That is to say, exchanges like Binance are heavily dependent on USDT. Those are the only venues you as an individual have to exchange tethers for USD (of course this is not the same as a redemption which is solely at Tether's discretion). Why would the exchanges ever come to Tether for the cash knowing they weren't good for it when revealing the pantslessness of the emperor would take them down too?
It is my opinion that Tether succeeded in doing what the Luna Foundation Guard was trying to do - they made all the 'industry' players so dependent on their continued existence that anyone blowing the whistle would take out the whole space. This in turn makes sure nobody gets within a few hundred yards of a whistle.
Meanwhile, there was no talk on HN about Luna or FTX being a scam before they imploded.
In finance, when everybody "knows" something, it's 99% likely to be false. Because there is a lot of money to be made knowing actual facts in finance.
These things go on for a long time, often in plain sight, so if that's what is making you feel better about it, stop.
On the other hand the Tether folks signed off on the NYAG settlement where they admitted among other things that basically their entire bankroll was in Hoegner's personal Bank of Montreal account for a while, and that for many years the numbers didn't add up in the slightest. Here, give 'er a skim. [1] And when you're done with that there's always the CTFC settlement. [2]
To quote the CFTC settlement:
> In fact Tether reserves were not “fully-backed” the majority of the time. [2]
If this is a witch hunt we found ourselves a coven.
> Meanwhile, there was no talk on HN about Luna or FTX being a scam before they imploded.
Maybe not on HN but among the crypto skeptics, they called it outright far in advance. Everyone here was too busy 'making money' to listen.
> In finance, when everybody "knows" something, it's 99% likely to be false. Because there is a lot of money to be made knowing actual facts in finance.
I mean basically all the things that were alleged for years were admitted in [1] and [2]. You're confused, crypto isn't finance. Crypto is a mob casino.
There is no money to be made in a mob casino by knowing 'actual facts.' Not any more than there was at Ultimate Bet by knowing that people could see your cards while Hoegner was director of compliance at their parent entity. Unless you're the one looking at the cards that knowledge is purely entertainment value.
[1] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
Why did they stop at a fine? I don't know. Maybe there were jurisdictional issues, maybe the Feds were/are looking at it. Heck maybe they thought it would be better if the thing fell in on itself so they weren't viewed as the entity that took down crypto. I dont work at DoJ so I can't tell you. Doesn't change anything though.
On the other hand I've given you plenty of night-time reading where you can find the answers to basically every question you've asked me.
They... did. That was the suit that was settled.
Tether managed to come back from the brink of death (user loss of confidence) by co-mingling funds with Bitfinex and getting a third-party to provide an 'attestation' based on money they didn't actually have. This was only discovered years after the fact, and were it not for this deception they would have collapsed ages ago, much like FTX.
A lesson I've taken from the last few years is that consequences can take a very, very long time, but that doesn't mean their strategy is working even if the tactics seem to be succeeding in the short term.
There's a lot of analogs here.
It doesn't stop there: that lawyer at Bitfinex you mentioned was working back then at Excapsa with Dan Friedberg, the top lawyer at FTX.
And given the current interest rates, they could just be parking it all in short term US treasuries, and slowly fixing the issue. If they play their cards right, they can migrate to something that is both fully backed, and highly profitable.
IE, if 50% of the principal was spent on crypto gambling and Tether lost ~80% of it (so they lost 40% of the total principal), and the other 50% was put in safe assets and they got 20% of that (10% of the principal), they'd be down to 70% of the principal. But they're only going to be insolvent if people try to cash out 70% of the Tether in circulation at once. And like you said, just putting that into fairly safe investments is going to undo a lot of the damage. Heck, even just getting the returns an online savings account is giving now would have them make back the principal in about a decade.
Which isn't to say they won't fall apart. But I think a lot of people go to far assuming that their collapse is inevitable.
Now, a big depeg is indeed an opportunity for them to make billions within minutes.
https://www.yahoo.com/video/stablecoin-issuer-tether-ordered...
> The New York Attorney General’s probe into Tether’s reserves concluded in February 2021 with an $18.5 million settlement.
I don’t hold any tether, and I wouldn’t recommend it to others. But the common opinion that Tether is insolvent might be wrong. Tether, as a stable business, is a money printing machine. I’m not sure it’d be worth risking the business and jail time to pump shitcoins.
I encourage you to watch Coffeezilla's video about Tether. There's lots of shady stuff going on behind the scenes, like them borrowing $383M from Bitfinex and showing that to an auditor to prove they were solvent (~20:00).
Coffeezilla says that Tether doesn't need to honor your redemption by point to the TOS. The TOS that he shows in the video says that Tether reserves the right to delay the redemption and pay it in-kind securities held by Tether. So if Tether is holding a bond, they reserve the right to give you that bond instead of selling the bond and giving you the proceeds. That's very different than his claim that Tether doesn't need to honor the redemption.
His discussion about whether or not it was transparent that Bitfinex and Tether were owned by the same people. He plays sound clips that sound a little misleading: Phil Potter is prompted with "Tether is Bitfinex, right?" To which Phil Potter responds: "No, it's not." Is that really misleading. If someone asked Elon Musk, Twitter is SpaceX, right? Wouldn't the answer be no, even though they're owned by the same people? All the sound clips are less than 10 seconds longs, so it's really hard to understand everything in context.
The leadership team of Tether does seem a little sketch.
The part about Tether lending Bitfinex money to stay solvent while Bitfinex's money was held by the state pending investigation of their bank was sketchy, but technically the currency would still be backed by the loan, assuming Bitfinex can get their money back, which seems likely given that they weren't a party in the investigation holding up the money.
I think the bottom line is that you have to trust the Tether team to handle the money wisely. Usually, you can't trust people to do that so using Tether is extremely risky. As for the video, I won't say it's wrong, but it certainly picked the least charitable interpretation of events and also cherry-picked sound-bites, which is kind of a misleading tactic to use that helps suit a narrative.
That is a phenomenal amount of risk free income. That's putting the founders somewhere high, probably first 50 names high, on the Forbes 400 list.
That seems foolish to risk to commit crimes.
But what many believe is that tether received crypto from the big exchanges and put it in crypto stuff that yields more crypto, so the billions of circulating tether is not backed by billions of Treasury bills or Chinese real estate: they are for a significant part backed by various tokens which have probably gone to zero since.
So why would people use Tether as opposed to Coinbase's stablecoin?
So why don't they do that now? Why are the crypto prices at two years low?
This is the age old ZeroHedge conspiracy recycled - if the stock market goes up, it's because of WOPRs (their name for HFT algos) and the Fed plunge-protection-team, but if it goes down it's because of healthy market forces which are calling the Feds bluff.
They used to, for several years, until they were pressured to prove it and could not (27:05).
They were also investigated and found guilty by the New York Attorney General, and were subsequently banned from activity in New York and fined 18.5M.
> Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines,” said Attorney General James. “Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie.
https://ag.ny.gov/press-release/2021/attorney-general-james-...
[1]: https://www.ft.com/content/23ab2258-ce03-4fbb-a9b2-7d9ec6e3d...
What? That's such a bizarre idea.
Do you think the lawyers go "thank god this man plays Starcraft, so he understands the need to have a strategy in court!"