What exactly happened with Bitfinex and Tether isn’t yet known, but financial regulators are not going to give up until they find out. The missing $851 million is no small deal and, if Bitfinex cooked the books to hide any losses, it will definitely be help legally—and possibly criminally—responsible. There have been plenty of instances over the past two years to indicate that Tether’s USDT stablecoin was anything but stable, but the red flags and alarm bells have been increasing lately and it’s time that USDT supporters actually begin to take notice.
There have always been questions about whether or not USDT was actually truly tied to the U.S. dollar as Tether had asserted from the beginning. When it was recently revealed that the stablecoin’s description no longer mentions being backed by physical dollars, some users took notice. Now, the USDT is apparently backed by dollars and reserves. Those reserves include currency and cash equivalents. A Lamborghini could be considered a cash equivalent. Check the garages of Tether’s executives.
Another interesting point that warrants attention is a comment made recently by Binance’s leader, Changpeng Zhao. He reportedly said that there are about 782 million USDT sitting in a Binance wallet that reportedly belong to customers, with another 27 million in a separate wallet. With everything that is going on in the Tether world, USDT holders are going to get spooked and Binance could soon see a significant number of withdrawals. This could potentially cause the company’s exchange business to collapse. However, it will most likely suspend all withdrawals before that can happen, just like what has been seen with other crypto exchanges.
The collapse of Tether has been predicted to be approaching, and even Dr. Craig Wright recognized it a year and a half ago. He said at the time, “When #Tether collapses, and it will, #BTC debacle will be far worse than Mt. Gox. These [anti-capitalist], [anti-bank] fools who have created a bank run and fiat [Tether] to add this collapse into BTC. Not hard money.”
Wright has also pointed out that Tether is not market driven and has some serious issues. He states, “If you use basic fraud detection methods—even 2 place Benford’s law, the results are statistically significant at the alpha = 1% range to show fraud. What this means—the USDT is not market driven. This and other data show that the actual underlying asset is likely non-existent. The entire wash market will lose 99.1-99.6% of the value when tether collapses—and it has to. It is funds in the U.S. and this, it is acting as a USDS ramp illegally. This is a major crime. In effect, what you have is a real BTC valuation of 30 to 45 USD and the rest being manipulation.”
Tether has also repeatedly refused to allow a third-party audit of assets, arguing that it would be too complicated or difficult. It can only be difficult if the company is not keeping accurate records or doesn’t have the stores it has often asserted to have. Other stablecoins have welcomed third-party audits with open arms, further indicating that the process cannot be that difficult.
If that weren’t enough to cause Tether supporters to step on the brakes, there have been concerns that Tether was used to manipulate the price of Bitcoin Core (BTC). According to documents released by the New York Attorney General, Letitia James, a Bitfinex executive was quoted as saying, “BTC could tank to below 1k if we don’t act quickly” in a conversation with a possible business partner at Crypto Capital. There has always been a relationship between Bitfinex and Tether that was too close for comfort and the U.S. Department of Justice is looking into the companies and any possible wrongdoing.
In the latest revelation regarding the Bitfinex/Tether debacle, it has been revealed that Bitfinex made a highly questionable deal with a company that may have taken $850 million and run away. According to a tweet by Tim Swanson, “Bitfinex: we are totes legit. Also Bitfinex: we privately gave $850m of commingled client deposits to a company we didn’t sign a contract with, they took the money and ran, so we privately pilfered from our own “stablecoin” fund and demonized anyone who questioned the math.”
Tether supporters have been warned, and they’ve been warned plenty of times. Now is the time to reconsider the value of continuing to hold the stablecoin before things really get ugly.
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