Tether is a Bigger Crypto Scam than FTX. By Daniel Beattie.
The collapse of FTX and its founder is one of the most spectacular implosions in history. …
Tether, as it’s supposed to be:
USDT, or Tether, is what is known as a “stablecoin.” A stablecoin is a cryptocurrency that, instead of fluctuating in value, is intended to hold to a consistent price. Tether is a USD stablecoin — each Tether is supposed to be equal in value to one U.S. dollar. While most cryptocurrencies are wildly speculative and backed by essentially nothing, each Tether is supposed to be backed directly by a U.S. dollar, or an extremely liquid, reliable investment like a U.S. treasury bond.
These USD stablecoins are used on cryptocurrency exchanges to conduct on-the-blockchain trades in lieu of using actual U.S. dollars. Without stablecoins like Tether, the current crypto ecosystem simply would not exist. There are multiple USD stablecoins, but Tether is by far the most popular. According to coinmarketcap.com, Tether has the third highest market cap of any crypto currency at $66 billion, trailing only Bitcoin and Ethereum. Today, fully half of all bitcoin trades globally are executed using Tether.
A year ago, crypto news site Protos [mentioned]: “Just two companies, Alameda Research and Cumberland Global, were responsible for seeping roughly two-thirds of all Tether into the crypto ecosystem.” …
Alameda Research is the quantitative trading firm founded by Sam Bankman-Fried. Bankman-Fried and his partner in crime, Alameda CEO Caroline Ellison, allegedly propped up their trading firm by plundering FTX customer accounts.
No audits, no oversight:
The inner workings of Tether remain remarkably opaque. New Tethers are supposed to only be minted, and added to the crypto ecosystem, when somebody gives Tether Limited dollars to create them. And if that’s how it all worked, Tether would be fine.
But there is no evidence Tether actually works this way. …
Despite first being released eight years ago, Tether has never been audited in any way. …
[In August the WSJ reported:] “A 2017 attestation of Tether was skewed by its sister company, Bitfinex, transferring $382 million to its bank account, hours before the accountants checked the numbers, the Commodity Futures Trading Commission said last year.” …
In 2017, when Tether’s total market cap was still under $1 billion, it needed a last-minute transfer of $382 million just to sly its way through a non-audit attestation of its assets. …
That 2017 attestation, incidentally, led the Commodity Futures Trading Commission to fine Tether $41 million last year, without the company admitting any wrongdoing. Tether also paid an $18.5 million fine to New York state to settle claims that it misrepresented its reserves. The settlement forced Tether and its associated Bitfinex exchange to cease operations in New York. Crucially, though, none of these fines have fully exposed how Tether works, forced it to change its methods, or even compelled it to admit wrongdoing. Tether essentially made a political payoff, it seems, and moved on. …
Another private money-printing machine, creating money out of thin air:
It’s important to state what is happening if Tether is not actually backed by the dollars that it claims. If Tether Limited is pumping out new Tethers without actually taking in an equal amount of USD, then it is essentially a privately-run money printer.
Just manufacture new Tethers, pump them into a crypto exchange, use them to buy bitcoin, then sell the bitcoin for real U.S. dollars. …
Run by crooks, for crooks, by the biggest crooks of all:
Tether is apparently run by serial scammers. Its books aren’t open. It’s CEO and CFO refuse public interviews. …
So, if Tether is so obviously shady, what might explain its stability even as the surrounding crypto ecosystem burns down? Some key fact is missing.
There is, for example, the strange coincidence of Tether being a crypto of choice for a U.S. government-backed rebels in Myanmar. …
The al-Qaeda affiliated Sunni rebel groups of Syria also just so happen to love Tether. …
Tether is not just the cryptocurrency of choice for US-backed rebel groups. It has also become a favorite of drug cartels, which, according to some journalists, are deeply intertwined with U.S. three-letter agencies, including the CIA. …
All of this was aided by Tether’s special advantage for use in money laundering, according to Bloomberg: “Tether… broke just about every rule in banking. Banks keep track of everyone who has an account and where they send their money, allowing law enforcement agencies to track transactions by criminals. Tether Holdings checks the identity of people who buy coins directly from the company, but once the currency is out in the world, it can be transferred anonymously, just by sending a code. A drug lord can hold millions of Tethers in a digital wallet and send it to a terrorist without anyone knowing.”
From all this, an alternative possibility emerges: Tether, despite being a scam, persists because for at least some portion of the U.S. government, the scam’s survival is useful, be it for intelligence or subterranean geopolitics.
Ironically, Tether having some kind of hidden link to U.S. intelligence would be a best case scenario for crypto. After all, that would at least explain why Tether maintains its value so reliably despite so many red flags.
By the way, there’s a blueprint for this. It’s time for a brief digression about the Bank of Credit and Commerce International (BCCI).
Ostensibly founded by Pakistani national Agha Hasan Abedi, BCCI at its peak was the 7th-largest private bank in the world with more than $20 billion in assets. But in 1991, the bank spectacularly collapsed in a scandal involving bribery, gunrunning, drugs, terrorism, and theft of customer funds—among other things. …
Is Tether the new BCCI? Is crypto’s entire infrastructure built on top of a naked scam, perpetuated and kept alive because unseen actors have decided its survival is more useful than its demise?
That may all sound too ridiculous to be real. Surely the best argument that Tether is legitimate is simply that it has continued for years without collapsing. But until two weeks ago, that was the best argument for FTX as well. Today, it feels incredibly obvious that FTX was a fraud: Gee, maybe headquartering a crypto exchange in the Bahamas to dodge and buy off all oversight was a tell? Maybe somebody should have realized that FTX having no chief financial officer was also a giant red flag? …
Tether sent almost $36.7 billion in USDT to Alameda Research. …
So why does Tether still exist?
Two powerful forces may in fact spare Tether FTX’s fate.
The first, on the public side, may be the sheer intensity with which people choose to not even think about it. There is a lot of youthful energy and idealism behind crypto, in addition to many people’s fortunes, and the thought that something as big and fundamental to the crypto ecosystem as Tether could be a complete scam might very well be a difficult pill for many to swallow. Indeed, many in the crypto-sphere have embraced cryptocurrencies as a technological alternative to corrupt centralized governments.
This brings us counter-intuitively to the second factor that may be propping up Tether: the sheer magnitude of the government’s corruption itself, and the government’s reliance on Tether as a convenient vehicle for that corruption.
Thus we are left with the possibility of a dark comedy according to which government corruption is one of the main things preventing the cryptocurrency project from spiraling into a Lehman-like collapse.
Thus when it comes to Tether, “Too big to fail” may very well have become “Too big to even lift up the veil.”
Watch this space. There are rumors of a Tether-FTX-Ukraine-Democrats link, but no credible details have emerged yet. But, as they say, character is destiny — and cheats attract other cheats.
Btw, Bitcoin is somewhat above this nonsense. There is an inviolable maximum of 21 million bitcoins, so it is emphatically not a money-printing machine.
