[HN Gopher] Hindenburg Research Announces $1M Bounty for Details...
___________________________________________________________________
Hindenburg Research Announces $1M Bounty for Details on Tether's
Backing
Author : ilamont
Score : 284 points
Date : 2021-10-19 20:46 UTC (2 hours ago)
(HTM) web link (hindenburgresearch.com)
(TXT) w3m dump (hindenburgresearch.com)
| rexstjohn wrote:
| Federal Reserve was crafted in a secret meeting on Jekyll Island
| (https://en.m.wikipedia.org/wiki/Federal_Reserve) between
| industry and government.
|
| Still exists and functions today. Lot of people don't like it,
| but it's there regardless.
|
| Even if the origin, operation of Tether is highly suspicious: if
| it functions, is widely adopted and does what is expected ... may
| last longer than people think.
|
| Best response is more open stable coin equivalents.
| xur17 wrote:
| > Even if the origin, operation of Tether is highly suspicious:
| if it functions, is widely adopted and does what is expected
| ... may last longer than people think.
|
| I think you're right about this point, and I've been trying to
| imagine what might cause Tether to collapse - you really need a
| run on the bank situation triggered by something causing them
| to become insolvent.
| the_optimist wrote:
| Liquidity squeezes and credit crises are correlated:
| inability to repay happens at the same time as unwillingness
| to lend. In practice, you get a commercial paper default at
| the same time you get increased liquidity demands. All you
| need is one event; one fraud, one excess-risk taking that
| doesn't pay off. If Tether is investing reserves, it is only
| timing until they default. There is no exception, and
| everyone sophisticated in finance knows this. Banks play the
| same games with probability distributions on risk assets;
| this 'social science' still reliably fails and banks are
| accordingly bailed out. Tether has no such recourse.
| PKop wrote:
| A crash in the corporate paper they hold, which would destroy
| the rest of the economy even more. Tether would be a footnote
| to that event.
| wpietri wrote:
| That they _claim_ to hold. They won 't prove it, and many
| financial industry insiders have suggested they couldn't
| possibly hold what is normally thought of as "commercial
| paper" in the quantities they claim.
| rossdavidh wrote:
| Like, say, a bunch of Chinese firms who need cash quickly to
| pay dollar-denominated bonds, all selling their Tether at the
| same time?
| Traster wrote:
| The real question is basically how much is it leveraged. We
| learned this from so many other frauds/crashes. It's not so
| much that "as long as there isn't a run on the bank it's
| fine" it's that an outflow of a tiny percentage could
| effectively be a run on the bank, since they may only be
| backed by a tiny fraction of what they claim to be backed by.
| It's one thing if they have 90% backing. What happens if it
| turns out it's only backed 0.05%? A run on the bank won't
| kill them, an averagely bad few days could see it all
| collapse. This is exactly why banks have regulations.
| perl4ever wrote:
| A run on a bank can make it insolvent?
|
| I thought that insolvency was when they don't have the assets
| to cover their liabilities.
|
| My understanding of a bank run is it happens when a bank is
| solvent, but doesn't have enough in reserves - liquid, short
| term assets.
|
| But if they simply don't have at least 100% of their
| liabilities in assets, then they are bust because they can
| never pay people back barring a miracle.
| marvin wrote:
| > But if they simply don't have at least 100% of their
| liabilities in assets, then they are bust.
|
| Only when we find out!
| Closi wrote:
| Well usually banks have huge audit requirements and are
| covered in regulation to avoid this happening (after
| learning what happens when you have entirely unregulated
| financial institutions)
| [deleted]
| stevage wrote:
| Insolvent literally means liabilities exceed assets. There
| are various ways a company can trade while insolvent,
| including being a Ponzi scheme.
| perl4ever wrote:
| When people say "hey, Tether is no worse than the existing
| financial system" I wonder if they don't understand the
| difference between holding a fraction of deposited money as
| reserves, and only having a fraction of deposited money as
| assets, period. As far as I know, when the latter happens in a
| real bank, they get shut down, shareholders lose their money,
| and only the FDIC saves the depositors.
|
| Just because that's the primary factoid I know about banking.
| Dma54rhs wrote:
| I've never held any coin but why can't it be true? The money
| is imaginary anyway and while you can talk about backing
| dollars with tanks and bomb at the end of the day is there
| are believers there is a market snd one market can outlive
| another. Saving depositors in regular banking is pure belief
| as well.
| wpietri wrote:
| > Saving depositors in regular banking is pure belief as
| well.
|
| Not in the same way. FDIC insurance goes back more than 90
| years. Its value has been proven through major financial
| crises. It is pretty transparent about what it does, and
| it's accountable to the public. There is also arms-length
| regulatory verification between banks and their various
| regulators to make sure that they aren't taking on too much
| risk.
|
| Tether, on the other hand is intentionally opaque, run by a
| small number of people, has mysterious relationships with
| other players, and has been caught lying about their
| backing. It has never been tested by a serious crisis. And
| of course there's no real regulation, so you basically have
| to take the word of people who have demonstrated they're
| not trustworthy.
| jcranmer wrote:
| If a bank makes a loan to somebody else, the value of that
| loan is recorded as an asset. Customer deposits at a bank
| are recorded as liabilities. Even when banks loan out money
| to other people, they are careful to make sure that their
| assets exceed liabilities--and not by a small amount, but
| by something like 10%.
|
| Now, not all loans are repaid, and when that happens, the
| bank will take a write-off of that asset, reducing its
| assets. In a bad financial crisis, this might hit something
| 5, 6, 7% of their total assets--but remember that they
| started with 110% assets over liabilities, so they're still
| left with more assets over liabilities.
|
| The thing with Tether is that if you look at Tether's
| claimed accounts, their assets-to-liabilities ratio is
| 100.2%. When that ratio dips below 100%, _you are
| insolvent_. If I recall my math correctly, a 5% drop in the
| price of Bitcoin would make Tether literally insolvent.
|
| You might argue that all the financial shenanigans are
| ultimately illusory, but the fact remains that the person
| crowing about the unreality of finance is the one that is
| tapdancing on an oil-soaked rope while juggling
| flamethrowers. And huffing ClF3 at the same time, perhaps--
| they're unwilling to tell us.
| ufo wrote:
| Additionally, that 100.2% figure is from Tether's own
| creative accounting. In all likelyhood the numbers are
| even worse than that.
| dnautics wrote:
| Moreover the Fed _implicitly_ has the authority to do the
| bullshit that it does. Arguably that makes it more pernicious
| and evil, but short of political collective action there 's
| also not much as an individual you can do about it. You can
| certainly do things about the tether situation, e.g. exit
| crypto, short tether (this may be stupid, lol), etc.
| adrr wrote:
| Didn't they pay a huge fine for lying about actually being
| fully backed by assets? This is crypto's biggest problem, the
| amount of scams.
| cyberpunk wrote:
| Am I missing something here or is this basically a bounty for a
| black hat hack campaign against tether?
|
| I mean, yeah, fuck those guys, but how is any kind of enforcement
| to be done on how this information was obtained?
|
| Sysadmin at Microsoft or google with access to their emails may
| be mighty tempted by this eh?
| gitfan86 wrote:
| It is highly dependent on what prosecutors have jurisdiction
| and the politics involved. The Duke Lacrosse prosecution is a
| good example of a prosecutor going over the top on charges for
| political reasons, and the Jeffrey Epstein plea bargain in 2007
| is an example of the opposite.
| paulsutter wrote:
| They should denominate the bounty in Bitcoin, or even
| Zcash/Monero
| arthurcolle wrote:
| this is extremely bearish on crypto
|
| BRB, buying puts on everything
| javajosh wrote:
| Sounds like they're offering to bribe an insider to disclose
| specifics about the "commercial paper"[1], which is presumably
| how a company like Tether would make most of its money. That is,
| taking advantage of the time-value of money over short periods of
| time (< 30 days) with large quantities of money (tranches of
| $100k) at a time, reserves which any marketplace would naturally
| have on hand.
|
| Note that Tether looks shady at first blush, with a link to
| "Proof of Transparency"[2] that is content-free. I also find it
| sus that their job listings only list "Business Development
| Specialist" [3].
|
| Is it illegal for a private person to offer to pay someone to
| illegally snitch on an illegal operation? Do two illegal things
| cancel out?
|
| 1 - https://www.investopedia.com/terms/c/commercialpaper.asp
|
| 2 - https://tether.to/latest-assurance-opinion-confirms-
| tether-f...
|
| 3 - https://tether.recruitee.com/
| Gortal278 wrote:
| It doesn't have to be an insider
| arthurcolle wrote:
| it's a very small group of people with pretty well-known
| dubious banking connections. I won't rehash it but the CEO of
| their main bank is some rando with pretty poor spelling.
|
| I doubt anyone beyond the inner circle (I guess maybe the
| exec assistant of the aforementioned rando might know
| something interesting) would know anything interesting.
| JumpCrisscross wrote:
| > _Is it illegal for a private person to offer to pay someone
| to illegally snitch on an illegal operation?_
|
| It's not illegal to pay someone for information. If you induce
| them to violate an NDA, yes, it could be. But given the
| question "under what jurisdiction does Tether really operate"
| is a debatable question, I'd say it's probably risky but fine.
| (If you trade on that information, it could be a different
| story.)
| skulk wrote:
| "Induce" is a tricky word; does it imply the target has
| agency? I think the line is drawn when you strip the target
| of agency. Does offering a large amount of money constitute
| stripping a target of agency? It may depend on how you feel
| about capitalism.
| UncleOxidant wrote:
| > If you induce them to violate an NDA, yes, it could be.
|
| Is violating an NDA _illegal_? I 'm not a lawyer and I don't
| play one on TV, but I don't think violating an NDA is illegal
| as in you could go to prison for violating a law. Yes, it
| could open you up to legal jeopardy as in a lawsuit which
| could be expensive, but I don't think any laws are violated.
|
| And if you're violating an NDA to expose some corrupt
| practices it seems like the NDA shouldn't hold any power.
| javajosh wrote:
| Never thought about this, but I guess you might be on the
| hook for fraud if you violated an agreement for profit.
| That is, an employee violating an NDA for profit might be
| considered committing fraud against their employer. It's
| strange - Tether seems shady but I don't think Hindenburg's
| offer is on firm ethical or legal ground. What if
| Hindenberg offered $1M for access to a private list of
| donors to a [prominent abortion rights organization]?
|
| But now that I think about it, why doesn't every successful
| private contract enforcement action end in a public
| prosecution for fraud?
| IgorPartola wrote:
| An NDA would be a civil matter, I would think. It is a
| remedy for monetary damages, right?
|
| Of course I have no idea if offering someone a large sum
| of money to violate any kind of contract is in any way
| illegal or even actionable in civil law since the person
| can always refuse the money and uphold their contract. If
| it made you criminally liable, wouldn't every job offer
| to someone under contract with a competitor lend you in
| jail?
|
| IANAL so offer money to break NDAs at your own risk.
| UncleOxidant wrote:
| > Of course I have no idea if offering someone a large
| sum of money to violate any kind of contract
|
| Hindenburg isn't expressly offering the money for someone
| to break some contract or NDA. They're just offering
| money for information. Yes, the person with the
| information may have to break an NDA to share the
| information, but that doesn't seem like Hindenburg's
| problem. It's also possible that some insider with
| knowledge isn't under an NDA and would be willing to
| share information for $1M.
| djbebs wrote:
| It's not, but tortious interference is a thing
| graeme wrote:
| This is very interesting. Hindenburg is the real deal.
|
| One challenge may be that, like the Mafia, Tether keeps its inner
| circle and employs family members. They have ~15 employees for a
| 70 billion dollar operation.
|
| The CTO's wife is a manager, and the CEO's daughter works for an
| unnamed crypto family office, which may be related.
|
| Their counterparties in Chinese commercial paper may not know
| they are counterparties due to proxies.
|
| Still, the statements are out there. Zeke Faux from Bloomberg got
| a copy of their records somehow. They've had to give them to the
| New York Attorney General, and their accountants in the Cayman
| Islands, among others. And other counterparties may have bits and
| pieces.
|
| Someone may be tempted by this.
| fnordfnordfnord wrote:
| >Hindenburg is the real deal.
|
| Hindenburg is not the real deal. If you think Hindenburg is the
| real deal you should pay closer attention to their activities.
| They (he) are one of a number of noisy short sellers who try to
| drive stock prices with their tweets/reports. SEC should be
| doing things to these people.
|
| That said, he is probably right about Tether. Tether should
| make every crypto speculator or holder very nervous.
| cdolan wrote:
| They were right about Nikola and Lordstown Motors.
|
| I'm a Hinden-believer I suppose
| wpietri wrote:
| Oh? Why should the SEC do anything? If it's wrong to talk
| about a company in hopes of affecting the stock price,
| shouldn't Elon Musk be doing hard time?
| jdhn wrote:
| >shouldn't Elon Musk be doing hard time?
|
| He should be, but they basically gave him the same
| treatment they give a lot of people: a slap on the wrist.
| ctvo wrote:
| > _Hindenburg is not the real deal. If you think Hindenburg
| is the real deal you should pay closer attention to their
| activities. They (he) are one of a number of noisy short
| sellers who try to drive stock prices with their tweets
| /reports. SEC should be doing things to these people._
|
| https://hindenburgresearch.com/about-us/
|
| Which of the items listed there do you have an issue with?
| Hindenburg were the folks who gave us Nikola rolling their
| truck down a hill.
| discodave wrote:
| Technically Nikola gave us the truck rolling down the hill.
| Hindenburg just let us find out about it.
|
| :)
| andreilys wrote:
| Do you have an example of them targeting a non-
| fraudulent/fair-valued company and ruining them?
|
| As far as I know they were the ones who broke the NKLA
| scandal. We need short sellers to keep markets honest and
| stop fraudsters from taking advantage of the current
| exuberant markets.
| adrr wrote:
| Would you pay $1m for information that could let you profit
| 10x or even 100x?
| Leader2light wrote:
| LOL if you think Hindenburg is bad compared to this stupid
| ass bloated fraud market with people like Elon Musk telling
| the SEC to suck his dick. ROFL!!!!!!!!!
| graeme wrote:
| They had a pretty serious report against Nikola that forced
| the CEO to step down and started an SEC investigation.
|
| They also forced a CEO stepdown at Lordstown motors, got the
| SEC to investigate and forced the company to amend their
| accounting statements.
|
| https://en.m.wikipedia.org/wiki/Hindenburg_Research
|
| And their reports have been pretty accurate this year based
| on long term market reaction:
| https://breakoutpoint.com/blog/2021/10/activist-short-
| sellin...
| [deleted]
| [deleted]
| Taikonerd wrote:
| I just realized that the Bloomberg reporter who wrote the
| recent story is named "Zeke Faux." ( _Faux_ meaning "fake" in
| French, in a story about fraud.) Is his name a pseudonym? If
| not, it's another surreal point in a surreal story.
| lgierth wrote:
| Zeke = ZK = zero-knowledge?
| senectus1 wrote:
| lol with a name like that its hard to not think its from a
| Charles Stross novel... ZK Fake .
|
| good lord, the world is a strange place. or, we make it a
| strange place...
| speedybird wrote:
| I guess it's actually his real name, and Zeke short for
| Ezekiel isn't uncommon. But Zeke can also mean 'cloak'.
| fknorangesite wrote:
| Christ this may as well be numerology.
| speedybird wrote:
| As I said, I think it's probably his real name. But it's
| a cool name for sure; his name would be right at home in
| a cyberpunk novel.
| disillusioned wrote:
| Just a hop skip away from Q
| 0ksana wrote:
| You've opened up a can of something. Check this out: Zeke
| = 4 letters. Ezekiel, the long form = 7 letters (note
| this number, cos it will come up further down). Cloak = 5
| letters. 4 + 5 = 9. 9 is the number of spiritual adepts
| that govern the 7 Universes. 9 * 7 = 63. Add those two
| digits, and you get 9, again. See where this is headed?
| mikeyouse wrote:
| Nope - that's his real last name. We have some mutual friends
| and via FB I can see at least a dozen family members with the
| same surname.
| VRay wrote:
| "Well, Mikey Ouse on HackerNews vouched for him"
| avree wrote:
| It's pretty clear that Zeke Faux from Bloomberg existed
| long before Tether existed as a company.
| shoo wrote:
| not clear if it is the easiest target to short, given that many
| people who use tether are fairly skeptical about how/if the
| tokens are backed by assets but use it anyway (if the recent
| Bloomberg story is accurate).
| NovemberWhiskey wrote:
| Seriously, how would you short Tether at scale? It's not like
| you can call up your prime brokerage.
| opinion-is-bad wrote:
| There are entire textbooks written about how to construct
| options from a combination of short and long positions in
| different assets offset by borrowing. It's not trivial, but
| it's a well established discipline in trading world. For
| anyone that would offer a $1M bounty, it's probably a
| talent already on the staff.
| badloginagain wrote:
| Could short the futures ETF now. Timing lines up nicely.
| Marazan wrote:
| It is a terrible target to short as you can only do it
| through exchanges that deal in Tether. Exchanges that can
| manipulate your position and liquidate you if they feel like
| it. Exchanges that benefit from Tether existing.
| PKop wrote:
| Tether is pervasive in DeFi. You could borrow Tether
| through a smart contract, exchange for another stable or
| asset. Pay the interest until it collapses in the future
| and, buy back worthless Tether cheap to pay off loan and
| get collateral back.
| thebean11 wrote:
| The danger is that the smart contract you borrow from
| becomes insolvent and you lose your collateral. This
| becomes way more likely if Tether/crypto is crashing.
| Some of them are more prone to that than others, I'm
| sure, but all of them require collateral > the amount you
| borrow, so the risk is large.
| PKop wrote:
| Yes that is the basic structure of all crypto loans, I'm
| just describing a mechanism by which you could short
| Tether. I get what you mean that if Tether collapses,
| crypto assets like ETH, BTC would crash too. But you
| could short Tether against USDC w/ USDC as collateral
| too. I can definitely envision a scenario where USDC
| holds relatively stable even if USDT crashes.
|
| Nearly all of the smart contract loans are over
| collateralized, so collateral > borrow isn't too hard to
| achieve...but yes, probably only likely in crash if
| collateral is another stable that holds peg.
|
| Just to be clear, I think shorting Tether is a bad idea
| lol
| TigeriusKirk wrote:
| Well, there's a number of very public, very loud Tether skeptics
| out there. I guess now we'll find out if they have anything
| concrete.
|
| I think the skeptics are probably right, but we're at the point
| where real information needs to be uncovered.
| aazaa wrote:
| It may be counterintuitive, but the best thing that could happen
| to Bitcoin would be for Tether to collapse in a cloud of dust.
| Tether is continually cited as a large risk factor to Bitcoin by
| people who have gotten past the "it's not real money" objection.
|
| But I think it's worth considering what happens if the collapse
| never comes. If government investigation, findings of wrongdoing,
| admission of lies, and punishment aren't enough to shake Tether
| users out of their trees, then what would, exactly?
|
| Ethereum allowed a claw-back of funds lost fair and square to a
| defective contract. Where is Ethereum now? Oh yeah, near an all-
| time high and a market cap approaching half a trillion dollars.
|
| What non-users don't get is the fanatical level of devotion by
| users. It waxes and wanes with the Bitcoin halving cycle, but
| always comes back stronger than before.
|
| If Tether did somehow implode and users left in droves, something
| else would come along to take its place and within a year or two
| and the entire Bitcoin ecosystem would come roaring back stronger
| than ever.
| manquer wrote:
| Each scam is draining some money from the market. All these
| scammers are siphoning of real money from the ecosystem each
| time.
|
| Fanatic and devoted fans there maybe, however they don't have
| limitless fiat money to play with. In the recent past, new
| found mainstream popularity has fueled inflows into all kinds
| of crypto products sustaining the strong bull runs despite
| significant and clear risks.
|
| This popularity has little to do with widespread belief in
| distributed / unregulated financial systems, and more because
| these assets have outperformed traditional instruments
| spectacularly, the allure of making ton of money _fast_.
| Eventually it will fade either because there is not enough new
| people who can /will put more money or an unsustainable growth
| tapers off.
|
| When ( not if) the second set of players leave inevitably after
| enough scams, the hardcore fans that will remain and prop up
| the market and keep it going yes. However without non fanatic
| users there is not enough money to come roaring back like in
| the past.
|
| To be clear, it may take a few years or more and few cycles of
| what you say, markets can stay irrational for a very long time,
| it is unstable equilibrium nonetheless, and eventually will
| correct permanently
| fleddr wrote:
| "What non-users don't get is the fanatical level of devotion by
| users. It waxes and wanes with the Bitcoin halving cycle, but
| always comes back stronger than before."
|
| Indeed. 80-90% pullbacks, multi-year bear markets, the seasoned
| crypto trader has seen multiple apocalyptic financial
| disasters, where this simply is a potential next one. It fails
| to impress.
|
| The really clever ones thrive from these crashes, that's when
| they buy. Volatility is the feature.
| qeternity wrote:
| I'm not sure you guys get this: Tether is the reason it comes
| back.
|
| Tether drove the 2017 bubble (this is when Bitfinex'd got
| their start) and has driven the 2021 bubble to the tune of
| $70b.
|
| This resilience wouldn't exist without Tether.
| ur-whale wrote:
| > It may be counterintuitive, but the best thing that could
| happen to Bitcoin would be for Tether to collapse in a cloud of
| dust.
|
| I share your opinion, and especially true if you have a ~5 year
| horizon on BTCUSD.
| ryanSrich wrote:
| > If Tether did somehow implode and users left in droves,
| something else would come along to take its place and within a
| year or two and the entire Bitcoin ecosystem would come roaring
| back stronger than ever
|
| Pick any of the already existing stable coins. We don't even
| need new technology to replace Tether. We just need
| international exchanges to support existing stables.
| zionic wrote:
| Exactly. Tether has some amazing alternatives. DAI for
| example.
| zionic wrote:
| Fair and square? It was a completely new failure mechanism
| found in one of the first major smart contract deploys.
|
| BTC had a similar early-phase bug that minted tons of coins by
| the way, that they also had to "claw back".
|
| At least pretend to be unbiased.
| seibelj wrote:
| The price of Bitcoin would rise precipitously as traders tried
| to exit tether any way possible, as would all other cryptos.
| TacticalCoder wrote:
| Yes but long term? The big question is not if there are real
| USD behind USDT or not but if Tether has a way to pump _the
| entire crypto market_. Basically: did Tether make BTC go to
| 64 K USD, by printing non-backer tether by the billions and
| then use them to buy BTCs?
|
| Short term if USDT collapses, BTC would probably skyrocket
| due to everybody looking for an exit out how USDT. But long
| term? What if the BTC demand is simply mostly all fake?
| qeternity wrote:
| No, the price in USDT would rise and then as people promptly
| sold for USD it would collapse in USD terms.
| graeme wrote:
| The price in Tethers would rise
| _ah wrote:
| As always, Matt Levine is shockingly informative:
|
| https://www.bloomberg.com/opinion/articles/2021-10-07/matt-l...
|
| Key quote:
|
| _1. You get a bunch of Bitcoins.
|
| 2. You slice them into junior and senior claims.
|
| 3. You sell the junior claims to people who want levered Bitcoin:
| people who want margin loans against their Bitcoins, etc., who
| want to gamble on Bitcoin without putting up too much cash.
|
| 4. You sell the senior claims as stablecoins: "Even if Bitcoin
| drops by 50%," you say, "these coins will still be worth $1,
| because they are backed by $2 worth of Bitcoin."_
| dustingetz wrote:
| https://archive.md/cQVJl
| [deleted]
| JumpCrisscross wrote:
| Tranching is a thing. It's fine. It works, if you don't pretend
| AAA-rated securities, which have--and historically had--a very
| low risk of losses, are both safe _and_ liquid.
|
| If tranching were all Tether were doing, it would just be
| fraud. You can't sell a senior tranche on a pool of assets as a
| fully-backed security and call it a day. But whatever, Tether
| did that and more, nobody cared, we're on the next tier of the
| Narcissist's Prayer [1].
|
| The new problem is we have circumstantial evidence that at
| least _some_ of Tether 's assets are Chinese developers'
| commercial paper. That's a risky asset. Even before Evergrande
| and Sinic defaulted, it was a speculative asset. (Now it's a
| distressed one.) If that's what we know they're in, how bad is
| the rest of their balance sheet? Tether claims to be over-
| collateralising their crypto-backed loans by 30%. An LTV of 77%
| will start losing money in a 25% crash. Bitcoin...does that a
| lot? For an asset they understand, they've set their risk
| limits woefully low. If that's what we know they're doing, how
| thin is the rest of their capital?
|
| We're going to see a run on Tether. Not might. Statistically,
| the assets Tether holds will sometimes go down. Sometimes a
| lot. Most of the time, that will be fine. Some times, however,
| Tether will get a redemption at the same time. (Assets going
| down and investors redeeming things are correlated.) Most of
| the time, that will work out. Some times, however, Tether will
| need time to avoid their own selling driving down the asset's
| price. Most of the time, that will be fine. Some of the time,
| however, the person making the redemption request won't have
| that time. They'll blow up, and they'll blame Tether. This will
| prompt additional redemptions, which will force the
| aforementioned fire sale until, in all likelihood, Tether kills
| its domain and steals the money. (The last part is a novelty
| really only afforded by their setup.)
|
| [1] https://news.ycombinator.com/item?id=28880280
|
| [2] https://www.bloomberg.com/news/articles/2021-10-07/can-
| you-t...
| miohtama wrote:
| Likely in the case of a bank run, Tether cannot redeem even a
| cent because their organisation is unable to serve any
| customer outside few selected one (no staff, no processed).
| However the damage to retail US investors should be quite
| well contained, as I do not feel they have significant Tether
| holdings. It is mostly (shady?) professional traders
| (Alameda, Celsius) and offshore (China) that use Tether.
|
| Tether is 50% of crypto trading. Tether stopping would case
| quite interesting escape into either Bitcoin or some other
| liquid widely available pair (ETH). Prices would shoot up
| until real dollar offramps can pick it up. Long term USDC,
| USDP snd other more robust stablecoins can pick up the slack.
| Tether is not too big rato,fail, though is massive.
| JumpCrisscross wrote:
| > _the damage to retail US investors should be quite well
| contained, as I do not feel they have significant Tether
| holdings_
|
| This is my understanding. The U.S. regulatory apparatus
| appears to have deterred Tether from getting too involved
| here. China, too, seems to have taken the hint.
| miohtama wrote:
| Also in the US you can use real ACH dollars, not Italian
| plastic surgery dollars.
| tobltobs wrote:
| The "Tether crash" == "Bitcoin surge" story is just BS.
| Just stop believing this crap and think about a better exit
| strategy for your crypto wealth.
| gitfan86 wrote:
| But they can print more tether, buy bitcoin with that tether,
| and give you bitcoin as redemptions. This could go on for a
| very long time.
| hackingforfun wrote:
| Can Tether give you Bitcoin as a redemption? Do you have a
| source for that?
| ac29 wrote:
| "Tether reserves the right to redeem Tether Tokens by in-
| kind redemptions of securities and other assets held in
| the Reserves."
|
| https://tether.to/legal/
| paulpan wrote:
| Last week CFTC fined both Tether and Bitfinex $42.5M for
| allegedly not holding enough reserves and colluding together.
| https://www.cftc.gov/PressRoom/PressReleases/8450-21
|
| Seems like a fairly small fine in grand scheme of things no? If
| the critics are right and $70B+ supply is just made up paper
| money, then it'll be huge losses for all Tether holders. I'd
| conjecture it would tank the entire crypto market - and possibly
| the equity market too.
| legutierr wrote:
| There is one scenario in which the 70 billion was at one time
| made-up money, but where it won't ever actually tank the crypto
| market:
|
| 1. Tether prints $1 billion with no backing.
|
| 2. Tether buys $1 billion of Bitcoin with the the fraudulent
| tokens.
|
| 3. Bitcoin triples in price.
|
| 4. Tether sells 1/3 of their position in exchange for hard
| currency, and holds that money in their reserves.
|
| 5. Tether now has 100% reserves backing the tokens they
| created, and is also holding $2 billion in Bitcoin. Maybe they
| sell the extra Bitcoin to diversify.
|
| 6. Rinse and repeat.
|
| Under this scenario, what these guys did was to take a massive
| uncollateralized loan from ordinary consumers, use it to buy
| buy Bitcoin, and sell off the Bitcoin in order to pay back the
| loan. Basically an uncollateralized version of what most DeFi
| borrowers are doing right now, but at a massive scale.
|
| As long as the price of Bitcoin is going up, the scheme a
| surefire way to make a lot of money. If the price of Bitcoin
| starts going down before they can cash out, then it can easily
| bankrupt them and crash the market--which is also a big risk
| with DeFi.
|
| It could be that we are passed that point with Tether, though.
| With as much scrutiny as they are under right now, if Tether
| ever defaults, the people who run Tether are going to be wanted
| for criminal prosecution in dozens of countries. They will be
| running and hiding for the rest of their lives. I can't believe
| that a few more billion dollars in the bank is worth the risk--
| especially if they won't be able to access those billions.
|
| If you look at the rate of issuance of Tether since June 1 of
| this year, it has flattened out dramatically.[0] Could it be
| that the people at Tether have realized that the jig is up, and
| are now just trying to get things in order so they can walk
| away clean? Maybe.
|
| Or, it could be that they printed so much funny money last year
| that the amount of Bitcoin they need to sell is more than the
| market can accept without tanking the price of Bitcoin, given
| current market liquidity. Maybe they aren't generating more
| Tether for themselves because they figured out that whenever
| they try to sell the Bitcoin they need to sell in order to
| replenish their reserves, they crash the Bitcoin market. Maybe
| they're stuck.
|
| Or it could be that Tether is fully backed, that they have
| never minted any Tether that didn't correspond to $$ in their
| bank account, and the reason that Tether's growth has slowed is
| only because people are now buying USDC and other stablecoins
| instead. (Not likely, in my opinion.)
|
| [0] https://coinmarketcap.com/currencies/tether/
| thebean11 wrote:
| If the 95% crash in 2017 didn't kill Tether I'm not sure what
| kind of price action could, unless they are in a materially
| worse position now than they were in 2017 (the accusations
| were already super common).
| omgwtfbyobbq wrote:
| Why do you think it would tank the equity market?
| PKop wrote:
| It's all tied together. If one asset class is crashing people
| sell others to grab cash. Another way, according to Janet
| Yellen, that Tether and other stables can destabalize
| markets, is that they have large portions of reserves in
| corporate debt, a crisis in these coins would cause a fire
| sale of billions of corporate debt they hold, itself probably
| cascading into all risk markets.
| exdsq wrote:
| Or people will accept it as paper dollars and carry on
| regardless. Honestly this wouldn't surprise me - it'll just be
| a representation of the dollar that things use as an
| intermediary step.
| Traster wrote:
| Well, if Tether _isn 't_ backed by dollars, then there's some
| pretty big questions to answer - for example: "When people
| buy tether using fiat currency, they hand $1 to bitfinex, and
| in return get 1USDT. Where did that real $1 go?"
| arthurcolle wrote:
| back to the money store (https://vimeo.com/215534945)
| honestduane wrote:
| Tether is a cryptocurrency with tokens issued by Tether Limited,
| which in turn is controlled by the owners of Bitfinex
| pornel wrote:
| Isn't that absurd? Cryptocurrencies were supposed to be fully
| decentralized, and not require trusting anybody.
|
| This one depends on financial hacks done by a single private
| company. It seems like beenz.com, only with a different tech
| stack.
| warkdarrior wrote:
| Oh, we're all equal and decentralized here, but some are more
| equal than others.
| fuddle wrote:
| Wow, bold move :)
| kfprt wrote:
| Tether is just shady which is not a word people generally want
| associated with their money.
| jstx1 wrote:
| This made me check the prices. Apparently Bitcoin hit a new all-
| time high today at over $64k.
| fnordfnordfnord wrote:
| ATH is 64.8k iirc, so nearing ATH but not there yet. Watch
| tomorrow, First day of open trading for BITO ETF, might see a
| new ATH.
| keefe8 wrote:
| Wasn't today (Oct 19) the first day of open trading?
| thebean11 wrote:
| It'll be a sell the news small drop if I had to guess
| paulpauper wrote:
| There has been nothing but Tether doom and gloom since 2017 and
| yet here it is still at 1.0000 If anyone thinks this will drop,
| now is the opportunity to short, I suppose.
| RC_ITR wrote:
| Circa 2020: There has been nothing but Wirecard doom and gloom
| since 2019 and yet here it is still at 115. If anyone thinks
| this will drop, now is the opportunity to short, I suppose.
| hmate9 wrote:
| Exactly. These things dont go down in value slowly as they
| start rotting. They suddenly collapse in a matter of hours.
| TedDoesntTalk wrote:
| Just because you're paranoid, doesn't mean you're wrong.
| hmate9 wrote:
| Shorting Tether is a great play. Either everyone loses faith
| and nobody trusts them anymore or.... it stays at $1. You are
| not going to lose. You just have to pay funding fees for your
| short which on FTX is around 4% a year.
|
| Do you think there is a great chance that Tether is a massive
| scam and will find its doom within the next 25 years?
|
| My answer to that is yes.
| ur-whale wrote:
| Given how deep FTX is into USDT, it's rather unlikely they'd
| survive a Tether implosion, and your short position will
| there will evaporate in a puff of smoke.
| hmate9 wrote:
| What do you mean FTX is deep in USDT?
| ur-whale wrote:
| > What do you mean FTX is deep in USDT?
|
| https://www.newsbtc.com/news/reason-behind-billions-ftx-
| teth...
|
| https://www.youtube.com/watch?v=BQiRA_-VAd8
| JumpCrisscross wrote:
| > _Shorting Tether is a great play_
|
| Why do you think there will be a functioning market to pay
| you out if and when it collapses?
| shukantpal wrote:
| You get paid immediately when opening a short position
| superfunny wrote:
| Or that the person from whom you borrowed Tether to put on
| your short position won't demand it back while it is
| collapsing.
| superfunny wrote:
| I think the better trade would be to do a hedged short
| against bitcoin, perhaps using futures; if Tether
| collapses, Bitcoin is going to get hurt as well.
| ur-whale wrote:
| > if Tether collapses, Bitcoin is going to get hurt as
| well.
|
| That's one theory. Another is that the only way out of
| Tether will be BTC and the pressure will likely push BTC
| up, at least for a while.
| paulpauper wrote:
| you could probably fund this by selling some far out of money
| bitcoin puts.
| filvdg wrote:
| Disclosure: Hindenburg Research does not hold positions, either
| long or short, in Tether, bitcoin or any cryptocurrency at the
| time of this press release.
| perl4ever wrote:
| Did they specify the time down to the nanosecond?
| tcgv wrote:
| I wonder why this Reaserch firm is offering such a substantial
| bounty for information on Tether. What's in it for them? Where
| will this money come from?
|
| From their site they provide an answer (and even a "track
| record") [1]:
|
| > We look for (...) man-made disasters floating around in the
| market and aim to shed light on them before they lure in more
| unsuspecting victims.
|
| Hence it seems they're doing it for the bennefit of the public.
| So much for the expression "there's no such thing as a free
| lunch".
|
| [1] https://hindenburgresearch.com/about-us/
| sremani wrote:
| You can have positions in Microstrategy and Coinbase.
|
| If Tether tanks -- there are definitely decent proxies out
| there.
| epivosism wrote:
| Just because someone has something to gain, doesn't mean that
| their actions are corrupt.
|
| "It is not from the benevolence of the butcher, the brewer,
| or the baker that we expect our dinner, but from their regard
| to their own self-interest. We address ourselves not to their
| humanity but to their self-love, and never talk to them of
| our own necessities, but of their advantages" -Adam Smith
|
| https://www.goodreads.com/quotes/68664-it-is-not-from-the-
| be...
| b9a2cab5 wrote:
| Presumably they short the shit out of Tether and related
| stablecoins before they release the information they get.
| It's certainly for their own gain.
| toomuchtodo wrote:
| As qeternity pointed out in a comment [1], you want your
| trade to play out in a dollar denominated, clearinghouse
| backed financial product. You don't bet against the house
| in their casino (crypto exchanges), such as shorting
| tether.
|
| [1] https://news.ycombinator.com/item?id=28794377
|
| (not investment advice, educational purposes only)
| WalterSear wrote:
| I would hazard they are planning to target the BTC
| Futures ETF that opened this morning.
| maxbond wrote:
| Presumably they would like to start a position by don't have
| sufficient information, and are attempting to buy that
| information.
|
| Hidenburg is a short seller who takes positions in their
| research. See for instance their short of Nikola. While I'm
| sure they enjoy being helpful and that there's a reason they
| choose to engage in a very difficult way to earn a living,
| when there are easier opportunities available, their motives
| are hardly a mystery.
|
| You can discount all their talk of helpfulness or assume
| they're just talking their book, and it doesn't really change
| anything.
| kfprt wrote:
| Pure speculation but I'd wager they have a position involving
| a 3rd party hedge fund etc with a sizable crypto position.
| JumpCrisscross wrote:
| It's marketing.
|
| When Hindenburg publishes equity research, the disclosure is
| "you should assume that as of the publication date of any
| short-biased report or letter, Hindenburg Research...has a
| short position in all stocks (and/or options of the stock)
| covered herein, and therefore stands to realize significant
| gains in the event that the price of any stock covered herein
| declines."
|
| [1] https://hindenburgresearch.com/draftkings/
| qeternity wrote:
| Precisely. It's too risky to actually short the crypto
| complex because if the Tether fraud is true, then they can
| pump it to $100k or $1m or whatever they want.
|
| But if they contribute to the unwind of a fraud of this
| scale, they will go down as heroes.
| skybrian wrote:
| There are firms that look for good opportunities to short
| stocks. Find some credible bad news, short the stock, then
| publicize the bad news.
|
| If the news is actually true, this might even be considered a
| public service (as well as obviously a way to make money).
|
| They probably wouldn't do until they actually got a tip.
| Also, they might short crypto-related stocks if that's
| easier.
| llimos wrote:
| This is how markets weed out the bad ones on their own,
| without relying on government.
| ygjb wrote:
| I am curious about how that type of activity doesn't
| constitute insider trading? Presumably having "bad news"
| would constitute material nonpublic information?
| djbebs wrote:
| Because they are not insiders
| speedybird wrote:
| It might be insider trading in some countries, but it
| isn't in America. It's perfectly legal to trade on
| information you found out through your own research and
| didn't tell anybody about.
| snark42 wrote:
| They do the equivalent of investigative journalism.
| Arguably everything they know is public, just no one has
| looked or put all the pieces together until they do a
| press release.
| qeternity wrote:
| Simply trading on MNPI is not insider trading. You must
| have a fiduciary duty to protect said MNPI.
|
| If I do some analysis and reveal some MNPI for myself,
| it's perfectly legal to trade on that since I do not have
| a fiduciary duty to any publicly traded firms.
| paulpauper wrote:
| so they can trade on it before announcing it and then with
| the profit pay for the bounty, assuming they pay up or
| assuming tether falls. Tether has survived thus far
| everything thrown at it. The market is evidently very
| confident about tether.
| nawgz wrote:
| > The market is evidently very confident about tether.
|
| I don't see how that's a valid conclusion to draw. I would
| say in this case the "market" is completely codependent on
| Tether, and therefore are willing to overlook red flags
| until forced to via damage to pricing or legalities.
| hansjorg wrote:
| They usually disclose that they hold short positions at the
| same time as publishing their reports.
|
| If Tether unravels and brings down the whole cryptocurrency
| bubble, there are probably more indirect positions that are
| safer bets?
| dnautics wrote:
| I wish they also published a list of things they were wrong
| about.
| elefanten wrote:
| I agree, but "them and everyone else too..."
| PeterisP wrote:
| The expectation is that they will obtain large and valuable
| positions (either long or short) upon obtaining this
| information which is not (yet) known to the general public.
| ac29 wrote:
| It notably doesnt say that their _clients_ dont have any
| cryptocurrency positions. The $1M is coming from somewhere.
| lvl100 wrote:
| Sadly the scheme behind crypto extends well beyond tether. This
| is what happens when you have money sloshing around unregulated
| market with very loose margin and leverage limits, free money
| afforded by central banks, and an absolute mania.
| lazyeye wrote:
| Worth reading for some background..
|
| The $94b crypto mystery
|
| https://www.afr.com/wealth/investing/the-94b-crypto-mystery-...
|
| 12ft.io gets around the paywall.
|
| My favourite quote..
|
| "seemed to be practically quilted out of red flags.."
| tppiotrowski wrote:
| How can one profit from a crypto bubble? I've heard of an ETF for
| shorting Bitcoin but never saw any specifics. Can anyone provide
| a reputable brokerage for shorting crypto currencies?
| fleddr wrote:
| You don't need an ETF for that, you can directly short any
| crypto at many exchanges. To profit from the short you should
| obviously time the market well.
| pxue wrote:
| short sell MicroStrategy (mstr), they are pegged to crypto
| because they decided to hold large amounts of crypto as a
| corporation
|
| New crypto ETF is also right around the corner. There will
| definitely be futures on that.
| thebean11 wrote:
| The ETF is based on the futures, which have existed for
| years.
| throw123123123 wrote:
| It's a very small bounty...missing at least 2 zeros considering
| the scope of Tether's supply.
| ghego1 wrote:
| It's a million for each submission
| exdsq wrote:
| *up to a million
| toomuchtodo wrote:
| No need to overspend. A million dollars will still motivate
| people with the necessary skills. You can always increase the
| bounty, decreasing it is frowned upon.
| humanbeinc wrote:
| But... does it ultimately matter? All the other sh*tcoins are
| backed against nothing and have huge market caps as well.
| tppiotrowski wrote:
| It's different because Tether claims to hold 1 USD for each
| Tether. A claim that should be verifiable.
|
| The value of sh*tcoins is just a function of their future
| resale value.
| aeternum wrote:
| They claim to hold assets with values equivalent to 1 USD /
| Tether. Different than holding the USD directly.
|
| They provide a more detailed breakdown here:
| https://tether.to/wp-
| content/uploads/2021/08/tether_assuranc...
|
| About half in commercial paper and CODs. A quarter in
| t-bills. 2B in unspecified "digital tokens".
| mrgordon wrote:
| Yes because if they're saying they have tons of USD-equivalent
| and buying other coins with it then they've been artificially
| inflating the other coins with bogus funds
| [deleted]
| otterley wrote:
| Of course it does. Fraud is a crime for a reason.
| spzb wrote:
| It's almost certain now that Tether doesn't have fiat currency
| to back up its claimed value. But it's a convenient fiction for
| everyone to keep believing as long as you're not the one
| holding the Tethers when everyone suddenly decides to stop
| believing.
| WalterSear wrote:
| Given that 70% of all crypto transactions involve Tethers, the
| market cap of everything in crypto is more realistically
| denominated in Tethers than dollars.
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