Crypto\u2019s ongoing addiction to the Tether stablecoin is nearly as alarming as the sector\u2019s questionable embrace of lawyers linked to online gambling fraud. The Tether stablecoin\u2019s money printer dramatically accelerated in recent weeks\u2014$4 billion USDT minted in just two weeks, pushing its market cap above $65 billion\u2014with predictable (albeit illusory) \u2018number go up\u2019 effects on the BTC token.\u00a0 The fact that billions in fresh capital (allegedly) continue to pour into Tether\u2019s coffers despite the looming threat of more legal action\u2014Bloomberg reported in July that U.S. federal agencies were investigating Tether for suspected bank fraud\u2014will only fuel skepticism surrounding the existence of the financial reserves backing USDT. The unidentified journalists at Protos recently revealed that just two firms\u2014Alameda Research and Cumberland Global\u2014have received over two-thirds of all USDT minted in recent years, a period in which USDT\u2019s market cap underwent exponential growth. While Alameda and Cumberland led the corporate USDT parade, Protos also revealed that TRON founder Justin Sun is the single largest individual recipient of USDT, having amassed around US$200 million worth of the stablecoin directly from Tether. The TRON blockchain has been the vehicle through which Tether has issued more USDT than any rival chain. Sun\u2019s motivations for hoovering up such a vast quantity of USDT remain (for the moment) somewhat opaque, but Alameda and Cumberland\u2019s rationale is far more obvious. Both companies act as market makers for crypto whales who wish to avoid transacting in fiat currencies and evade the scrutiny that comes with traditional payment rails. Given the increasingly toxic narrative surrounding USDT\u2014including its two top execs\u2019 apparently crippling agoraphobia\u2014one might well ask why any company would wish to tie itself too tightly to Tether. As it turns out, both Alameda and Cumberland appear to have greater appetites for \u2018risk\u2019 than the average crypto glutton. Cumberland Cumberland is reportedly the largest recipient of USDT, a status befitting its origins as an offshoot of Chicago-based giant DRW Trading Group. In 2013, the U.S. Commodity Futures Trading Commission (CFTC) accused DRW of manipulating the price of interest rate swap futures contracts to earn $20 million at the expense of its counterparties. A judge dismissed the CFTC\u2019s arguments, even as he acknowledged that DRW submitted thousands of outsized bids in specific time windows that the company knew would never be accepted (and were withdrawn after serving their pumping purpose). Cumberland may share its parent company\u2019s institutional appetite for risk but the same can\u2019t always be said for its senior managers. Consider the events that followed the New York Attorney General\u2019s April 2019 announcement of a probe into iFinex\u2014parent of both Tether and the controversial Bitfinex cryptocurrency exchange. (The NYAG ultimately concluded that the company had covered up massive financial theft while outright lying about the non-existent reserves backing USDT.) Within a week of that 2019 announcement, Cumberland announced that its global head of trading, COO Bobby Cho, was stepping down without any indication of future plans. A month later, the new global head Jason Leung also pulled the ejection seat. Both departures were preceded by Cumberland\u2019s biz-dev chief James Radecki, who announced his exit in late-March. It\u2019s rarely a good sign when a company loses three top execs in the space of a couple months, but Cho\u2019s exit is notable given that Radecki\u2019s exit announcement indicated that Cho would be assuming Radecki\u2019s relationship management role. It seems more than a little odd that Cho would agree to take those reins if he knew his own exit was just weeks away, suggesting his decision to leave was made somewhat abruptly. Cumberland itself appears to have wanted to put a little public distance between itself and Tether following the NYAG\u2019s announcement. As of April 2019, Cumberland\u2019s website indicated that it traded \u201cupwards of 40 cryptoassets,\u201d with a dozen of the biggies\u2014including USDT\u2014singled out as noteworthy. Shortly thereafter, this page was streamlined to say only that Cumberland \u201ctrades BTC, ETH and a number of other cryptoassets.\u201d Alameda \/ FTX The Alameda quantitative crypto trading firm began life in 2017 as the brainchild of Sam Bankman-Fried (SBF), who went on to launch FTX two years later. This spawned no shortage of critics, some of whom expressed reservations about a single individual controlling both a market maker and the exchange on which it trades. (SBF reportedly owns nearly 60% of FTX and 90% of Alameda, putting his combined paper wealth over $15 billion.) The massive success of both entities enabled Sam Bankman-Fried (SBF) to become one of the single largest individual donors to Joe Biden\u2019s 2020 presidential campaign. SBF suggested to Vox this spring that if Biden\u2019s administration \u201cis ever looking for, like, an expert on crypto regulation,\u201d SBF wouldn\u2019t be averse to taking a meeting. Precisely what form of regulation Sam Bankman-Fried (SBF) might champion in any such meeting is unclear, but one suspects something along the lines of \u2018as little as possible.\u2019 FTX has to date largely mimicked the regulatory compliance theater of rival exchange Binance, an early investor in FTX (and another crypto fixture that relies heavily on USDT).\u00a0 If one ever doubted the insincerity of SBF\u2019s compliance commitment, one need only consider FTX\u2019s hiring of Ryne Miller earlier this month as the company\u2019s new general counsel. The company\u2019s former GC, Daniel S. Friedberg, is now FTX\u2019s new chief compliance officer, a role for which Friedberg is almost comically inappropriate. Ultimate coverup Friedberg joined FTX in March 2020. Before that, he was a partner at Seattle-based Fenwick & West, where he specialized in financial services for around four years. Before that, Friedberg performed a similar role at a few other Washington-based law firms (Riddell Williams, Miller Nash Graham & Dunn) and was listed as the registered agent of a small Seattle firm (Crest Law) in 2008. However, nowhere on Friedberg\u2019s resume does one encounter the two online poker businesses at which he toiled for years. That\u2019s probably because both sites ultimately collapsed, taking around $50 million in customers\u2019 account deposits with them. But long before that debacle, Friedberg played a pivotal role in the attempted coverup of a major insider cheating scandal. In 2008, online poker site Ultimate Bet (UB) publicly confirmed rumors that certain individuals had utilized a little-known feature of the site\u2019s software to view players\u2019 hole cards during hands. This so-called \u2018god mode\u2019 allowed a number of \u2018super users\u2019 to cheat opponents out of tens of millions in poker winnings. The site\u2019s operators begrudgingly paid out a few million to the loudest complainers and folded the site\u2019s operations into a sister site (which was dealing with its own scandals). In 2013, an audio recording surfaced that made mincemeat of UB\u2019s original version of events. The recording of an early 2008 meeting with the principal cheater (Russ Hamilton) features Daniel S. Friedberg actively conspiring with the other principals in attendance to (a) publicly obfuscate the source of the cheating, (b) minimize the amount of restitution made to players, and (c) force shareholders to shoulder most of the bill. https:\/\/www.youtube.com\/watch?vcJnBg5meBD4 On the tape, Daniel S. Friedberg tells Hamilton that he doesn\u2019t want news of the cheating scandal to get out, but if it must, the \u201cideal thing\u201d would be for the public to be told that a \u201cformer consultant to the company, uh, took advantage of a server flaw by hacking into the client.\u201d Friedberg advises Hamilton to publicly claim that he was among the victims of this cheating, \u201cotherwise not going to fly.\u201d Regarding how many millions the site would have to cough up\u2014both in returns to players and regulatory penalties\u2014Friedberg says \u201cif we could get it down to five, I\u2019d be happy.\u201d This is despite Friedberg knowing the real sum owed was many multiples of that number. Friedberg later says that achieving this $5 million target is possible, \u201cdepending how creative we get.\u201d Friedberg also emphasizes the need to shift responsibility for the payout to Excapsa, the holding company that owned UB\u2019s software during the period in which some of the cheating took place. Friedberg discusses naming an Excapsa employee as having prior knowledge of the cheating, because \u201cin order to get to Excapsa\u2019s money legally you almost have to show fraud.\u201d Excapsa, which was in the process of liquidation at the time, eventually coughed up $15 million (from its shareholders\u2019 pockets) to help cover the player payouts. But only after the original liquidator\u2014which had objected to this deal\u2014was replaced by a more pliant firm with ties to UB principals.\u00a0 Wait, there\u2019s more Unfortunately, UB\u2019s ties to the crypto world don\u2019t end with Friedberg. Recall that Excapsa began trading on London\u2019s Alternative Investment Market (AIM) in early 2006, but unfavorable legal developments in the U.S. (UB\u2019s biggest market) forced the company to take itself private again in October of that year. This was done through a sham \u2018sale\u2019 to a shell company for $130 million, of which all but $5 million was to be paid in monthly installments over a six-year period. (Those payments stopped less than a year after the sale, in part due to the aforementioned cheating scandals, leading to still more litigation.) Helping Daniel S. Friedberg guide Excapsa through this public market in-and-out was none other than Stuart Hoegner, whose current claim to fame is acting as Tether\u2019s general counsel. Predictably, Stuart Hoegner\u2019s stated role at Excapsa was\u2014you guessed it\u2014director of compliance. Idiots In 1925, New York-based writer Ben Hecht received a telegram from his friend Herman Mankiewicz, who was trying to entice Hecht to come ply his trade in Hollywood. The telegram read: \u201cMillions are to be grabbed out here and your only competition is idiots. Don\u2019t let this get around.\u201d It\u2019s not hard to imagine a similar exchange between Friedberg and Hoegner once they discovered digital currency, with the \u2018your only competition\u2019 part replaced by \u2018your customers.\u2019 By 2013, both Daniel S. Friedberg and Stuart Hoegner had reinvented themselves as crypto counsels, occasionally appearing together on BTC conference panels. It\u2019s perhaps not that strange that both men made this transition, as payment processing is a key aspect of online gambling operations. But while birds of a feather may indeed flock together, flies also gather in swarms, particularly around piles of crap. It\u2019s notable that neither Daniel S. Friedberg nor Stuart Hoegner appear interested in reminding anyone of their shared UB history. The fact that Hoegner now reps Tether while Friedberg reps one of Tether\u2019s biggest customers only amplifies the suspicions surrounding the stablecoin\u2019s undue influence on the overall digital currency market. Quite how Friedberg managed to avoid being disbarred following the UB tape\u2019s release remains something of a mystery. Friedberg\u2019s presence on FTX\u2019s payroll means Sam Bankman-Fried (SBF) either didn\u2019t do his due diligence before hiring, or he knew of Friedberg\u2019s past sins and didn\u2019t care. Neither of these options paints Sam Bankman-Fried in an overly flattering light. This calls into question not only Sam Bankman-Fried\u2019s commitment to compliance, but also his overall judgment. When you\u2019re on an extended roll and are the subject of countless flattering media profiles, the temptation to view oneself as infallible tends to rise. Such rises rarely come without a fall, and SBF\/FTX appear headed for a doozy. FTX largely succeeded due to rival exchange BitMEX being hobbled by its U.S. legal woes. Who\u2019s to say FTX won\u2019t lose its crown to some fresh upstart when the U.S. finally acts against FTX and\/or Tether? Should that day come, let\u2019s hope FTX customers fretting over the safety of their deposits have a better legal advocate in their corner. Follow\u00a0CoinGeek\u2019s Crypto Crime Cartel\u00a0series, which delves into the stream of groups\u2014a from\u00a0BitMEX\u00a0to\u00a0Binance,\u00a0Bitcoin.com,\u00a0Blockstream,\u00a0ShapeShift,\u00a0Coinbase,\u00a0Ripple\u00a0and\u00a0 Ethereum\u2014who have co-opted the digital asset revolution and turned the industry into a minefield for na\u00efve (and even experienced) players in the market.