Tether execs draw dividends as threat of US indictment grows

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Tether management has paid themselves major dividends this year, suggesting they believe reports that U.S. authorities are about to drop the hammer on the world’s largest stablecoin.

On November 1, Tether issued its latest quarterly ‘attestation’ of the reserve assets allegedly backing the $119.4 billion in issued USDT stablecoins as of September 30. This figure has since risen by $1 billion as Tether claims that demand for its stablecoin is high, despite reports that U.S. authorities are preparing criminal charges against its issuers and possible seizure of its assets.

As always, we must point out that this attestation—prepared by BDO Italia—is not an audit, merely a snapshot of the alleged reality on a single day (September 30) based on documents supplied by Tether. BDO Italia offers no opinion or assurance regarding what the figures looked like the day before or the day after September 30.

Tether has previously been caught fudging its figures and has never submitted to an independent audit despite years of failed promises that an audit was only ‘months’ away. So, take whatever comes next with a grain of salt. Tether claims to have held $125.5 billion in its reserves on Sept. 30, representing a $6.1 billion surplus to the amount of issued USDT on that date (up from $5.3 billion in so-called ‘equity’ reported in Tether’s Q2 attestation).

Of these reserves, $84.5 billion is allegedly held in short-term U.S. Treasury bills, with a further $12.5 billion in overnight reverse repurchase agreements (backed by T-bills) and other T-bill-adjacent holdings that make up a combined $102.5 billion in “direct and indirect exposures to U.S. Treasuries.” That represents nearly $8 billion more than the direct/indirect exposure that Tether reported in Q2.

Tether allegedly custodies its T-bills with Wall Street financial services firm Cantor Fitzgerald (NASDAQ: ZCFITX), a claim supported by Cantor CEO Howard Lutnick. However, Lutnick has never provided any T-bill CUSIP data that might allow the world to verify these unproven claims.

(Lutnick, who co-chairs the transition team of presidential hopeful Donald Trump, recently outed himself as something of an anti-vaxxer. In a CNN interview, Lutnick was asked about Trump’s pledge to give infamous anti-vaxxer Robert F. Kennedy Jr. “control of the public health agencies,” to which Lutnick responded that RFK Jr. “wants the [vaccine] data so he can say these things are unsafe.” This is kinda how Tether’s critics view its ‘trust us’ T-bill claims, but you know, the irony is dead and all.)

Tether’s stash of ‘precious metals’ totaled just under $5 billion, up nearly $1.2 billion from Q2 as the price of gold rose 15% during Q3 (and set a new all-time high in October). Last month, CEO Paolo Ardoino claimed that Tether has 48.3 tons of gold bars stashed away, which helped offset recent cuts in U.S. interest rates that lowered the returns on those T-bills.

The value of Tether’s BTC tokens remained largely unchanged from Q2 at just under $4.8 billion, although this value soared to $5.6 billion in October (and then surrendered much of those gains over the past week or so due to U.S. election uncertainty).

Tether’s‘ other investments’ and ‘secured loans’ categories both nudged up a couple hundred million apiece to $3.7 billion and $6.7 billion, respectively. Those loans were supposed to be decreasing following Tether’s nearly two-year-old pledge to eliminate these loans entirely from its balance sheet, but we were also promised an audit, so…

The loan arranger

There’s been no shortage of speculation as to why Lutnick would be willing to let Cantor serve as Tether’s alleged custodian, particularly given the likelihood of Tether facing some kind of U.S. federal crackdown due to its status as one of history’s most impactful financial facilitators of criminality. Presumably, Cantor is charging Tether fees that are well above market rate for this custodial service.

But there’s an interesting coincidence involving the roughly $2 billion increase in Tether’s loan balance between its Q1 and Q2 attestations. In July, Cantor Fitzgerald announced a new BTC financing business “to provide leverage to investors who hold” BTC. What is the initial sum Cantor would allocate to this new financing unit? $2 billion.

Lutnick later told BTC Nashville conference attendees that Cantor would increase this lending facility in $2 billion tranches as needed. So keep a close eye on Tether’s future secured loans tally to see whether it moves in lockstep with Cantor’s BTC financing commitment. That is—much like BTC’s fiat price—assuming any of these numbers have anything to do with reality.

In a recent appearance on Anthony Pompliano’s podcast, Lutnick claimed to have “hundreds and hundreds of millions of dollars’ exposure” to BTC, and “it will be billions.” Lutnick added, “Every time [BTC’s fiat price] dips, I’m going to be the buyer.” To which Pomp replied, “Trust me, I know why you’re doing the lending,” prompting both men to have a good long laugh, presumably directed at anyone who thought BTC’s price was ‘organic.’

Tetherdämmerung

The press release accompanying Tether’s Q3 attestation is predictably bombastic, noting that the $27.8 billion increase in Tether’s market cap over the first nine months of 2024 “is almost equivalent to the entire market cap of its closest competitor.” That’s a reference to Circle, the issuer of the USDC stablecoin via a partnership with the U.S.-based digital asset exchange Coinbase (NASDAQ: COIN). (For the record, USDC’s market cap is $35.2 billion.)

Tether also humble-bragged that its alleged T-bill stash ranks “among the top 18 holders globally if it were classified as a country, above Germany, Australia, and the UAE.” Tether supporters like to use this stat to claim some kind of immunity to U.S. legal action, but Tether’s T-bills represent a mere 0.0027% of the total $36 billion in circulating T-bills, so maybe don’t throw away that criminal attorney’s business card just yet.

Tether’s Ardoino recently acknowledged his company’s vulnerability due to most of its apples being in Cantor Fitzgerald’s basket, admitting that “if the U.S. wanted to kill us, they can press a button and kill us everywhere.”

And yet it was only last year that Tether warned the market about “the risks stablecoin users face while holding a stablecoin that has a significant jurisdictional concentration in one country or banking system.”

That warning came after Circle nearly lost $3.3 billion via the failure of Silicon Valley Bank (SVB), which held a good chunk of Circle’s cash reserves. Circle was ultimately saved when the U.S. federal government stepped in with a bailout of SVB’s depositors, proving once again that there are no atheists in foxholes and no libertarians in financial holes of their own making.

In addition to rumors of Department of Justice (DoJ) indictments being prepared, U.S. Treasury meetings are showing renewed interest in bringing some regulatory order to the stablecoin market in the hopes of avoiding a repeat of the ‘wildcat banking’ era of the 19th century.

With Tether HQ looking like the Führerbunker circa April 1945, senior management is showing less compunction about dipping into Tether’s ‘excess reserves.’ The Q3 attestation shows dividend distributions topping $550 million so far this year, and hey, Christmas is coming, so let it snow, let it snow, let it snow.

Meanwhile, Tether’s self-aggrandizing promotional activities show no sign of letting up. The Q3 PR offered lofty proclamations of “transcending traditional financial boundaries,” including the boundaries imposed on the use of the U.S. dollar by the people that issue the U.S. dollar.

Tether also boasts about “enabling access to a stable financial system,” again ignoring that this stability was not built by Tether, nor was Tether ever given permission to enable access by pig butcherers, money launderers, and sanctions-dodgers.

As Bloomberg’s Matt Levine recently observed, the line Tether is walking here is a very fine one: “‘We are a way to send dollars without quite as much interference from the U.S. government’ is a good pitch, but not if the U.S. government hears it.”

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