Federal investigators probe Tether
46 comments
·October 25, 2024100k
Zeke Faux's Number Go Up (https://www.amazon.com/Number-Go-Up-Cryptos-Staggering/dp/05...) started as an investigation into Tether. He found some extremely suspect clues, but he wasn't able to crack it. Hopefully the feds are able to shed some light on it.
stogot
From what I’ve seen, they waited a couple years longer than they should have. I expect tether deleted evidence by now
satvikpendem
Ah, finally, will Tether get its day in the litigious sun? It's well known in cryptocurrency circles that their coin is not backed 1:1 to USD, similar to FTX, only that FTX crashed and this was found out the easy way. Cracking Tether will be much harder as they resist audits.
JumpCrisscross
> Cracking Tether will be much harder as they resist audits
If Tether is sanctioned, they can't hold most dollar-denominated assets. Certainly none of the safe or liquid ones. Figuring out why it failed may take some digging. But causing it to fail is trivial.
yieldcrv
> It's well known in cryptocurrency circles that their coin is not backed 1:1 to USD
Its well known in the legal space and has already been addressed by multiple US courts. They're not looking for that and this isn't controversial.
Those court cases already happened in 2018-2020. Tether just needed to update its language. A financial institution not backed 1:1 to USD isn't a problem in any part of the banking sector, they just need a disclaimer that says that, and Tether updated their's and moved on. Those court cases were also about specific periods of time and were very intelligent and more nuanced than the Tether discourse in crypto spaces. Tether has periodically had more assets available, and its only controversy was about whether those were USD and US Treasuries amongst other things.
This is a probe about violating AML laws and sanctions. Which would likely only involve specific addresses in crypto and some onramps. But otherwise crypto-crypto trading won't be a part of this.
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alchemist1e9
> It's well known in cryptocurrency circles that their coin is not backed 1:1 to USD, similar to FTX, only that FTX crashed and this was found out the easy way.
Being speculated about is not the same as “known”. In fact every tether investigation seems to end up showing they are even over capitalize and hold more than 1:1!
My understanding of the audit situation was that the big accounting firms have refused to do it, presumably due to pressure from someone to not get involved.
JumpCrisscross
> every tether investigation seems to end up showing they are even over capitalize and hold more than 1:1
The one adversarial investigation I know of found the opposite [1].
> presumably due to pressure from someone to not get involved
Not how audit works.
[1] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
jujube3
It would be very simple for Tether to just hold $1 for each 1 Tether coin. They could invest their cash in safe assets like treasury bills that yield 4% or more. Meanwhile, they pay no interest in Tethers. So they get a 4% return for doing nothing at all.
As far as I know, there is no evidence that they are doing anything else. (There is some evidence that they did something else in the past, when interest rates were way lower.) But this hasn't stopped tons of people from speculating that they are.
from-nibly
If it was that easy then we'd probably see more banks that do just that.
cool_dude85
Can you link one of these investigations that show that tether is backed more than 1:1 with the USD?
alchemist1e9
I will try to find it. I would also point out they hold excess reserves in Bitcoin.
My guess is nobody can get them on not being 1:1 but this idea of AML violations as the attack vector makes a lot of sense.
BLKNSLVR
Good timing, along with the election. Going by history there's the likelihood of a ~20% dip in the BTC price before it takes a couple of big steps up in the last few months of the bull run part of the 4-year cycle.
If it happens, accumulate.
JumpCrisscross
Tether was launched in 2014 [1]. It has over $120bn in outstanding liabilities against unknown assets [2]. When it fails, it will rival the fourth-largest 'bank' failure in U.S. history [3].
This has been a complete failure of U.S. regulatory bodies.
[1] https://www.investopedia.com/terms/t/tether-usdt.asp
[2] https://coinmarketcap.com/currencies/tether/
[3] https://en.wikipedia.org/wiki/List_of_largest_bank_failures_...
TheAlchemist
Exactly - a massive failure of regulatory bodies. I wonder why. It was similar with Madoff - there were people literally sending documents showing it's a fraud, and they did nothing for years.
I don't follow crypto lately, but it seems that Tether is printing money in high interest rate period.
But back before that, it was a complete joke - it was so apparent that they published only made up numbers that didn't really add up, pretended to get legitimate transfers of billions of $ on Sundays etc.
They were investigated once by a US A.G. and found out to have lied on the reserves in the past, but nothing really serious happened. They got a fine and were forced to published a pseudo balance sheet, which was a joke (still a bit better than FTX's Excel spreadsheet).
llamaimperative
> Exactly - a massive failure of regulatory bodies. I wonder why. It was similar with Madoff - there were people literally sending documents showing it's a fraud, and they did nothing for years.
For this to mean much (unfortunately), we have to know how many legitimate companies are being constantly reported as fraudulent. Similar to the FBI's flawless "they were on our radar" after every mass shooting event... if everyone is on the radar then it's not that informative that this person was too.
Madoff's returns were so egregious that they definitely should've been looked into despite any of this^ though. Arguably Tether should be looked into if only because of the systemic risk it (allegedly?) produces for the crypto universe more broadly. But then again... no one seems to eager to spend a bunch of investigative resources to bail out an economy of anti-government gamblers/degenerates.
HWR_14
Aren't you comparing the wrong values. Those banks that failed had more assets than tether has liabilities.
However, the actual difference between assets and liabilities was significantly less than 120bn for those banks. With Tether, I imagine the collapse will go from 1:1 redemptions day 1 to "oops all gone" day 2.
So I expect Tether to be the largest "bank" failure in US history by terms of loss of value.
SheinhardtWigCo
It really is just a bank without any of the regulatory safeguards. A disastrous outcome is inevitable.
JumpCrisscross
> really is just a bank without any of the regulatory safeguards
A "bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans" [1]. Tether doesn't offer demand deposits--withdrawals are subject to a minimum and fee [2]. It's thus not a bank, but a bank-like shadow bank [3].
[1] https://en.wikipedia.org/wiki/Bank
pessimizer
Both presidential candidates have signaled that they are pro-crypto scams (and one thinks that has something to do with the welfare of black men.) It's too late. Bitcoin has entered the house price zone, where people are elected to office on promises to make housing as expensive as possible. We'll have to wait until crypto brings down the entire economy. And after it does, the people who hold it will be bailed out:
"Do you know how many disadvantaged minorities are invested in crypto? Especially after we allowed them to invest their social security into it, with matching contributions from the state if they agree to hodl? Are you a racist monster?"
Meanwhile 90% of black people will have 90% of their savings in crypto, accounting for less than 2% of all crypto holdings.
FTX so far was barely a speedbump. All it taught politicians is that there's a lot of money in doing what crypto whales say, and absolutely no consequences even if it goes belly up in the worst way.
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daft_pink
deleted. I have to figure out the exact agency and repost sorry. I thought it was the sec, but I am wrong.
JumpCrisscross
> Tether effectively evaded future SEC oversight by withdrawing from the U.S. market and operating outside U.S. jurisdiction
U.S. "jurisdiction is triggered when a payment in U.S. dollars [takes] place and the U.S. financial system [is] used" [1].
EDIT: Tether withdrew from New York State's jurisdiction as part of its settlement with the New York AG [2], not to be confused with the U.S. attorney based in Manhattan.
[1] https://www.ziv.unibe.ch/unibe/portal/fak_rechtwis/c_dep_pri...
[2] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
ldjkfkdsjnv
How bitcoin got huge was basically tether money printing. since it wasnt backed by anything, they just printed tether and bought bitcoin. a group did it behind the scenes, got massively wealthy.
FireBeyond
And at stupid numbers that cryptofans just ate up like it was perfectly logical.
"Oh, you're banking $700M PER DAY in deposits for Tether? Sounds legit to me!"
wmf
I don't know why, but the one thing cryptobros fear is OFAC. They shrug off fraud, securities violations, and money laundering but when sanctions are mentioned people start running away. We saw this with Tornado Cash and hopefully Tether will get OFACed next.
BTW, Tether probably is backed 1:1 or better because they bought $XXB of US treasury bonds at >4% which return billions in profit per year. BTC is also (currently) near all time highs. Whatever hole they had was probably filled in.
charliebwrites
My unsubstantiated conspiracy theory on this is that not only is Tether not backed 1:1 USD > USDT but that they are so disproportionately not backed that they basically printed money during the peak of the pandemic, causing real measurable inflation in the crypto markets
https://www.msn.com/en-us/money/markets/federal-investigator... has the article