for 10-15 years which today traded $350 mil everyone here not building that including me is the idiot.

Tether isn’t some new innovation that is it’s own animal. We know what to compare it to. The right comparison isn’t “the US Dollar.”

The right comparison is money market funds - they are very highly regulated. If a money market fund said “we are backed by very highly rated short term debt,” but they weren’t, that is 100pct a scam that has huge fines.

Just because Tether is in the crypto world doesn’t mean it’s now a magical novel currency. Still just a money market fund in a slightly different form.

I haven't seen anyone defending Tether in a really long time

You can find plenty on twitter. E.g.

https://twitter.com/BrutalTrade/status/1449035910658600969

Some are paid bots but some are real

> I haven't seen anyone defending Tether in a really long time

Check out comments in this discussion by bpodgursky and vmception, for example. Similar comments come out in every Tether article on HN.

> Check out comments in this discussion by bpodgursky

Here's one from bpodgursky:

>My stance has always been "Tether is a scam,

Not sure how that's "defending" Tether.

The full context, which you have chosen to elide, is clearly defensive of Tether[1]:

> Tether is a scam, but no worse than the US dollar and normal banking fractional reserves... and even if it collapses, who cares,

[1]: https://news.ycombinator.com/item?id=28880411

It's not, he's simply pointing out that there's even bigger scam out there. That's not the same thing as defending Tether.

It is defending Tether, because he is wrong. Some things are worse than other things. Fraud is worse than the Fed. No one sensible would claim the Fed is as bad as, say, Bernie Madoff.

Formally, his tactic is known as “whataboutism”

> No one sensible would claim the Fed is as bad as, say, Bernie Madoff.

Give it a couple of decades.

Making comparisons to a perceived bigger problem is a defensive statement. The implication in this kind of comparison is that because Y is worse than X, that somehow ameliorates the harm of X. This is reinforced by the "who cares" remark.

Or also matheusmoreira in the other parallel discussion on the same news. Again, this kind of stuff shows up on every Tether article.

"Defend" is a four letter word; I wouldn't paint with such a broad brush.

I hold the position that you need to be careful to distinguish between a) "every Tether statement is true/in good faith" vs "b) Tether will fail to produce sufficient backing value, sending crypto into a secular crash", and that a) is false but b) is false as well. That is enough to get me labeled a "defender" in some contexts.

Disclosure: I hold liquidity pools that have Tether and have borrowed Tether against BTC via DeFi.

Has Sam Bankman-Fried changed his tune? Last I heard on Odd Lots, he was conceding that their optics were poor, but still seemed to claim that they were legit.

I don't disagree with you, but USDC and USDT are identical in their transparency, yet everyone hates USDT.

Not by a mile. USDC are emitted by a consortium which the HN unicorn Coinbase is a major part of. They have something like 73% of USDC in actual USD and the rest are corporate bonds / money markets and things like that. It's not 100% USD, but they're 100% backed.

Coinbase is a reputable US company ran by US citizens.

USDT is operated by shady people with an history of fraud from shady micro countries on the dark list of fiscal havens.

They are nothing similar.

I do believe there are actual people wiring a lot of real USD / EUR to Coinbase's bank accounts to buy crypto. I'm really not so sure there are people actually wiring lots of money to Tether's bahamas bank accounts. I'm not sure many ever did.

I really don't get this: Coinbase is a HN unicorn. Do you think it's a gigantic fraud / scam and there aren't a shitload of real people putting a shitload of freaking real money to Coinbase's very real bank accounts?

> Now that there's strong evidence the commercial paper is just fake money

Tether is issuing loans of USDT against collateral in the form of crypto and calling that "commercial paper".

The whole idea that anyone would be sending $70B of actual USD to Tether is now "fucking ludicrous". But the idea that anyone is selling $70B of crypto to Tether during a massive bull market in crypto (and it should be now quite apparent that this is still a bull market) is also "fucking ludicrous". There's no counterparty that massively stupid for either side of those trades.

What makes sense is that people sitting on large cold wallets of BTC are using that as collateral to get USDT loans. They then trade it between themselves and any retail "investors" on a USDT exchange. The loans are USD denominated which provides an incentive to maintain the USDT-USD peg. Since they're loans against collateral and aren't redeemable that removes a lot of the risk of a run on the bank.

It is still crypto-backed wildcat banking script, which won't end well.

I don't understand why so many people who are Tether-skeptics believe them that their commercial paper is something the banking system would regard as commercial paper.

And try graphing Tether issuance denominated in BTC rather than $USD and it is much more stable at around 1M BTC.

Would those loans be called commercial paper by any accountant’s definition? We have two data points:

* Moore Cayman, the auditing firm doing Tether’s attestations, says they have commercial paper. They risk penalties for blatant lies

* Bloomberg reporter Zeke Faux say Tether’s accounts and said they have “a lot” of Chinese commercial paper

The massive loophole in the attestation regarding CP is Tether management policy is to value it at redemption value, even if the CP trades below par. So, they could buy the worst quality CP, for say $5 billion, with a redemption value of $30 billion, and the accountants would say “yup, $30 billion of CP per management policy”

That seems easier than a pure lie. NYAG has also seen the statements for recent months. I suspect a total lie would carry more risk than the blatant misleadingly accurate statements I outlined above.

Some of the paper could also be to crypto exchanges, collateralized the way you say. Then it would technically be CP. Tether has denied taking CP from affiliated entities but they use a narrow definition. Only majority ownership counts as affiliated I believe, since they consider their loans to Celsius non-affiliated despite part owning celsius.

Also those Celsius loans are USDT denominated with crypto collateral.

> seems easier than a pure lie

Aren't Tether and Bitfinex firms with a documented track record of repeatedly telling "pure" lies?

Yes, but not through accountants. Recall one incident where they transferred in a few hundred million to a formerly empty account. Moore Cayman accounting accurately reported they say money in the account. Then the money was transferred out after accountants looked at it.

Much more complex than just lying. They used the accountant’s true report to cover the truth.

> Would those loans be called commercial paper by any accountant’s definition?

We're talking about crypto here, blantant lying is pretty rampant, and Tether has clearly blatantly lied in the past.

> They risk penalties for blatant lies

If the amount they're being paid for those attestations exceeds the risk then it makes sense to blatantly lie.

They are also not audits, but attestations, so Tether can be blatantly lying to them.

> Also those Celsius loans are USDT denominated with crypto collateral.

And that is it right there.

Pretty big and popular strawman you got there. Tether has been a boogie man since forever, the traditional system is infinite times more corrupt. Top voted hackernews comment like this? Probably a pretty amazing time to buy some more and short some yc. edit: remember eth being mentioned here for the first time 6 years ago, how the cycles roll.

> When thousands of people lose their retirements in a gigantic defi crash

Do we have any evidence this would happen? That ordinary people who didn't know they were investing in Tether would lose money in its collapse? (Honest question.)

I own a bunch of crypto and often people ask me questions.

I endlessly have to warn then to never hold tether. The problem is people don't understand what tether is, they assume it is just USD and use it because it is the most popular in many platforms or the outright default settings.

Tether crash will be very, very ugly when a lot of people leaving money on their "default" account realise the money all went poof.

Thank you for your perspective. Are there any U.S. services which default balances into Tether this way? Trying to get a sense for whether the shockwaves will be principally offshore or not.

I don't think there are.

IIRC, until recent demand triggered by use of tether in ethereum "defi" I believe the only US exchange which even had access to tether at all was Kraken and it didn't see much trade.

Basically the main reason for tether existing outside of acting as USD in bitfinex is for people to trade altcoins at sketchy offshore altcoin exchanges that have no access to actual USD by virtue of being sketchy and/or offshore. I believe there is essentially no reason for US residents to use these exchanges except for access to more obscure altcoins (as they require much smaller bribes to list things than larger exchanges).

It's extremely hard to estimate the aggregate impact because the very same exchanges that use tether as their primary/only form of "USD" are the ones which have volumes which are dubious (zero fee trading) to outright obviously fake (e.g. showing volume when the exchange is off the internet).

It's also hard to estimate the impact because its possible that as tether comes untethered people will trade out of it (e.g. into Bitcoin) thus driving _up_ the price of the things they're trading into.

(see the bitwise report to the SEC on fake exchange volume: https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca2... (they also wrote a paper on the subject, but a quick google isn't turning it up).

If hypothetically Tether ever crashes, then a lot of big accounts will need to cover their losses. Meaning they will exchange USDT to BTC (also a big IF), and then will immediately sell those BTC, and primary points of sale would be USA exchanges specifically because they don't list USDT and are reputable. Tether flash crash will bring down all crypto prices a lot.

Meanwhile BTC is racing towards a new all time high, I simply can't wrap my head around this. What on earth is going on? Does anyone have a clue? I'm genuinely interested.

Nobody gives a f-ck about tether except those who keep yelling at the sky. The govt said it will be regulated like a bank and they received a fine.

Tether doesn't change the fact that my percentage ownership of all btc will never be diluted like my dollars constantly are.

The unlicensed offshore exchanges that use Tether to avoid USA banking regulation and AML/KYC don't let you cash out real money. You have to buy crypto and hope that they let you transfer it out before their real asset reserves run out. Now that people have the data that Tether has <5% in cash reserves it's a race to get converted into BTC etc and get it out before the insolvency stops everything.

The fact that USDT is currently trading at $0.9995 seems to contradict that theory.

It's all about incentives.

Everybody knows Tether is a scam - and it will probably take down crypto once it implodes. But the people 'with knowledge of the matter' have 0 incentive to expose it, and they have every incentive to keep it as it is. People are making hundreds of millions of dollars on it. Until the music stops, they will keep dancing.

Anyway, it's fascinating ! As Patrick McKenzie put it ""we are living in the middle chapters of a Michael Lewis book."

Why do people think that Tether will take down crypto if it implodes? The market survived the implosion of Mt Gox, which was much more severe.

By this point everybody knows that Tether has junk status. Much ink has been spilled about the matter. It's hardly a secret.

A few years ago when Tether was the only stablecoin, then yes it's implosion would have been catastrophic. But now anybody using Tether clearly has some (good or bad) reason to do so. There's simply not enough people living under rocks to be surprised when the thing collapses.

Agreed, and I was doing cross exchange arb with mt gox in 2012 and knew never to keep anything on there overnight when I wouldn't run the bot.

I think this quote from somewhere describes this best: "It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so."

If you ask me, i think the big thing™ most people trust and don't question that's pretty much backed into tradfi mm funds and centralized crypto stablecoin reserves alike is US treasuries. Most assume that they are super safe and that nothing can go wrong, however most ignore or are in ignorance of the rehypothication of them in eurodollar markets (and the rehypothication of collateral more generally). The heavy usage of them as collateral in the post 2008 monetary system has basically tied the super-safe-risk-free-asset™ asset to the credit risk of the most junkiest actors globally (that for the most part, whose balance sheets go unseen and will never see the light of day).

I sort of agree. I think people know they're taking a risk with Tether, but they think they'll get out in time. Maybe they're right. Maybe it will be slowly and then all at once and if you get out in the slowly phase you'll be fine. People did that with Gox.

Everyone certainly knows the risk exists by now. And the markets keep on chugging.

There’s just over $68 billion Tether.

The 24hr trade volume for BTC alone is just over $50 billion.

If all tether were to completely turn to dust, it would not lead anywhere close to a “gigantic defi crash”. This is in no way a defense of Tether. I’m just zooming out from the hyperfocus on Tether as the pseudo foundation of crypto. That is just simply not the case.

If all retail investors were not allowed to buy or sell stocks anymore what would that do to the stock market? Its only 10% of transaction volume, but critical to so many liquidity dependent financial instruments, it would be catastrophic for the market.

The important thing about all these Tether settlements is that they are for very specific periods of time, which were well before the most recent parabolic issuance in USDT.

It's anyone's guess what they are currently sitting on.

> Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018

With how shady they acted I would have assumed that number was 0%. A bit shocked it wasn't a total scam to be honest, even if they did misrepresent that it was in fiat not risky investment assets.

CFTC/FDIC/OCC/NYAG/Congress/all bank users: Collateral requirements for everything we regulate are like 4%. You need $4000 to trade with $100,000.

Also everyone: omg tether was not 100% collateralized by fiat dollars at all times, sometimes, but also not at all times!

I just feel like the arguments are weak. Tether was controversial because it was centralized at all and requires ongoing trust and its collateral is not verifiable except by the state's subpoenas. Then the argument moved to something much more .... tolerant of their existence but requires completely ignoring how all the rest of finance works to make it an issue with Tether. Strange. At this point I can acknowledge that the market can bear it. Tether, like everything non-crypto, are vulnerable to bank runs, and that works. If people actually wanted fiat, then Tether could be in trouble. But Tether users do not want fiat and redemptions barely occur. People don't want to accept the reality that Tether actually works as stated. Like if you just assume it works as described, using the investigations of multiple US agencies, then it makes sense! Tethers are created when people deposit fiat on Bitfinex, deposit directly with the Tether issuer, sometimes by Tether issuer when Tether trades at a premium (in exchange for other cryptos that are not dollars), and sometimes arbitrarily. But its better to assume the first 3 everytime a big tether print occurs, than to always assume the last one, because the formers are what all the US regulators and enforcement agencies have also found to have occurred most of the time. Not that hard. It is a trusted system, like everything else we are used to. They change their contract to reflect any deviation from 100% usd collateralization and that's not that controversial. Fractional systems also work. Ideology doesn't make something else suddenly not work.

Yeah! And the reserve requirements were suspended during the pandemic for banks anyway. Tether is, at least on chain, completely open and auditable. You can trace every token, in ways the global banking system is opaque. A fine, some regs and compliance, and capital still flows.

> Also everyone: omg tether was not 100% collateralized by fiat dollars at all times, sometimes, but also not at all times!

The key point is that it wasn't fully backed and Tether represented that it was: "Tether misrepresented to customers and the market that Tether maintained sufficient U.S. dollar reserves to back every USDT in circulation with the “equivalent amount of corresponding fiat currency” held by Tether and “safely deposited” in Tether’s bank accounts. In fact Tether reserves were not “fully-backed” the majority of the time."

Tether can either do a sort of fractional banking or not, but what they're getting fined for is lying about it.

Yes. To me, its more like they leaned into what the assumptions about them because they couldn't shake the assumptions. As in, at first they were doing what they said and people complained anyway, so then they did what people were complaining about because it was a conveniently awesome amount of money and people kept complaining, so then they changed their legal contract to reflect that they can be what people complain about, the state investigated and found the period of time where they did what people complained about and had not updated their legal contract yet.

Leaned into assumptions? Come on. It's just called lying. End of story.

"Everyone thought I was lying so I decided to prove my detractors correct" is just lying to your customers with extra steps.

"Because you thought I (cheated on you|took drugs|did crimes) and I hadn't, I decided I might as well do it for real, so there's no harm done" is not a defense, it's a hollow self-justification.

I'm not an apologist for them, I just don't care that they lied. Corporations lie and that's not controversial to me. They settled, with another US authority, the matter over their reserves is resolved - for that time period and legal agreement, the same standard applied to every other institution in the financial services sector. If you want a chronology of events, I offered it.

The assumptions were that they were committing financial fraud. That's not something you just "lean into."

> To me, its more like they leaned into what the assumptions about them because they couldn't shake the assumptions

Ah yes, the reasonable defense of "Your honor, I only robbed the bank because someone thought I was going to. Therefore, it's not my fault."

its not a defense, I'm not an apologist. corporations lie. I don't actually find that controversial maybe because we are not 4 years old anymore. this is what happened, they settled, does your passion over how you frame this topic actually matter?

you literally explained a completely nonsensical reason as to why they did what they did. call it whatever you want...

its not different than someone that everyone overwhelmingly trusts was found to have moved the reserves.

here everyone just expected them to be doing that, and eventually they did it, not different than someone nobody expected to be doing that eventually being found to have done it as well. these cases prove that at one point they had not, even when everyone assumed they were. its like taking a time machine back to 2016 and telling people "hey actually they're fully backed", its interesting to find out, from the state's investigations, that they actually were.

thats the only chronology I explained.

lets play a new game: what's inaccurate about what I said? seems like thats a much more productive discussion.

the reason I think the distinction matters is because its resolved now. And that resolution involves Tether still existing. So our passion about a systemic threat to crypto and maybe the broader financial system will not involve the state doing something about that. which is fairly important to understand, both for your decision to use it even if briefly, or for espousing your passion about why others shouldn't use it.

Once again, this demonstrates a complete misunderstanding of fractional reserve banking. Fractional reserve banking is how new money enters the financial system. When you borrow money for, say, a mortgage, new money is created - alongside a liability on the banks books. [edit: This liability is what gives fiat value - money is always 100% backed by the demand for that money].

As you pay off your loan, the new money that was created is destroyed.

This is how the money supply is actively managed, it's not some tinfoil hat conspiracy haha.

There is also a 1/2 trillion dollar fund (FDIC) and a further 1/2 trillion dollar line of credit at the Fed to ensure depositor funds are secure.

The federal reserve, created via act of congress, exists to manage the money supply - to maintain a low, fixed rate of inflation and maximum employment. These two features are correlated, by the way, as you can see in the Philips curve.

Now, Tether on the other hand is just printing fake money to pump up the market to benefit themselves and a small cabal of crypto holders who recognized early on the liquidity did not exist to support their desired level of wealth.

They lie about it regularly - in fact their announcement of this settlement included a bald faced lie.

> CFTC: "In fact Tether reserves were not “fully-backed” the majority of the time."

This is the central bank of crypto, 85% of all trading volume is against USDT, and they have shown themselves to be the least trustworthy entity in the world. Just a new Liberty Reserve.

We are talking about totally different things, and I have absolutely no issue with fractional reserve banking and have no conspiracy laden issue or understanding of it.

What you mentioned happens. And requires a charter from governments to occur.

What I mentioned happens too. And simply relies on the tolerance of the market.

One is about banks.

Another is about the amount of unsecured leverage that all individuals and entities can operate with, and whether their counterparties need disclosure or not.

“Fractional reserve” in this context, is more about the ratio of collateral, used colloquially for quicker understanding. “Loan to value” could be helpful for other people to understand. “margin requirements” for other people.

I am only referencing the reality that individuals, businesses, and almost any kind of entity, can have a lower value of assets redeemeable for any liability they issue or accrue. It can be a “fraction” or their “reserves”.

The "charter of the government" is the difference between kidnapping and an arrest.

We've long since given up on the idea that anyone should be able to do whatever they want no matter who it harms.

Many financial infractions operate in a different reality that has no analogy to non-financial criminal law.

You are focusing far too much on the marketing that uses the terms currency. Any individual or corporation is capable of creating a product said to be redeemable for something in their treasury. This has nothing to do with the parallels to the federal reserve when corporation calls its product a stablecoin or dollar-like. All settlements with Tether's companies have been exclusively related to the reality that the corporation's product was not in fact redeemable for the thing they said it was. That is the only issue, every authority that matters has said that was the only issue. Both crypto twitter as well as blockchain skeptic's opinion doesn't matter here. Their armchair legal analysis don't matter. Their comparisons to the state-monopoly on currency issuance doesn't matter. The corporation having marketing and legal agreements that accurately describe what their product can be redeemed for, if anything at all, simply has to be congruent with reality. That's the totality of the sanction from the CFTC, and the same with the NYAG at one state level. But I will give you one bone, and that's the reality that the DOJ can of course come with a parallel criminal prosecution for the same activity. So if that will validate your thoughts on anything, just wait for that if it ever comes. I'm not worried about "being right", only saying what this settlement is saying.

I sympathize with the observation of hypocrisy, but disagree that this excuses Tether. The USD note once featured the words, "This certifies that there has been deposited... payable to the bearer on demand". At least in this case the offending text was removed.

https://en.wikipedia.org/wiki/History_of_the_United_States_d...

>In February 1965, President Charles de Gaulle announced his intention to exchange its U.S. dollar reserves for gold at the official exchange rate. He sent the French Navy across the Atlantic to pick up the French reserve of gold and was followed by several countries. As it resulted in considerably reducing U.S. gold stock and U.S. economic influence, it led U.S. President Richard Nixon to end unilaterally the convertibility of the dollar to gold on August 15, 1971 (the "Nixon Shock"). This was meant to be a temporary measure but the dollar became permanently a floating fiat money and in October 1976, the U.S. government officially changed the definition of the dollar; references to gold were removed from statutes.

https://en.wikipedia.org/wiki/Exorbitant_privilege

There is some irony in the US gov objecting to Tether's methods. While the USD is backed by what exactly? What are these reserves of the Federal Reserve? Meanwhile, the 1 trillion dollar platinum coin is being proposed. Yes, it is fair to say Tether is guilty of having insufficient reserves. But how meaningful is it to say that they have insufficient reserves of an unbacked currency?

> But how meaningful is it to say that they have insufficient reserves of an unbacked currency?

Because being backed by USD reserves is their whole (self reported) value proposition and the supposed reason why 1 USDT == 1 USD on the open market. If this is all false, USDT should float relative to USD like any other crypto equity.

>There is some irony in the US gov objecting to Tether's methods. While the USD is backed by what exactly?

It's backed by the obligation to repay roughly $50 trillion (private plus public debt). I honestly don't get how people misunderstand the new system. The money system is quite simple. Money is just the liquid portion of credit and credit has value because a debtor has obligated himself to accept credit as payment.

A business isn't accepting USD because it has faith in the USD, it's because it is in debt and needs to earn the money back by providing goods and services or alternatively it needs the money to buy products and services from other companies that are in debt.

The way tether is run is quite strange. It's not a bank so people expect it to have a reasonable amount of cash reserves or alternatively they expect tether to declare that they do not intend to hold cash reserves and that holding tethers has a completely different risk profile than holding USD which also means it would have its own exchange rate vs USD instead of 1:1.

>Meanwhile, the 1 trillion dollar platinum coin is being proposed

That's just a hack to get around a self imposed debt ceiling. Everyone knows it's stupid. Blame the bigger idiots in congress that want it to be necessary.

Is it really ironic?

The US is saying "we don't care if you market your product as a currency, all we see is a product. If you say it is redeemable for something, it actually better be or we fine you. But it doesn't matter to us if it is redeemable for anything, just make that match how you advertise it."

People care way more about this than government regulators do. The derivatives regulators looked at it, found something that affected the spot market based on confidence alone, and got their fine and a company agreement to match so people can be more objective about their confidence.

Consider that the etymology of 'dollar', coming from 'thaler' has always meant a fixed weight of metal. Yes, for me there is some irony there. We still call them dollars, not debt instruments or tally sticks. As you say the key points are redeemability and backing.

Well, it'd be pretty easy to partially back tether.

Create new tether, declare 1:1 fiat, sell new tether for 1 fiat each.

It only really becomes a problem if they're trying to be completely backed, as new tether isn't an option then.

The longer you keep a scam running the more you can make out of it.

This is a slap on the wrist. Tether's current market cap is $68.5 billion of printed money that users assume is really held in bank reserves.

Expect a massive cryptocurrency crash if Tether's regulatory downfall finally occurs; a majority of exchange trading pairs are between currencies and USDT. (not financial advice)

>a majority of exchange trading pairs are between currencies and USDT. (not financial advice)

Is that actually true? In my (limited) experience I have seen ETH and USDC much more frequently than USDT.

There also seems to be a recent migration to algorithmic stablecoins like RAI which aren't pegged to the dollar but are (supposedly) designed to limit fluctuation in value. I suspect that without regulatory action against both USDC and decentralize stable tokens that crypto would recover from a Tether collapse.

My source was a cursory look at https://coinranking.com/markets but I admittedly could dig deeper to verify this.

I agree that prices would recover after a short term Tether-induced crash, and markets would almost certainly shift to DAI and similar decentralized stablecoins.

Wow, you're right, USDT is much more prevalent in the largest markets than I would have suspected. Is this a first mover effect? As far as I can tell USDT is the shakiest and least compelling stable.

There are a bunch of sketchy unlicensed exchanges that are heavily invested in utilizing USDT. The Tether meltdown should be quite the show. All of those outstanding balances have to be reconciled somehow. Or they'll just close up shop and disappear and years later people will maybe get a small % back, like with MTGOX.

As someone with ambivalent interest in crypto, it seems like a Tether meltdown might be healthy for the space.

It would wash out a lot of the accumulated speculative value and hopefully lead to a much more confident regulatory framework for the interface between blockchain money and real world money. It would also long-term strengthen fully decentralized aspects of the crypto ecosystem while flushing out those that don't really function independently of traditional finance but instead accumulate speculative valuation based on an unsafe interface with fiat and the financial sector.

Winners all around (except for crypto speculators)?

depends. It could ripple into the legacy financial system. If that happens, we could see some really onerous regulations that prevent innovation.

That's my worry about the integration of crypto into tradfi (via BTC ETFs, stablecoin savings accounts, &c). It's OK if crypto is a hellstorm of speculation because it rides on top of rapid experimentation. However, it's really not tolerable to have that much chaos actually affecting e.g. people's retirement funds. If crypto messes up main street then the regulatory hammer will be unfortunately well earned.

It's not about trading pairs, those can easily switch to USDC or other stables. The big challenge will be the futures markets which are nearly exclusively with USDT. If tether collapses so do all those futures, which presumably will cause chaotic algorithmic driven effects as hedging positions evaporate.

What about the billions in exchange balances held in USDT? That's a lot of liability for the exchanges holding those, right?

You mean a liability for the users of that exchange

> those can easily switch to USDC or other stables.

So why don't they? Why would literally anyone choose to hold USDT over any other stablecoin?

CME futures are all USD cash settled.

Or are you referring to unregulated futures on some crypto exchanges?

I think it would be the opposite. tether failing would force ppl to convert to BTC, ETH to preserve $.

It's possible. But I would expect panic selling as charts make it _look_ like all cryptocurrency is crashing due to USDT's sudden decrease in value.

Small exchanges could also lose liquidity from bad code that assumes USDT will always equal $1.

Tbh I wouldnt dare keep usd on an exchange when its crashing

Short term, yeah ( people converting). Long term, no ( way less pumping)

$41m is a quarter of Tether's present claimed excess reserves ($160m), so it's a bit more than a slap on the wrist.

Of course, this assumes Tether aren't lying about that too.

People on reddit and twitter are like, "great, now that Tether FUD is over, leave it behind and go for $100k!" - of course it is over. U in FUD stands for Uncertainty, and now it is Certain that Tether is a fraud.

The only thing I can't understand is why the price still pumps.

Seriously - Bitcoin is more than 8% up today and about 50% up compared to 3 weeks ago. It's almost back to the all-time high from April. How does anyone explain any of this?

A complete lack of regulation in the markets.

I can explain - More people want to buy than sell

Thats not really how it works - every transaction must have a buyer and a seller. When prices go up, buyers are simply willing to go deeper into the order book to get their orders filled.

More simply, more money (not people) is buying than is selling.

> How does anyone explain any of this?

Suppose you hold a big bunch of USDT (Tethers) right now.

What would be be doing in light of these news?

Exactly.

Why not just convert to USDC / BUSD / some other stablecoin?

Or Dai or Gemeni Dollars?

How do you convert if nobody wants to buy your USDT?

Bitcoin's price "in USD" makes more sense as a price "in USDT". It's completely unsurprising that Bitcoin went up relative to USDT after this news.

The big question is when the peg of 1 USDT ~= 1 USD (or USDC) is going to break. Tether is going to do everything they can to maintain that peg as long as possible.

> The big question is when the peg of 1 USDT ~= 1 USD (or USDC) is going to break. Tether is going to do everything they can to maintain that peg as long as possible.

Yuup. Assuming USDT is a fraud, Tether likely makes very good money off of it, and is hence HEAVILY incentivized to keep it running as long as possible. I'd be very curious to hear theories as to what might cause it to collapse.

Complaints by companies trying to exchange usdt to usd

But those companies would only complain if Tether stopped redemptions, which presumably would only occur if they ran out of cash. You'd need some other outside impetus to trigger it all.

I could tell you, but because this information could reduce my purchasing power, I’m choosing to keep quiet.

I’m not willing to share the short/medium term philosophy, catalysts, and predictable patterns. But I’ll reshare the long term philosophy since I’ve already written about it 4 months ago:

https://news.ycombinator.com/item?id=27202204

If you’re smart and knowledgeable, you may be able to piece it out from my comment history.

It looks like a Bitcoin futures ETF is nearing approval and could go live next week [1][2]. My guess is that people are pricing that in.

[1] https://www.cnbc.com/2021/10/15/bitcoin-etfs-may-finally-mak...

[2] https://twitter.com/JSeyff/status/1449010847074897933

Same reason why prices went way up before MTGOX collapsed. People have "assets" in Bitfinex that they can't cash out for something with real value except by buying crypto and hoping it gets transferred out before reserves are depleted. They can't cash out actual fiat. So fiat prices on the failed exchange go up up up until the legit regulated exchanges eventually decouple and then the house of cards comes down.

Keep in mind people will try to take advantage of arbitrage situations so this process can take a while. Go back and research MTGOX.

Where would one start to research this?

Are there delays on Bitfinex transfers currently? And were people able to transfer out of MTGOX at all?

I had wondered if there were parallels in the runup, but haven’t heard widespread reports of people being able to transfer out yet. Or rather, more than the usual number of such reports, there are always some.

Can you convert those assets to Gemini's stablecoin, GUSD? Gemini is regulated as a trust company in New York State and has pass-through FDIC insurance. You should be able to sell GUSD on Gemini and wire transfer the proceeds out. Gemini claims no limits on the size of wire transfers. This is useful, because most other exchanges make large withdrawals difficult.

It's hard to convert USDT to GUSD. Coinbase does't list GUSD. Changely says they will do it for a 2% fee. Bequant has a market, but US$20,000 would wipe out their order book. Hotbit claims a deeper market but has a US$10,000/day withdrawal limit. Bitfinex has de-listed GUSD. Probably because it was too convenient a way to convert Tether to real US dollars. Gemini does not list USDT.

It's striking how difficult it is to convert large amounts of USDT to a hard currency.

What's stopping someone from doing USDT -> BTC -> USD?

Finding an BTC exchange that will reliably pay out millions of USD isn't easy. Although Gemini says no limits on wire transfers.

> The only thing I can't understand is why the price still pumps.

I know for a fact that there are private banks, the traditional ones (think Swiss banks), working on funds that'd let their HNWIs invest in crypto. We're talking about entry tickets to the tune of 1 million EUR minimum. It's not private/confidential infos: it's information some private banks are relaying to their very wealthy clients.

There are a lot of people who want to get in but have zero clue as to how to do that: now their traditional banks are going to let them do that.

There are simply people out there who want to buy.

And crypto manipulators are trying to spin the recent price increase as positive news with absolutely no regard to how a similar price ramp up happened on MTGOX before it went down completely from insolvency. Has Bitfinex pricing decoupled from the prices on legit exchanges yet?

No, no decoupling.

I wondered if the runup was like MTGOX. It’s plausible, but if so then someone is providing the dollars for everyone selling into USD on Coinbase etc. Whereas MTGOX’s prices were all self referential right? By the time it started freezing up

One other possibility is that Tether is playing the CME futures and making money from the pump up. I suspect they’re insolvent but it’s possible they aren’t and are merely crooks. The crypto markets interface with real money now

MTGOX was essentially one large bug bounty for any hacker that had the means and ways of collecting the jackpot. Once the bug bounty was several million dollars…

Tether's collapse will be to Mt. Gox what Little Boy was to a firecracker.

I’m not so sure it will collapse (now), this settlement adds legal clarity. The CFTC has set their parameters in the settlement and will enforce compliance, BitFinex/Tether paid a fine. Tether will be stronger through greater reserve and investment grade requirements, and more transparent.

Nah it certainly doesn't. This only covers up to February 2018. At the time they only had $2B in issued USDT, and of course, they remain under investigation by the DOJ and SEC.

Fair enough, I guess there are other battles still at play. Let’s see where this goes :-)

Every day is a fresh adventure haha.

Open question: Has this been priced in by the market?

Everything has always been priced in by the market

Of course "the market" is people, and algorithms watching what the people and other algorithms do, so is not immune from excessive optimism or pessimism, as the stock market should demonstrate

One would assume so. Interesting to see the price rise in advance of the announcement. Maybe this punishment was seen as less severe than it could have been?

I think the price rise in advance of the annoucement may have more to do with the approval of bitcoin ETFs, there are some news about that..

The price rise was a Tether-fueled pump. Someone poured $1b of stablecoins into a single purchase to pump the price.

You mean someone gave 1 billion of tether to buy bitcoin?

It's not remotely priced in.

The BTC price is currently held up by USDT inflows, rather than USD. Tether issuance notifications are the most reliable leading indicator in crypto: they are all you need to trade BTC.

Most people in crypto aren't even aware of the problem. Most of the ones that are, refuse to accept the situation and get very emotional when it's brought up.

If Tether went to zero today, what would the true price of BTC be?

It's very difficult to say because the waterfall of cascading liquidations would shut down exchanges. It would take quite a while for things to settle down enough for a real fiat market to exist. The whole market is propped up by stacked leverage.

Given that it's being issued specifically to manipulate the market (it's not just a 'whale'), and the fact it's involved in 70% of crypto trades, I can't see a way to put a floor on it.

Neat where do you track Tether issuance notifications?

The canonical method would be to call the `totalSupply()` method on Tether's ERC20 contract.

Twitter bots are easiest, though they come and go. But you can see the issuing wallet here:

http://omniexplorer.info/lookupadd.aspx?address=3MbYQMMmSkC3...

Or visit Tether's site:

https://wallet.tether.to/transparency

You can answer this question yourself by comparing the borrowing rates of USDC, DAI, USDT, BUSD, and GUSD. You can learn more by plotting the interest rate basis point spread on a time-series line chart. If the borrow rate for USDT was 18%, the borrow rate for USDC was 6%, and the borrow rate for DAI was 4%, what would that tell you?

Can someone imagine a world where the fine for tether is sufficiently large , that they dont have a capacity to pay it, and thus, blowing up the entire thing ?

No, because Tether can issue it's own coins to pay for it.

Like trying to fine the US Government.

> No, because Tether can issue it's own coins to pay for it.

To a point, and that point is far larger than any of us imagined.

But the Titan / Titanium collapse shows that you can't print money forever (or in the case of Titan / Titanium: print money automatically). It only takes a small downturn to make everything go to crap.

They still have to pay the fine in dollars, though. If you fine Tether a trillion dollars, they'll need to find people willing to pay them one trillion dollars in exchange for newly-minted (and obviously unbacked) Tether.

If you fined Tether one quadrillion dollars, they could mint a quadrillion Tether but they definitely won't have a quadrillion dollars to hand over.

Also, if you can't pay a fine without dipping into your depositors' money you are insolvent by any reasonable definition.

That's like imagining a world where governments hold billionaires and CEOs accountable for their greed and crime and their tax evasion. In other words, a pipe dream.

The whole long blows up when enough people try to withdraw tether for dollars and they don’t have enough to cover. As long as that doesn’t happen it will be alive. Works just like a Ponzi Scheme or a run on a bank.

The takeaway: tether executives are explicitly engaging in dangerous and shady behavior, and you can't trust any statements made by them.

I have 2 questions about this. Is it ever legal for a company to hold assets in a personal account of an owner/employee? Karpeles did the same, didn't he? And if it's legal, how does the bank do due diligence on the source of wealth?

The other thing is, people say Mt gox collapsed, but it recovered. True, however the recovery was very slow and many people took a large hit. I understand if the Mt gox btc are still there, most can be made whole. Now people say btc can collapse just like Mt gox, but Mt gox collapsed because it was hacked, the btc themselves have been stolen. How would btc collapse if tether is stopped being used by exchanges? The people holding tether would simply not be paid whatever cryptocurrencies they bought with tether? I understand people just use it as a gateway and hold only for few seconds, right?

I am completely ignorant here.

I read an article not that long ago where a journalist was trying to figure out where Tether kept its money (if there was any).

The main characters seem to be distributed in different parts of the world and were not inclined to be interviewed.

This corporate entity seems to be highly convoluted, which means its hard to know what jurisdiction they fall under.

My question: How is Tether compelled to pay this? What happens if they do not?

Can they just terminate whatever US subsidieres there may be and keep operating the same?

Do they need a corporate component in the US, if so why?

> I read an article not that long ago where a journalist was trying to figure out where Tether kept its money (if there was any).

I think that you might be referring to this one [1] from Bloomberg on Oct 7: Anyone Seen Tether’s Billions?

It generated plenty of discussion on HN [2].

I mention it here because I enjoyed the article and the style in which it was written, if you don't mind a little snide humour in discussing a potentially serious problem. (The article was also archived [3].)

Bloomberg commentator Matt Levine discussed the article in his Money Stuff column of the same day, Looking for Tether's Money [4]; it provides background and explanation of the mechanics of Tether, which I found to be educational. (That column was also archived [5].)

[1] https://www.bloomberg.com/news/features/2021-10-07/crypto-my...

[2] https://news.ycombinator.com/item?id=28784745

[3] https://archive.is/LdRL6

[4] https://www.bloomberg.com/opinion/articles/2021-10-07/matt-l...

[5] https://archive.is/cQVJl

If someone knew for sure that USDT is not backed by USD, and is going to crumble, she could go ahead and short the USDT/USD trading pair. Easy money! Yet somehow the USDT/USD trades at 1.000 in a free market. Don't believe the fluff, believe the money.

> Totaling $42.5M

Which is essentially peanuts for the folks being Tether who will chalk it up to "cost of doing business".

How do people come up with theses "punitive" numbers?

I'm really disappointed that the EU hasn't launched an investigation yet ( at least, not that I heard)

Should have been done 5 years ago.

No regulator or government official wants to see Tether destroyed, so they have to act all shocked and surprised before moving on to the next Facebook Privacy scandal.

Reply on news.ycombinator.com