My conspiracy theory is that USDT is actually well backed, but the Tether people intentionally make it look shady so they can buy the dip and arbitrage against panic selling. Some volatility would actually increase their ability to profit.
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.
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.
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.
Now, a big depeg is indeed an opportunity for them to make billions within minutes.