$1M bounty for details on Tether’s backing

by ilamont • 5 years ago

440 309 5 years ago

graeme8• 5 years ago

This is very interesting. Hindenburg is the real deal.

One challenge may be that, like the Mafia, Tether keeps its inner circle and employs family members. They have ~15 employees for a 70 billion dollar operation.

The CTO’s wife is a manager, and the CEO’s daughter works for an unnamed crypto family office, which may be related.

Their counterparties in Chinese commercial paper may not know they are counterparties due to proxies.

Still, the statements are out there. Zeke Faux from Bloomberg got a copy of their records somehow. They’ve had to give them to the New York Attorney General, and their accountants in the Cayman Islands, among others. And other counterparties may have bits and pieces.

Someone may be tempted by this.

Taikonerd• 5 years ago

I just realized that the Bloomberg reporter who wrote the recent story is named "Zeke Faux." (Faux meaning "fake" in French, in a story about fraud.) Is his name a pseudonym? If not, it's another surreal point in a surreal story.

lgierth• 5 years ago

Zeke = ZK = zero-knowledge?

mikeyouse2• 5 years ago

Nope - that's his real last name. We have some mutual friends and via FB I can see at least a dozen family members with the same surname.

OJFord2• 5 years ago

If you're unacquainted, look up (other?) examples of 'nominal determinism' - you're in for a treat!

baby• 5 years ago

It also means wrong

shoo• 5 years ago

not clear if it is the easiest target to short, given that many people who use tether are fairly skeptical about how/if the tokens are backed by assets but use it anyway (if the recent Bloomberg story is accurate).

Marazan• 5 years ago

It is a terrible target to short as you can only do it through exchanges that deal in Tether. Exchanges that can manipulate your position and liquidate you if they feel like it. Exchanges that benefit from Tether existing.

NovemberWhiskey• 5 years ago

Seriously, how would you short Tether at scale? It's not like you can call up your prime brokerage.

fnordfnordfnord5• 5 years ago

Hindenburg is the real deal.

Hindenburg is not the real deal. If you think Hindenburg is the real deal you should pay closer attention to their activities. They (he) are one of a number of noisy short sellers who try to drive stock prices with their tweets/reports. SEC should be doing things to these people.

That said, he is probably right about Tether. Tether should make every crypto speculator or holder very nervous.

cdolan• 5 years ago

They were right about Nikola and Lordstown Motors.

I’m a Hinden-believer I suppose

wpietri4• 5 years ago

Oh? Why should the SEC do anything? If it's wrong to talk about a company in hopes of affecting the stock price, shouldn't Elon Musk be doing hard time?

ctvo2• 5 years ago

Hindenburg is not the real deal. If you think Hindenburg is the real deal you should pay closer attention to their activities. They (he) are one of a number of noisy short sellers who try to drive stock prices with their tweets/reports. SEC should be doing things to these people.

https://hindenburgresearch.com/about-us/

Which of the items listed there do you have an issue with? Hindenburg were the folks who gave us Nikola rolling their truck down a hill.

andreilys• 5 years ago

Do you have an example of them targeting a non-fraudulent/fair-valued company and ruining them?

As far as I know they were the ones who broke the NKLA scandal. We need short sellers to keep markets honest and stop fraudsters from taking advantage of the current exuberant markets.

adrr2• 5 years ago

Would you pay $1m for information that could let you profit 10x or even 100x?

graeme8• 5 years ago

They had a pretty serious report against Nikola that forced the CEO to step down and started an SEC investigation.

They also forced a CEO stepdown at Lordstown motors, got the SEC to investigate and forced the company to amend their accounting statements.

https://en.m.wikipedia.org/wiki/Hindenburg_Research

And their reports have been pretty accurate this year based on long term market reaction: https://breakoutpoint.com/blog/2021/10/activist-short-sellin...

LurkingPenguin2• 5 years ago

They (he) are one of a number of noisy short sellers who try to drive stock prices with their tweets/reports.

Are sell-side "analysts" who cheerlead their long recommendations not doing the same?

bleachedsleet• 5 years ago

This is like saying Z$ should make every fiat speculator or holder very nervous. Crypto is huge. You can be involved without coming anywhere near USDT.

yawaworht1978• 5 years ago

How did you get this info?

I am inclined to apply, but what would be the the best company? Bitfinex or tether?

fuddle• 5 years ago

Wow, bold move :)

filvdg• 5 years ago

Disclosure: Hindenburg Research does not hold positions, either long or short, in Tether, bitcoin or any cryptocurrency at the time of this press release.

perl4ever9• 5 years ago

Did they specify the time down to the nanosecond?

tcgv• 5 years ago

I wonder why this Reaserch firm is offering such a substantial bounty for information on Tether. What's in it for them? Where will this money come from?

From their site they provide an answer (and even a "track record") [1]:

We look for (...) man-made disasters floating around in the market and aim to shed light on them before they lure in more unsuspecting victims.

Hence it seems they're doing it for the bennefit of the public. So much for the expression "there's no such thing as a free lunch".

[1] https://hindenburgresearch.com/about-us/

b9a2cab5• 5 years ago

Presumably they short the shit out of Tether and related stablecoins before they release the information they get. It's certainly for their own gain.

maxbond• 5 years ago

Presumably they would like to start a position by don't have sufficient information, and are attempting to buy that information.

Hidenburg is a short seller who takes positions in their research. See for instance their short of Nikola. While I'm sure they enjoy being helpful and that there's a reason they choose to engage in a very difficult way to earn a living, when there are easier opportunities available, their motives are hardly a mystery.

You can discount all their talk of helpfulness or assume they're just talking their book, and it doesn't really change anything.

kfprt3• 5 years ago

Pure speculation but I'd wager they have a position involving a 3rd party hedge fund etc with a sizable crypto position.

skybrian• 5 years ago

There are firms that look for good opportunities to short stocks. Find some credible bad news, short the stock, then publicize the bad news.

If the news is actually true, this might even be considered a public service (as well as obviously a way to make money).

They probably wouldn’t do until they actually got a tip. Also, they might short crypto-related stocks if that’s easier.

paulpauper3• 5 years ago

so they can trade on it before announcing it and then with the profit pay for the bounty, assuming they pay up or assuming tether falls. Tether has survived thus far everything thrown at it. The market is evidently very confident about tether.

hansjorg• 5 years ago

They usually disclose that they hold short positions at the same time as publishing their reports.

If Tether unravels and brings down the whole cryptocurrency bubble, there are probably more indirect positions that are safer bets?

epivosism• 5 years ago

Just because someone has something to gain, doesn't mean that their actions are corrupt.

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages” -Adam Smith

https://www.goodreads.com/quotes/68664-it-is-not-from-the-be...

JumpCrisscross7• 5 years ago

It's marketing.

When Hindenburg publishes equity research, the disclosure is "you should assume that as of the publication date of any short-biased report or letter, Hindenburg Research...has a short position in all stocks (and/or options of the stock) covered herein, and therefore stands to realize significant gains in the event that the price of any stock covered herein declines."

[1] https://hindenburgresearch.com/draftkings/

dnautics2• 5 years ago

I wish they also published a list of things they were wrong about.

sremani• 5 years ago

You can have positions in Microstrategy and Coinbase.

If Tether tanks -- there are definitely decent proxies out there.

freeAgent2• 5 years ago

They are fishing for edge. If they get information that they feel will be able to quickly move markets, they'll initiate a large position before dropping the release to the public. That's how they make money.

PeterisP• 5 years ago

The expectation is that they will obtain large and valuable positions (either long or short) upon obtaining this information which is not (yet) known to the general public.

ac292• 5 years ago

It notably doesnt say that their clients dont have any cryptocurrency positions. The $1M is coming from somewhere.

freeAgent2• 5 years ago

They'll certainly hold positions when they release any juicy findings they have.

LittlePeter• 5 years ago

$1 million is not that much, just for the sheer publicity Hindenburg gets. They're going to be quoted in WSJ, Economist, ... This brings new clients...

IAmGraydon• 5 years ago

Perhaps they’re holding long put contracts on the Bitcoin ETF that just started trading. Their disclosure would still be true as they own contracts, not shares. An interesting coincidence with the timing.

lazyeye• 5 years ago

Worth reading for some background..

The $94b crypto mystery

https://www.afr.com/wealth/investing/the-94b-crypto-mystery-...

12ft.io gets around the paywall.

My favourite quote..

"seemed to be practically quilted out of red flags.."

Abrownn• 5 years ago

Fantastic read, thank you.

throw123123123• 5 years ago

It's a very small bounty...missing at least 2 zeros considering the scope of Tether's supply.

toomuchtodo2• 5 years ago

No need to overspend. A million dollars will still motivate people with the necessary skills. You can always increase the bounty, decreasing it is frowned upon.

ghego1• 5 years ago

It's a million for each submission

exdsq2• 5 years ago

*up to a million

humanbeinc• 5 years ago

But... does it ultimately matter? All the other sh*tcoins are backed against nothing and have huge market caps as well.

tppiotrowski2• 5 years ago

It’s different because Tether claims to hold 1 USD for each Tether. A claim that should be verifiable.

The value of sh*tcoins is just a function of their future resale value.

aeternum2• 5 years ago

They claim to hold assets with values equivalent to 1 USD / Tether. Different than holding the USD directly.

They provide a more detailed breakdown here: https://tether.to/wp-content/uploads/2021/08/tether_assuranc...

About half in commercial paper and CODs. A quarter in t-bills. 2B in unspecified "digital tokens".

mrgordon• 5 years ago

Yes because if they're saying they have tons of USD-equivalent and buying other coins with it then they've been artificially inflating the other coins with bogus funds

otterley• 5 years ago

Of course it does. Fraud is a crime for a reason.

spzb• 5 years ago

It’s almost certain now that Tether doesn’t have fiat currency to back up its claimed value. But it’s a convenient fiction for everyone to keep believing as long as you’re not the one holding the Tethers when everyone suddenly decides to stop believing.

WalterSear2• 5 years ago

Given that 70% of all crypto transactions involve Tethers, the market cap of everything in crypto is more realistically denominated in Tethers than dollars.

rexstjohn• 5 years ago

Federal Reserve was crafted in a secret meeting on Jekyll Island (https://en.m.wikipedia.org/wiki/Federal_Reserve) between industry and government.

Still exists and functions today. Lot of people don’t like it, but it’s there regardless.

Even if the origin, operation of Tether is highly suspicious: if it functions, is widely adopted and does what is expected … may last longer than people think.

Best response is more open stable coin equivalents.

xur17• 5 years ago

Even if the origin, operation of Tether is highly suspicious: if it functions, is widely adopted and does what is expected … may last longer than people think.

I think you're right about this point, and I've been trying to imagine what might cause Tether to collapse - you really need a run on the bank situation triggered by something causing them to become insolvent.

rossdavidh• 5 years ago

Like, say, a bunch of Chinese firms who need cash quickly to pay dollar-denominated bonds, all selling their Tether at the same time?

Traster2• 5 years ago

The real question is basically how much is it leveraged. We learned this from so many other frauds/crashes. It's not so much that "as long as there isn't a run on the bank it's fine" it's that an outflow of a tiny percentage could effectively be a run on the bank, since they may only be backed by a tiny fraction of what they claim to be backed by. It's one thing if they have 90% backing. What happens if it turns out it's only backed 0.05%? A run on the bank won't kill them, an averagely bad few days could see it all collapse. This is exactly why banks have regulations.

perl4ever9• 5 years ago

A run on a bank can make it insolvent?

I thought that insolvency was when they don't have the assets to cover their liabilities.

My understanding of a bank run is it happens when a bank is solvent, but doesn't have enough in reserves - liquid, short term assets.

But if they simply don't have at least 100% of their liabilities in assets, then they are bust because they can never pay people back barring a miracle.

the_optimist• 5 years ago

Liquidity squeezes and credit crises are correlated: inability to repay happens at the same time as unwillingness to lend. In practice, you get a commercial paper default at the same time you get increased liquidity demands. All you need is one event; one fraud, one excess-risk taking that doesn't pay off. If Tether is investing reserves, it is only timing until they default. There is no exception, and everyone sophisticated in finance knows this. Banks play the same games with probability distributions on risk assets; this 'social science' still reliably fails and banks are accordingly bailed out. Tether has no such recourse.

PKop4• 5 years ago

A crash in the corporate paper they hold, which would destroy the rest of the economy even more. Tether would be a footnote to that event.

perl4ever9• 5 years ago

When people say "hey, Tether is no worse than the existing financial system" I wonder if they don't understand the difference between holding a fraction of deposited money as reserves, and only having a fraction of deposited money as assets, period. As far as I know, when the latter happens in a real bank, they get shut down, shareholders lose their money, and only the FDIC saves the depositors.

Just because that's the primary factoid I know about banking.

dnautics2• 5 years ago

Moreover the Fed implicitly has the authority to do the bullshit that it does. Arguably that makes it more pernicious and evil, but short of political collective action there's also not much as an individual you can do about it. You can certainly do things about the tether situation, e.g. exit crypto, short tether (this may be stupid, lol), etc.

Dma54rhs• 5 years ago

I've never held any coin but why can't it be true? The money is imaginary anyway and while you can talk about backing dollars with tanks and bomb at the end of the day is there are believers there is a market snd one market can outlive another. Saving depositors in regular banking is pure belief as well.

dsjegkl2• 5 years ago

...holding a fraction of deposited money as reserves...

US banks haven't had reserve requirements since March 2020.

https://www.federalreserve.gov/monetarypolicy/reservereq.htm

adrr2• 5 years ago

Didn't they pay a huge fine for lying about actually being fully backed by assets? This is crypto's biggest problem, the amount of scams.

Breza4• 5 years ago

The fights over the Bank of the United States and the Federal Reserve have been public and well documented. Congress has as much oversight as it wants to grant itself. That's very different from Tether.

arthurcolle3• 5 years ago

this is extremely bearish on crypto

BRB, buying puts on everything

_ah• 5 years ago

As always, Matt Levine is shockingly informative:

https://www.bloomberg.com/opinion/articles/2021-10-07/matt-l...

Key quote:

1. You get a bunch of Bitcoins.

2. You slice them into junior and senior claims.

3. You sell the junior claims to people who want levered Bitcoin: people who want margin loans against their Bitcoins, etc., who want to gamble on Bitcoin without putting up too much cash.

4. You sell the senior claims as stablecoins: “Even if Bitcoin drops by 50%,” you say, “these coins will still be worth $1, because they are backed by $2 worth of Bitcoin.”

JumpCrisscross7• 5 years ago

Tranching is a thing. It's fine. It works, if you don't pretend AAA-rated securities, which have--and historically had--a very low risk of losses, are both safe and liquid.

If tranching were all Tether were doing, it would just be fraud. You can't sell a senior tranche on a pool of assets as a fully-backed security and call it a day. But whatever, Tether did that and more, nobody cared, we're on the next tier of the Narcissist's Prayer [1].

The new problem is we have circumstantial evidence that at least some of Tether's assets are Chinese developers' commercial paper. That's a risky asset. Even before Evergrande and Sinic defaulted, it was a speculative asset. (Now it's a distressed one.) If that's what we know they're in, how bad is the rest of their balance sheet? Tether claims to be over-collateralising their crypto-backed loans by 30%. An LTV of 77% will start losing money in a 25% crash. Bitcoin...does that a lot? For an asset they understand, they've set their risk limits woefully low. If that's what we know they're doing, how thin is the rest of their capital?

We're going to see a run on Tether. Not might. Statistically, the assets Tether holds will sometimes go down. Sometimes a lot. Most of the time, that will be fine. Some times, however, Tether will get a redemption at the same time. (Assets going down and investors redeeming things are correlated.) Most of the time, that will work out. Some times, however, Tether will need time to avoid their own selling driving down the asset's price. Most of the time, that will be fine. Some of the time, however, the person making the redemption request won't have that time. They'll blow up, and they'll blame Tether. This will prompt additional redemptions, which will force the aforementioned fire sale until, in all likelihood, Tether kills its domain and steals the money. (The last part is a novelty really only afforded by their setup.)

[1] https://news.ycombinator.com/item?id=28880280

[2] https://www.bloomberg.com/news/articles/2021-10-07/can-you-t...

miohtama2• 5 years ago

Likely in the case of a bank run, Tether cannot redeem even a cent because their organisation is unable to serve any customer outside few selected one (no staff, no processed). However the damage to retail US investors should be quite well contained, as I do not feel they have significant Tether holdings. It is mostly (shady?) professional traders (Alameda, Celsius) and offshore (China) that use Tether.

Tether is 50% of crypto trading. Tether stopping would case quite interesting escape into either Bitcoin or some other liquid widely available pair (ETH). Prices would shoot up until real dollar offramps can pick it up. Long term USDC, USDP snd other more robust stablecoins can pick up the slack. Tether is not too big råto,fail, though is massive.

gitfan863• 5 years ago

But they can print more tether, buy bitcoin with that tether, and give you bitcoin as redemptions. This could go on for a very long time.

dustingetz• 5 years ago

https://archive.md/cQVJl

paulpan2• 5 years ago

Last week CFTC fined both Tether and Bitfinex $42.5M for allegedly not holding enough reserves and colluding together. https://www.cftc.gov/PressRoom/PressReleases/8450-21

Seems like a fairly small fine in grand scheme of things no? If the critics are right and $70B+ supply is just made up paper money, then it'll be huge losses for all Tether holders. I'd conjecture it would tank the entire crypto market - and possibly the equity market too.

omgwtfbyobbq• 5 years ago

Why do you think it would tank the equity market?

PKop4• 5 years ago

It's all tied together. If one asset class is crashing people sell others to grab cash. Another way, according to Janet Yellen, that Tether and other stables can destabalize markets, is that they have large portions of reserves in corporate debt, a crisis in these coins would cause a fire sale of billions of corporate debt they hold, itself probably cascading into all risk markets.

exdsq2• 5 years ago

Or people will accept it as paper dollars and carry on regardless. Honestly this wouldn't surprise me - it'll just be a representation of the dollar that things use as an intermediary step.

Traster2• 5 years ago

Well, if Tether isn't backed by dollars, then there's some pretty big questions to answer - for example: "When people buy tether using fiat currency, they hand $1 to bitfinex, and in return get 1USDT. Where did that real $1 go?"

legutierr• 5 years ago

There is one scenario in which the 70 billion was at one time made-up money, but where it won't ever actually tank the crypto market:

1. Tether prints $1 billion with no backing.

2. Tether buys $1 billion of Bitcoin with the the fraudulent tokens.

3. Bitcoin triples in price.

4. Tether sells 1/3 of their position in exchange for hard currency, and holds that money in their reserves.

5. Tether now has 100% reserves backing the tokens they created, and is also holding $2 billion in Bitcoin. Maybe they sell the extra Bitcoin to diversify.

6. Rinse and repeat.

Under this scenario, what these guys did was to take a massive uncollateralized loan from ordinary consumers, use it to buy buy Bitcoin, and sell off the Bitcoin in order to pay back the loan. Basically an uncollateralized version of what most DeFi borrowers are doing right now, but at a massive scale.

As long as the price of Bitcoin is going up, the scheme a surefire way to make a lot of money. If the price of Bitcoin starts going down before they can cash out, then it can easily bankrupt them and crash the market—which is also a big risk with DeFi.

It could be that we are passed that point with Tether, though. With as much scrutiny as they are under right now, if Tether ever defaults, the people who run Tether are going to be wanted for criminal prosecution in dozens of countries. They will be running and hiding for the rest of their lives. I can't believe that a few more billion dollars in the bank is worth the risk—especially if they won't be able to access those billions.

If you look at the rate of issuance of Tether since June 1 of this year, it has flattened out dramatically.[0] Could it be that the people at Tether have realized that the jig is up, and are now just trying to get things in order so they can walk away clean? Maybe.

Or, it could be that they printed so much funny money last year that the amount of Bitcoin they need to sell is more than the market can accept without tanking the price of Bitcoin, given current market liquidity. Maybe they aren't generating more Tether for themselves because they figured out that whenever they try to sell the Bitcoin they need to sell in order to replenish their reserves, they crash the Bitcoin market. Maybe they're stuck.

Or it could be that Tether is fully backed, that they have never minted any Tether that didn't correspond to $$ in their bank account, and the reason that Tether's growth has slowed is only because people are now buying USDC and other stablecoins instead. (Not likely, in my opinion.)

[0] https://coinmarketcap.com/currencies/tether/

thebean114• 5 years ago

If the 95% crash in 2017 didn't kill Tether I'm not sure what kind of price action could, unless they are in a materially worse position now than they were in 2017 (the accusations were already super common).

chunky1994• 5 years ago

It really can't happen this way. Between 3 and 4, you'd tank bitcoin's value significantly (assuming $1B is able to triple bitcoin's market value). Any sizeable liquidation of bitcoin at an inflated price is going to affect the price heavily and so now you no longer have 100% backing. (This of course depends on how elastic BTC/USDT price is)

graeme8• 5 years ago

Tether claimed their excess reserves were $160 million. So the fine is a quarter of that.

VHRanger2• 5 years ago

Tether has claimed their excess reserves is almost exactly $160m for more than a year. Two ways to confirm:

- Go look at the wayback machine on their transparency page

- Look at the difference in their attestations

This implies they loot the interest rate yield on their reserves

kfprt3• 5 years ago

Tether is just shady which is not a word people generally want associated with their money.

jstx1• 5 years ago

This made me check the prices. Apparently Bitcoin hit a new all-time high today at over $64k.

fnordfnordfnord5• 5 years ago

ATH is 64.8k iirc, so nearing ATH but not there yet. Watch tomorrow, First day of open trading for BITO ETF, might see a new ATH.

thebean114• 5 years ago

It'll be a sell the news small drop if I had to guess

keefe8• 5 years ago

Wasn't today (Oct 19) the first day of open trading?

paulpauper3• 5 years ago

There has been nothing but Tether doom and gloom since 2017 and yet here it is still at 1.0000 If anyone thinks this will drop, now is the opportunity to short, I suppose.

RC_ITR• 5 years ago

Circa 2020: There has been nothing but Wirecard doom and gloom since 2019 and yet here it is still at 115. If anyone thinks this will drop, now is the opportunity to short, I suppose.

hmate94• 5 years ago

Exactly. These things dont go down in value slowly as they start rotting. They suddenly collapse in a matter of hours.

TedDoesntTalk• 5 years ago

Just because you’re paranoid, doesn’t mean you’re wrong.

hmate94• 5 years ago

Shorting Tether is a great play. Either everyone loses faith and nobody trusts them anymore or.... it stays at $1. You are not going to lose. You just have to pay funding fees for your short which on FTX is around 4% a year.

Do you think there is a great chance that Tether is a massive scam and will find its doom within the next 25 years?

My answer to that is yes.

JumpCrisscross7• 5 years ago

Shorting Tether is a great play

Why do you think there will be a functioning market to pay you out if and when it collapses?

paulpauper3• 5 years ago

you could probably fund this by selling some far out of money bitcoin puts.

ur-whale4• 5 years ago

Given how deep FTX is into USDT, it's rather unlikely they'd survive a Tether implosion, and your short position will there will evaporate in a puff of smoke.

323• 5 years ago

Shorting Tether is a great play. ... You just have to pay funding fees for your short which on FTX is around 4% a year.

That's what people shorting the Russian ruble said in 2014. Then funding spiked to 17% a year and a lot of speculators got burned.

JoshuaDavid• 5 years ago

Is there a way to short tether without either significant counterparty risk or absurd interest rates? Looking at Kraken, if I'm reading the chart correctly, it would cost 0.01% / 4 hours to short tether, works out to be a positive-sum bet if you think there's more than a 20% / year chance that tether will go to zero, and you think the counterparty risk is minimal.

However, I'm not sure how likely Kraken is to take the money and run in the event that tether collapses and I have a short position. It also looks like you can do [mumble mumble borrow tether on Aave collateralized by other crypto somehow] which currently costs about a 12% / year, but if I'm understanding correctly that cost is not fixed and would likely go up significantly if tether looked likely to crash.

Can someone who knows more about the topic confirm whether the cost is actually between 12 and 20% per year and the counterparty risk is minimal, and whether or not there are non-obvious footguns with either of the above approaches to shorting tether?

lvl100• 5 years ago

Sadly the scheme behind crypto extends well beyond tether. This is what happens when you have money sloshing around unregulated market with very loose margin and leverage limits, free money afforded by central banks, and an absolute mania.

cmckn2• 5 years ago

For sure. The circular dependencies and the turtles-all-the-way-down nature of the crypto ecosystem is kind of terrifying to behold. Like watching a car crash. I have a feeling that this all will unravel exactly as everyone has predicted; but at a time no one expects.

cyberpunk• 5 years ago

Am I missing something here or is this basically a bounty for a black hat hack campaign against tether?

I mean, yeah, fuck those guys, but how is any kind of enforcement to be done on how this information was obtained?

Sysadmin at Microsoft or google with access to their emails may be mighty tempted by this eh?

gitfan863• 5 years ago

It is highly dependent on what prosecutors have jurisdiction and the politics involved. The Duke Lacrosse prosecution is a good example of a prosecutor going over the top on charges for political reasons, and the Jeffrey Epstein plea bargain in 2007 is an example of the opposite.

paulsutter• 5 years ago

They should denominate the bounty in Bitcoin, or even Zcash/Monero

javajosh2• 5 years ago

Sounds like they're offering to bribe an insider to disclose specifics about the "commercial paper"[1], which is presumably how a company like Tether would make most of its money. That is, taking advantage of the time-value of money over short periods of time (< 30 days) with large quantities of money (tranches of $100k) at a time, reserves which any marketplace would naturally have on hand.

Note that Tether looks shady at first blush, with a link to "Proof of Transparency"[2] that is content-free. I also find it sus that their job listings only list "Business Development Specialist" [3].

Is it illegal for a private person to offer to pay someone to illegally snitch on an illegal operation? Do two illegal things cancel out?

1 - https://www.investopedia.com/terms/c/commercialpaper.asp

2 - https://tether.to/latest-assurance-opinion-confirms-tether-f...

3 - https://tether.recruitee.com/

Gortal278• 5 years ago

It doesn't have to be an insider

arthurcolle3• 5 years ago

it's a very small group of people with pretty well-known dubious banking connections. I won't rehash it but the CEO of their main bank is some rando with pretty poor spelling.

I doubt anyone beyond the inner circle (I guess maybe the exec assistant of the aforementioned rando might know something interesting) would know anything interesting.

JumpCrisscross7• 5 years ago

Is it illegal for a private person to offer to pay someone to illegally snitch on an illegal operation?

It's not illegal to pay someone for information. If you induce them to violate an NDA, yes, it could be. But given the question "under what jurisdiction does Tether really operate" is a debatable question, I'd say it's probably risky but fine. (If you trade on that information, it could be a different story.)

UncleOxidant2• 5 years ago

If you induce them to violate an NDA, yes, it could be.

Is violating an NDA illegal? I'm not a lawyer and I don't play one on TV, but I don't think violating an NDA is illegal as in you could go to prison for violating a law. Yes, it could open you up to legal jeopardy as in a lawsuit which could be expensive, but I don't think any laws are violated.

And if you're violating an NDA to expose some corrupt practices it seems like the NDA shouldn't hold any power.

skulk• 5 years ago

"Induce" is a tricky word; does it imply the target has agency? I think the line is drawn when you strip the target of agency. Does offering a large amount of money constitute stripping a target of agency? It may depend on how you feel about capitalism.

TigeriusKirk• 5 years ago

Well, there's a number of very public, very loud Tether skeptics out there. I guess now we'll find out if they have anything concrete.

I think the skeptics are probably right, but we're at the point where real information needs to be uncovered.

honestduane• 5 years ago

Tether is a cryptocurrency with tokens issued by Tether Limited, which in turn is controlled by the owners of Bitfinex

pornel• 5 years ago

Isn't that absurd? Cryptocurrencies were supposed to be fully decentralized, and not require trusting anybody.

This one depends on financial hacks done by a single private company. It seems like beenz.com, only with a different tech stack.

warkdarrior• 5 years ago

Oh, we're all equal and decentralized here, but some are more equal than others.

tppiotrowski2• 5 years ago

How can one profit from a crypto bubble? I’ve heard of an ETF for shorting Bitcoin but never saw any specifics. Can anyone provide a reputable brokerage for shorting crypto currencies?

pxue• 5 years ago

short sell MicroStrategy (mstr), they are pegged to crypto because they decided to hold large amounts of crypto as a corporation

New crypto ETF is also right around the corner. There will definitely be futures on that.

thebean114• 5 years ago

The ETF is based on the futures, which have existed for years.

jfrunyon13• 5 years ago

MicroStrategy invested ... in Bitcoin as a treasury reserve asset ... [and] has spent over $2.2 billion purchasing Bitcoin [0]

WTH? Why does a company with a $7b market cap need over $2b of "treasury reserve assets"?

[0] https://en.wikipedia.org/wiki/MicroStrategy

fleddr5• 5 years ago

You don't need an ETF for that, you can directly short any crypto at many exchanges. To profit from the short you should obviously time the market well.

graeme8• 5 years ago

If Tether implodes, strong risk those exchanges do too. Massive counterparty risk.

garmaine2• 5 years ago

LedgerX.

drexlspivey2• 5 years ago

Buy puts on the new Bitcoin ETF that launched today (BITO)

aazaa2• 5 years ago

It may be counterintuitive, but the best thing that could happen to Bitcoin would be for Tether to collapse in a cloud of dust. Tether is continually cited as a large risk factor to Bitcoin by people who have gotten past the "it's not real money" objection.

But I think it's worth considering what happens if the collapse never comes. If government investigation, findings of wrongdoing, admission of lies, and punishment aren't enough to shake Tether users out of their trees, then what would, exactly?

Ethereum allowed a claw-back of funds lost fair and square to a defective contract. Where is Ethereum now? Oh yeah, near an all-time high and a market cap approaching half a trillion dollars.

What non-users don't get is the fanatical level of devotion by users. It waxes and wanes with the Bitcoin halving cycle, but always comes back stronger than before.

If Tether did somehow implode and users left in droves, something else would come along to take its place and within a year or two and the entire Bitcoin ecosystem would come roaring back stronger than ever.

ur-whale4• 5 years ago

It may be counterintuitive, but the best thing that could happen to Bitcoin would be for Tether to collapse in a cloud of dust.

I share your opinion, and especially true if you have a ~5 year horizon on BTCUSD.

ryanSrich• 5 years ago

If Tether did somehow implode and users left in droves, something else would come along to take its place and within a year or two and the entire Bitcoin ecosystem would come roaring back stronger than ever

Pick any of the already existing stable coins. We don't even need new technology to replace Tether. We just need international exchanges to support existing stables.

zionic2• 5 years ago

Exactly. Tether has some amazing alternatives. DAI for example.

zionic2• 5 years ago

Fair and square? It was a completely new failure mechanism found in one of the first major smart contract deploys.

BTC had a similar early-phase bug that minted tons of coins by the way, that they also had to “claw back”.

At least pretend to be unbiased.

aazaa2• 5 years ago

Not even the same league of event. The value overflow incident was a flaw in the protocol implementation itself.

https://en.bitcoin.it/wiki/Value_overflow_incident

The DAO hack resulted from a poorly-written contract. Concerns about the quality of the contract were ignored by the team. The DAO itself wasn't even part of the Ethereum protocol, just an application running on it.

The DAO was like a Bitcoin transaction that spent all output value to miner fees, which has happened a lot. But at no time did that ever result in a rollback of history.

The response to the DAO was the Ethereum community slapping a giant asterisk on the motto "Code is Law." And the community is quite all right with that.

seibelj• 5 years ago

The price of Bitcoin would rise precipitously as traders tried to exit tether any way possible, as would all other cryptos.

graeme8• 5 years ago

The price in Tethers would rise

TacticalCoder• 5 years ago

Yes but long term? The big question is not if there are real USD behind USDT or not but if Tether has a way to pump the entire crypto market. Basically: did Tether make BTC go to 64 K USD, by printing non-backer tether by the billions and then use them to buy BTCs?

Short term if USDT collapses, BTC would probably skyrocket due to everybody looking for an exit out how USDT. But long term? What if the BTC demand is simply mostly all fake?

qeternity9• 5 years ago

No, the price in USDT would rise and then as people promptly sold for USD it would collapse in USD terms.

manquer3• 5 years ago

Each scam is draining some money from the market. All these scammers are siphoning of real money from the ecosystem each time.

Fanatic and devoted fans there maybe, however they don't have limitless fiat money to play with. In the recent past, new found mainstream popularity has fueled inflows into all kinds of crypto products sustaining the strong bull runs despite significant and clear risks.

This popularity has little to do with widespread belief in distributed / unregulated financial systems, and more because these assets have outperformed traditional instruments spectacularly, the allure of making ton of money fast. Eventually it will fade either because there is not enough new people who can/will put more money or an unsustainable growth tapers off.

When ( not if) the second set of players leave inevitably after enough scams, the hardcore fans that will remain and prop up the market and keep it going yes. However without non fanatic users there is not enough money to come roaring back like in the past.

To be clear, it may take a few years or more and few cycles of what you say, markets can stay irrational for a very long time, it is unstable equilibrium nonetheless, and eventually will correct permanently

hackingforfun8• 5 years ago

How do you feel about stocks that have completely unrealistic P/E ratios? Is that not the same speculation that happens in crypto? And yes, I agree, prices don't go up unless people are putting more in, but I'm just saying that crypto is not unique here. Yes, traditional companies can liquidate their assets, but my point is, a lot of what's going on in stocks, at least ones greatly differing from traditional P/E ratios, is also speculation.

Also, in terms of siphoning of "real money" from the ecosystem each time, if some of the money going in is fake, i.e. Tether printing without having 1:1 USD backed up, and that is going back into crypto, then how do we quantify that exactly, in terms of "real money" lost? Is it because "real money" is also buying at the inflated prices, or is it because some of the Tether that is buying other crypto is backed up by "real money"? I'm trying to understand the argument here.

fleddr5• 5 years ago

"What non-users don't get is the fanatical level of devotion by users. It waxes and wanes with the Bitcoin halving cycle, but always comes back stronger than before."

Indeed. 80-90% pullbacks, multi-year bear markets, the seasoned crypto trader has seen multiple apocalyptic financial disasters, where this simply is a potential next one. It fails to impress.

The really clever ones thrive from these crashes, that's when they buy. Volatility is the feature.

qeternity9• 5 years ago

I'm not sure you guys get this: Tether is the reason it comes back.

Tether drove the 2017 bubble (this is when Bitfinex'd got their start) and has driven the 2021 bubble to the tune of $70b.

This resilience wouldn't exist without Tether.

DrammBA• 5 years ago

Can you (or anyone) give me a few more keywords to find more info about that claw-back of funds? I'm new to the crypto space and my google-fu is lacking today, can't find anything about Ethereum defective contract and subsequent claw-back of funds.

hackingforfun8• 5 years ago

It was The DAO hack [1].

[1] https://www.gemini.com/cryptopedia/the-dao-hack-makerdao

nstj• 5 years ago

https://www.gemini.com/cryptopedia/the-dao-hack-makerdao

beachwood23• 5 years ago

A good overview can be found on the Wikipedia page for Ethereum Classic. ETHC is made up of the users and miners who didn't want to "claw-back" those funds.

https://en.wikipedia.org/wiki/Ethereum_Classic

eightysixfour3• 5 years ago

Here's the wiki article: https://en.wikipedia.org/wiki/The_DAO_(organization)

nrmitchi• 5 years ago

IIRC, back in the day, there was the original DAO. They released this very large contract, citing "the code is the law".

The code had a bug, and someone drained the $50M or so contract.

Since everyone lost a bunch of money, the majority agreed to fork Ethereum and roll back the hack, leading to "Ethereum" (with the roll back), and "Ethereum Classic" (without the rollback).

staticautomatic• 5 years ago

“ Ethereum allowed a claw-back of funds lost fair and square to a defective contract. Where is Ethereum now? Oh yeah, near an all-time high and a market cap approaching half a trillion dollars.”

Another interpretation is that courts customarily invalidate “defective” contracts, and therefore the “claw-back” actually inspires confidence by demonstrating consistency with contract law norms.

singularity20013• 5 years ago

Just a note of wording: Almost everyone is a "non-user", speculators probably vastly outnumber the true "users" (money transfer, laundering, ... what else?)

csomar2• 5 years ago

USDC (coinbase stable coin) is already around 50% of the market cap (value) of Tether. Tether influence is already waning. If it doesn't collapse in the next couple years, it'd probably be significant but a minor event/thing in the crypto space.

dwild• 5 years ago

It waxes and wanes with the Bitcoin halving cycle, but always comes back stronger than before.

Already forgot about 2008? Go check all theses banks values! Morgan Stanley is on an all time high right now!

schleck8• 5 years ago

Crypto twitter's mature response, as expected

https://twitter.com/HindenburgRes/status/1450562266919841798

https://twitter.com/HindenburgRes/status/1450562260993298433

garyclarke27• 5 years ago

Tether is obviously not backed 1:1 by USD as previously claimed. Now the dodgy piechart informs us that it is backed mainly by corporate bonds and loans - if true I would guess mostly to related companies. A recent Bloomberg article says they have been lending Billions to Chinese property companies! Eventually enough of the gullible fools will realise that the Emperor has no clothes, then there will be a run on Tether which will collapse its price, this will also crash the whole crypto market and people will finally realise that a random number (no matter how cleverly generated) is not worth $64k, not even $1k.

rvz• 5 years ago

Correct. Tether is a giant scam as I and many others have said before: [0]

Won't be surprised to see the scam finally unveiled and to cause a seismic crash in the crypto markets.

I would start packing my crypto holdings out of the market real soon™... Things are getting quite, unstable and euphoric once again.

[0] https://news.ycombinator.com/item?id=27960613

tenuousemphasis• 5 years ago

Why would a collapse of tether cause a crash in the crypto markets?

jzymbaluk2• 5 years ago

Part of me is trying to come up with ways I could short this incredibly irrational market™, but I'm reminded of the saying that the markets can stay irrational longer than you can stay solvent

rchaud2• 5 years ago

It won't be that straightforward.

Tether is one head of the snake. As scrutiny increases on USDT, volume will simply shift to USDC and other similarly unaudited stablecoins. These can be issued and adopted faster than regulators can file cases against them.

smoyer• 5 years ago

Given the way this is worded and the fact that many crypto fans are also "highly technical", does anyone else feel like this is a request to compromise the Tether organization's infrastructure?

democracy• 5 years ago

Anyone can issue a "cryptocurrency", yeah, but why would anyone accept that crap? Why would exchanges start trading it if it would take them 10 minutes to launch a "stablecoin" of their own? Was they way in financed by millions and millions of dollars in listing/marketing fees? I think that's the only reason tether even exists.

NelsonMinar• 5 years ago

For anyone looking for context on Tether's finances: "With estimated leverage of 383-to-1, Tether would be unable to honour all its tokens after losses of just 0.26%—a safety cushion that regulators would never allow at a bank." https://www.economist.com/leaders/2021/08/07/why-regulators-...

gitfan863• 5 years ago

But Tether doesn't have to honor redemptions like a bank does. They can mint Tether, buy BTC with that, and give you that BTC as a redemption.

arcticbull2• 5 years ago

Banks usually allow depositors to withdraw.

Tether's terms and conditions state that they:

(1) do not ever have to honor redemptions for US persons

(2) do not have to honor redemptions except to authorized customers

(3) only they decide who authorized customers are

(4) even for them they can delay withdrawals indefinitely, arbitrarily

(5) and even then they can offer whatever they happen to have in reserves in lieu

So there's bigger issues than their composition, like the fact they can just sail off and keep the backing, and they don't have to honor withdrawals for anyone ever.

You give them $1 (maybe, someone does, probably, honestly its not clear) and you get 1 USDT. That's it. Hope its worth $1 to you because you're not entitled to ever see that dollar again. All this hand wringing over backing doesn't mean much if you're not entitled to it you know?

[edit] You don't really need a $1M bounty this is all in their T&Cs, it's just that it is difficult to get a man to understand something when his salary depends upon his not understanding it.

[1] tether.to/legal

41b696ef1113• 5 years ago

Let's say Hindenburg gathers definitive proof that Tether is a scam. Tether (and crypto generally) will have an enormous crash. What is the money making position they take in all of this? Short crypto exchanges? Assume the fallout spreads to the wider market?

tsujp• 5 years ago

Back in 2019 Tether was proven to NOT be backed 1:1 in USD. Rather it is backed 74% by fiat AND cash-equivalents. So that 74% is not even 74 literal cents.

Article: https://www.coindesk.com/markets/2019/04/30/tether-lawyer-ad...

$1M bounty for details on Tether’s backing

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