Comment by onlyrealcuzzo | Hacker News Reader

Comment by onlyrealcuzzo | Hacker News Reader

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The main thing people claim Tether does is:

1. pretend to have customers

2. pretend those customers have deposits

3. issue Tether to front those deposits

4. pump up their favorite coins with their newly minted Tethers

My first suspicion would be that FTX was more fraudulent to its investors than people claim.

It pretended to have a lot more customers & deposits than it actually did to pump up FTT, to get real money from investors looking for a real business rather than crypto BS.

Mainstream institutional money is gigantic, and it's mainly refusing to invest in coins. However, it's not afraid to invest in companies selling shovels to the gold rush.

You can get a lot more money by defrauding institutional money than you can by defrauding retail.

Is there hard evidence this isn't what happened?

All I see is that the records were so bad they have no idea who's owed what.

That seems like a really convenient way to cover up you didn't actually have customers in the first place and everything was a fraud.

It's actually much, much worse than that. Tether, by misrepresenting its reserves, essentially "prints" money by faking the peg. This was already done in the overnight lending markets by huge financial institutions abusing the fractional reserve system, but at least there's a tiny facade of regulation on that side.*

*https://press.uchicago.edu/ucp/books/book/chicago/M/bo224388...

What? How does Tether come into this? How is it related to FTX?

Tether is related to FTX in the sense it is also a fraud and will eventually collapse.

FTX was one of their biggest customers. I think they both used the same bank too

They both claim to be well capitalized, but have provided no proof that that capitalization isn't coming from market manipulation of coins they own.

For whatever it's worth (I have no skin in the crypto game, I just watch for the drama), Tether posts some third party audits around this, but who knows if that's trustworthy.

https://tether.to/en/transparency/#reports

It isn't an audit but a report. The difference is that a report just says "this person had $100 in their checking account on this date" an audit tells you where those funds came from and how long they have been in the account.

tether (aka USDT) and Bitfinex are part of the same iFinex group.

The Panamera papers revealed what everyone in the business knew: they're all exactly the same owners.

So tether/Bitfinex: one and the same.

Now how does FTX relates to tether? Bifinex's top lawyer happens, what a coincidence, to be an ex-colleague of FTX's top lawyer. But wait, it gets better: what does these two used to work together on? A poker server software that had a "god mode" where owners would see customers' cards and defraud them.

So these two lawyers were already working hand in hand on a previous fraud. And now at least one of them is caught, again, in a similar fraud (replace poker with crypto), where the money sent to these guys disappears in a black hole.

But it's just a coincidence right?

OK... What about this one: it's well known that the Bahamas bank at the center of the entire tether thing is Deltec/Delbank (they also have tens if not hundreds of companies).

Guess who SBF bought a bank in the US from? From the owner of Deltec.

So tether and FTX may be related in that they both frauds (at least one is proved to be a fraud now).

Or, if we listen to those who correctly explained SBF and FTX were scam from day one, before SBF was even in the news as the savior of the world, FTX and tether are one and the same fraud.

Tether is ultra shady but they may have counterfeited their way into solvency (buy cheap bitcoins, print fake usdt to pump bitcoins... The guys were already in this game back when Bitcoin was worth $200 or so IIRC). Especially if, by sheer luck, the trading arm of Bitfinex (Bitfinex has a company that is to Bitfinex what Alameda was to FTX) happens to be those on the winning side of the trade where FTX/Alameda lost billions.

For that's the thing: they "lost" billions and we're to believe it's retail who won big vs the billions FTX lost?

But I'd say it's unlikely anything substantial will be publicly disclosed. I only except lies and more lies from the very same media that were presenting SBF as an altruistic genius.

Tether has been around far far longer than FTX has. It has also been called a fraud for half or more of that time and it is still standing strong. FTX wasn’t publicly called a fraud, at least here on HN. The moment Coindesk published that FTX and Alameda were a house of cards, the house collapsed in 2 weeks more or less.

Tether has probably made a ton of money by lending newly minted tether at 1-6% annual interest to people pessimistic enough to short it unsuccessfully this whole time, ironically.

Sounds a lot like what banks do. They mostly lend out money they don't actually have, with the hope that the owners of the money they lend out don't notice.

The main difference is that banks enforce a low loan to value ratio and collateral. So a bank will give a 10k personal loan to someone who has 100k of stock and 500k of equity in their home. If that person doesn't pay back the loan the bank can sell some of that person's stock or put a lean on the person's house. With FTX no one was putting up collateral other than crypto.

In addition, banks don't precisely lend out "money they don't have." They lend out cash they don't have against outstanding loans that are rationally expected to be repaid. If those loans are bad and the bank conceals it, or if they misrepresent the amount of those loans, then that's fraud. (IANAL)

> expected to be repaid

In other words, they don't have the money. They just have an IOU, but that isn't money.

What I deposited into the bank, that's money. And it's my money, not theirs.

If you believe that IOUs by definition aren't valuable, then stay away from treasury bonds.

If you're just drawing some kind of distinction between valuable things that aren't money and valuable things that are money then ok. I don't understand the point, but ok.

> If you believe that IOUs by definition aren't valuable, then stay away from treasury bonds.

IOUs are like a lottery. Treasury bonds, OOM call options, they all aren't valuable on their own, there's just a chance I might win. In the case of treasury bonds, that chance is more like 99.99%, in the case of the call options, it might be 20%, but it's a spectrum, and never 100%.

At the end of the day, my landlord isn't going to take a treasury bond for my rent payment, and neither is my supermarket. IOUs are not the same as hard cash.

Money is literally an IOU.

Would you accept a handwritten IOU from me for your car or would you rather cash?

Hmm, I got a car loan from a credit union that didn't even ask for my assets, only my credit report.

Did the credit union ask any questions related to the value of the car? Because a car might be considered an asset.

It's a Tesla, and yes, they needed the entire MVPA.

It might be because I applied with a downpayment of 10K so they just shut up and gave me a super low interest rate.

I didn't actually need the loan, I just saw interest rate increases coming and figured I could save a few bucks by taking the loan and putting the balance of the value of the car in a CD or bond at higher interest a few months later, which I did.

A lot of what FTX did was indeed bank-like, the difference being that they avoided outright qualifying as a bank because of the associated regulations.

Incidentally, this was something they got in trouble for just a few months ago because they made it seem like they were covered by FDIC (like banks are required to be), but were not.

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