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0 pointsJasper_8y ago0 comments

Who gave them all that USD? Where are they keeping it? They've been shunned by their US banking partners. They've basically been printing Tethers 50m at a time. The only thing they've released which attempted to show that they actually had the USD was something they called an "audit" which explicitly said "this is not an audit" [0] on the second page.

When you go to withdraw from Tethers it basically says "if you don't have more than $50k in claims, go away" [1]. Suffice it to say that most of their customers don't have that.

My guess is that Bitfinex, through a combination of wash trading and Tethers, have been pushing up the price of Bitcoin and they've basically been running a Ponzi scheme.

[0] https://tether.to/wp-content/uploads/2017/09/Final-Tether-Co... -- "This engagement does not comtemplate tests of accounting records or the performance of other procedures performed in an audit or attest engagement"

[1] https://cdn-images-1.medium.com/max/800/1*7BOwdYvUycjNFdUB2e...

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SilasX8y ago

I’m still wrapping my bed around the concept of Tethers, but I don’t see [1] as problematic. That’s the same way that ETFs work — they ensure value parity by guaranteeing that you can redeem blocks of them for the corresponding assets. But to ensure the ETF shares aren’t all redeemed this way, they limit it to large blocks of shares. That way, smaller investors can still sell their (smaller blocks of) ETF shares for dollars at par, since any divergence would be an arbitrage opportunity that a bigger trader can exploit.

The requirement to redeem in large blocks doesn’t change that logic, and still ensures that the smaller trades happen at par.

Jasper_OP8y ago

I agree it's not problematic by itself, but together with the other allegations (including plenty I haven't listed) and it starts to paint a picture that they do not have USD to back up every single one of their Tethers.

askmike8y ago

> When you go to withdraw from Tethers it basically says "if you don't have more than $50k in claims, go away" [1]. Suffice it to say that most of their customers don't have that.

This is not how most people redeem tether, they go to any of a wide range of exchanges (kraken, poloniex, bittrex, etc) and trade whatever amount (from a dollar or whatever the minimum trade amount is).

PKop8y ago

Do you not see that inability to redeem for Dollars (AND the fact that most people aren't doing this but rather pumping these so-called-$-backed-tokens into other cryptos) could potentially be catastrophic if they were created without organic investment? They would literally be fake money priced at $1 buying $1 of BTC.

It is the definition of inflation: increased money supply. Except it's priced in $, which hasn't actually inflated. So if the bubble pops and the money is found to be fraudulent, then it equates to money supply shrinking. Artificial demand removed..

Jasper_OP8y ago

How does that prove that Tethers has USD to back each USDT? If it's all exchange-based then there's no guarantee of a peg to USD.

askmike8y ago

I 100% agree with you how risky it is and how hard to prove this is for bfx. It's very dangerous and there is a lot of money on the line (not just the tethers themselves, USDT reaches for and beyond bfx).

However I don't think it's obvious that this thing will implode, based on the information we have we can only speculate. Pointing to screenshots about being unable to withtdraw tethers is a red herring and has nothing to do with whether tether will implode.

Jasper_OP8y ago

It's not hard at all. There's a few, very basic things that would change my tone:

1) Let users exchange USDT for USD no matter the denomination or status. If they can't do that, remove the thing that says "You always have 24/7 access to our balance" from the website marketing.

2) Release an official audit (that doesn't say "this is not an audit")

3) Explain the large amounts of Tethers being minted. If they are legitimate, who is pumping $100m into Tethers almost every 3 days? No need to be specific, but records would be nice.

4) Tell us who their banking partners are that are holding the USD.

5) Put their transparency page back up [0]. Bonus points if they actually keep the "Shareholder Equity" number negative in the interest of transparency, or explain why it might have gone negative.

[0] Compare: https://archive.is/6os3c https://wallet.tether.to/transparency

The fact that they haven't done any of these heavily imply to me that Bitfinex and Tethers are a sham operation.

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SilasX8y ago

The requirement to redeem in large blocks doesn’t change that logic, and still ensures that the smaller trades happen at par.

Jasper_OP8y ago

askmike8y ago

> When you go to withdraw from Tethers it basically says "if you don't have more than $50k in claims, go away" [1]. Suffice it to say that most of their customers don't have that.

PKop8y ago

Jasper_OP8y ago

How does that prove that Tethers has USD to back each USDT? If it's all exchange-based then there's no guarantee of a peg to USD.

askmike8y ago

Jasper_OP8y ago

It's not hard at all. There's a few, very basic things that would change my tone:

1) Let users exchange USDT for USD no matter the denomination or status. If they can't do that, remove the thing that says "You always have 24/7 access to our balance" from the website marketing.

2) Release an official audit (that doesn't say "this is not an audit")

3) Explain the large amounts of Tethers being minted. If they are legitimate, who is pumping $100m into Tethers almost every 3 days? No need to be specific, but records would be nice.

4) Tell us who their banking partners are that are holding the USD.

5) Put their transparency page back up [0]. Bonus points if they actually keep the "Shareholder Equity" number negative in the interest of transparency, or explain why it might have gone negative.

[0] Compare: https://archive.is/6os3c https://wallet.tether.to/transparency

The fact that they haven't done any of these heavily imply to me that Bitfinex and Tethers are a sham operation.

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