[HN Gopher] Tether Fined $41M for Lying About Fiat Currency Backing ___________________________________________________________________ Tether Fined $41M for Lying About Fiat Currency Backing Author : virtualwhys Score : 242 points Date : 2021-10-15 15:53 UTC (7 hours ago) (HTM) web link (www.bloomberg.com) (TXT) w3m dump (www.bloomberg.com) | buhrmi wrote: | Probably paid in USDT. | sneak wrote: | They don't need to; they can print USDT, swap it for Ether, and | take Ether to any normal, above-board exchange and get Real | Dollars. | kangnkodos wrote: | What is the average daily net inflow of US dollars into Tether? | How many days of net inflow is $41M? | FireBeyond wrote: | At times they've claimed that it is in the billion dollar a | week range. | | But their cash backings say that that was most likely always | bullshit, even as they move to "other instruments" (cough | Chinese junk paper cough). | satellites wrote: | But crypto coins are so much more trustworthy and secure than | traditional financial institutions... /s | robcohen wrote: | I'm pretty sure no one thinks digital IOUs are worth more than | the word that's behind them. | | It's not reasonable to conflate decentralized cryptocurrency | with digital coupon IOUs. | jfk13 wrote: | See also https://news.ycombinator.com/item?id=28878874, which | (currently, at least) has more extensive discussion. | mensetmanusman wrote: | They will have to spin up 41,000,000 more Tethers to pay for | this! | dylan604 wrote: | But when they submit the payment, they print out the hashes for | the coins in 6pt font double spaced in a script style font. | system2 wrote: | I am blown away. 61.5 million dollars for $68,536,825,819 (68 | billion dollars.) Maybe not the same in 2017 but damn, how does | this even work without anyone panicking? | inopinatus wrote: | It doesn't, but that's bubbles for you. | gws wrote: | Don't really get you guys saying Tether should be shut down... | the big banks get routinely fined with much bigger fines for much | bigger crimes, are we gonna shut them all down then? At least | Tether did not steal from nor defraud anyone. Just as a random | example: https://www.justice.gov/opa/pr/jpmorgan-chase-co-agrees- | pay-... | ceejayoz wrote: | Tether _did_ defraud people. They lied on their website, | claiming a) audits (which they never completed a single one of) | and b) 1:1 backing of each Tether with a dollar in the bank | (which they didn 't have). | gws wrote: | You are right, they lied, and people could have been harmed | if there were a "bank run" on Tether. But in practice there | was not and nobody suffered any damage, zero, nada, nicht. | While big banks got fined for actually taking money illegally | out of people's pockets and nobody said let's shut them down | tootie wrote: | I think the difference is this is Tether's entire reason for | existence. It's equivalent to Bernie Madoff. | gws wrote: | Still there have been zero redemption issues in getting USD | back from USDT | joelbondurant wrote: | Fiat backing, lol , clown world. | missedthecue wrote: | Hear that? That's the sound of 41 million new tether coins | entering the market | adflux wrote: | Perfect haha. Tether has figured out how to print money and | nobody seems to care. | BitwiseFool wrote: | "Stay out of my territory" - Jerome Powell, PBUH | zardo wrote: | They just printed $440 Million in _technically not | counterfeit USD_ | Hamuko wrote: | Where can I apply to get this silk glove treatment by the | authorities when I start making "untrue or misleading" bank | notes? | rossdavidh wrote: | Well I think it's maybe more like how to do a GoFundMe on a | massive scale. | SilasX wrote: | lol yeah: "So can we pay the fine in--" "No." | | (Reminds me of Zimbabwe having to come up with money to pay | Switzerland for printing their hyperinflating currency.) | pkulak wrote: | Jokes aside, Tether can't both determine how many coins are in | the market and the price of those coins. | orthecreedence wrote: | No, but apparently they can tell people "this is worth $1" | and people will believe them, even if there's nothing backing | it. On a long enough timeline what you say might be true, but | in the short term it seems that most people haven't gotten | the memo. | danuker wrote: | > there was never more than $61.5 million backing Tether, even as | more 442 million coins were circulating at one point. | | Ah, pulling the classic "fractional reserve" I see. | trident5000 wrote: | Depends what that means. Dollar reserve could be low because | investment reserve is high. Would need to see the numbers. | sneak wrote: | I'm sure that the 68.5 billion-with-a-b tethers they have out | there now must be backed, though, right? | | Surely they learned their lesson when they only had 442 million | tethers issued and only 61.5 million dollars in the bank. | SandB0x wrote: | This is simply insolvency, not fractional reserve. | tom-thistime wrote: | Insolvency would be a better _metaphor_ than fractional | reserve. But I 'm guessing* Tether doesn't actually offer to | settle up in any reserve currency. | | *I think it's a pretty good guess, based on the fact that | Tether is still in business. | SilasX wrote: | I think that would be illiquidity -- having only assets that | need to be converted, rather than dollars themselves -- | rather than insolvency, right? | SandB0x wrote: | Well that too | mortehu wrote: | If you read the order, it's clearly about cash reserves (in | the financial sense) specifically, and not total underlying | assets. | AlexandrB wrote: | And yet, they're still operating. This is the kind of thing | that makes me think the whole cryptocurrency ecosystem is a | house of cards. Cryptocurrency advocates seem to be really | bad at spotting and punishing incompetent and malicious | actors in their markets. | onlyrealcuzzo wrote: | Why would they? If you're invested in Crypto - you don't | want it to go down. It's better to look the other way while | someone is pumping and hope they never start dumping. | ikiris wrote: | It's hard to claim someone's specifically malicious / | incompetent when the entire "market" is. | wbsss4412 wrote: | It's really an amazing case study in what happens when* you | take libertarian ideology to its conclusion. | | Edit: typo* | CryptoPunk wrote: | Libertarian ideology has resulted in Tether being | replaced by USDC in Ethereum DeFi. Your claim is based on | the bizarre premise that people are only intelligent when | formulating mandates for otherd, while they can only | exercis if formulating a course of action for themselves | wbsss4412 wrote: | > Your claim is based on the bizarre premise that people | are only intelligent when formulating mandates for | otherd, while they can only exercis if formulating a | course of action for themselves | | I'm not sure where my statement implied what you are | assuming here. I think you may have your dogmatic | blinders on. | | Both tether, and crypto unrelated to tether are | implicated in what I stated. That doesn't make tether any | less a result of libertarian ideology drawn to its | conclusion. | TameAntelope wrote: | I think if you got a few beers in even the most adamant | crypto advocate, you'd discover their thinking is more | along the lines of, "The house of cards is out in the open | with crypto, vs. hidden behind bureaucracy and obfuscation | in traditional banking". | | With crypto, the "average" person gets to feel "in on it" | in a way usually reserved for coked up Goldman associates. | That is possibly _not_ a good thing, as you 're pointing | out. | pasabagi wrote: | It's a misunderstanding of what the house of cards is | about, though. | | One of the first empires to use fiat currency was the | Yuan dynasty, and it worked, because if your currency is | backed by the mongols, you're absolutely going to act as | if it makes sense, even if it seems crazy to you. The | backing of money is not precious metals, nor currency, | but rather force - a state can demand tax in it, and | exact retribution if their taxes are not paid. The state | could demand taxes in cowries, and people would collect | cowries, because you are going to get imprisoned if you | don't pay your tax. | | The fiat-currency house of cards collapses when people | think the state isn't going to be able to pay their bills | and collect their dues. Cryptocurrencies are more like | tulips. There's nothing behind the curtain - it's just a | weird social eddy that's grown out of all proportion. | usrusr wrote: | While they are not completely divested, self-interest | mandates that they still hype what they try to get out of. | And after that, they simply don't care and pride | discourages them from being vocal about their apparent | change of heart. Some might be good at spotting, but they | will be excellent at staying quiet about their conclusions. | chihuahua wrote: | In my opinion it's a house of cards (and Ponzi scheme), but | combined with the John Maynard Keynes observation that the | market can reman irrational longer than you can stay | solvent (if you were to bet against it) | ceph_ wrote: | > 442 million | | Current market cap is up to 70 billion! 90% of which has been | printed in the last 2 years, and wasn't even covered by the | report. Looks like they're going on a last ditch printing spree | FireBeyond wrote: | Hah. At one point Tether was claiming, during the days where | they were holding on to the "1:1 backing!" that they were | banking $2 billion A WEEK. | | And yet the cryptofans were telling us we were curmudgeons for | not buying into the hype (or in this case, the bullshit). | tastyfreeze wrote: | From their website: "Every Tether token 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")." | | They don't claim 1:1 USD backing. They claim that every | tether is backed by 1 USD of value. So, when their crypto | holdings go up in value, TADA!, more reserves to print tether | against. The problem here is they never explain what happens | when the value of their backing assets goes down. | loeg wrote: | Their website's claim has changed. Historically, they | claimed USD backing: 2015[1] 2016[2] 2017[3] 2018[4]. By | 2019, they had abandoned that claim[5]. | | [1]: https://web.archive.org/web/20150814185145/https://tet | her.to... "Every tether is always backed 1-to-1, by | traditional currency held in our reserves." | | [2]: https://web.archive.org/web/20160417000232/https://tet | her.to... "Every tether is always backed 1-to-1, by | traditional currency held in our reserves." | | [3]: https://web.archive.org/web/20171201230600/https://tet | her.to... "Every tether is always backed 1-to-1, by | traditional currency held in our reserves." | | [4]: https://web.archive.org/web/20180809053152/https://tet | her.to... "Every tether is always backed 1-to-1, by | traditional currency held in our reserves." | | [5]: https://web.archive.org/web/20190426055956/https://tet | her.to... (current language) | onlyrealcuzzo wrote: | Don't worry - like Stonks - Crypto only goes up | zomglings wrote: | There has _always_ been a healthy amount of skepticism about | Tether in the crypto community. Your cryptofans narrative | does not accurately reflect reality. | SkyPuncher wrote: | Yea, I'm on the edge of crypto and I knew that Tether has | always been viewed is questionnable. | Kiro wrote: | I've never seen a cryptofan defend Tether. | leppr wrote: | Most of the big Bitcoin talking heads did. | bonestamp2 wrote: | Some of us who like crypto also knew it was bullshit. | pfisherman wrote: | <insert crypto rant> fiat <more crypto rant > debasing the | currency. | | What I find ironic is that the crypto ecosystem still ended up | with something like central banks, only in this case their | mandate is make money for its owners, and they have no | accountability or obligation to serve the general public. | DennisP wrote: | Play centralized games, win centralized prizes. | rgrieselhuber wrote: | Exactly. | bko wrote: | The difference is I can choose not to hold Tether. Removing | my exposure to dollars as a US citizen is a lot harder. Not | to mention people that are on a fixed income like my parents. | So debasing fiat is a lot worse | lupire wrote: | Sure but "not holding Tether" is just "Tether not existing" | but with extra wasteful steps. | frankbreetz wrote: | I believe a tether collapse would have a significant effect | on the entire cryptocurrency ecosystem | kaashif wrote: | It would at least open the door to more regulation, not | to mention prudence on the parts of investors. I can't | escape the feeling some of these risks aren't being | priced in properly. | | I don't think very many average people are invested in | crypto significantly, if at all, despite the hype, so | hopefully the harm would be limited. | [deleted] | headmelted wrote: | This is the big question mark, and why I sigh when people | shrug it off. | | How much of the demand for these tokens is being driven | by money that never really existed? 100%? 50%? 0.02%? | | There's no way of knowing until it crashes - then what? | e.g. if the price dives by 50%, and that really equates | to 200% of the actual capital ever invested, what happens | then? | | I was listening to Darknet Diaries episode 102 today | about the Canadian money printer, and I was thinking the | entire way through it that it was basically describing | tether but with paper and ink. | | It got especially eye-opening when he talked about having | to manage how it was released into circulation slowly so | as no-one could track where it was coming from. | itsoktocry wrote: | > _The difference is I can choose not to hold Tether. | Removing my exposure to dollars as a US citizen is a lot | harder._ | | Did you miss the part about them lying? | | "I have a right to choose to buy something" for whom the | value is deceptively obfuscated is quite the argument. | spywaregorilla wrote: | That is part of being part of the society, yes. | anm89 wrote: | So is having the right to hold other currencies and | assets. | | Tell that to an Argentinian who has had their life ruined | because of the lack of foresight from the the people who | run their society. | floatingatoll wrote: | Incorrect, no such right is necessarily guaranteed by | societies. For example, during much of the 1900s you were | required to sell gold to the US government for USD rather | than keep it under your mattress, and if you refused they | had the right to seize it with force. For another | example, negative savings interest rates in certain | European countries. | anm89 wrote: | And yet, I still hold those other things. | | Many people told that society where to shove it when they | came to repossess their assets by force. | | If you are trying to explain why I owe some debt to | society to support their currency you aren't making a | very convincing argument. | [deleted] | waterhouse wrote: | > during much of the 1900s you were required to sell gold | to the US government for USD rather than keep it under | your mattress, and if you refused they had the right to | seize it with force | | Many considered this a violation of their rights. Justly | so. I would say that "no such right is necessarily | guaranteed" is only true in the sense that no rights _at | all_ are necessarily guaranteed. | dragonwriter wrote: | > What I find ironic is that the crypto ecosystem still ended | up with something like central banks, only in this case their | mandate is make money for its owners, and they have no | accountability or obligation to serve the general public | | So, like private currency-printing banks _before_ government | monopolies (and like private banks, which subject to central | regulation still create money though they don 't print | currency), _not_ like central banks. | majormajor wrote: | > So, like private currency-printing banks before | government monopolies (and like private banks, which | subject to central regulation still create money though | they don't print currency), not like central banks. | | Yes, nothing prevents a crypto bank from "creating money" | (aka lending) in the same way that a fiat bank does. Loan | out your deposits. It's that easy. | | Not having it blow up on you in a run-on-the-bank scenario | is the harder part than "creating the money". ;) | jayd16 wrote: | But the point of the article is that they essentially did | print currency, no? | dragonwriter wrote: | The point of the article is rather that they violated the | rules on creation of "money" [0] by means other than | issuing legal-tender currency, and are being punished for | that violation. | | [0] viewed broadly, but I won't quibble about that. | OneLeggedCat wrote: | > crypto ecosystem still ended up | | It's decades from its final form. | rzwitserloot wrote: | Perhaps. But we're, what? 10 years in and so far crypto has | enabled 'I encrypted your data!' scams, caused political | instability, been a vehicle for highly volatile investment | (but the world wasn't hurting for such opportunities...), | and served as a fine buzzword for dev teams around the | world to get a sack of cash to update some systems. | | That's a pretty poor result for 10 years of this much | investment and focus. The internet was waaaaaaaaaaaaay more | useful 10 years in. | | I don't think crypto gets to claim the benefits of the oft | touted protection against centralized bullies or scams. | Quite the opposite: You need to go pretty deep into | political dictatorships before crypto on net balance seems | favourable. So far crypto coins are far more likely to be | fleeced, and the vast majority of crypto holding folks are | working with mostly centralized entities (such as Tether), | which rate, as far as trustability and good shepherdship | goes, not in a good place. Better than Pol Pot and Mugabe. | Maybe. | | Oof. | | So if it's decades from its final form, when is it going to | deliver on its first actually useful to humanity milestone? | I'm still waiting. | kbenson wrote: | If that's the trend, by the time it reaches it's final | form we'll all be smoking husks left over from the great | AI uprising wars, but don't judge those AIs too harshly, | that new testnet that paid out for verified kills was | just too good to pass up. | bonestamp2 wrote: | > so far crypto has enabled 'I encrypted your data!' | scams | | These scams existed long before crypto. But, crypto | currencies are a better solution to international money | transfers so of course they became the preferred | currencies for these scams. | varjag wrote: | It took crypto to make them Web scale. | lottin wrote: | If cryptocurrencies were a better solution, they would | have been widely adopted. Instead, they have been adopted | by people who can't use real money for one reason or | another, e.g. criminals. Which tells us they are a bad | substitute for real money. | AnthonyMouse wrote: | > I don't think crypto gets to claim the benefits of the | oft touted protection against centralized bullies or | scams. | | The big problem here is that the core benefit of | cryptocurrency is in removing the bank as a middle man. | But the bank is the chokepoint where governments impose | constraints. | | When you're up against an authoritarian government | imposing unreasonable constraints, that's what you need. | But it works the same against any constraints. So if you | want constraints on "money laundering" or processing | transactions related to criminal activity, those | constraints are gone too. | | The constraints are already gone for anyone willing to | break the law. You can't un-invent Bitcoin, so from here | on drug dealers will be able to use it or something like | it to transfer their drug money etc. That's happened, | it's in the past, no regulations you put on law-abiding | people will undo it because the people doing it are | already the people breaking the law. | | We still have all the regulations. They just don't work | anymore. We're still paying the cost and the benefit has | evaporated. But for all the honest people who are | following the law, the regulations still apply. The | overhead is still there. All the paperwork and the false | positives. | | So you can use Bitcoin to buy drugs but you can't use it | to buy a sandwich, because to accept Bitcoin the sandwich | shop would have to deal with filing fees and lawyers that | the drug dealer is just ignoring. Regular people don't | get the benefit until we have a regulatory system that | makes it as easy to accept cryptocurrency as it is to | accept cash. | clusterfish wrote: | You can't uninvent Bitcoin but you can certainly make it | illegal, making it all but useless for drug trade or | money laundering. Nobody needs a currency that you can't | exchange for, you know, real currency that you can buy | real things with. So although the government doesn't have | the power to eliminate Bitcoin, they do have the power to | make it useless. I don't think they will though, because | guess who is using it for bribes and money laundering? | AnthonyMouse wrote: | Making it illegal doesn't affect its utility for illegal | activity. Criminals already break the law. It would cause | a one-time decline in value but that only matters to | speculators. The value would still be non-zero because | it's global and there exist places where it isn't | illegal. | | Even if it was somehow illegal everywhere, the value | still wouldn't be zero because of black markets. The drug | user uses it to buy drugs, the drug dealer uses it to buy | guns, the gun runner uses it to buy stolen art, the fence | uses it to buy stolen goods from petty thieves who use it | to buy drugs. | | Black markets would also exist to exchange it for cash or | ordinary commodities so that someone else could get it to | buy drugs/guns/art/whatever. | | And it has utility over using physical cash or gemstones | or bullion in that you can transfer it over the internet. | mwint wrote: | If you can't trade BTC for USD, you'll trade it for Yen, | and then trade for USD. | | Some country will want to cash in on the demand for their | currency, and will leave it legal to exchange. | flipbrad wrote: | Don't forget the environmental catastrophe of all that | wasted electricity generation, and driving up prices of | GPUs. | [deleted] | dylan604 wrote: | > their mandate is make money for its owners, | | Isn't this pretty much the description of every company? I | understand feduciary responsibilities blah blah, but if the | company didn't think they could do both then they wouldn't be | running the legitimate buisness. If it was started to | intentionally dupe people that's an entirely different thing. | dragonwriter wrote: | > Isn't this pretty much the description of every company? | | Which is why we don't let private companies create currency | willy-nilly anymore. | heurisko wrote: | > Which is why we don't let private companies create | currency willy-nilly anymore. | | As I understand, private banks extend loans, which while | not being printing money, the loans being deposits (which | can be withdrawn) the effect of creating currency is the | same. | majormajor wrote: | Private banks can only extend loans so much as they have | the money already. | | Yes, it's a juggling act: Person A still has $1000 on the | ledger in their deposit even if the bank lends $800 of | that to Person B, so if the people with deposits want to | cash out all at the same time, and the bank can't pull | back what they've lended out fast enough, you have big | problems! | | But they aren't just adding numbers to a cell in a | spreadsheet without having the money to back it - a loan | that can't be used to pay someone or to be turned into | cash is useless. You can't just start a bank and issue | yourself a thousand dollars into your own account and | expect to be able to use it for anything. This would be | closer to the credit card model - short term credit | without taking deposits, making money on the repayment - | but again, good luck issuing yourself your own credit | card to buy a bunch of stuff with to "create money." | | And they also aren't doing anything that couldn't be done | with crypto! | rsj_hn wrote: | Correct, for the non-financial sector, "money" is | currency in circulation (created by the government) and | then liabilities of the financial sector (created by the | private sector). This is true regardless of whether they | are checking accounts, savings accounts, certificates of | deposit, money market mutual funds, etc. It's all private | money and we not only allow it but we subsidize and | encourage it. | dragonwriter wrote: | Lending, and the maintenance of the depository accounts | where lent money not withdrawn in cash must end up, is | much more tightly regulated than it was in the era of | willy-nilly private currency issuance, as well as direct | currency issuance itself being reserved for the State. | simonh wrote: | Issuing tether was basically an unregulated bank loan | system. With a regular loan the created money is | destroyed when you repay it. In theory that would happen | to the tether when you redeem it for dollars. The problem | is really just that tether was lying about how they were | operating. | lazaroclapp wrote: | > Isn't this pretty much the description of every company? | | For the most part, sure. But that's the parent's point, I | think. _Central_ banks are not companies, they are part of | the public financial infrastructure of a nation (or, in the | EU case, group of nations). | jameshart wrote: | > Central banks are not companies | | Actually... it's complicated. The Bank of England, for | example, was nationalized only in 1946, and it remains | technically a company which is owned by the state, not | actually part of the government. | | In the US, the Fed is... well, it's not a company, but | it's also not _not_ a company... or group of companies... | | See https://en.wikipedia.org/wiki/Federal_Reserve_Bank | pfisherman wrote: | Objectives and incentives are extremely powerful drivers of | mass behavior in large organizations. Maximizing profit is | a much different objective that contributing to the social | good. That is why some functions are best fulfilled by non | profits and government. | | There world is full of cases where products or services are | degraded in order to maximize profit. Has DRM ever made for | a better gaming experience? Do clickbait articles result in | a better informed public? | ChainOfFools wrote: | decentralization is at best nothing more than a polite name | for the transition period from one centralized regime to | another. | | like all mirages, it dissolves when you get too close. | lmkg wrote: | On the initial headline I thought that $41 million would be | negligible compared to the central role they have in the crypto | ecosystem. But apparently that fine is 2/3 of their backing | reserves. | boole1854 wrote: | Correction: it is 2/3rds of what their reserves were back in | 2017. The amount of Tether in circulation has increased over | 150-fold since then, so presumably their reserves have | increased as well. | delecti wrote: | > The amount of Tether in circulation has increased over | 150-fold since then, so presumably their reserves have | increased as well. | | They _just_ got punished for not having actual reserves | match their circulation. What basis is there to presume | that their reserve is matching their circulation now? | sgpl wrote: | While I wouldn't say that their reserve is matching now ( | I do not know) there were a few threads on twitter that I | read a while back that stated that the folks behind | tether were increasing the supply (of tether) to | artificially inflate the value of their bitcoin holdings | - which is something that they could have liquidated in | exchange for more fiat since then. Obviously this is all | conjecture at this point. | | This is the best reference I could find in relation to | what I've said above: | | _In newly published research, with Amin Shams of Ohio | State University, he finds evidence that Bitcoin's | 2017-2018 bubble was inflated by a lesser-known digital | currency called Tether._ [0] | | [0] https://medium.com/texas-mccombs/tether-connection- | puts-bitc... | 35fbe7d3d5b9 wrote: | https://tether.to/wp- | content/uploads/2021/08/tether_assuranc... | | This all boils down to two questions in my mind: | | 1) Do you trust the unsigned report from the auditor, who | appears to be a fairly unknown entity? | | 2) Do you trust the asserted quality of the commercial | paper, which makes up 50% of the putative reserves? | jyrkesh wrote: | Even worse, they just took the opportunity to pay off the | govt to avoid disclosing exactly to what extent they | lied. | | At this point, what basis is there to presume that their | reserve is non-zero? | [deleted] | thaumasiotes wrote: | Problem: Tether has less money than they're supposed to have in | order to back their obligations. | | Solution: take some of their money away. | rkagerer wrote: | https://archive.is/eqUP1 | nickff wrote: | The CFTC claims to be helping end-customers by doing this kind of | thing, but it is really taking money that could have been | distributed off the table. Fining (and perhaps requiring the | dismissal of) Tether's corporate officers would likely instill | more discipline, but fining the company just hurts the customer. | klyrs wrote: | No. This teaches scammers and customers alike that this is a | risky business. Fining the corporate officers is almost | certainly off the table, because Tether appears to be some form | of limited liability corporation (but I don't know anything | about the law in HK). Play stupid games, win stupid prizes. I'd | hope the founders end up in jail for what appears to be blatant | fraud... but chances are, they'll just move on to the next | thing after Tether crumples. | nickff wrote: | The CFTC mission statement is: | | > _" The mission of the Commodity Futures Trading Commission | is to promote the integrity, resilience, and vibrancy of the | U.S. derivatives markets through sound regulation."_ | | I don't see how punishing customers accomplishes that goal. | klyrs wrote: | Let's read that carefully, now. | | The CFTC provides "sound regulation," not insurance. | Insurance protects customers. Regulation by the CFTC is | meant to protect "the U.S. derivatives markets." They | aren't there to protect customers. | | If the customers wanted a safe investment, they should have | used an insured vehicle for that. | tdeck wrote: | It would be better to confiscate Tether's entire reserve, force | them to allow tether holders to cash out (for fractional | amounts), and punish the execs directly. | nickff wrote: | That would make sense to me, though it may be possible (and | less disruptive) to allow tether to continue under new | management. | Hamuko wrote: | This sounds a lot like letting Bernard L. Madoff Investment | Securities LLC to "continue under new management" in order | to be less disruptive. | nickff wrote: | Madoff's fund was insolvent; I am not sure whether the | same is true of Tether. There's no need to liquidate a | solvent entity. | tdeck wrote: | I don't understand why this is something they can settle rather | than something that gets them completely shut down. | _3u10 wrote: | The SEC is in the business of protecting investors not | destroying peoples savings over a few inaccuracies. | | Why would misleading statements ever result in a shutdown of a | company instead of a fine? | tdeck wrote: | Because the "misleading statement" (i.e. deliberate lie) is | the entire basis of Tether's business. The service they claim | to provide is fiat backing for their cryptocurrency and they | didn't do that. That's not "a few inaccuracies", it's fraud. | _3u10 wrote: | Isn't the basis of the business that tethers are | exchangeable for USD? Have they failed to provide USD when | asked? | orthecreedence wrote: | Wait, has anybody ever in the entire existence of Tether | actually _withdrawn_ their USDT for USD?? | tdeck wrote: | Essentially yes. They throw up all kinds of roadblocks to | make it difficult to exchange tether for cash in order to | preserve the facade. | | Just one article I found: | https://www.google.com/amp/s/micky.com.au/irredeemable- | why-i... | wmf wrote: | It's debatable whether Tether has a few inaccuracies or | massive fraud. | [deleted] | Kranar wrote: | The CFTC doesn't have that authority; a company can only get | shut down for a criminal offense and Tether is not accused of | any crime. Only the Department of Justice can prosecute or | investigate crimes, the CFTC is an independent agency and as | such has no authority to do so. | | All the CFTC can do is levy a fine, so both parties are fairly | indifferent as to whether that money comes from a judgement or | from a settlement. There could be some minor benefit of not | having to admit any "wrongdoing" for press release purposes, | but overall it makes no difference. | AlexanderTheGr8 wrote: | Tether is not a US-based company. So does US have the authority | to shut them down? | 35fbe7d3d5b9 wrote: | There is an entire branch of the Department of Treasury | designed to enforce stiff sanctions and financial penalties | against people, companies, and even _countries_ that defy US | regulations. | | If the federal government decides Tether needs shut down, it | won't be a struggle. | 35fbe7d3d5b9 wrote: | Since I didn't really talk through this before, a bit of an | effort post. | | OFAC sanctioned Suex, a crypto exchange based in the Czech | Republic, less than a month ago[1]. As far as I can tell it | is _gone_ from the face of the earth. Here 's why: | | > As a result of today's designation, all property and | interests in property of the designated target that are | subject to U.S. jurisdiction are blocked, and U.S. persons | are generally prohibited from engaging in transactions with | them. Additionally, any entities 50% or more owned by one | or more designated persons are also blocked. In addition, | financial institutions and other persons that engage in | certain transactions or activities with the sanctioned | entities and individuals may expose themselves to sanctions | or be subject to an enforcement action. | suex.io. 676 IN SOA ns-648.awsdns-17.net. awsdns- | hostmaster.amazon.com. 1 7200 900 1209600 86400 | | suex.io's hosting is gone due to OFAC's ruling: Amazon is | barred from providing them service. | | They used to take Visa & Mastercard[2] - even if they were | online today, they wouldn't find a payment processor in the | world willing to touch them: that would expose the payment | processor to OFAC sanctions which is as close to | "existential risk" as you can get in finance. | | Suex was listed on the SDN list[3]. As a result no US based | exchange can touch any crypto from those addresses. If, | say, you wanted to cash out that crypto by sending it to | Coinbase, they'd be legally required to freeze it and deny | you access to it: otherwise, they're at risk of OFAC | sanctions. | | Every bank in the US monitors the OFAC SDN list, and as a | result, they will be monitoring transactions. If Suex | attempted to move their money into a bank account | controlled by the US, they'd be blocked. But most likely | their accounts are already frozen, because OFAC | jurisdiction attaches when funds pass through any US | financial institution or any foreign financial institution | owned by a US person. | | OFAC has recently decided that _the mere presence_ of US | dollars in a financial transaction is sufficient to | establish jurisdiction: if Suex had their entirely foreign | owned bank process any transactions in dollars, this would | cause a US counterparty to indirectly provide financial | services to an SDN. This risks sanctions at their foreign- | owned bank. | | At the end of the day, most global financial institutions | assume a US nexus is present and deny any service to | targets of US sanctions - the risk is much lower. | | To wrap this up, OFAC has published an interesting guide[4] | to sanctions that directly relate to cryptocurrency, and | it's well worth a read. | | [1]: https://home.treasury.gov/news/press-releases/jy0364 | | [2]: | https://web.archive.org/web/20210414074952/https://suex.io/ | | [3]: https://home.treasury.gov/policy-issues/financial- | sanctions/... | | [4]: https://home.treasury.gov/system/files/126/virtual_cur | rency_... | orthecreedence wrote: | This is really interesting. I've long thought of as the | US' empire being a primarily financial one (as opposed to | military, like many other past empires) and I didn't even | realize OFAC existed until reading your comment, much | less the types of activities they engage in. This | certainly cements my suspicions even more about the | financial empire of the US and how they exercise that | power. | | Thanks for the post. | BitwiseFool wrote: | I'm not saying they _shouldn 't_ be shut down, but I genuinely | wonder how that process would work. People don't have an | account with Tether itself, so how would they be able to compel | people to "return?" the Tethers and get their cash back? | skybrian wrote: | In theory, by announcing a changeover period and a deadline | for turning them in? If they don't, it's on them. | | A similar thing was done when upgrading national currencies | to the Euro: https://europa.eu/european-union/about- | eu/euro/exchanging-na... | WalterSear wrote: | * They don't need to? If Tether, the company, disappeared, | the market can decide what to do with the, now entirely | unbacked, Tether cryptocurrency. | | * Tether, the company, can freeze specific Tethers they have | issued, making them unusable as currency. Whoever shuts them | down might be able to force them to do this en masse. | BitwiseFool wrote: | That's the thing, though, Tether is supposed to be holding | all these assets and individuals are able to redeem Tethers | proportionally. Leaving aside the strict notion of 1 Tether | = 1 Dollar convertibility, just closing up shop would mean | all those actual real world assets now belong to... who | exactly? | WalterSear wrote: | I'm confused as to what 'real world assets' you are | referring to. | | If Tether goes away, any value goes with it, like a gift | card to Blockbuster's. | | Fwiw, it's likely just the _pretence_ of redemption that | would go away - it may never have been really there. | Tether is explicit that they only redeem Tethers at their | discretion. While they also specify that they will only | redeem them for high value, non-US parties, I suspect | this is misdirection. | | There is no evidence of any appreciable redemption going | on, though they have announced the burning of $1.5 | billion Tethers - all in the last six months. According | to Tether, this is because they just 'keep them for | later'. | | https://cointelegraph.com/news/tether-explains-why-it- | hasnt-... https://cointelegraph.com/news/bitfinex-is- | constantly-printi... | paulgb wrote: | I'm more surprised that anyone still _holds_ Tether, unless | they 're stuck with it. The company has been caught in lies | several times before, it's not as if a $41M fine will turn them | honest. | ur-whale wrote: | >I'm more surprised that anyone still holds Tether, | | The price BTC shooting up right now (it is around $61k as I | write this) is probably because lots of USDT holders are | starting to realize what a bad idea that is. | | If you were in their shoes ... what would you be doing right | now? | leppr wrote: | The BTC price increase is because of rumors of a US BTC ETF | being approved. The Tether fine is a non-event in crypto | social networks. | knownjorbist wrote: | Lending rates for USDT on the major decentralized lending | platforms are more favorable than other stablecoins. | sdhfjgjh wrote: | The lending rates are higher because lenders are paid a | premium for owning a potentially worthless (USDT | denominated) credit. The idiom that comes to mind is | "picking up pennies in front of a steamroller". | gammarator wrote: | Basic question: why doesn't this affect the currency pair | exchange rate? If lending rates reflect the (realistic!) | idea that holding 1 USDT is less valuable than holding 1 | USD, how does 1 USDT trade at par? | humaniania wrote: | The platforms that deal in USDT have a very strongly | vested interest in seeing its continuation. To the long | term detriment of nearly everyone else. | ZephyrBlu wrote: | I'm assuming because a lot of people would lose a lot of | money if it stops trading 1:1. | sdhfjgjh wrote: | If the price is under $1, the backer can purchase the | coins with reserves and pocket the difference. The price | will only depart from the peg if selling forces the | market price down and the backer doesn't have enough | reserves to purchase tokens sold beneath the peg. This | scenario is similar to a bank run and would require high | selling volume to set if off. | | The lending rates are determined by a separate mechanism | and reflect the probability of a future departure from | the peg. | bluecalm wrote: | Once the peg is broken it will collapse quickly. That | means it's in their interest to keep the peg. If they | have enough reserves (hard to imagine they have even 5% | in cash but maybe they managed to buy enough BTC with | their tokens to keep afloat for a while) they can keep | the facade going for a very long time (until some kind of | bank run is triggered). | humaniania wrote: | Many people are also assuming that unlicensed unregulated | offshore exchanges keep 100% of client funds in reserve. | LOL. | SilasX wrote: | It flips back and forth with USDC, which one is higher, | at least on compound.finance. Right now USDC is higher, | but it's been different. Here are the historical charts | (click the "borrow" tab, doesn't seem to be a way to link | it with that one selected): | | https://compound.finance/markets/USDC | | https://compound.finance/markets/USDT | | For example, on October 7, it shows USDT at over (sorry, | "north of") 13%, while USDC was (sorry, "clocked in at") | ~5%. | leppr wrote: | The rates are mostly affected by sudden changes in | demand. | | The demand for Tether comes mostly from Binance and the | other centralized Asian exchanges. The demand for Circle | dollars comes from the DeFi ecosystem and FTX. | SilasX wrote: | Really? I've been using compound.finance, and it | fluctuates, heavily -- sometimes a lot less than USDC, | sometimes a lot more. | | Edit: More details in my other comment: | https://news.ycombinator.com/item?id=28882422 | 300bps wrote: | Or why outright lying that every Tether was backed by a U.S. | dollar is termed "misleading". | | It's incredible - they had 4x as much Tether as dollars backing | it and lied about audits taking place that never happened. | BbzzbB wrote: | More than 7x ("at one point") | [deleted] | WalterSear wrote: | That was then. This is now: | | https://pbs.twimg.com/media/FBwhKnmXEAE1whT?format=jpg&name | =... | BbzzbB wrote: | The fact the number of Tethers in circulation basically | never goes down even when the crypto market gets more | then halved says it all as far as I'm concerned, but | without an investigation it is speculation. I was | referring to the ratio highlighted by the article. | [deleted] | JumpCrisscross wrote: | > _why this is something they can settle rather than something | that gets them completely shut down_ | | I'm a Tether sceptic. I wouldn't want to be the regulator | (note: not prosecutor, different standards) to shut it down. | | There was a moment when I suspected Tether may hold U.S. dollar | money market securities. That would mean a collapse could spill | to our financial markets. But that doesn't seem to be the case. | The only people who would get hurt in its wake seems to be | those who choose to keep using Tether despite the screaming | warnings. | | Those same people would make you public enemy No. 1 for | bringing down the house of cards. So given the problem is | contained to the people who oppose its solution, there isn't a | great argument for allocating regulatory resources to this over | anything else. ___________________________________________________________________ (page generated 2021-10-15 23:01 UTC)