Tether has “dissolved” relationship with auditor Friedman LLP

https://twitter.com/coindesk/status/957381065190133767

by atomical • 8 years ago

115 87 8 years ago

Who and who?

deckar01• 8 years ago

Tether is a company that created a cryptocurrency (USDT) pegged to USD that is a popular substitute for trading fiat USD on cryptocurrency exchanges. Friedman LLP is the accounting agency that was supposed to be auditing Tether's USD holdings to ensure they were maintaining a full-reserve (1 USD in holding per 1 USDT in circulation).

https://tether.to/announcement-transparency-update/

jameskilton• 8 years ago

And with no audits and some very sketchy behavior, the thinking is that there are hundreds of millions of Tether in circulation without any subsequent backing USD.

https://twitter.com/bitfinexed

ufo2• 8 years ago

Thether Inc. is a company running a cryptocurrency scam.

They have create a cryptocurrency (also called Tether) that they claim is pegged to the US dollar. They have since emitted more than 2 billion of these tethers, and they claim that they are holding an equivalent amount of US dollars in their bank accounts.

Tether Inc. have never released a public audit proving that they have these billions of dollars that they claim to have. And today the company that they said was auditing them has apparently cut ties with them, which is yet another sign that tethers are a scam that is about to blow up.

The reason why this is important is the magnitude of the fraud here. Is is suspected that the billions of dollars of fake money that Tether has printed have been used to push up Bitcoin and cryptocurrency prices to their current high levels. There are many cryptocurrency exchanges accept tethers as if they were worth 1 USD and the latest price increase in bitcoin price that started last April coincides with when Tether inc became more active.

dragonwriter• 8 years ago

More substantive article linked deeper in Twitter chain:

https://www.coindesk.com/tether-confirms-relationship-audito...

tehlike10• 8 years ago

Following bitfinexed@ is also good.

Lazare• 8 years ago

Don't worry guys, I'm sure Tether is a 100% legitimate operation that just happens to be conducting an ongoing research project to see how much like a scam they can appear. They've got the money, they're just keeping it hidden! ...very hidden! They had to fire their auditors because they were about to find proof the money exists, and that would have ruined the research project!

More seriously, I've got to ask: Why does anyone trust them? Why did anyone trust them? They've never offered the slightest reason to think they're anything else but a particularly lazy fraud.

Is this an "emperor's new clothes" situation where everyone assumes everyone else has proof of Tether's validity, and doesn't want to look dumb by asking? Or a "bigger fool" situation where everyone believes Tether is a fraud, but thinks they can get out and leave someone else holding the bag when it bursts? Raw wishful thinking because a legit Tether would be so useful to the ecosystem that people have collectively decided to pretend it does exist? Or what?

mschuster913• 8 years ago

Why does anyone trust them? Why did anyone trust them?

Greed. I get why people would trust BTC, Ether (before the DAO hardfork, that is) or Dogecoin, as these had real value and usecases (e.g. Bitcoin for getting high quality weed, ecstasy or guns, and Dogecoin for having fun + a quick-and-easy donation way on Reddit other than gold). But the other ~1.5k coins listed on https://coinmarketcap.com/? What in blazes? People stuck billions of dollars into altcoins!

jpatokal• 8 years ago

Not really: just because the market cap of an altcoin is in the billions doesn't mean there's more than a tiny fraction of that amount actually invested (as in, bought with fiat) into it.

earenndil• 8 years ago

LTC, Bitcoin cash: similar reasons to doge.

Monero: anonymity.

riku_iki• 8 years ago

Greed.

How it's relevant? Tether has fixed price: 1 USDT = 1 USD, you can't become rich by buying it.

ht852• 8 years ago

People don't really trust them, but it's not like you have a choice if you want to be in crypto. It's more of a calculated risk that you have to take.

The explanation behind them putting off the audit might have nothing to do with tether. It could be concerns about what an investigation could uncover in their creative bookkeeping, being an incredibly profitable, offshore, unregulated company and all.

In the end, the whole situation boils down to

1) Did people really wire them the equivalent of the entire tether market cap?

2) Did they use the money?

I don't think it's unrealistic that ~1.5B has entered the market in the last few months.

I also don't think it's impossible they didn't need to touch that money, given that they seem to pocket 8 figures in fees daily. That's not even counting all the other things they can legally do as an unregulated exchange, like front-running, liquidation fishing with unlimited assets, etc.

millstone• 8 years ago

Stupid question: Why don't you have a choice if you want to be in crypto? People were exchanging bitcoin before tether was created; what changed?

Hermel• 8 years ago

That's not even counting all the other things they can legally do as an unregulated exchange, like front-running, liquidation fishing with unlimited assets, etc.

Unregulated does not mean that they can ignore the law. Fraud is illegal either way. In fact, most businesses used to be unregulated and just had to follow the same laws as everyone else. That should be the natural state.

danieltillett3• 8 years ago

The more interesting question is why has Tether been allowed to run wild for so long?

Imagine if you were part of the current elite that had control over the current fiat currency system and something like bitcoin appeared. You could ignore it and hope it and its kindred doesn't catch on with the population, or you could allow a fraudulent scam like Tether to run that pushes up the price into the stratosphere and then allow the bubble to burst tar-and-feathering the whole concept of crypto currencies. It is not like hundreds of trillions of dollars are at risk if we move away from fiat currencies.

paulgb2• 8 years ago

What I don't get about these conspiracy theories about the "current elite", is if they thought bitcoin was such a threat they could just put money in it.

Until I hear otherwise, I assume Hanlon's razor is at play here: regulators in all jurisdictions are still figuring out what to think about cryptocurrencies. US regulators have their hands tied in the case of Tether because they've gone to lengths to avoid US jurisdiction. Other regulators around the world may be less resourced.

Scoundreller2• 8 years ago

I'm just waiting for the musical rendition of USDT. Matt Stone and Trey Parker can re-use half of The Book of Mormon.

Just replace golden plates with USDT.

pfisch• 8 years ago

I'm guessing you haven't seen The Book of Mormon. It is not about the story told in the actual Mormon bible. That is just a southpark episode.

tptacek• 8 years ago

I think similar thoughts about basically all cryptocurrencies.

Feniks• 8 years ago

Because interest rates are ridiculously low and VAST amounts of money are looking for ANYTHING to invest in.

lhl4• 8 years ago

What's interesting is that while Coindesk posted to this as "breaking" news, plenty of people (like @bitfinexed) had noticed and dug into this on the 23rd: https://twitter.com/Bitfinexed/status/956053106516688898

(from a closed discussion group on the 24th: "I just spoke with the AICPA, Friedman has no professional responsibility to announce if they were ever auditing Bitfinex/Tether and/or if they withdrew from the engagement, so we will never know if there was even an audit in the first place.")

I've been personally pretty closely tracking the Tether situation, as I think it's basically the largest risk to the cryptocurrency market today. Here's a good even-handed summary that covers both sides and what it might mean: https://steemit.com/cryptocurrency/@cryptoscopia/making-sens...

Regardless of whether Tether is fully backed, it's certainly running fraudulently. The original premise promised not just 1:1 USD backing, but also regular audits, which AFAIK have never happened (first supposedly engaging w/ Ledger Labs, and then with Friedman LLP) and now appear like they will never happen. Of course, as bitfinexed pointed out, it's not like they didn't warn anyone about it in their white paper: https://twitter.com/Bitfinexed/status/957416416294068224

(The white paper of course does lie because it specifies regular audits and also banking partners that were aware of their business model.)

For those tracking the market conditions of an impending Tether collapse, I recommend reading this article (and tracking the author, @BambouClub's twitter feed): https://hackernoon.com/what-will-happen-when-the-shit-hits-t...

chrisco2553• 8 years ago

I'm just not understanding how a $1.5B scam coin would impact the crypto market dramatically at this point. Coincheck got hacked for $500M today and the markets are green across the board. There are alternative peg currencies to the dollar, including Dai, by Maker, which is backed by Ethereum, and seems like a better model for a stable coin: https://coinmarketcap.com/currencies/dai/

guildenstern• 8 years ago

Tether isn’t a traditional “scam coin”. Tether is the currency used on many major exchanges, they don’t use USD they use USDT and if tether have printed 2bn in fraudulent dollars that underly the entire crypto market they could wipe out huge portions of the market when it implodes. The market cap isn’t the amount of money invested, a hundreds of billions market cap can come from a few billion in “real” dollars — and if those dollars don’t exist, well...

lhl4• 8 years ago

@guildenstern's response covers it a bit, but a bit more on why this is so important. While the nominal market cap of the cryptocurrency sector is somewhere between $500-600B these days, this is based on an estimated $10-20B of capital inflow (eg "real" dollars invested). USDT, as a de facto 1:1 USD peg acts much more like this money than another random coin, because trades into USDT are treated as dollar settled. While there are some weaknesses to some of the analysis, the recent Quantifying the Effect of Tether report [2] does a good job pointing out the correlation (if not the causation) in terms of pricing/demand.

You can also note that if you order the charts by 24h trading volume, USDT is #3 (right under BTC and ETH) [1] and if you dig into say the top 3 exchanges [3][4][5] you can see that BTC/USDT and ETH/USDT are basically in the top spots. Ignoring the Korean exchanges (who are their own little universe), you have to get down to GDAX @ #10 to get down to an exchange that doesn't directly touch Tether.

If you pay attention to the markets, you can see USDT clearly driving price movements and as long as everyone treats it as a USD equivalent, USDT drives USD prices. When new USDT is printed (easy money), then people (and potentially market manipulating bots if you are into conspiracy theories) use it to margin into BTC, increasing demand, driving the whole market up. If this is not organic demand (USDT issued due to USD deposits), then we have a huge problem, since this has been going on for months and represents a huge price distortion.

Now Tether isn't solely responsible for driving prices up - there has been a real mania (you can see it with the insane amount of signups going on for retail exchanges), with a lot of real money coming in, but there's some real dirty sausage making going on atm. A writeup that points out a lot of the messy stuff going on: https://medium.com/@Skycoinproject/state-of-the-cryptocurren...

Personally, I believe that most of the Tether is backed by real currency, however it is being driven primarily by large OTC swaps by those evading Chinese (or Korean) and potentially dark market capital controls. I don't know if this actually leaves the market any better off if/when Tether Inc and many exchanges get busted by governmental/international regulators.

These shenanigans btw hasn't gone completely unnoticed in the mainstream news. Nathaniel Popper, who covers the digital currency beat for the NYTimes has done writeups on Bitfinex/Tether [6], as has Bloomberg [7], heck, even Dr Doom is all in on beating the Tether drum now [8] although I don't think anyone is straight up talking about the likelihood of major ML going on...

Re, other stablecoins, while they'd be nice to have in theory, I think one needs to be a bit skeptical: https://prestonbyrne.com/2018/01/11/epicaricacy/

A recent insightful quote I saw was that stablecoins trade volatility risk for blow-up risk.

The most interesting stablecoin announcement I saw was MUFG's plan to release a JPY-pegged coin soon. Now that'd be interesting...

[1] https://coinmarketcap.com/currencies/volume/24-hour/

[2] http://www.tetherreport.com/

[3] https://coinmarketcap.com/exchanges/okex/

[4] https://coinmarketcap.com/exchanges/binance/

[5] https://coinmarketcap.com/exchanges/huobi/

[6] https://www.nytimes.com/2017/11/21/technology/bitcoin-bitfin...

[7] https://www.bloomberg.com/news/articles/2017-12-05/mystery-s...

[8] https://twitter.com/Nouriel

dreit13• 8 years ago

Ironically it could push the price up. If everyone rushes out of tether to Bitcoin...well you know what happens

conanbatt6• 8 years ago

What I truly don't get from the tether is how its almost at parity on kraken (https://www.kraken.com/charts) You would expect a sizable discount going on for all the shennaningans.

256• 8 years ago

I'm guessing this is because most people who trade tether don't intend on holding it for long, so the "shennanigans" surrounding tether aren't as likely to affect them.

tehlike10• 8 years ago

It actually does. A lot of people moved recently to tether due to volatility as a stable value token.

conanbatt6• 8 years ago

Thats like saying you dont mind holding a bomb you cant see the time off, because its only going to be a for a short time.

paulgb2• 8 years ago

They could be buying up the excess supply from the reserves. In fact, I thought that was part of the design of Tether, but I haven't really dug into the details.

What will be interesting, if that's the case, is what happens if their reserves are not enough to cover the outstanding supply. Things could go sour very fast.

SwellJoe6• 8 years ago

They have to buy up the excess supply to keep the Ponzi scheme going. As long as it's lower than the amount they're able to get away with counterfeiting, it's just a cost of doing business. Even Ponzi paid some of his investors.

They'll keep buying back Tethers...until one day, they won't. And, I'd guess that day will come when there are a couple billion Tethers out there, and the folks running the scam decide it's enough to buy an island to retire on. What's that you say? There are already a couple billion Tethers? Well...I guess anyone unlucky or dumb enough to be holding Tethers ought to GTFO if they can.

ht852• 8 years ago

It's because of arbitrage.

If people didn't value tether at $1, then the price for X/USDT pairs (on other exchanges) would be lower.

As it isn't the case, if the price dropped below $1, you could buy USDT here, transfer it to a different exchange and make a profit by buying back your coins there.

tehlike10• 8 years ago

Bots and arbitrage, yes.

stale2002• 8 years ago

Well that's only if the USDT is actually worth that on the OTHER exchange.

You can't engage in arbitrage if nobody is paying more than 50 cents on every dollar.

conanbatt6• 8 years ago

Arbitrage explains why prices tend to be the same across exchanges, but it doesnt explain why it isnt discounted today. Kraken is the only one where you trade tethers for dollars that I know of. You cant trade dollars for tethers on tether.to.

Its possible tether is able to sell tethers to exchanges alone and mint tokens at 1 on 1 rate and so it should tend to be so, but considering tether is issuing through bitfinex..

pmorici• 8 years ago

Kraken is a total disaster. You can barley login and trade on it. The several times I've tried I've never been able to. Point being that the Tether price there is not to be trusted. Can you even move Tether between exchanges?

empath75• 8 years ago

Bitfinex just needs a bot to buy tether back when the price goes below $1.00. It’s fairly low volume so probably doesn’t cost much on most days. If there’s a run on the bank, that will change, though.

conanbatt6• 8 years ago

This is akin to bitfinex/tether actually redeeming USDT for USD, which is precisely what they don't do.

ActsJuvenile• 8 years ago

Check out the depth chart for USDT/USD pair. There is no buy-side demand at all. Anyone selling Tether would have to eat huge losses by selling their USDT well under $1. It is human nature to not sell at a loss, so no one is selling.

On the other hand, it takes very little effort ($100K) to prop USDT price up. Rumor has it that Tether themselves are propping up the price on Kraken.

Sad part is that once the prop crumbles, everyone in sell-side of the chart will become bagholders because USDT will be worth nearly zero.

conanbatt6• 8 years ago

Since I posted this, tether has gone down in parity to 0.97. Maybe the news is hitting the market?

vzcx• 8 years ago

HN might be interested in this statistical analysis of Tether's influence on the cryptocurrency markets: http://www.tetherreport.com/

cjbprime• 8 years ago

I think it had some (critical) comments of the statistics on HN.

Not saying Tether is legit. Just haven't heard that this report is especially persuasive.

neuralzen• 8 years ago

I'm really glad Jibrel's tokens are unlocking in 3 days, don't have to deal with Tether bullshit anymore.

brandnewlow• 8 years ago

How might one make a few bucks from Tether falling apart?

tehlike10• 8 years ago

Short futures.

alexeldeib• 8 years ago

This seems like a sound approach in general to be honest. If they succeeed, tether should remain 1:1 USD. If they fail, the price declines to 0. So the typical unlimited downside of the short is plausibly negated by their own definition of success.

SwellJoe6• 8 years ago

Are there futures on Tethers? One could short Bitcoin, but it's hard to predict how soon this is going to come crashing down. I sold nearly all my cryptocurrency a couple of weeks ago on the belief that Tether would collapse the market, but others sold long before that...and before the massive run up to $10k+. Had those folks shorted back then, they would have had to close their positions...and would have lost a lot of money. Even though they are (I believe) long-term right.

I'm just saying be careful with shorting something with unlimited potential upside...like Bitcoin. But, if I could short Tethers, I would, though I don't know who'd take the other side of that deal.

Blackthorn• 8 years ago

I'm constantly wondering if I have the fortitude for this.

I've been staring at the Feb BTC futures for a while. I mean, everyone knows that Tether is a scam. But the old phrase about the market remaining irrational longer than you can remain solvent is true. Bitcoin's basically hovered between 10k and 11.5k, for the past while, but this is something that's known for going up tremendously. That takes some fortitude to hold a short position in, that I'm not sure I have.

Tether has “dissolved” relationship with auditor Friedman LLP

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