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Centralized stablecoin Tether (USDT) has reported zero exposure to any failed crypto exchange, funds, and custodians.
According to Tether, the collapse of FTX, Genesis, Alameda, 3AC, and Celsius has no impact on the stablecoin. Meanwhile, Tether’s executives maintain an obscure rationale regarding the stablecoin's reserves.
The Tether team also seems to lack professional PR skills, as it often treats critics with contempt and responds with derogatory comments on social media, marking a huge red flag.
Since 2021, it resumed offering attestations regarding its one-day reserves once every three months as part of a transparency procedure.
FTX was the largest customer of Tether, with over 35 Billion USDT assigned to the Bahamas-based exchange. An exchange with ties to Tether’s main bank in the Bahamas, Deltec. Similarly to Tether, Deltec also claims no exposure to FTX.
How did Tether achieve no exposure to a collapse of that magnitude with its top trading partners, and how it plans to keep business as usual at the heights of a $60 billion market cap and a bear market?
As the pieces of the crypto domino keep crumbling, the bear market will expose the weakest structures in the field.
Tether is a $70 Billion crypto empire with just a handful of employees, a loose corporate structure, and limited financial accountability.
Its executives have already admitted the collateral was not covering the dollar peg 1:1 in the past. However, a lot has changed since that admission.
The stablecoin grew exponentially, reaching an $80 billion market cap in 2021. Since then, it has reduced the USDT in circulation to 66 billion tokens.
In the previous two years, the stablecoin deviated from its statement of supporting USDT with equal deposits in USD and declared that commercial paper backed USDT by $40 Billion! This statement effectively turned Tether into one of the largest commercial paper holders worldwide.
The commercial paper mention and the public criticism it attracted forced Tether to change its process, and within months it “managed” to liquidate $30 billion of commercial paper into US treasury bills, as Tether announced.
BDO Italia, the auditing firm, in the report's notes, mentions it can only attest regarding the selected day of the cash reserves (CRR) and not any other day before or after this time (30th September).
BDO signed this paper on the 30th of September but did not perform a full audit of Tether and its reserves. This attestation is a draft document with the auditor just skimming through the numbers to present this opinion for the selected date and that date and time only.
However, such an attestation does not serve transparency regarding any other than the selected days. Manipulation can always apply on any other day.
This attestation means nothing. It is a paper for internal purposes only, at the demand of Tether. Promoting transparency demands a full audit from an independent auditor using generally accepted auditing standards.
Tether's inability to provide definite trusted financial data resembles the practices of FTX and Alameda.
Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here" Ray said in the filing on Thursday, which was lodged with the District of Delaware bankruptcy court. (source)
John Ray further lambasted the FTX management, which is not considerably different from the rest of crypto exchanges and custodian practices:
“From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented” Ray added in the filing.
While Tether resumed reports in 2021, it still hasn’t presented a full audit. Any full audit will likely come with an adverse opinion by the auditor, indicating gross misstatements and deceptive accounting methods.
These amounts represent the USDT received by the mentioned funds but not the current balances. Also, the chart is not recent but covers the total incoming Tether for these financial institutions until November 2021.
Alameda seems to be at the top, with a significant difference from the second fund (Cumberland Global).
Alameda does not hold 36Billion USDT today. Redemptions and trades occurred, although this chart also points to the strength Alameda (the trading team of Sam Bankman-Fried) possessed.
Interesting position by Tether, especially when the iFinex lawyer had already admitted it was missing collateral backing USDT.
In 2019, New York state Attorney General Letitia James said:
“Our investigation has determined that the operators of the ‘Bitfinex’ trading platform,who also control the ‘tether’ virtual currency, have engaged in a cover-upto hide the apparent loss of $850 million dollars of co-mingled [sic] client and corporate funds.”
Tether’s lawyer admitted that Tether was only 74 percent backed. -
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