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Tag #Tether

What are Tether doing now?

The company behind USDT essentially admits to running a fractional reserve, and potentially issuing money backed by broken or failing assets.


As we mentioned yesterday in our market update, Tether have been up to their shenanigans again. Very quietly, without trying to draw attention it it, the company have changed some text on their website. Instead of claiming that every USDT is backed 1:1 by dollar reserves – something that was always in doubt because they won’t allow a proper audit – Tether now state:


Every tether 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”).


We have always been skeptical about Tether. It’s been a while since we last posted about them and their shady practices, but what is abundantly clear is that Tether have not been playing above board for years. You can read what we suspect has been going on, and how the company made some serious profits through manipulating the markets and their currency, in this article: Tether could be guilty of perpetrating a huge fraud, just not the one we think.


So now, Tether has actually admitted that they may not back their USDT 1:1. ‘From time to time’ Tethers are backed by other assets – including debt. A debt owed to Tether is an asset, from their perspective, and so if they are owed $1 million by another company or individual, they can mint 1 million USDT against that asset.


Now, it doesn’t take much to see how this could be abused.


Remember that little episode that happened ten years ago? It was called the ‘Global Financial Crisis’. Basically, banks issued enormous loans but didn’t know how risky they were. Then they parcelled them together and mixed them up and sold them around in circles to each other, until no one really knew who was holding the bad loans, assuming they even knew the loans were bad in the first place.


So let’s say that one of the loans against which Tether issues USDT never gets repaid. What happens then? Is it:

  1. Tether publicly updates the community and makes up the difference from its reserves
  2. Tether comes clean and allows USDT to trade at a discount that reflects the problem until they can cover the bad debt
  3. Tether says nothing to anyone and lets the party continue.


Right. Because this is not a company that is famous for its transparency.

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Deltec Bank provides utterly convincing and professional letter to prove Tether reserves exist

Ok, so we know we talk a lot about Tether and Bitfinex. We don’t much like them. For the record, we don’t think they’re quite as shady as some have made out, but there’s plenty wrong with them.


And that’s why we felt the need to laugh at the letter that Tether’s new bank has provided to ‘prove’ the company has the US dollar reserves to back their USDT tokens. You can find a copy of the document here:


A cursory look at this letter will raise a number of questions for anyone who has ever received a letter from their own bank. Now, we don’t know how it works in the world of High Finance, but there are a couple of red flags here.


  • Banks use your actual name. A generic ‘Sirs’, as we see here, is unusual, to say the least. They would perhaps use the company name, or more likely the name of the CEO or CFO. ‘Sirs’ reads like a crypto scammer has written it (they’re always polite to begin with). Tether presumably want to protect the identities of their people, but their CEO’s name isn’t exactly a secret. (And just to confirm, the CEO’s name isn’t ‘Sirs’.)
  • That signature. It’s kind of, well, squiggly, isn’t it? Like, illegible. Of course, a lot of people’s signatures are. That’s why you also write your name underneath, so the recipient knows who the letter is from. A list of the people you might expect to have signed the letter can be found in this doc.


So here we have a letter, written from one unknown person to another unknown person, stating that Deltec hold a lot of money on behalf of Tether.


We’re not suggesting it’s fake. Only that both Tether (and Deltec) could do a lot better in their efforts to improve transparency and confidence in their business. And that we understand anyone who casts doubt on its provenance. They just make it so easy.


Ok, we’ll stop laughing at Tether now. Honest.

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