I think one of the reasons it's allowed to go on is that a lot of exchanges are in on it.
This passage on tether's website specifically:
>tether is always 100% backed by reserves which include other assets and receivables from loans made by Tether to third parties
makes it sound like if you are an exchange, you can ask for a billion dollars of tether and give back an IOU written on a napkin saying you pinky promise you owe them that billion. So tether gives out free cash to anyone who asks and in exchange can print fake money of their own and sell it on bitfinex.
