Tether Fined $41 Million For Lying About Fiat Currency Backing (bloomberg.com) 71
An anonymous reader quotes a report from Bloomberg: Tether will pay $41 million to settle allegations it lied in claiming its digital tokens were fully backed by fiat currencies, putting a major compliance headache behind the world's biggest issuer of stablecoins even as regulatory scrutiny intensifies. For years, Tether told customers and the broader cryptocurrency market that it had $1 in reserve to back every token, the Commodity Futures Trading Commission said in a Friday statement. That claim was wildly misleading, according to the agency. For instance, from June to September 2017, there was never more than $61.5 million backing Tether, even as roughly 442 million coins were circulating at one point.
"This case highlights the expectation of honesty and transparency in the rapidly growing and developing digital assets marketplace," said acting CFTC Chairman Rostin Behnam. In its enforcement action, the CFTC said Tether failed to disclose that it held unsecured receivables and non-fiat assets as part of its reserves, and falsely told investors it would undergo routine, professional audits to demonstrate that it maintained "100% reserves at all times." In fact, Tether reserves weren't audited, the agency said. Until at least 2018, Tether manually kept tabs on its reserve levels, a process that wasn't updated in real time, the CFTC said. Tether didn't admit or deny the CFTC's allegations. "Tether agreed to resolve this matter in order to move forward and focus on the future," the company said in a statement posted on its website. The CFTC also announced that Bitfinex, a crypto exchange affiliated with Tether, was fined $1.5 million for permitting retail transactions by American residents.
"This case highlights the expectation of honesty and transparency in the rapidly growing and developing digital assets marketplace," said acting CFTC Chairman Rostin Behnam. In its enforcement action, the CFTC said Tether failed to disclose that it held unsecured receivables and non-fiat assets as part of its reserves, and falsely told investors it would undergo routine, professional audits to demonstrate that it maintained "100% reserves at all times." In fact, Tether reserves weren't audited, the agency said. Until at least 2018, Tether manually kept tabs on its reserve levels, a process that wasn't updated in real time, the CFTC said. Tether didn't admit or deny the CFTC's allegations. "Tether agreed to resolve this matter in order to move forward and focus on the future," the company said in a statement posted on its website. The CFTC also announced that Bitfinex, a crypto exchange affiliated with Tether, was fined $1.5 million for permitting retail transactions by American residents.
Um, how does this solve the problem? (Score:5, Insightful)
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US dollar is actually been pretty stable, maybe slightly up since Biden came in.
Uh, no actually, that's bullshit. You might want to check on that.
https://www.google.com/search?... [google.com]
Yep. Up a bit. Checking on that is not very challenging.
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Ah, but if you put the graph on 1 year and look at the start of April to a third of the way through June, there's an obvious dip (ignoring that it was a dip back down to slightly higher than the level when Biden took office). Sure it went back up and then higher after that, but don't you see that doesn't matter? There was a dip, and now a certain segment can say that the dollar dipped under Biden for the rest of his term.
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Yep. I did put it on 1Y, roughly covering the current term. It went down, it went up again and landed a bit higher than at the start. Hence "up a bit".
That was usd vs. euro, which I picked because I was until recently a European.
Pick your choice of comparison currency to achieve the result you want. I think it's fair to say that the bullshit comment was itself bullshit.
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I think it's fair to say that the bullshit comment was itself bullshit.
Oh absolutely. I was just being very sarcastic about the fact that if there's ever a dip at any point, people like that will remember only the dip forever and keep bringing it up and telling you that you're not paying attention to the news, etc. when you point out that they're giving out incorrect information.
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It's because crypto fanatics are morons or out to pump+dump.
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"Tether will pay $41 million to settle allegations... there was never more than $61.5 million"
So, after paying the fine, they'd have about $20 MM of cash backing, so it seems the problem will only get worse.
Yeah, the numbers are probably different now, but it seems the fine screws Tether holders more than those who were dishonest. Jail and personal fines seems more appropriate.
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Not the way it works. Payment will likely come from a credit line, not cash nest egg.
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And when you put that new 20,000 inch flatscreen on your credit card, you don't spend any money, you just have to sign your name, right?
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Corporate credit lines have nothing to do with consumer credit cards.
But thank you for telling us that you have never done any business planning in your life.
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I said that payment for the fine will be made from a credit line chinabot.
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It's way more alike than apparently you are comfortable with.
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Of course it is. Also, pigs are more alike birds than I'm comfortable with.
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Prison is more than appropriate, it's basically required. They appear to have absolutely, 100% committed large-scale financial fraud. There are obvious, real, provable felonies here. The fact that this sort of thing is always just handled with fines is really eye opening.
Re: Um, how does this solve the problem? (Score:1)
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It does seem to be the de facto way of things. I can't just let it pass without at least commenting, however.
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That asset valuation was from mid 2017. It's widely suspected that Tether Ltd./Bitfinex issued most of their USDT with no backing assets and then used it to directly or indirectly buy up BTC during a bull run. Tether's false liquidity fed on actual liquidity: people moving USD into exchanges like Bitfinex and GDAX (now Coinbase Pro). All they did is buy BTC with nothing, HODL, and then resell for USD later to pad out the holdings accounts allegedly backing USDT.
Tether Ltd. now has billions in assets, tho
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Pretty much. Tether Ltd. officially got away with it. They beat a rap with the Feds and the State of NY. Sad, really. The blockchain world would be much better off without them. There are better stablecoin models (like DAI).
Re: Um, how does this solve the problem? (Score:2)
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Because it's not gotten broadly enough used for the Ponzi schemes to bottom out yet. They also keep "pivoting" and the investors switching exchanges as each, in turn, is revealed to be fundamentally fraudulent. Have _any_ digital currency exchanges managed to stay honest for even one year yet?
Re: Um, how does this solve the problem? (Score:2)
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> I'm not sure staying legit, honest or moral is even wanted by the investors.
It's not the goal of cryptocurrency: money laundering is. I'm afraid that its illegal and unethical use is inevitable, though it does have legitimate uses.
Tether appears to be used primarily (Score:2)
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You keep fitting the same false narrative onto every blockchain story you read. The crooks aren't the people using Tether. They're the people who issued it.
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^^^ This.
For Pete's sake, how is USDT still holding at $1?!
Re: Um, how does this solve the problem? (Score:2)
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Even the world trade center took a while to drop after the planes hit, though when I saw it happen I though surely that it would collapse immediately with an impact like that.
This house of cards is definitely going down.
I hope it doesn't have the same impact on peoples lives as that terrible event though. With the large number of people that have swallowed the hype - especially for retail investors, this is definitely a concern.
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"all of crypto is propped up on Tether"
[citation needed]
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How is crypto not imploding right now?
Easy. It remains propped up by the same thing that props all crypto up: Hopes and dreams of the economically illiterate.
You're thinking of this place all wrong! (Score:2)
youtube.com [youtube.com]
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-Mr. Potter has nothing on Fanny Mae and Freddie Mac.
Crypto's use of "fiat currency" is amusing (Score:1)
All currency today is fiat currency. Crypto is even more fiat than real currencies.
Re: Without fiat to give it value.... (Score:2)
You mean someone in crypto lied? (Score:3)
I'm shocked to hear this. Shocked I say. Who would have thought?
Paid fine but didn't admit guilt (Score:4, Informative)
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Re: Paid fine but didn't admit guilt (Score:2)
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Re: Paid fine but didn't admit guilt (Score:2)
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The hard part in these cases is proving whether it's fraud or negligence, and if you try to prove both you might lose on both. Having signed this agreement, when they inevitably fuck up again this agreement implicitly refutes any "who coulda know'd" defense.
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Didn't hold $1 in Italian autos to back each token (Score:2)
So, obviously not a Fiat currency.
So Tether is worth $20 million? (Score:3)
So after they pay the fine of $41 Million out of the reserves of $61M they only have $20 Milliuon left?
Currently the market cap is ~68,535,000,000
61M Reserve / 68,535M Market Cap = $0.00089 per token.
Or more the more interesting question is where did the other 68,434M go?
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No
That valuation of Tether Ltd.'s assets is from mid 2017. If you had been following the issue since then (or 2018 when a number of independent bloggers started following it), you would know that Tether Ltd. has long claimed more assets than that in offshore holdings that have never been subject to proper auditing.
Tether Ltd. is now thought to control over $70 billion in assets.
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Honey.
So they say.
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Tether Ltd. made an enormous amount of money on BTC that they directly or indirectly acquired by issuing USDT and then buying low/selling high. They got rich running a potent scam. They're using some of their winnings to back the USDT they (apparently) fraudulently issued prior to the 2018/2019 bear market.
The USDT printing mechanism still may not operate according to its white paper, but it is highly probable that Tether Ltd. has acquired billions of dollars in assets.
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Right, so you're saying Tether (the company) somehow turned it all around, without no one really knowing, and somehow amassed multiple times Bitfinex's market cap in savings? Or, more than the top 20 US banks by asset size combined?
Tread carefully. I think you want to believe a bit too hard.
Fiat currency should not be trusted (Score:2)
They should have used Subaru currency, or at least Audi currency.
What if they pay out that dollar to someone? (Score:5, Funny)
I think you may have read that wrong. They have $1 in reserve for every token. They don't have $1 in reserve for each token.
Re: What if they pay out that dollar to someone? (Score:2)
And now we know the risk reward ratio (Score:2)
Stable Coins Make No Sense (Score:3)