USDT - Mt. GOX 2.0, a massive disaster waiting to happen.

[crypt0heaven]

Dear all,

Its come to the point where this cannot be ignored anymore. Tether is backed by nothing so it seems, they have created more tether when the shouldn't have been able to. There is no audit that ever happened from their Taiwanese bank, nothing. Please read this article and I Want to hear all of your opinions. This is a massive disaster that's just waiting to happen. It's a matter of when and not IF.


https://hackernoon.com/the-curious-tale-of-tethers-6b0031eead87

[Fortify]

It's always good to keep people informed, this might be better placed in the scam section of the forum. From that article, it looks like the market capitalization of "tether" is ten million USD? I'm fairly sure that Mt. GOX was vastly bigger in proportion when it started to fall over.

[crypt0heaven]

It's always good to keep people informed, this might be better placed in the scam section of the forum. From that article, it looks like the market capitalization of "tether" is ten million USD? I'm fairly sure that Mt. GOX was vastly bigger in proportion when it started to fall over.

Hey, I am not familiar with moving the post. Please read the article properly. The cap is supposed to be 10million but they have issued many more millions than that.

[Creative_Juices]

Yeah total supply of almost 445M giving it an almost identical marketcap. I don't trust it! I'm sure there will be a day the US Gov gets involved and it all comes crashing down

[European Central Bank]

i'm a serious skeptic too but things are starting to look a little less outrageous now.

https://www.reddit.com/r/BitcoinMarkets/comments/73enml/tether_audit_by_friedman_llp_released/

this at least confirms some money is in some relevant accounts. the real audit should happen at some point.

[Poink]

It is a big scam and I wonder why only now people are starting to notice it.

I've never used Tether and will never...it doesn't have any investment value...all loss and risk.

[vfrcbv911]

That usdt is not supported what has long been known, but I think that a disaster will not occur. Just as you imagine it? All sharply sell usdt and..... what? He's not exactly bitcoin is just the digital equivalent of dollars. I mean few people hold it, and will not be a shock if anything happens.

[Legendari]

That usdt is not supported what has long been known, but I think that a disaster will not occur. Just as you imagine it? All sharply sell usdt and..... what? He's not exactly bitcoin is just the digital equivalent of dollars. I mean few people hold it, and will not be a shock if anything happens.

And people who failed to sell will be left with nothing. This is best to exchange usdt on something right now.

[ChromaticStar]

I've always wondered how USDT can have a profitable business model. Unless they can beat everyone else by arbitraging, I don't have any idea. I realize it might be a good idea to move into cash sometimes, but I will never move into USDT. Unless there is a credible third party audit, I have to assume it's a giant scam that could go to 0 very, very quickly.

[European Central Bank]

I've always wondered how USDT can have a profitable business model. Unless they can beat everyone else by arbitraging, I don't have any idea. I realize it might be a good idea to move into cash sometimes, but I will never move into USDT. Unless there is a credible third party audit, I have to assume it's a giant scam that could go to 0 very, very quickly.

interest. they current have over 400 million parked. even at 0.5% that's 2 million dollars a year for doing nothing. it also stimulates trading in places it otherwise wouldn't have happened so there are more fees on bitfinex at least.

[ChromaticStar]

I've always wondered how USDT can have a profitable business model. Unless they can beat everyone else by arbitraging, I don't have any idea. I realize it might be a good idea to move into cash sometimes, but I will never move into USDT. Unless there is a credible third party audit, I have to assume it's a giant scam that could go to 0 very, very quickly.

interest. they current have over 400 million parked. even at 0.5% that's 2 million dollars a year for doing nothing. it also stimulates trading in places it otherwise wouldn't have happened so there are more fees on bitfinex at least.

How do we know they have $400 million? That number is the market cap, not money in the bank. If it was that easy to make so much money, I would have thought Bitfinex would have just made their own USDT rather than outsourcing it.

They can only create a token if they have cash to back it. You can earn interest without creating a token, so why would you create a token anyway, what's the business model of that? Does Bitfinex pay them to stimulate trading on their exchange?

[European Central Bank]

How do we know they have $400 million? That number is the market cap, not money in the bank. If it was that easy to make so much money, I would have thought Bitfinex would have just made their own USDT rather than outsourcing it.

They can only create a token if they have cash to back it. You can earn interest without creating a token, so why would you create a token anyway, what's the business model of that? Does Bitfinex pay them to stimulate trading on their exchange?

market cap is irrelevant when it comes to tether. the total amount of tether should reflect the total amount of dollars. market cap is pure fiction for other coins. tether is nothing but money in the bank.

without tether there wouldn't be markets on bittrex, poloniex and multiple others. those are dollars they otherwise wouldn't have control of to earn interest on.

[ChromaticStar]

How do we know they have $400 million? That number is the market cap, not money in the bank. If it was that easy to make so much money, I would have thought Bitfinex would have just made their own USDT rather than outsourcing it.

They can only create a token if they have cash to back it. You can earn interest without creating a token, so why would you create a token anyway, what's the business model of that? Does Bitfinex pay them to stimulate trading on their exchange?

market cap is irrelevant when it comes to tether. the total amount of tether should reflect the total amount of dollars. market cap is pure fiction for other coins. tether is nothing but money in the bank.

without tether there wouldn't be markets on bittrex, poloniex and multiple others. those are dollars they otherwise wouldn't have control of to earn interest on.

My point is, they can create 400 million USDT tokens and sell them all they want. Without an audit to prove they aren't operating fractionally reserved, we can't assume that they are operating above a 1:1 USD/USDT ratio. They may have created those tokens, sold them and then spent the money on Lambos and mansions for all we know.

Ask yourself this: If every USDT holder sent their USDT to Bitfinex and wanted USD for them, would Tether have the funds to redeem them all? Without an audit, we can not know for sure.

EDIT: I just noticed the link you posted above. That's a credible sign. It looks like they are just barely solvent. Assuming you and Yellen don't lower interest rates negative during the next recession, they might be able to stay alive. But as soon as interest goes below zero, Tether will have to close it's doors unless USDT holders are willing to accept the interest plus operating expense losses.

[Winner]

It is a big scam and I wonder why only now people are starting to notice it.

I've never used Tether and will never...it doesn't have any investment value...all loss and risk.

Many Altcoins and projects failed before. Putting money into that project is a not something that I would do though.

[weredo911]

do you know  Liberty Reserve. even this is control by a company people still use them. we dont have any escrow coin to hold our fund at this time when storm coming. so usdt is the only choice now. some people use btc-e code before but btc-e get raided by fbi so no one use it anymore. sometime we must accept risk

[European Central Bank]

Ask yourself this: If every USDT holder sent their USDT to Bitfinex and wanted USD for them, would Tether have the funds to redeem them all? Without an audit, we can not know for sure.

this part is already impossible for average users. tether points you to the kraken usd/usdt market which means some other guy is doing the dollar backing instead of tether.

the only people who they claim can are their institutional investors that they like talking about but never name.

[alani123]

i'm a serious skeptic too but things are starting to look a little less outrageous now.

https://www.reddit.com/r/BitcoinMarkets/comments/73enml/tether_audit_by_friedman_llp_released/

this at least confirms some money is in some relevant accounts. the real audit should happen at some point.

Tether  is sure better at being audited and in my opinion points to the direction that hey are legitimate but people should still be cautious. Tether is long running and has come to be treated but so far an audit should be a must.

[sp_skeptic]

Oh God, this again.

From Tether's Terms of Service on https://tether.to/legal:

"Tethers are not money and are not monetary instruments. They are also not stored value or currency. There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers."

I don't know why it even matters if there is money in the bank, if there is no commitment by Tether to use it to redeem Tethers.

Incidentally, there is no mention anywhere in the TOS of any obligation by Tether to maintain bank reserves to back up Tethers. There is this though:

"No Representations & Warranties: We make no representations, warranties, or guarantees to you of any kind, including with respect to any right of redemption or exchange of Tethers for any property. The Site and the Services are offered strictly on an as-is, where-is basis and, without limiting the generality of the foregoing, are offered without any representation as to merchantability or fitness for any particular purpose."

No guarantees of any kind? What about this from Tether's home page:

"100% Backed
Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD."

Isn't that a guarantee? Well it happens that there is a neat little clause in the TOS stating that if there is a conflict between the TOS and something else on the site, the TOS wins!

There is a lot more eye-opening stuff in the TOS. Read it, and consider the possibility that it means what it says.

[Board-Room]

Oh God, this again.

From Tether's Terms of Service on https://tether.to/legal:

"Tethers are not money and are not monetary instruments. They are also not stored value or currency. There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers."

I don't know why it even matters if there is money in the bank, if there is no commitment by Tether to use it to redeem Tethers.

Incidentally, there is no mention anywhere in the TOS of any obligation by Tether to maintain bank reserves to back up Tethers. There is this though:

"No Representations & Warranties: We make no representations, warranties, or guarantees to you of any kind, including with respect to any right of redemption or exchange of Tethers for any property. The Site and the Services are offered strictly on an as-is, where-is basis and, without limiting the generality of the foregoing, are offered without any representation as to merchantability or fitness for any particular purpose."

No guarantees of any kind? What about this from Tether's home page:

"100% Backed
Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD."

Isn't that a guarantee? Well it happens that there is a neat little clause in the TOS stating that if there is a conflict between the TOS and something else on the site, the TOS wins!

There is a lot more eye-opening stuff in the TOS. Read it, and consider the possibility that it means what it says.

Thanks for sharing this. This is indeed eye-opening and equally worrisome. For those who can, it will always be better to xchange your BTC/ETH etc on an exchange that offers USD/EUR etc trading, like Coinbase or Kraken.