Tether ($USDT): A Crypto CHERNOBYL Waiting to Happen!
Tether’s Scale A Threat For The Cryptocurrency Industry
YOU WON’T BELIEVE Tether’s real story, even when Hollywood makes a movie of it!
What connects a former child actor (and presidential candidate with links to Steve Bannon and Jeffrey Epstein), a former plastic surgeon sued by Microsoft for digital piracy, and an operator of a shady online poker room found to be cheating its customers with a “god mode”option?
Furthermore, what connects all the above with a Bahamian bank founded by the creator of “Inspector Gadget” (!!!), MtGox and more crypto exchanges, Ponzi schemes, multi-million dollar exchange hacks, Blockstream, fractional reserve lending platforms, an authoritarian regime, and a notorious stablecoin worth 70 billion dollars?
You guessed it right! Tether ($USDT) is the common denominator.
A Tether collapse will leave ruins in what we perceive as the cryptocurrency industry, with a financial fallout lasting for years.
A $70 Billion Einsturzende Neubauten
Tether demonstrates a loose organizational structure with a relatively small number of employees managing a $70 billion stablecoin, while at the same time, the same people operate cryptocurrency exchange Bitfinex and launch various side projects (keet).
One might consider such a corporate structure demands thousands of employees. A typical corporate layout isolates different products and projects within organic departments, such as accounting, marketing, and R&D, and produces transparent and valid data for the public and regulators.
Tether never had a full audit by an idependent and reliable auditor (which it promised in 2021) but instead proceeded with monthly attestations by Italian accounting firm BDO.
The $70 billion Tether ($USDT) stablecoin, part of the iFinex parent company that also operates Bitfinex, has none of the above.
A striking similarity with the scheme Bernie Madoff was operating.
A $70 billion behemoth stablecoin reached where it probably shouldn’t and now casting doubts on the long-term viability of the whole cryptocurrency industry.
The Bitfinex / Tether team probably has seen it all.
It certainly takes unimaginable social and strategical skills to make Tether happen and reach at its current size.
However, the Bitfinex exchange was the main reason Tether succeeded. Bitfinex used to be competing with top cryptocurrency exchanges Coinbase and Kraken until 2017. By 2018, most of its users abandoned it for Binance and regulated exchanges. Since 2018, the iFinex team focused solely on Tether, with Bitfinex unable to compete with top exchanges and slowly becoming irrelevant.
Bitfinex Origins:
The initial concept was a high-yield lending scheme with a 2% weekly interest!
In this 2012 bitcointalk post, Raphael Nicolle (unclescrooge) presents the inception of Bitfinex:
Smells like a Ponzi? No need to overthink this one.
Somehow, though, the plan altered, a team formed, and the exchange was launched, offering stop trading and derivatives. It was the beginning of Bitfinex.
In 2013 a leaked email by Raphael Nicolle was explaining the Bitfinex reserves policy to Tuur Demeester approximately one year before MtGox collapsed:
Source: bitcoin.com
We don’t have the rest of this conversation available, but it seems that Bitfinex, back in 2013, had limited knowledge of operating a secure cryptocurrency exchange.
By trusting another exchange (which failed and collapsed) and the hacks that Bitfinex suffered afterward, tell a different story.
Before the “Paradise Papers” revelations, the connection between Tether and Bitfinex wasn’t clear.
In fact, the Paradise Papers’ leaks established the connection between Tether and Bitfinex, hinting at Giancarlo Devasini and Philip Potter as founders of the stablecoin.
It was the same people running both operations.
An investigation by the Office of the Attorney General (OAG) found that iFinex — the operator of Bitfinex — and Tether made false statements about the backing of the “tether” stablecoin, and about the movement of hundreds of millions of dollars between the two companies to cover up the truth about massive losses by Bitfinex.
The city of New York banned Tether and Bitfinex for its false representation of the backing of USDT and a massive loss of funds by the exchange.
Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018. (source)
Tether was fined $41 million by the Commodity Futures Trading Commission (CFTC) in 2021 for misrepresenting its reserves and misleading investors regarding the 1:1 backing of USDT with US dollars.
Most likely, Tether will never allow a full audit. Its irregular model and practices differ considerably from accounting standards, so any audit will only expose Tether’s failure of regulatory compliance.
Price Manipulation Accusations
Tether is often accused of manipulating the price of Bitcoin (BTC), and a 2019 email exchange between Tether executives added further fuel to the speculation.
BTC could tank to below 1k if we don’t act quickly
-Bitfinex & Tether CFO “Merlin”, Giancarlo Devasini (October, 2018)
Indeed traders were expecting (and betting) BTC to drop to $1k and perhaps even lower.
In Conclusion
Adam Back (Blockstream) with Jean-Louis van der Velde and Paolo Ardoino (Source)
Bits and pieces of the Tether puzzle lie in the dark corners of the Internet, yet the information available to the public is only a tiny percentage of the whole picture.
Undoubtedly, the story of Bitfinex / Tether fits Hollywood, but probably waiting for an accident to happen, as drama makes a comedy unique.
Tether seems to be coping well with the latest market decline. Regardless, an audit is out of the question, speculation is on the rise, and the long-term viability of the stablecoin is in question.
The detrimental effect of a looming USDT collapse is hovering over the cryptocurrency industry, reducing long-term certainty.
Given the size of the cryptocurrency industry, a Tether-related crypto Chernobyl is definitely waiting to happen.
Cover: Various combined images from Pixabay (Pixabay licence)
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I want to invest criptocurrency ..if you know that it is good play form.please would you convey about USDT and USD ?