Tether ordered to produce documents showing backing of USDT [pdf]
storage.courtlistener.com
storage.courtlistener.com
...In the absence of agreement between the parties (id., Ex. 1 at 5
("Plaintiffs remain open to considering an alternate proposal ... but
cannot do without some indications of what the B/T Defendants intend to
produce[.]")), the Court finds that Plaintiffs' financial records RFPs
are not overly broad, particularly given that Defendants have had
opportunities to make sample productions of the financial records RFPs,
but have failed to do so despite Plaintiffs' agreement to such proposal
(id., Ex. 1 at 5). Plaintiffs plainly explain why they need this
information: to assess the backing of USDT with US dollars, and to
allow a forensic accountant to assess the USDT reserve...
The documents sought in the transactions RFPs appear to go to one of
Plaintiffs' core allegations: that the B/T Defendants engaged in
cyptocommodities transactions using unbacked USDT, and that those
transactions "were strategically timed to inflate the market."...
Accordingly, the Court ORDERS the B/T Defendants to produce documents in
line with the revised RFPs 22-25, 29, 31, and 72Judges don't have to care about formatting and headers. Each judge generally gets to write their own rules for how they want lawyers to format filings in their cases.
[1] Or at least I often see them when browsing through cases as an interested layperson and I've heard lawyers discussing doing it in a tone that suggests it's the norm.
But no, each judge generally does NOT get to write their own rules of formatting. Districts (at the federal level) go to great lengths to ensure that things are uniform in that jurisdiction, for the ease of the clerk's office. Someone looking at this PDF would likely not immediately know it was an order. State courts are even more uniform, with statewide rules on typeface, font size, margin width, whether something must or can be included in a single document or broken out into a separate filing, number of lines of empty space at the top of a page, etc etc
But this was very much not that. A proposed order would match what was being argued in the attached brief, and this did pretty much the exact opposite, rejecting the arguments in the attached letter.
Not saying there's anything improper about it, but it looks really bizarre to me. Why the judge didn't have one of her clerks slap it into a Word document with a short caption and file that on ECF is totally beyond me. And as a matter of style, it seems amateurish and haphazard.
And definitely was never the case if that chain of assets had the same par value.
E.g. a 100% dollar-backed worth $1000 can never be backed by $1000 of B-rated mortgages. It would have been e.g. $2000 of B-rated mortgages. Obviously, this still had a massive flaw as we saw.
The point still stands though that USDT's profits are probably all based on it's float, so they want to go as risky as possible to generate more profits. They get all the upside of high-yield assets, and not the downside.
The problem in 2008 is correlated risk — basically, the difference between rolling once per mortgage (uncorrelated defaults) or just once that impacts all the mortgages (correlated defaults). Creating a “more secure” investment out of nominally more “less secure” for investments depends on the risk being uncorrelated, ie every risky investment is a separate roll.
But as we saw in 2008, many people may default at once if the economy becomes unhealthy.
-JUST- on the housing side you had Inflated assessments (A lot of places got in trouble for this in the aftermath,) a tendency to do ARMs and being unprepared for an interest spike, NINJA loans, and the general expectation by too many people (both securities handlers and homeowners) about correlated vs individual risk.
On the homeowner side, correlated risk and the subsequent drop in their home's value resulted in a good number of defaults, leading to a second drop in values (lest we forget the 'goodbye parties' some of these people threw in their temper tantrums on defaulting, a coworker of mine was able to buy one of those on the cheap but it needed a lot of repairs.)
We cannot forget however that general the whole populace, both citizen and corporation, were drunk on 'cheap' credit. (Which is my biggest concern about our current situation, I think some people still are.) When they were unable to refinance existing debt on terms as good as before, or rates on other lines of credit went up, it became harder to service said debt.
I can think of at least two cases where 'expansion' efforts in the age of cheap credit (In one case it was expanding a chain, in another it was launching a new line of business,) led to death spirals of the companies in question.
It was ignoring solvency != liquidity. Most of the structured mortgage products paid out fine. You really can skim cream off crap through payment prioritisation. But that was not clear ex ante. If you’re leveraged or in dire straits, that a security will pay as promised over the coming decade is little comfort when it’s going at a dime on the dollar.
For the posterity of this thread American banks are no longer required to hold any reserve requirements at all[1].
Though I guess that is a "different" issue depending on who you ask here.
Ask yourself this - can everyone in the country take their money out at the same time
For these shitty stablecoins: nearly everyone
For the actual money you use everyday: Maybe 2-3% of people can cash out of the system properly.
A system built on trust works until it doesn't.
[1] https://www.federalreserve.gov/monetarypolicy/reservereq.htm
They simply do not have your money nor could they realistically insure every persons savings if their was bankruns, it's a system built upon nothing more than trust. When that trust dwindled in recent times, they brought in FDIC to create more trust out of thin air.
Stablecoins don't offer that. They have their own stabilizing mechanism where in a crisis, the peg collapses so quickly that it's not even worth trying to take any out after considering peak traffic tx fees.
Glorious.
The FDIC has a track record of payouts and they keep meticulous of every bank they insure, going back to the program inception in 1933.
Which, I believe is correct and also about as stabilizing as a deadman’s switch on an explosive vest held by an gorilla. Which, hey, gorillas are pretty smart, if they know they aren’t supposed to let go, they’ll try. But it’s not a good idea to spend much time in their vicinity in such a situation.
I’d assumed it was an attempt at dry humor, straight man/ad-absurdism style, which I appreciated.
That is misleading. Banks are no longer required to hold a certain fraction of their deposits in their bank account at a Federal Reserve bank--that's the reserve requirement that was reduced to 0%. Keep in mind that only money in the bank account qualifies as reserves that requirement; a literal pile of dollar bills would contribute not one cent.
Instead, banks are required to keep on hand sufficient equity for a percentage of their risk-weighted assets--money that, if the assets go to 0, can be raided to make up the losses. The requirement here starts at I believe 8%, and increases if you're a more important bank.
(If I'm computing it correctly, Tether has disclosed a capital ratio of approximately 0%, FWIW. Were Tether actually held to the same standards as a bank, Tether would be considered dangerously undercapitalized if not outright insolvent.)
Define "sufficient", give it an actual number...
> Tether has disclosed a capital ratio of approximately 0%
NYAG accounted for 90% of their assets with that big case last year didn't they?
Banks do have strict Capital requirements.
The "reserve" requirement going to zero is different.
Tether was originally 100% ‘backed’ and after more and more pressure, they literally did that exact same thing with the percent that was backed in USD.
“It’s 100%. Okay, it’s absolutely backed by 99% usd. JK, 96! I think they are at like 74% now publicly backed by USD?
There's a chance that Tether has been pumping BTC.
Which probably means it's Chinese dollar-denominated debt, perhaps stuff like Evergrande bonds that you could get for $0.05 on the dollar. So, it is "backed", perhaps, in that there are dollar denominated assets.
But, functionally, it's probably not backed in a way that does anyone any good. So your basic point is correct. At some point, people rush for the exits, and when they do, BTC may collapse with it.
He has been telling me to go nowhere near it for the last 5 years and I have not.
Ex-employee, whistleblower, service dependency, . . .
With billions at stake, there are highly motivated players. Similar to paying for dirt on mudge: https://news.ycombinator.com/item?id=32823548
It is a traditional ponzi scheme but with an additional layer that makes it far more resistant. It's essentially the same thing as government central banking but for crypto and without the threat of violence to control valuations.
Would you accept the lowest rated Chinese junk bonds instead?
Asking for a friend…
It’s hard to accumulate $100bn Treasuries without the dealers noticing.
- U.S. Treasury Bills: $28,856,434,491
- Commercial Paper and Certificates of Deposit: $8,402,426,505
- Money Market Funds: $6,810,253,431
- Cash & Bank Deposits: $5,418,232,067
- Reverse Repurchase Agreements: $2,992,015,954
- Non-U.S. Treasury Bills: $397,150,678
- Corporate Bonds, Funds & Precious Metals: $3,486,896,735
- Other Investments: $5,551,836,303
- Secured Loans: $4,494,373,260
- Total: $66,409,619,424
[1] https://assets.ctfassets.net/vyse88cgwfbl/2xJyKdUKicdRUWpC9b...
Also Terra was the algorithmically pegged stablecoin to Luna (not Tether in case that was the confusion)
This is not true: https://trading.bitfinex.com/t/UST:USD
https://i.imgur.com/FQbszHZ.png
A quick eyeball has January to July 2018 where a Tether was worth less than $1.
EDIT: Screenshot https://www.tradingview.com/x/I92ccibV/
As long as Tether has some liquidity, things will keep operating as normal. However, if the amount of money withdrawn is greater then the amount deposited, eventually Tether's reserves will dry up. Once that happens, anyone with outstanding USDT will be stuck with a worthless asset. Only Tether knows how close we are to that point, and they aren't saying.
I think Market Cap = (value per asset) * (total # of assets in the market). So the Market Cap of USDT SHOULD BE roughly equal to the number of Tethers on the market (assuming the price of a single Tether is stable, which isn't a bad assumption right now).
Since "every Tether is backed 1:1 by USD" and Tether is (more-or-less) pegged 1:1 to USD, if you see the market cap drop by a significant margin, it's likely that the drop was an outflow to currency. If we check the Luna crash event (~early May - ~early June 2022), we can see that USDT lost ~18B in market cap over that period. So (I think) we can assume that there was (roughly) 18B of dollar outflow over that period.
If any of my statements here are incorrect, please correct me. I'm a software engineer, not a finance artist or an MBA, and the last business class I took was summer school in High School in like 2006.
Couldn’t Tether burn tokens it holds on its own or affiliates’ books to create that impression?
I don't know of any way to find how much USDT is held by the issuer of Tether (or their coparties) and how much is held by other wallets at any given time. I suspect that calculation would require a significantly greater knowledge of the blockchains that USDT is on than what I have.
Tether does not make this claim, I'm not sure why you put it in quotes
If your point is that there isn’t infinite liquidity at the current market price for an equity or bond, you’re correct, but it’s irrelevant since tether is nothing like an equity or bond.
Heck, to generalize on this, this is kind of the ur-problem with crypto generally: a bunch of things pretending to be currencies but are actually securities. The whole subterfuge is intentional, to foist risky assets on people by lying about their nature, and to avoid the (hard fought and hard justified) regulations around said risky assets.
If you say that one of something is worth one of the other, you are promising that you have a bottomless supply of the currency on both sides of the peg. This almost never actually happens and whoever is running the peg will inevitably be caught with their pants down. Bankers specifically love breaking pegs and have the means to do so.
If USDT was run by the Federal Reserve nobody would question the system; because then they'd have the capability to issue both the USDT token and the dollars backing it. They would be considered as fungible as dollars in the bank versus dollars in your hand.
that's true, but only because the US (and the Feds) have had a good history of managing the system well (enough at least).
And if that's the case, USDT is basically USD. It's the same reason why the USD is a reserve currency in the world today.
Tether is attempting to tap into that reserve currency trust (ostensibly, to generate profit for themselves).
Meh, plenty of currencies—from the Emirati dirham to the Hong Kong dollar—are pegged [1]. International investors would just shit bricks if any of them dared the lack of transparency Tether pulls on crypto users.
[1] https://www.investopedia.com/articles/forex/061015/top-excha...
You're also buying a commitment from the Hong Kong Monetary Authority (HKMA) to convert between Hong Kong and U.S. dollars at fixed exchange rates [1]. That promise is backed by the HKMA's reserves [2]. Tether closely resembles a pegged currency, albeit a banana republic's.
[1] https://www.hkma.gov.hk/eng/key-functions/money/linked-excha...
[2] https://www.hkma.gov.hk/eng/news-and-media/press-releases/20...
Tether does not print their own currency. If USDT goes to zero, you have nothing. It's good nowhere.
Tether prints Tethers. The HKMA prints Hong Kong dollars. They both derive their value from the U.S. dollar. If the HKD goes to zero, one has as much as if Tether goes to zero. (This is tautology.)
The Hong Kong dollar is backed by the Hong Kong government. Tether is backed by no government. Tether is probably lying about its reserves. Hong Kong could just as well convert everyone's HKD to renminbi overnight.
Point is, there isn't something fundamentally currency-like about one versus the other other than state backing.
The fundamental difference between Tether and HKD (or any other currency) is that Tether is not a legally recognized currency.
That may mean nothing to you, or to various other people who think that laws mean less than code, but it means a hell of a lot to most of the world.
The reasons something is a currency is because it is backed up by the power of the state. This includes (but is not limited to) the recognition of its status as legal tender within a the realm of a state, the ability to pay taxes in it, and also the very real guns and batons wielded by said state to enforce said authority.
There is no such thing as a currency that is not backed by some state, or at least some entity enjoying the broad authorities of a state. Tether (along with literally every single crypto product out there) does not.
But because primarily crypto was invented to snooker people who find the entire concept of state authority to be objectionable, this fact will never quite land.
No, they don't. The HKD is pegged to the US Dollar. They engage in open market operations to buy and sell HKD in order to keep the value of it around 7.8 HKD to a USD. This can be very expensive for them to do sometimes, such as right now. There is nothing fundamental about the HKD that makes it worth 12.8 US cents. Its intrinsic value is derived entirely from the fact that you can pay taxes with it in Hong Kong. It can't go to zero because demand for it will always be higher than 0.
On the other hand, the USDT is ostensibly $1 because you bought it for $1. They claim to be backing it with $1 worth of assets allowing you to sell it back to them for $1. This entire thing is about how nobody actually knows what its backed with. It has no other intrinsic value. If Tether doesn't (or wont) buy it back for $1, it's worth nothing. It does nothing.
No, they don't. You are either genuinely confused or engaging in that tiresome crypto game of "well, if we pretend sovereign states (or even Hong Kong like entities) were the same as a corporation, then logically..." Sure. But they aren't, so it doesn't matter. Wishing this weren't true isn't really interesting.
I agree they are functionally similar, it is just a matter of scale. I can write IOUs pegged to the dollar. The only difference is the confidence others have in me.
It might technically count as a ‘crypto ecosystem currency’ since it is often used to exchange value between different chains/coins/exchanges. But it is very difficult to convert to a recognized currency, so a lot of folks also get unknowingly stuck with it thinking they have dollars. There is a reason USDT is the ticker they pushed for, not TETH or whatever.
When Voyager entered bankruptcy, quite a few people suddenly discovered that the USDC they held on the platform was not the same as USD, did not enjoy the same legal protections USD would have, and that much of it had been loaned out to 3 arrows capital and was not coming back.
The distinction became even more significant when the bankruptcy judge agreed that the bank accounts that were holding actual USD customer deposits were not part of the bankruptcy estate and had to be released back to those customers.
If a bank never takes deposits, they have nothing to lend out. If Tether was printing Tethers without having deposits in place, they're not doing fractional reserve banking.
If you don't have assets on your books, and have instead either walked with or lost a large portion of the money, then you're not doing fractional reserve banking, you're running a confidence scheme.
If Tether, as suspected, was largely "backed" by crypto assets and Bitfinex shares, then they're gambling with the bank funds... and the recent losses in the crypto markets mean that they have been losing those bets.
(I edited the last portion of this substantially to make it more concise.)
1. You deposit $100 in the bank. It keeps $30 as cash and lends out the rest to someone. The money is still there on the balance sheet (but with a risk that it might not be returned)
2. You deposit $100 with Mr. Paulo in return getting 100USDT. Mr. Paolo spends $70 on private jets and ho*kers. If you ever want back more than $30, you're out of luck.
From https://www.federalreserve.gov/monetarypolicy/reservereq.htm
> As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.
--- Feel free to correct me on this; my financial knowledge is only just a bit higher than that 0% rate noted above.
Every US bank still has asset & liability requirements including having at least as many assets as liabilities and stringent rules on what the assets are. Further they have reporting requirements as well.
A chance? It's an absolute certainty.
Not only most exchanges have only a USDT:BTC pair and not a USD:BTC pair, but if you look at recent (~1.5 years) sudden spikes in BTC price, they correspond almost always to a new supply of USDT being released by Tether.
The only upward momentum Bitcoin has had since the last ATH has been due to Tether printing money, so it's safe to say that not only it's pumping it, but it's probably contributing 80%+ of its value.
If Tether dies, it's the end of cryptocurrency, period.
Bitcoin is a failed open source project turned Ponzi. I can’t wait for tether to take it to the absolute bottom and end the current epoch of crypto-as-speculation. Crypto will have its uses as a decentralised application platform.
Spoilers: - saying "but there is fraud" is not an argument against NFTs, because actually an automated solution for NFT fraud is conceivable. And the fact that there is fraud does not take away from the thousands of artists using it legitimately. Plus, authenticating you are buying from a real artist in the NFT space is actually not that hard.
I actually think there is a huge potential to decentralized applications, but this is essentially faith for now so I won't add much more to the discussion.
My feeling is that the odds of anything useful coming out of this are small. After insane money and over a decade, nothing useful has resulted. Perhaps conditions will be right in another decade for something useful to emerge, but at this point it's all scams imo
Will they, when ETH collapses to being worth less than 10 bucks because you can't exchange it for funny drug money and it's only usable as funny slow distributed computer coins ? When users can't speculate on it, when stakers lose money on running a node because they're getting 5 bucks worth of rewards every other month ?
Thankfully for the Ethereum Foundation, they conveniently prevented people from taking out their stake then did the merge, so that now that someone is in Ethereum, they cannot back out of it. Some might say it was something that only a malicious actor would do, but then again, the crypto community has never really been that bright when it comes to detecting scams.
just curious because I haven't seen a practical use for the EVM, it just seems like the slowest, most expensive VM ever conceived.
Spoilers: - saying "but there is fraud" is not an argument agaisnt NFTs, because actually an automated solution for NFT fraud is conceivable. And the fact that there is fraud does not take away from the thousands of artists using it legitimately. Plus, authenticating you are buying from a real artist in the NFT space is actually not that hard.
Saying something wrong many times doesn't make it right.
They are signed URLs that you can trade around on an exchange. This solves no problem that anyone making art has ever had.
Yeah NFTs did exactly this and they’re doing a decent job. If you’re a digital artist it was really really hard to get people to buy your art without a gatekeeper/art gallery certifying it. Now it’s easy. So yes they work for specifically that purpose.
If you think coffee shops are a substitute for digital art to be sold in a permissionless global open market I don’t know what to tell you.
At scale we’ve been building completely decentralized applications for a decade and a half. They’re just internal to some organization not public. Taking this and placing the database in the users hands is an interesting way to go but not exactly an order of magnitude more complex at that point.
But this doesn’t require some dumbass blockchain currency and ethereum is super forced.
That's because technological decentralization is much easier with political centralization.
But technological and political decentralization together is incredibly difficult.
In my experience, federated systems are more practical than decentralized systems and provide 98% of the benefits.
I agree that cryptocurrency is not necessary (or ideal) for either.
So when people want to buy BTC they often do exchange from USDT.
The question then becomes whether the fiat going in matches the new Tether being issued, and that can't be answered without a proper audit.
> if you look at recent (~1.5 years) sudden spikes in BTC price, they correspond almost always to a new supply of USDT being released by Tether.
is what you would expect to see even if Tether was 100% legit. As you say, most BTC liquidity is in USDT, so people buying Bitcoin would first buy (mint) USDT from Tether, and then use that to buy BTC.
Lol, you think these transactions done with crypto? Don't be silly.
Silk Road … facilitating annual sales estimated at almost $15 million.
https://reason.com/2013/04/09/bitcoin-vs-big-government/
Researchers estimate that from 2006 to 2016, the total amount of money spent by Americans on these four drugs fluctuated between $120 billion and $145 billion each year.
That's what I thought about MtGox. How wrong I was.
It's mind boggling how long this has gone on, really. I've been following the crypto scam for like 10 years now and it just keeps going.
It doesn't take cleverness, just complexity.
We've all been saying this for literally years now and yet here we are. The crypto market doesn't make any sense at all.
It has to crash sometime, right? I mean it is obvious to anybody paying any attention that tether is a scam. How has it gone on this long? What will finally do it in?
2. We would only see this on a massive sell off when Tether can't prop up the price fast enough with their reserves (by buying USDT with USD). This almost happened on May 11 of 2022.
3. The Madoff scam went years and years before finally being outed in 2008. Decades perhaps?
They are too powerful with too much money and too much centralized collusion to fail on their own. And the US policy still can’t define crypto, let alone police it properly. Only the full might of the US judicial system will make tether fail.
This did not almost happen. Do you enjoy writing fiction?
If you pay low or no interest, a Ponzi can be kept going for a long time. Eventually, though, the end of growth plus ongoing withdrawals catch up.
At least it’s a non-productive asset so that’ll keep the cost down a bit, no?
Tether was taking other end of bitcoin shorts for 5 years. Its fantastically profitable and you bought the manufactured story that they are about to collapse any moment.
Unfortunately, it is very difficult to know when.
Then again, neither is a typical bank account.
Source: https://www.fdic.gov/resources/deposit-insurance/faq/index.h...
> Deposits are insured up to at least $250,000 per depositor, per FDIC-insured bank, per ownership category
If you want have more than $250k insured in regular accounts, spread it across multiple banks (or put some in a joint acct, but that has its own risks).
Opening a chequing account and a savings account at the same bank doesn’t give you $500k of coverage if you were to put 250k in each.
The only similar is that they are guarantees.
The FDIC can't run out of money because Congress would just re-fund it in the unlikely (and extreme) event that its current funding ran out.
Bank accounts with FDIC insurance are literally backed by the people who create dollars.
Banks are backed by FDIC insurance which, although it has been able to pay each claim ever filed, did get cold feet in the 2015 crisis and obviously does not hold a dollar for each insured dollar. In fact some cursory research shows they hold about $6 for every $10000 and in a major collapse like the 2015 crisis, which could have been even worse, they could very well get in trouble.
Tether is an integral part of the whole cryptocurrency ecosystem, and it's insane to claim that the global industry operates closely with a "scam that soon unravels" without the industry players being worried at all. Large exchanges are not some shadowy operations which can just close their eyes when they are exposed to risk.
is this sarcasm? because the 2008 mortgage crisis showed that yes, large non-shadowy institutions can absolutely keep their eyes closed.
This same comment could have been posted about LUNA and large crypto investors like 3AC 6 months ago.
> LUNA/UDT is an innovative part of the whole cryptocurrency ecosystem, and it's insane to claim that the global industry operates closely with a "scam that soon unravels" without the industry players being worried at all. Large investors are not some shadowy operations which can just close their eyes when they are exposed to risk.
The red flags around Tether are many, but the biggest is that it would be easy for them to prove that USDT is backed 1:1 with USD if it actually was. The fact that they've consistently avoided offering such proof is all the evidence I need. It's the same reason no one believes Craig Wright is Satoshi.
There is no evidence that they have been fabricating those numbers.
If you had a fund that provided that report instead of their normal reports it would have investors headed for the hills (independent of the regulatory requirements).
https://www.courtlistener.com/docket/16298999/in-re-tether-a...
(I'm posting this because it's slightly unintuitive to go from the PDF download back to the page it came from if you're not familiar with the site)
I don't know why they would stop lying now.
When I’m adding liquidity to a common pair that I utilize a lot and get a divergent loss between the two assets, should that be impairment at the time of the transaction or only when all the coins are converted to USD?
I can go on and on and on about the impossibility to comply with tax regulations and crypto. I’m an avid crypto user, I like making bots for all the games, I think NFTs are cool and always like meeting the programmers turned artists, I participate in 10+ exchanges and 50+ liquidity pools across the map.
When it came time to do my taxes this last year, I had to hire a crypto specific tax person. His advice was that every time I transfer crypto off an exchange, it is ‘sold’ for that price and I have to pay taxes on the minuscule difference between my purchase price and the 10 seconds it take me to transfer into the meta verse. It’s literally impossible to do it otherwise.
Not to defend them or anything for sure, I find them and their Bitfinex/price manipulation schemes super shady too, but it's also a success that they came this far when many people expected them to collapse for years.
Being more stable than Terra is not a very high bar.
That's the crux of it, isn't it? A lot of people think that they are greedy. Also, most tethers were created in 2020, when short term treasuries we're yielding nothing. Which made the incentive to "cheat" much higher than with the present rates.
The Luna fiasco was a consequence of Luna specifically encouraging people to hold UST, encouraged with unsustainable incentives. That dynamic doesn’t exist in the context of USDT, there’s no benefit to holding USDT.
The problem with USDT is that so much of the current cryptocurrency market has been propped up by USDT that probably isn’t backed by any real assets.
Tether print $1bn of USDT -> buy $1bn worth of BTC on an exchange that uses USDT (e.g: their own…) -> price goes up and increases the market cap by orders-of-magnitude more than $1bn.
If you have exposure to the cryptocurrency market (whether you hold USDT, or BTC or own $COIN stock) and tether blows up, you will very probably be hurt in the fallout. Buying BTC with any USDT held is a false sense of security.
If you don’t want to be exposed to the tether blowup contagion, sell everything now into cash-in-your-bank-account (not “cash” on an exchange) and wait.
If you want the smart contract, I'll do a $25k min. Once you give me the money, I'll do this:
1. Load a smart wallet with 1.2x equivalent value of ETH (which I'm long)
2. Tie it to a smart contract using a price oracle that will liquidate the ETH if the ETH/USDC price (using some combination of high-volume exchanges) drops to 1.01x of the amount of USD you should get
3. At any point of time, you can transfer in your strike USDT to exercise the option and receive USDC in return
This way I get to be long ETH and you get to be short USDT so long as you trust USDC (which is audited)
1. I won't be able to liquidate the ETH to USDC and transfer it to you => We can force me to liquidate using a DEX or Uniswap pool. Alternatively, if you're very worried about this, I'll just charge a higher premium and post USDC into the account. That's just a pricing problem
2. You won't be able to redeem the USDC I give you => You'll have to trust Circle here, yeah. If you don't trust their audits, we can use another stable coin, but I think USDC is more trustworthy than BUSD and there aren't pairs for ETH to very many other stable coins that have enough volume to keep the spread down so I can safely liquidate
They’re not exactly killing puppies here, they are just lying about funny internet money. There are plenty of other more reputable stablecoins out there if you insist on holding onto stablecoins for whatever reason instead of US dollars themselves.
Usually when you ignore liars they eventually stop talking. Why can’t we just ignore Tether until it goes away?
I agree with the general sentiment around tether acting very opaque / shady. That said:
1. creation/redemption of tether (read: actual USD wire transfers) has been done on the magnitude of billions of dollars a time by major players in the space
2. during UST collapse, something like $15b of tether was redeemed in less than 2 weeks. so they obviously had that much cash on hand at the time.
3. the academic paper that attempted to show that tether was being created to pump up bitcoin has an extremely simple alternative explanation: as bitcoin went up, holders of bitcoin sold it for tether on centralized exchanges on the way up.
so, IMO they could very likely have some bad commercial paper on their books, but i think its much more likely than tether is worth 90 cents on the dollar and not 0, and in the case that it is worth 90 cents on the dollar, it would be extremely likely to continue to trade at par as there's very unlikely to be a scenario which forces any kind of large-scale redemptions.
https://www.singlelunch.com/2022/06/14/the-state-of-stableco...
Tether depegging would be an apocalypse nonetheless
It's a fairly easily checkable lie.
The loan was written somewhere in the first half of 2021 - it's when heavy USDT activity starts in the celsius core wallet [2].
BTC price floor in 2021 was $32k.
You can't liquidate something 130% overcollateralized and underwritten at a price >$32k (more likely >$40k) at a price of $21k without taking a loss.
You'd need a minimum overcollateralization ratio of 150% for their math to check out in the most optimistic scenario.
Let me know if you have other easily disproven lies you need debunked.
[1] https://blockworks.co/celsius-loan-liquidation-caused-no-los...
[2] https://etherscan.io/address/0xdb31651967684a40a05c4ab8ec56f...
If you'd look at the documents filed in the Celsius bankruptcy, you'd see a sworn affidavit that says Celsius stopped providing additional collateral in May 2022:
https://storage.courtlistener.com/recap/gov.uscourts.nysb.31...
>In May and June 2022, Celsius made the difficult decision to forgo providing one of its lenders, Tether, issuer of USDT, a stablecoin, additional collateral and agreed to an orderly liquidation of its loan. During the market crash, Tether issued a margin call to Celsius with regard to an outstanding $841 million USDT loan. Although Celsius had always provided sufficient collateral to support its loan, and had never previously been liquidated by Tether, the Company agreed to an orderly liquidation and settlement of its loan with Tether to preserve the remaining collateral in excess of the value of the loan
Bitcoin dropped around 30% in May-June, so this timeline lines up exactly with the 130% collateralization ratio.
The exact transactions start here [2] (aug 11, 2021). I got the date wrong in my previous post because I didn't remember and was too lazy to check.
As for your misreading of legal documents and misunderstanding of how loans are written:
The loan was not written in May 2022 -- it was written prior to October 2021, when its existence was confirmed. The loan is denominated in BTC at the price at which it was underwritten (early August 2021, BTC price low-mid $40k)
The fact that BTC dropped 30% in may-june 2022 has no relation to the total loan value from Celsius' side. It only changes the amount of collateral tether would be margin calling Celsius for.
Celsius faced a margin call in May 2022 (price 30k) because the loan was written around a BTC value around 30% higher than that (~40k). Note the math checks out here as well.
It took over a month for the margin call to result in liquidation, hence tether's loss of $250-300m at a price of $21k. If tether immediately liquidated in May 2022, they would have skated by without a loss.
[1] https://etherscan.io/tokentxns?a=0xd41cdb2a35a666e8e1f9f5305...
[2] https://etherscan.io/tx/0x367f433872789fa0223d6ca93c6e073a72...
https://www.ft.com/content/5eff6c38-9410-45af-94f7-2488b3a87... this also confirms some of it:
>“If bitcoin drops, they give us a margin call [and then] we have to give them more bitcoin,” Mashinsky told the FT in October. He said the loans were typically 30 per cent overcollateralised. The price of bitcoin has since dropped by about half to $30,000. The person familiar with the matter said Celsius had indeed posted more collateral as a result of the falling price.
Sure, maybe everyone's lying, including in sworn declarations. Alex has obviously lied a lot leading up to the Celsius bankruptcy, so I'm not going to say that anything he says must be true. But I don't see any particular reason to doubt the claims here that tether's loan was overcollateralized, called, and liquidated with no loss (and in fact they returned excess collateral to Celsius, as per the court document above "preserve the remaining collateral in excess of the value of the loan"). I do think it's unlikely he'd swear to that specific claim under oath if it wasn't true, as he'd have nothing to gain from it?
The numbers don't need to be exact in any case given the magnitude of the discrepancies.
The core issue is, again, that Celsius stopped providing margin in May 2022 but were liquidated on June 15th.
Tether ate the loss for the difference in price between those two dates. Tether should have liquidated Celsius in May 2022, but didn't.
There's no way the math doesn't check out with tether ending up at a loss.
Similarly for the $190m of Celsius equity Tether bought, which is now worthless in bankruptcy proceedings.
The fact is Tether lost a 9 figure sum on Celsius. The only question is what the X is in a $X00,000,000 figure.
The equity is a loss, but that's not what I took issue is, which is your evidence free claim that there was a loss on the loan.
Bitfinex and Tether have a history of fraud, of losing money, for Tether to be backed today would mean Bitfinex/Tether did a complete 180 and went legit after years of bad dealings. Even if you believe they did a 180, how did they rectify the mess from before they went legit? How did tether become solvent?
I believe you're right just curious about the mechanism.
I think many people believe they don't even have enough USD to start with, eg because some of their assets are loans collateralised by crypto (such as the Celsius 1B loan).
I believe both are true - Tether printed USDT against non-cash, and used some of the actual cash to buy dodgy assets for more yield.
So imagine this scenario:
1. I issue a note for $1B to Tether and they send me 1B USDT.
2. I go about my business, trading crypto, doing whatever, and hopefully I end up with more than 1B USDT.
3. When I redeem, I send my 1B USDT back and Tether retires my note (or sends me back my crypto collateral) likely less some fees.
No actual dollars changed hands. And yet this fits in exactly with their narrative and language.
I mean hell they have issued a huge amount of USDT over weekends when you couldn’t possibly have wired any money (mayyybe some people banked at Deltec and could transfer between accounts, or via Finex…maybe)
How does this work exactly? Who is the counterparty selling tether here, and how come it wasn't newly minted USDT?
This is such a major factor with every cryptocurrency company. Especially 5 years ago when tether was made.
Tethers ‘dodgy’ investments is partially driven by there being no other options.
This is why banks can't be backed by 100% MBSes.
Tether will implode. It's just a matter of time.
e.g., we know from the CFTC settlement that for a while, Tether didn't keep anything so tawdry as "accounts" - the only documentation of the reserve was a single shared spreadsheet.
There are soooo many red flags with crypto. So many shady people at the top of its pyramid. It is amazing how people can be so blinded by greed so as to not see how big of a scam crypto is. It is truly impressive.
The question is whether Tether is too big to fail.
At this stage it’s unclear how many decision-making people have skin in Tether staying afloat.
1. borrow Tether
2. swap it for USDC (or stablecoin of choice)
3. wait for Tether to crash
4. pay off your Tether loan at a fraction of its original value
Of course, then there's the risk that non-crypto assets will be affected by the same…
Anyway good luck, just beware that you aren't making some kind of smart money play.
Doing so is betting against The House.
Not just any house, The House. The House in which all other houses are built.
You _cannot_ win shorting Tether.
Instability is often what kills short sellers.
In the meantime it has all the hallmarks of a scam manipulated asset. Shorting it will get you liquidated at the whim of the manipulators.
Cryptocurrency has been working just fine before tether, and it's going to work just fine without it. We've seen ups and downs. So I don't think it's that crazy when the house has failed many times in the history of cryptocurrency.
Why should I care about BTC when shorting tether?
What's your collateral?
Tether throws into sharp relief the excess of the Fed.
It prints money so the US government can use it (you can argue to what degree that is waste).
But the Fed's balance sheet is solid and highly liquid.
Tether is a private company, controlling $67B in assets, with less than 10 FT employees, a CEO who hasn't been seen in public for years, with no transparency into their backing, has been caught lying multiple times in court, and has been involved in multiple civil and criminal investigations.
There's no comparison.
But wait, what about the Navy, the Air Force, and the entire US economy?
There are already 2 comments here that are 100% sure tether has zero dollars backing it. I am not saying it has a 100% backing, or any other value. I do not know. But that fact people are so sure they know and know exactly and at the very extreme of the possible range is very telling...
The OP was not complaining that people think Tether is not well enough backed, they were complaining that some are "certain" that it is not backed at all - the least informed being the most certain.
The issue is when you say Occam Razor is a form of proof and you are "certain"...
As for Tether I'm certain enough to advise anybody investing it or any currency supported by it to not invest money they can't afford to lose.
You see my point now?
The burden of proof is on Tether. They're the one making the claim they're fully backed.
I am just confused why everyone seems to BOTH say they do NOT know AND then advise people and act like it's obvious and clear!?
I mean you don't know for a fact that I am NOT a prince right? And if you ask me for any documents I'll just say they got lost or it's too difficult to produce them.
In this case the absence of information is the proof that you need to say that tether is a scam.
3. Established beyond doubt or question; indisputable: What is certain is that every effect must have a cause.
5. Having or showing confidence; assured:
When someone says, "I am certain .." they are are clearly using definition 5. and especially in this context. Your insistence that they are using definition 3. is unreasonable, especially since you KNOW they came to this opinion via Occam's Razor.
https://assets.ctfassets.net/vyse88cgwfbl/2xJyKdUKicdRUWpC9b...
Its not like BDO are going to stick their neck out for tether here
Yes, that's a silly claim. Pretending that's anything near the average criticism of Tether is also silly.
Funny because this applies to people who are big time into crypto and those who bought completely into the Covid narrative. If those people did even a small amount of research they’d understand why skeptics are probably right to be skeptical. If they did their homework they wouldn’t lose all their money to scammers and they wouldn’t flush two years of their very short life down the toilet because some “expert” told them to freak out.
Also, Tether is owned by Bitfinex, which enables them to print Tether to cover their own losses.
It's a way of cashing out company funds.
Ah yes, they can just operate a classic ponzi scheme!
They can use new investors money to cover for the ficticious assets that previous investers were told that they hold!
I've never understood this theory. It implies that the market moves when they buy, but not when they sell?
If you're unscrupulous and you have a money printer, you don't need to resort to market manipulation to print money, you just... print money. And you can offer a 20% APR to people who are willing to pay real USD for your money, to keep the music from stopping too early.
That's not an unreasonable assumption when the asset isn't held and bought mostly by professionals trading based on its fundamentals, but by people that get very excited by "line goes up" and diehard HODLers. This isn't specific to Tether, it's standard pump and dump behaviour. Printing money is great, but getting further gains on your printed money (and a plausible "massive growth in crypto interest" story to make your printed money seem more real) is better still.
Plus chances are Bitfinex did the pump bit but actually holds onto a lot of the crypto it bought anyway.
> Plus chances are Bitfinex did the pump bit but actually holds onto a lot of the crypto it bought anyway.
Yeah, this is a theory that makes more sense to me. Tether may have driven up the price over time by buying and holding bitcoin. The more they bought, the more they drove up the price, reinforcing their decision to buy. Similar to Archegos, but with bitcoin instead of equities.
Tether and Bitfinex (one of the biggest exchanges) are both owned by the same people: iFinex. They're effectively one in the same.
Not coincidentally, both of them have already been caught and fined for Tether not being fully backed and for commingling reserves and customer funds: https://www.cftc.gov/PressRoom/PressReleases/8450-21
Also, you can't assume that exchanges paid dollars for them. Tether could print a lot of Tethers, transfer them to exchanges, and exchange them for crypto. No dollars are involved in the transaction and it all relies on everyone believing that Tethers are worth $1 because Tether says they are.
Crypto is a scam. Nothing about it should be trusted.
Why do you doubt that? They have motive and opportunity, and they're obviously not on the level so any appeal to general assumptions of honesty go out the window.
Your source for that is what, blind trust that they're being honest? When they've already been caught in numerous lies?
Banks have losses too. But they raise money by selling stock, which provides a cushion against losses. The stockholders lose money first.
How does this work with credit unions? The one I joined I had to “buy a share” for 5$ and keep that minimum of one share (5$) to keep my account active. The credit union is not publicly traded so the shareholders are the account holders.
I don't understand how that can work as risk capital. Maybe it just isn't.
[1] https://www.investopedia.com/terms/s/share-draft.asp [2] https://www.ncua.gov/support-services/share-insurance-fund
You can also replace "crypto fund" by any crypto project that uses leverage to deliver extraordinary returns - as long as everything goes up.
They clearly did NOT have any assets when they were pretending to be audited or they would have completed the audit.
Bitcoin crowd doesn't like less than 100% backing. The argument isn’t that they have nothing.
When Tether had disrupted fiat redemptions and lost banking, people would find the banks they likely moved to by looking at massive increases in the bank’s reported deposits.
For some time, the website read: “Every tether is always backed 1-to-1, by traditional currency held in our reserves.”
...
In February 2019, this text changed to: “Every tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, ‘reserves’).”
I hope you understand that after the first statement, EVERYTIME they don't have 100% of the tether backed by currency is fraud. And it wouldn't matter if it was all there now in the same way an accountant is a criminal if they gamble with client funds even if they manage to put all money back before it's missed.
Growing up is hard, but the outcome can be positive.
Cash & Cash Equivalents & Other Short-Term Deposits & Commercial Paper (75.85%):
- Commercial Paper (65.39%)
- Fiduciary Deposits (24.20%)
- Cash (3.87%)
- Reverse Repo Notes (3.60%)
- Treasury Bills (2.94%)
Secured Loans (none to affiliated entities) (12.55%)
Corporate Bonds, Funds & Precious Metals (9.96%)
Other Investments (including digital tokens) (1.64%)
Anyone saying Tether is not backed in any way is illiterate or a conspiracy theorist.
And I'm sure it's partially backed by something, the issue how much is it really backed and by what.
a) These percentages are true, but they don't actually add up to the amount of tether issued.
b) This was true in 2021 but is no longer true
c) This numbers were not an accurate representation.
- $25 in my gas tank (50.0%)
- $10 in a crumpled bill in my pocket (20%)
- $15 of groceries that are in my fridge (40%)
don't worry about how much it adds up to or if it's liquid, it's backed
They could indeed have all of those percentages, in exactly that relationship, all combined worth... a million dollars. That would be far, far, far, far short of what it should be.
> The Group’s consolidated total assets amount to at least US$ 66,409,619,424.
> The Group’s consolidated total liabilities amount to US$ 66,218,725,778, of which US$ 66,204,234,509 relates to digital tokens issued.
> ... US Treasury Bills ... $28,856,434,491
> ... other holdings by asset type
[1] https://assets.ctfassets.net/vyse88cgwfbl/2xJyKdUKicdRUWpC9b...
Tether's consolidated reserves have since changed composition. [2] The most recent report shows (approximate percentages):
- US Treasury Bills (43.45%)
- Commercial Paper and Certificates of Deposit (12.65%)
- Money Market Funds (10.25%)
- Cash & Bank Deposits (8.15%)
- Reverse Repos (4.5%)
- Non US Treasury Bills (0.59%)
- Bonds, Funds, Metals, Other, Loans (20.37%)
So the commercial paper was so far trustworthy enough to allow them to rotate out of much of their CP position and into US Treasury bills.
[1] https://assets.ctfassets.net/vyse88cgwfbl/4hiNJsZ98LlZqCJHKz...
[2] https://assets.ctfassets.net/vyse88cgwfbl/2xJyKdUKicdRUWpC9b...