
Tether has “dissolved” relationship with auditor Friedman LLP - atomical
https://twitter.com/coindesk/status/957381065190133767
======
Lazare
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?

~~~
mschuster91
> 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/](https://coinmarketcap.com/)? What
in blazes? People stuck billions of dollars into altcoins!

~~~
jpatokal
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.

~~~
chrisco255
Yeah, I can make a coin with $10T supply and sell one for $1 and imply a $10T
market cap.

~~~
SCAQTony
…Which makes trading volume a very important statistic to monitor.

~~~
maxander
He could proceed to have a bunch of bots throw coins around randomly, also, so
trading volume gives you nil reliable info, either.

~~~
mschuster91
This sort of behavior only works on exchanges with zero or extremely low
trading fees.

~~~
SwellJoe
It also works when you own the exchange. There's pretty good reason to believe
wash trading is happening at several exchanges...possibly performed by the
exchange themselves. I'm more willing to believe Bitfinex is doing the BTC
wash trading that's happening on their exchange, rather than some whale doing
it (the very close connection between Tether and Bitfinex, sharing several
founders and C-levels, makes this seem even more likely).

------
lhl
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](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...](https://steemit.com/cryptocurrency/@cryptoscopia/making-sense-of-the-
tether-situation)

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](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...](https://hackernoon.com/what-will-happen-when-the-shit-hits-the-fan-
with-tether-f59f92fd8dca)

~~~
chrisco255
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/](https://coinmarketcap.com/currencies/dai/)

~~~
lhl
@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...](https://medium.com/@Skycoinproject/state-of-the-
cryptocurrency-market-78f4a0dda9f)

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/](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/](https://coinmarketcap.com/currencies/volume/24-hour/)

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

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

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

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

[6] [https://www.nytimes.com/2017/11/21/technology/bitcoin-
bitfin...](https://www.nytimes.com/2017/11/21/technology/bitcoin-bitfinex-
tether.html)

[7]
[https://www.bloomberg.com/news/articles/2017-12-05/mystery-s...](https://www.bloomberg.com/news/articles/2017-12-05/mystery-
shrouds-tether-and-its-links-to-biggest-bitcoin-exchange)

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

~~~
chrisco255
In my opinion, people are using USDT to dodge the price swings that occur in
the market. I don't know that USDT represents a fundamental underpinning of
the price of Bitcoin, for instance. Coinbase had over a $1 billion in revenue
last year, alone, so Coinbase is probably responsible for tens of billions of
USD deposits on ETH & BTC markets.

Yeah if USDT crashed it might cause a big hit on the market, but not worse
than anything else we've seen. 30-50% drops are fairly common in this market.

In the mean time, I think other stable coins (like Dai) will continue to grow
in popularity. I've read Preston Byrne's article, but I've also read Dai's
white paper and I think that they have a fine model to build a relatively
stable coin, not a perfectly stable one, mind you, but a relatively stable one
that trends towards $1. For those wishing to hedge their bets against the
swings in the market (the great bulk majority of the USDT market) I think Dai
is a great alternative. We'll see as it matures, it's still early days.

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

~~~
ht85
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.

~~~
conanbatt
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..

~~~
Zarath
Kraken may be at 1:1, but Bitcoin is currently trading at a $500 (4%) premium
on tether based exchanges.

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

~~~
cjbprime
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.

------
dragonwriter
More substantive article linked deeper in Twitter chain:

[https://www.coindesk.com/tether-confirms-relationship-
audito...](https://www.coindesk.com/tether-confirms-relationship-auditor-
dissolved/)

~~~
tehlike
Following bitfinexed@ is also good.

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

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

~~~
tehlike
Short futures.

~~~
SwellJoe
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.

~~~
SwellJoe
I found you can short Tether on Kraken. So, I am (or trying to...it's
currently trading at .97 on Kraken, and my sell order is for .99, so if it
proves to be solvent in a month or two, I'll be out a few bucks plus margin
interest). I have vague concerns that this is like betting against the house
since presumably Kraken and other exchanges that accept USDT will be hit hard
by the failure of Tether, so they have a strong vested interest in seeing it
survive, even if it's shady as hell.

~~~
tehlike
You beat me to this - a friend just pinged me about the possibility of
shorting usdt at kraken for something like 1.8% /month. I did not confirm this
myself.

I am also not sure if tether fails, what happens to kraken/bittrex etc, will
you even be able to take your money out? I doubt. Don't know.

------
PhasmaFelis
Who and who?

~~~
deckar01
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/](https://tether.to/announcement-transparency-update/)

~~~
jameskilton
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](https://twitter.com/bitfinexed)

~~~
ufo
(It is up to 2.2 Billion now!)

