
Tether (USDT) Account Snapshot Statement [pdf] - Rygu
https://tether.to/wp-content/uploads/2018/06/FSS1JUN18-Account-Snapshot-Statement-final-15JUN18.pdf
======
devilmoon
eeeeeh I dunno

1) FSS is not an accounting firm and did not perform the above review and
confirmations using Generally Accepted Accounting Principles.

2) The above confirmation of bank and tether balances should not be construed
as the results of an audit and were not conducted in accordance with Generally
Accepted Auditing Standards.

3) FSS makes no representation regarding the sufficiency of the information
provided to FSS and all inquiries made by FSS have been directed to the Client
and/or third party personnel responsible for maintaining such information, and
the data has been obtained from the Client and/or third party personnel
responsible for maintaining such information.

4) FSS procedures performed are not for the purpose of providing assurance and
are limited to the findings listed above as of June 1st, 2018, Close of
Business. FSS has not performed any procedures or made any conclusions for
activity prior to or subsequent to June 1st, 2018, Close of Business.

5) FSS did not, as part of the Engagement, arrive at any conclusions as to
Tether’s compliance with applicable laws and regulations in any jurisdiction.

6) FSS has assumed, without further inquiry, that the bank personnel providing
the confirmations were duly authorized to provide such confirmations, and that
the confirmations were correct.

~~~
TAForObvReasons
7) FSS did not actually verify the liabilities:

> In conjunction with receiving the above balance information, FSS requested
> the Chief Financial Officer and the General Counsel of Tether to certify, by
> sworn statement, the amount of fully-backed USD Tethers that were in
> circulation as of the close of business on June 1st, 2018.

Based on the numerous downvotes, it seems many people didn't actually read the
PDF in question. The quote is directly from the report and at no point does
FSS claim they verified the USDT half of the claims, only that bank accounts
on a particular day held a specified dollar amount.

~~~
vorpalhex
You didn't counter the point. An Audit isn't some pinky swear. It requires an
external accountant to review not only the account balance but how it got
there.

~~~
ceejayoz
Plus "who else might have claims on this".

~~~
ttul
And... where did it come from...

------
JumpCrisscross
This is a positive sign. I had previously been doubtful that Tether/Bitfinex
even had $2.5 billion. This shows they did.

What this document is _not_ , however, is a statement from an auditor. Given
(a) Tether's previous auditors resigned and (b) Tether continues to claim, on
its website, that it is audited, that remains a red flag.

(In the history of funny money being issued by banks or exchanges, the
traditional switcheroo involved presenting customers' deposits as the bank's
own funds. Given the totality of this situation, that is what I assume is
going on.)

------
chollida1
One of the first lessons I learned about investing was, nothing is done until
someone puts their signature on a document.

Looking at what's posted I don't see anyone of these 3 former judges or FBI
director putting their signature on this.

That's pretty telling in of itself.

~~~
jacobush
Phew, it took a few years to find someone willing to count all that money.

Well all is good, nothing to see, go about your business as usual. Don’t mind
the man behind the curtain.

------
ceejayoz
"The above confirmation of bank and tether balances should not be construed as
the results of an audit."

Hey, look, another memo misleadingly posted as if it were an actual audit.
Completed audit count: still ZERO, despite fraudulent claims on the website
claiming "frequent professional audits".

One of the issues the previous Friedman LLP memo (also misleadingly posted as
if it were an audit, which many fell for) raised was that Tether might not
actually _control_ the funds in their bank accounts - i.e. that Bitfinex might
be parking customer deposits in Tether's account to make it look legit. Looks
like that is still unresolved here.

~~~
jacobush
Bitfinex would _never_! They are totally legit and have a healthy but separate
relation to Tether, in no way shape or form colluding with each other.

------
jezclaremurugan
Mixed emotions here - on the one hand - its not an accounting firm and they
are very clear that it wasn't done in accordance with Generally Accepted
Auditing Standards and so that gives the firm FSS a cop out should anything go
wrong. On the other hand - a reputed firm has staked its reputation to do this
- and being wrong would destroy their credibility.

~~~
slantyyz
There's a law firm in Toronto that specializes in tax issues, and in their
advertisements on the radio, the reason why they tell you to hire them over an
accountant/accounting firm is that they have the benefit of attorney client
privilege, whereas an accountant can be compelled to talk to the federal tax
agency, etc.

So maybe that's why FSS was hired as opposed to an accounting firm?

------
cremp
So they have a larger operating single account than a lot of countries have
for revenue.

If they were a country, they'd be #140, with just one account. #133 for their
total according to the report.

I find it _very_ hard to believe that a company that has that amount, would be
anywhere close to US borders, since... there has been no audit of any sort, by
anyone; including governments.

------
sireat
In some ways this is a positive news in that Bitfinex/Tether managed to have
2.5Billion in bank on June 01st, 2018.

That seems rather plausible unless FSS completely messed up verifying bank
sources(ie someone impersonated a respectable bank, or a micro bank official
lied).

So that is all that this statement says: on June1st,2018, Tether accounts had
2.5Billion USD in bank.

------
CPLX
This is interesting for sure. It answers at least one question, and certainly
makes the idea that they are solvent somewhat more plausible.

That's all it does though, given that there's absolutely no effort made to
determine liabilities. For all we know those accounts could have been funded
with a $2bn loan, or better yet customer deposits (ie via Bitfinex) which this
analysis is completely silent on.

With that said, it's interesting.

------
vorpalhex
So Tether is keeping 2 billion dollars in two bank accounts, way-way-way-way-
way above the FDIC protection limit?

Ignoring anything else, that seems astoundingly stupid.

~~~
jacobush
If they were a bank with bank accounts, yes.

They are not a bank.

The whole premise of Tether was that it was backed by USD one-to-one.

~~~
vorpalhex
No I mean, Tether, as a company, has two bank accounts, and in just two plain-
jane bank accounts, has 2 billion USD. The FDIC limit is 250k.

Tomorrow if there is a crises, Tether goes from a 2 billion dollar company to
a 500k company.

No company would do that. They would either spread across as many banks as
possible to stretch out FDIC as much as they can, or they would keep their
cash invested in some kind of relatively stable asset.

~~~
chatmasta
I find it hard to believe any company with significant cash reserves is
"spreading it across as many banks as possible." The FDIC limit is $250k.
Storing $2bn in chunks of $250k would require 8,000 bank accounts. That sounds
like a logistical, and possibly legal, nightmare.

I'm no CFO, but I assume the standard practice is to either setup an
investment office to manage cash reserves (ala Apple), and/or to invest cash
in stable assets, hopefully with returns greater than inflation.

Actually, how _do_ funds, investment vehicles, etc store these amounts of
money?

~~~
rkangel
"In a diversified portfolio of assets"

Fundamentally, having $2.5bn in a bank account is almost always a silly idea
due to opportunity cost: the alternative is that it could be invested in a mix
of things that give a reliable and reasonable rate of return.

~~~
glomph
But haven't tether explicitly promised to keep the USD reserves as cash?

~~~
JumpCrisscross
> _But haven 't tether explicitly promised to keep the USD reserves as cash?_

Just as we think of bank deposits as cash, most accounting procedures
(reasonably) treat Treasuries as cash.

~~~
wmf
I can imagine why central-bank-hating Austrians might not put money in
treasury bonds.

------
chinathrow
"Privileged & Confidential"

Heh.

Anyway, follow
[https://twitter.com/Bitfinexed](https://twitter.com/Bitfinexed) for some more
happiness arount them.

------
virtuexru
While not an audit like many have said, this is better than the continued
silence.

Tether has shown proof of reserves, by former director of FBI. Examinations
took place in Washington, D.C.

~~~
Analemma_
> this is better than the continued silence.

I think it's worse. Before, Bitfinex could at least implicitly claim ignorance
and that they didn't know people wanted an audit. But now they're showing
they're aware of the noise, and their response is a totally bogus statement
that proves nothing: FSS practically disavows all its own conclusions, and
there is no mention whatsoever of liabilities. If this company actually was on
the level, a genuine audit would be no problem, but this report is a clear
signal that they are actively (rather than just passively) refusing to do it.

This report actually increases my confidence that Bitfinex is a house of cards
and USDT is totally unbacked. For all we know, that "proof of reserves" was
borrowed from customer accounts just long enough for FSS to see it, then went
straight back.

------
hippich
From my understanding of how SWIFT works, USA should have logs of every
transaction to/from these accounts. Should be pretty straightforward to
calculate final balance, assuming that account info is known. Unless someone
was just shipping containers of cash. I wonder if there is a way to get answer
from USA authorities regarding that.

~~~
JumpCrisscross
> _From my understanding of how SWIFT works, USA should have logs of every
> transaction to /from these accounts_

SWIFT is a member-owned co-operative headquartered in Belgium [1]. It "does
not facilitate funds transfer: rather, it sends payment orders, which must be
settled by correspondent accounts that the institutions have with each other."

For example, suppose you bank with Bank H and I bank with Bank J. You send me
$100. Bank H will deduct $100 from your account (thereby increasing Bank H's
reserves by $100) and send a message, via SWIFT, to Bank J. Bank J will then
deduct $100 from Bank H's account with Bank J while simultaneously adding $100
into my account with Bank J.

The U.S. government _does_ have the power to audit banks for a variety of
reasons, but beneficial ownership records are ultimately held at the bank
level. All that said, I am surprised that a bank handling U.S. dollars is
willing to hold these balances given it is difficult to determine who
beneficially owns Tethers.

[1]
[https://en.wikipedia.org/wiki/Society_for_Worldwide_Interban...](https://en.wikipedia.org/wiki/Society_for_Worldwide_Interbank_Financial_Telecommunication)

------
matthewaveryusa
Does anyone know of a publicly available resource one can use to determine how
likely a number was randomly generated by a human? Wired [1] had a high-level
approach and it seems like this paper [2] has some interesting ideas as well.
Humans are truly poor at creating random numbers [3] and I wonder how well
1,968,538,584.82 and 576,528,652.00 would do in such a test.

[1] [http://www.wired.co.uk/article/how-to-detect-fake-
numbers](http://www.wired.co.uk/article/how-to-detect-fake-numbers)

[2]
[http://journals.plos.org/plosone/article?id=10.1371/journal....](http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0041531)

[3] [http://www.loper-os.org/bad-at-entropy/manmach.html](http://www.loper-
os.org/bad-at-entropy/manmach.html)

~~~
craigc
I hope you do realize that the idea that the two large numbers were randomly
chosen to represent funds in a bank account that doesn’t exist, and a law firm
founded by three formal federal judges (one who was a former FBI director)
reported and lied about it to mislead the public, is many many times more
improbable than the idea that the Tether actually holds this amount of US
dollars.

That is one thing I find so crazy about the entire thing — the fact that they
are backed 1:1 is the simplest possible explanation and yet the conspiracy
that they were created out of thin air to artificially prop up the price of
bitcoin is more believable to many/most people here.

Just so you know money is created out of thin air by the federal reserve every
day and much of it is used to prop up the stock market. I’m not saying that to
defend it or imply it is happening here. I just think it’s ironic cause no one
is claiming that the stock market is overly inflated or that the federal
reserve should go to prison even though there is proof there that it happens.

FWIW the stock market has a market cap around $30 trillion. Bitcoin alone is
around $115 billion. Big price fluctuations are much more likely with a small
supply and small market cap.

~~~
jcranmer
> That is one thing I find so crazy about the entire thing — the fact that
> they are backed 1:1 is the simplest possible explanation and yet the
> conspiracy that they were created out of thin air to artificially prop up
> the price of bitcoin is more believable to many/most people here.

Tether concealed its relationship to Bitfinex, which is generally not a good
sign. Their auditor also released a statement which, I am told, is auditor-
speak for "they failed the audit."

If they are backed 1:1, it requires them to have received large dollops of USD
at a time when many financial institutions were wary of giving cash to
cryptocurrencies. Without more details on how that USD came about, there is
reason to be skeptical of that claim.

~~~
craigc
Thank you for not ripping my head off. I too am skeptical. I just think the
other way is also not super likely.

On Bitfinex tethers are not used for actually purchasing bitcoins. US dollars
are. Tethers are only issued when you want to withdraw funds from the exchange
to, for example, take advantage of arbitrage opportunities with other
exchanges that offer Tether trading pairs.

Why is that idea so unlikely? Crypto was in a bull market last year and lots
of people were trying to buy. If I saw the price was cheaper on an exchange
that offered Tether pairs but not USD pairs I would probably convert some USD
to Tether to buy there as well.

