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Comment by Kranar | Hacker News Reader

Because no one cares about random wild speculation and rumors spread across the Internet for almost a decade. What people care about is whether they can take 1 USDT and exchange it for 1 USD, plain and simple.

Currently Bitfinex will exchange 1 USDT for 1 USD and they hold a substantial about of USDT, they also buy up USDT when it falls below 1 USD. I'm sure Bitfinex is happy to see reports about Tether's demise spread, because it's free money for them.

If at some point it's not possible to redeem 1 USDT for 1 USD, then Tether will collapse like the other stable coins and that's really all there is to it.

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It's literally been covered in CFTC and NYAG settlements. It's not wild speculation, it's not rumors. It's all here. [1, 2]

> Currently Bitfinex will exchange 1 USDT for 1 USD and they hold a substantial about of USDT, they also buy up USDT when it falls below 1 USD. I'm sure Bitfinex is happy to see reports about Tether's demise spread, because it's free money for them.

No, that's what they say they do. We have no evidence. The last people who stuck up for them in this regard, SBF and Trabucco, are in some pretty hot water. It could be Tether/Bitfinex, but it could be anyone else with an interest in perpetuating the ecosystem. Some exchanges mortally locked in perhaps?

> If at some point it's not possible to redeem 1 USDT for 1 USD, then Tether will collapse like the other stable coins and that's really all there is to it.

It may not be possible right now. Their terms of service say they can deny basically any redemption at their sole discretion. Anyone denied would not be incentivized to declare the emperor naked.

[1] https://ag.ny.gov/press-release/2021/attorney-general-james-...

[2] https://www.cftc.gov/PressRoom/PressReleases/8450-21

No one has complained about being unable to convert their USDT to USD. This is baseless speculation.

It's entirely fair to say there is no basis for trusting the company behind Tether, and by extension Tether. It's unfounded FUD to definitively claim that it's a scam.

The CFTC and NYAG statements said in no uncertain terms that there were long periods of time where Tether did not have the money to cover their obligations. You have lowered the standard to the point where it is significantly easier to meet. All they need to meet your standard is to have inflows in excess of outflows - outflows lower than inflows plus marketable securities.

Letitia James says:

> The OAG’s investigation found that, starting no later than mid-2017, Tether had no access to banking, anywhere in the world, and so for periods of time held no reserves to back tethers in circulation at the rate of one dollar for every tether, contrary to its representations.

The CFTC says:

> As found in the order, Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018.

It's literally not FUD, it's something they paid significant quantities of penalties over.

No access to banking is not the same thing as not having the reserves. If there was this massive shortfall/scam that you are alleging, those press releases would have spared no details in describing them.

>>> As found in the order, Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018.

You're leaving out critically important context, which is that Tether held other assets as reserves:

>>The order further finds that Tether failed to disclose that it included unsecured receivables and non-fiat assets in its reserves

Reading your comment without this context would lead a casual observer to conclude that the assets backing the issued USDT held a value of 27.6% of the USDT's face value, which is entirely different than reserves equalling ~100% of USDT in value, but with a significant fraction of assets constituting those reserves not being of zero-risk fiat as the marketing arguably implied.

I'm not sure why you're quibbling. At one point Bitfinex reached in and took out hundreds of millions of dollars from the reserves Tether had to cover the money they had lost to Crypto Capital Corp. At the time they had a market cap of about $2B, so that was ~25% of reserves wired out. [4, S. III pages 6-9].

That's just one example.

There is, and I can't stress this enough, literally no reason for you or anyone else to trust these people. They've never published audits, one of their auditors (Friedman LLP) literally walked away once they saw their books.

Then for some of the attestations, they literally wired money in the same day from Bitfinex, then wired it out the next to make it look like they had the reserves.

> If there was this massive shortfall/scam that you are alleging, those press releases would have spared no details in describing them.

They did. [1] Also, it was covered in the NYAG settlement and the CFTC settlement I linked. I strongly suggest you give them an actual read-through. The entirety of the section III of the PDF covers it in painstaking detail.

> Reading your comment without this context would lead a casual observer to conclude that the assets backing the issued USDT held a value of 27.6% of the USDT's face value, which is entirely different than reserves equalling ~100% of USDT in value, but with a significant fraction of assets constituting those reserves not being of zero-risk fiat as the marketing arguably implied.

Not only is that is than an obvious misreading of the comment, it wasn't my comment, it was a direct quote from the CFTC website - but then you go on to claim something I never claimed.

Let me be clear then:

1. There periods they were physically unable to fulfill demands because they had no bank account access [4].

2. At other times, their peer organization raided the kitty and literally took the money (because the same executives gave almost a billion dollars to a company indicted for laundering money for - among others - the Colombian cartels, without a contract, and whose execs are in prison or on trial). [2,3]

3. At other times, they invested in illiquid securities and got rekt (they invested in Celsius for instance).

Stop giving these people a lick of credit, stop apologizing for them, and demand some proof.

[1] https://www.coindesk.com/markets/2019/04/25/bitfinex-covered...

[2] https://www.coindesk.com/markets/2019/10/25/polish-police-ar...

[3] https://www.coindesk.com/business/2022/04/25/reggie-fowler-p...

[4] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...

By "your comment", I'm not referring to the excerpt you quoted from the report. I'm talking about your comment as a whole, which includes the quote about only 27.6% of reserves being fiat, but doesn't include the portion that indicates the shortfall was covered by other assets.

And like I said from the beginning:

>>It's entirely fair to say there is no basis for trusting the company behind Tether, and by extension Tether. It's unfounded FUD to definitively claim that it's a scam.

I will concede that some of the evidence you provided shows a company behaving suspiciously, and at times dishonestly, but this impression one gets from the Tether critics, that USDT is a total scam backed by nothing looks like baseless FUD at the moment, no matter how valid your claims that the company behind Tether shouldn't be trusted.

I concede that they have something in their reserves and that some people, at Tether, Inc. discretion, will be able to create and redeem Tether.

I can't say without an actual honest-to-goodness audit that they are backed fully. But hey if they come up with one I'll be the first to eat my hat.

>>I can't say without an actual honest-to-goodness audit that they are backed fully.

That's a fair assessment.

> ... reserves not being of zero-risk fiat as the marketing arguably implied.

Not arguably implied. Literally and directly stated.

Their website at the time said: "every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USDT is always equivalent to 1 USD." The lie detector test determined that was a lie.

Please I'm begging you, I'd love you to reply to this but only after you read the entire NYAG settlement PDF I linked you. It is actually something of a crime thriller so I promise you'll enjoy it.

I own one tether and I can't have Bitfinex convert it into a dollar for me. Is that good enough for you?

Having Bitfinex convert it for you would mean that you deposit the USDt to Bitfinex and exchange it for 1 USD. Having Tether convert it for you would mean you have an account with Tether and redeem your USDt. Are you saying you can't redeem your 1 USDt for 1 USD because you don't meet the minimum $100,000 conversion?

Correct, you cannot redeem USDT via Tether, Inc. unless you meet the minimum deposit. You can trade it on various platforms for dollars from other non-Tether-inc participants. This is all on https://tether.to/legal and/or https://tether.to/en/fees

Also you can't redeem USDT if you're a U.S. Person, or if you don't meet their definition of customer, at their sole discretion.

> In order to cause Tether Tokens to be issued or redeemed directly by Tether, you must be a verified customer of Tether. No exceptions will be made to this provision. The right to have Tether Tokens redeemed or issued is a contractual right personal to you. Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves. Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all.

The only sensible comment here. HN has been predicting Tether's collapse for nearly 5 years now and it's simply not happening, people purchasing tether have been taking a short against bitcoin, historically that a very bad bet and certainly one you want to be on the other side of.

Now they've been through very significant bear markets, some theft of funds and still are solvent.

I don't understand the criticism about high amounts and verification for directly redeeming it either. If they did neither of those things it would be a money-laundering haven and they'd have men with guns raiding their homes tomorrow. You can redeem it through kraken and other domestic exchanges for cold hard cash, it's working perfectly fine.

Tether will be looked back as an example of how dramatically wrong "common knowledge" can be in internet communities, some people are so mentally obstinate and committed to the idea that it is simply too hard to admit they might be wrong, this is fed by others in the community with the same affliction.

The article makes clear that Tether is actually more like a Special Drawing Right (SDR) on overcollateralized derivatives of the crypto ecosystem. Which is to say that Tether is more like a derivative of rainbows and unicorns-- actually it's basically the IMF of rainbows and unicorns.

Is Tether the equivalent of USD? No. It is not USD.

Why is Tether valued at 1 USD per coin? I'm not sure. But it almost certainly will not be if the value of crypto broadly falls enough to compromise Tether's collateral. The value of that "paper" is a nonlinear function. The "collapse" would happen so very slowly... and then all at once. Good luck.

> Now they've been through very significant bear markets, some theft of funds and still are solvent.

How did you determine they are solvent?

Note that even a literal Ponzi scheme could honor withdrawals for a time, so producing $1 for 1 USDT (or even several billion) is not proof.

The only reports I'm aware of are either paid for by Tether (e.g. the latest report from BDO--whom I know nothing about) or from governments (e.g. the NYAG and CFTC reports--which I trust--and show that Tether was, in fact, not telling the truth about reserves).

> How did you determine they are solvent?

That they keep paying out billions each year in dollars to those who request it?

Solvent usually means being able to pay ALL of your obligation in the LONG term so your claim that they are solvent because they manage to cover SOME obligations in the SHORT term doesn't mean anything.

Where can I find the info on billions that they exchange yearly?

https://coinmarketcap.com/currencies/tether/ / Market Cap / 1Y

Shows a decline in market cap from $83B in May 2022 to $66B in July 2022. That represents $17B in redemptions over a few months. That represents Tether net paying USD to USDt holders.

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