Yes, the NY investigation was all about this: they patched up the loss and quietly changed their terms to being backed by cash or equivalents.

And they later detailed the $1bn Tether printed for Celcius in return for collateral (once Celcius collapsed and they claimed it was fully repaid).

Understand: for modern banks this kind of fractional behaviour is considered normal. It's only from the weird Bitcoin perspective that full reserve would be a requirement.