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Comment by tcgv | Hacker News Reader

I wonder why this Reaserch firm is offering such a substantial bounty for information on Tether. What's in it for them? Where will this money come from?

From their site they provide an answer (and even a "track record") [1]:

> We look for (...) man-made disasters floating around in the market and aim to shed light on them before they lure in more unsuspecting victims.

Hence it seems they're doing it for the bennefit of the public. So much for the expression "there's no such thing as a free lunch".

[1] https://hindenburgresearch.com/about-us/

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Presumably they would like to start a position by don't have sufficient information, and are attempting to buy that information.

Hidenburg is a short seller who takes positions in their research. See for instance their short of Nikola. While I'm sure they enjoy being helpful and that there's a reason they choose to engage in a very difficult way to earn a living, when there are easier opportunities available, their motives are hardly a mystery.

You can discount all their talk of helpfulness or assume they're just talking their book, and it doesn't really change anything.

Just because someone has something to gain, doesn't mean that their actions are corrupt.

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages” -Adam Smith

https://www.goodreads.com/quotes/68664-it-is-not-from-the-be...

It's marketing.

When Hindenburg publishes equity research, the disclosure is "you should assume that as of the publication date of any short-biased report or letter, Hindenburg Research...has a short position in all stocks (and/or options of the stock) covered herein, and therefore stands to realize significant gains in the event that the price of any stock covered herein declines."

[1] https://hindenburgresearch.com/draftkings/

Precisely. It's too risky to actually short the crypto complex because if the Tether fraud is true, then they can pump it to $100k or $1m or whatever they want.

But if they contribute to the unwind of a fraud of this scale, they will go down as heroes.

If people aren't buying as much Bitcoin at $100k+ (I assume you are referring to Bitcoin), then what will cause it to go to $1m? I don't think they can have a guaranteed pump like you are saying.

If a fraudulent Fed is fabricating Tethers, and some people are buying it, the price is a ruinous fiction to a short. For shorts, delusions matter in a way that they don’t for ride-it-out longs.

There are firms that look for good opportunities to short stocks. Find some credible bad news, short the stock, then publicize the bad news.

If the news is actually true, this might even be considered a public service (as well as obviously a way to make money).

They probably wouldn’t do until they actually got a tip. Also, they might short crypto-related stocks if that’s easier.

This is how markets weed out the bad ones on their own, without relying on government.

Not really. Markets weed out unprofitable firms. Government doesn't really care about that. On the other side, government regulates firms that engage in some harmful (open to interpretation) practice, and markets don't care about that unless it makes them unprofitable.

I am curious about how that type of activity doesn't constitute insider trading? Presumably having "bad news" would constitute material nonpublic information?

Because they are not insiders

It might be insider trading in some countries, but it isn't in America. It's perfectly legal to trade on information you found out through your own research and didn't tell anybody about.

They do the equivalent of investigative journalism. Arguably everything they know is public, just no one has looked or put all the pieces together until they do a press release.

Simply trading on MNPI is not insider trading. You must have a fiduciary duty to protect said MNPI.

If I do some analysis and reveal some MNPI for myself, it's perfectly legal to trade on that since I do not have a fiduciary duty to any publicly traded firms.

Because it's not nonpublic information. It's public information that no one else had put together the pieces on, yet.

(Contrary to some of the other commenters, you don't have to be an insider yourself to run afoul of the law. If the information is not public and you got someone to leak it to you, for example. https://www.investor.gov/introduction-investing/investing-ba...)

Exactly. Did an oil company exec tell you that their sales are down before the earnings are released? That's insider trading. Did you hire a helicopter with a thermal camera to see how full their storage tanks are? That's perfectly legal.

so they can trade on it before announcing it and then with the profit pay for the bounty, assuming they pay up or assuming tether falls. Tether has survived thus far everything thrown at it. The market is evidently very confident about tether.

> The market is evidently very confident about tether.

I don't see how that's a valid conclusion to draw. I would say in this case the "market" is completely codependent on Tether, and therefore are willing to overlook red flags until forced to via damage to pricing or legalities.

> The market is evidently very confident about tether.

The market was very confident about Enron, WorldCom, Madoff, WireCard, Greensill, Theranos, WeWork, etc as well.

It's all good until it isn't.

https://www.reuters.com/world/china/hong-kong-audit-watchdog...

Presumably they short the shit out of Tether and related stablecoins before they release the information they get. It's certainly for their own gain.

As qeternity pointed out in a comment [1], you want your trade to play out in a dollar denominated, clearinghouse backed financial product. You don't bet against the house in their casino (crypto exchanges), such as shorting tether.

[1] https://news.ycombinator.com/item?id=28794377

(not investment advice, educational purposes only)

I would hazard they are planning to target the BTC Futures ETF that opened this morning.

You can have positions in Microstrategy and Coinbase.

If Tether tanks -- there are definitely decent proxies out there.

They are fishing for edge. If they get information that they feel will be able to quickly move markets, they'll initiate a large position before dropping the release to the public. That's how they make money.

They usually disclose that they hold short positions at the same time as publishing their reports.

If Tether unravels and brings down the whole cryptocurrency bubble, there are probably more indirect positions that are safer bets?

I wish they also published a list of things they were wrong about.

I agree, but "them and everyone else too..."

Pure speculation but I'd wager they have a position involving a 3rd party hedge fund etc with a sizable crypto position.

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