
Tether loaned USDT to investors and illegally traded in New York, says NYAG - benmunster1
https://decrypt.co/7795/investigators-tether-loaned-usdt-to-investors-illegally-traded-in-new-york-ran-an-unregistered-securities-offering
======
llamataboot
Tether has been an openly fraudulent enterprise since the beginning. Pretty
much anyone with any experience in financial securities and even passing
knowledge of crypto was raising red flags, including on this website. Never
wanna blame the victim, but kinda feel like anyone with any due diligence here
was just hoping for casino rallies and didn't believe what they were being
sold.

~~~
A2017U1
Do you have any proof?

The US authorities have literally shown in court they have vast sums backing
tethers. Bifinex itself is a money printing machine.

I'd love to take some serious 5 figure wagers with the people who say this
stuff. Because they've been saying it for years now and have been consistently
proven wrong.

~~~
pfisch
There is no chance it is 100% backed like they claim. I would happily wager
$10000 on it if a framework for such a wager existed.

~~~
repomies691
The majority of markets don't care if it is 100% backed, like they don't care
when their bank does fractional reserve. They care about whether the USD peg
will last within their timespan they plan to use tether.

One of the most common advertised applications for tether is arbitrage between
exchanges. There it hardly matters whether tether has 100% reserves, what
matters if the peg stays within the days that you are doing the arbitrage
(buying tether from one exchange, transfering to other, selling it).

~~~
pfisch
>The majority of markets don't care if it is 100% backed, like they don't care
when their bank does fractional reserve.

Banks are insured, and in general they haven't failed for the last like 100+
years.

I do think what you are saying about usdt is mostly true though, however
if(when) usdt does fail the entire market will take a dive off a cliff. So
even if your assets are in other cryptos it still represents a systemic risk
to the entire system.

~~~
SkyMarshal
_> Banks are insured, and in general they haven't failed for the last like
100+ years._

Not sure what you're trying to say here, given Bear Stearns and Lehman just
failed ~11yrs ago, and the entire banking system would have imploded if not
for trillions in Fed lending support and govt stimulus.

~~~
pfisch
Those were not consumer banks. I don't think anyone actually lost their
account balances.

~~~
arcticbull
That's the SIPC for ya ([https://www.sipc.org](https://www.sipc.org))

------
shireboy
Curious what HN thinks about Maker DAO. Dai is pegged to the dollar by a
decentralized scheme where people loan/borrow an underlying asset. Seems to be
floating pretty close to $1 and I wonder if it will replace USDT...

------
pretfood
oh man, I'm in New York and I've got Tethers. Time to pull the eject cord (on
both)

~~~
SimonPStevens
Serious question. What is the reason for holding Tethers?

They a supposedly pinned to the dollar, so there isn't much point in holding
them hoping they will gain in value. If anything their peg is questionable so
they are only likely to decrease in value.

As far as I can see their only purpose is a a way of transferring between
other crypto currencies and exchanges, but you would only ever need the
tethers very short term while you completed the movement or transaction.

~~~
koolba
The reason is when you have some other crypto holding and you want to close
out your position but not have any reportable tax or legal liability.

Of course you’re trading one set of liabilities and legal ramifications for a
whole new set. Plus a hell of a lot of counter party risk.

~~~
SimonPStevens
So to clarify... If you were holding bitcoin, but decided you wanted out
because you think it's about to go down, you'd exchange for tether and hold
that instead until you decided that bitcoin is ready to start going back up
again.

And you accept all the associated risk rather than fully cashing out to real
dollars because your jurisdiction doesn't treat crypto to crypto purchase as a
taxable event?

Interesting. Thank you.

~~~
carbocation
But if your jurisdiction is NY (as it is for OP), then this doesn't really
answer your question IMHO.

------
chvid
I am curious. Has anyone actually tried to redeem a tether?

[https://tether.to/fees/](https://tether.to/fees/)

It sure seems like they would like to just have people trade them on an
exchange.

~~~
shawabawa3
So best case scenario you can get $0.996 per USDT, and yet people still choose
to buy them for $1 on exchanges...

------
Lucadg
Tether business model is dependent on banks.

Banks are always a huge risk when you deal with crypto. They can freeze your
funds anytime.

You need to be on regulators side or they'll attack you on the bank accounts.

That means full compliance with KYC/AML and so on.

------
dawhizkid
This would explain the mini Bitcoin rally

------
HipGeeks
Quick - someone call the SEC!

------
lanrh1836
I know there are a lot of crypto skeptics here, but if you believe in Bitcoin
more than Tether at least then you should buy Bitcoin...if Tether does indeed
fail Bitcoin will almost certainly spike past 2017 highs.

~~~
grey-area
This assumes the price of bitcoin is not manipulated, specifically by bitfinex
and tether. Both may go down together when more news of manipulation comes
out.

At this point, I wouldn't recommend going near any of the current
cryptocurrencies, for any use.

~~~
andirk
What about other coins tied directly to fiat?

------
trophycase
"Loaned USDT" in this context just means created tether and gave it before the
wire transfers went through (but presumably these pending wire transfers count
as assets, especially considering they can blacklist tokens at will). Not
exactly damning evidence.

Also it seems like "illegally traded" just means that NY companies set up
foreign shell companies to skirt NY regulations? I don't see how this is
iFinex's fault either tbh

------
slappyjoe
I still don't see how the State of New York can claim jurisdiction. I mean, it
can "claim it" but good luck getting Bitfinex and Tether to comply.

~~~
Lazare
Yeah, Bitfinex and Tether won't have anything to worry about...

...as long as they don't want to have USD denominated bank accounts, or
transact with USD, or do business with people with USD denominated bank
accounts. Which, of course, they do. If you touch the US financial system in
any way, or if any of your counterparties do, or if your counterparties want
to have _other_ counterparties that do, then you need to care deeply about
what the US federal government and the NY state government think.

~~~
oyebenny
What are your thoughts on Gemini?

~~~
solotronics
Gemini and Coinbase are on the forefront of legitimizing cryptos. They go out
of their way to cooperate with American authorities, which is a good move for
their business model. Contrast this with a crypto exchange based outside of
the US that would loose their clientele if they worked with the American
government in any way. Why you ask? Do research about Americans trying to open
bank accounts in Europe. Basically under the new laws banks in Europe prefer
to reject Americans rather than try and go through all the extra reporting
involved.

~~~
logicchains
Most crypto is traded outside of the US though; most of the volume is on
Binance and Bitmex. In this sense they cut themselves off from many customers.
The advantage of their business model seems to be that with less competition
from other US-law-abiding exchanges (because there are so few of them), they
can charge much higher fees: Coinbase fees are higher than most large non-US
exchanges, and Gemini fees are insane, something like 1% per trade.

~~~
oarsinsync
> Most crypto is traded outside of the US though; most of the volume is on
> Binance and Bitmex.

This doesn't stop US persons from trading on the exchanges, and self reporting
accurately to the IRS/SEC, which may do.

~~~
jki275
Actually most don't. The IRS released statistics a couple of years ago, it
seems like the number was low 3 figures who actually reported though I don't
remember exactly.

------
seibelj
USDT has a strong following in APAC countries. Also for some crypto users part
of its allure is that it’s vaguely sketchy - it means they are less likely to
have their funds blacklisted, a feature which Tether maintains the ability to
do but has never enforced as far as I’m aware.

If you are getting into the space now USDC is an audited stablecoin backed by
Coinbase and Circle which has the second highest issuance after Tether. Most
likely you would prefer USDC over tether.

[https://www.circle.com/en/usdc](https://www.circle.com/en/usdc)

~~~
duxup
"vaguely sketchy"

What does that mean?

That doesn't sound like a positive thing.

~~~
floodyberry-
I think it means seibelj works for Circle and is shilling their stablecoin.
The irony is that the entirety of "crypto" outside of the people doing the
academic work for it is not just vaguely sketchy, but extremely sketchy.

~~~
repomies68
Well, don't know for these stablecoins but to me the "normal crypto" meaning
bitcoin is very easy to understand and use. It is like commodity nowadays - it
is up to the user whether to use it for scetchy things or for normal things.

~~~
chx
ROTFLMAO

Are you serious? You need to establish presence at an exchange meaning you
need to scan and send your ID to a company which more likely than not -- does
QuadrigaCX ring a bell -- is run by scammers. Then you need to buy bitcoin and
store it somewhere... and then send it to someone. The sending costs an
unknown amount, takes an unknwon amount of time, the receiver gets something
but none of you can predict how much that is actually worth by the time they
receive it. If they want to do something with it they need to go through the
exchange rigmarole. And you call this very easy to use.

Bitcoin was, is always will be nothing more than a novel scam. It's not a
Ponzi... it's a novel form of scam.
[https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/](https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/)

~~~
ryanlol
>The sending costs an unknown amount, takes an unknwon amount of time,

This is a downright lie.

>the receiver gets something but none of you can predict how much that is
actually worth by the time they receive it

This is just misleading, the recipient gains control of the transmitted
bitcoin almost instantly. Confirmation delays are known.

~~~
chx
I do not lie.

> The sending costs an unknown amount

Here's you can see historic daily average Bitcoin transaction fees both in
dollars per transaction and in satoshis per byte
[https://bitcoinfees.info/](https://bitcoinfees.info/)

> takes an unknwon amount of time

Here's the average time for one confirmation: [https://coincentral.com/wp-
content/uploads/2017/12/Screensho...](https://coincentral.com/wp-
content/uploads/2017/12/Screenshot-2017-12-06-15.35.05.png) here

> This is just misleading,

But it's not, there's a time delay between when you initiate exchanging your
real money to scam money and the receiver finishes the exchange back and
during that time bitcoin can move in any direction.

~~~
ryanlol
Fees are _always_ knowable, the real average confirmation time for
transactions with appropriate fees is fixed at 10 minutes.

>But it's not, there's a time delay between when you initiate exchanging your
real money to scam money and the receiver finishes the exchange back and
during that time bitcoin can move in any direction

Well yes, but this is known beforehand. There are many mechanisms you could
use to hedge your risk here.

~~~
chx
> There are many mechanisms you could use to hedge your risk here.

Do you even hear yourself? We started from very easy to use and now we are at
hedging strategies...

~~~
ryanlol
I don’t think I’ve ever said it was very easy. I don’t really have all that
many good things to say about cryptocurrencies.

I was merely objecting to your false claims. Bitcoin & co. have enough
problems as is, there’s no need to invent imaginary ones.

