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Author Topic: Bitfinex ‘Official Doc’ Confirms Plans to Raise up to $1 Billion in IEO for...  (Read 403 times)
Netnox
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May 15, 2019, 03:32:20 AM
 #21

I would stay out of Bitfinex, no matter how attractive their IEO is. Until they conduct a full professional audit of their funds, I would advise the other users to do the same. Rumors are going around that they lost $850 million in trading. Now what makes matters worse is that the money they used for trading was not theirs. It came from the accounts of their users. I have seen the response from Bitfinex, but it is a bit vague and a lot of questions remains to be answered.
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May 15, 2019, 05:29:11 AM
Merited by vit05 (1)
 #22

Tether owns in excess of $1 of assets for every tether outstanding.
You have no proof of that, because they have never submitted to an independent audit. You only have their ever changing word to go on, which is worth nothing.
I don't think their word has changed. If you are going to assume their word is worth nothing, there isn't much of a point even discussing their situation.

The NYAG did not explicitly say this, but it appears they verified tether had $1 in cash-like securities prior to giving the loan to Bitfinex for every USDT outstanding. I believe this because the NYAG is very anti-business, and would have pointed it out if there were not cash like reserves.
Your bank account is also backed 1-to-1 with reserves, a small percentage of which is cash like assets, and the majority of which is made up of loans made to various customers.
But again, Tether isn't a bank. They widely and very specifically claimed that USDT was backed up 1-to-1 with USD, which they've now admitted was a blatant lie. "Cash like assets" means nothing, since they include other cryptocurrencies in that definition. If they print a hundred million Tether out of thin air and use it to buy Bitcoin, they can claim that Tether is backed up with "cash like assets".
I don't think "cash like assets" would include bitcoin in their definition, nor do I believe they are holding anything like bitcoin as part of their reserves.

The claim the USDT was backed 1-to-1 with USD was not a lie. The claim was changed to its current form at the time they made the loan.

Your bank account is also backed 1-to-1 with reserves, a small percentage of which is cash like assets, and the majority of which is made up of loans made to various customers.

It boggles my mind that people consider outstanding loans to be a form of backing. You no longer have access to these funds. All you are left with is a contractual agreement that the loan will be paid back with x percentage of interest. If every Tether holder will be looking to cash out right now, they can't.
If you have a bank account with $100 in it, your deposit is exactly as you describe.

If you have a bank account with a billion dollars in it, your bank will almost certainly make you wait seven days (they may delay further) to process a wire withdrawal of a billion dollars. A bank deposit is not backed 1-to-1 with cash by the bank, and will need time to liquidate cash if a customer is making a very large withdrawal.

I speculate most of the other stablecoins invest most of their money in short term US government debt securities verses a bank deposit.

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May 15, 2019, 07:34:11 AM
 #23

So lets me get this correctly.
USDT was truly backed 1:1 with USD and the NYAG verified it. Until the loan to Bitfinex.
USDT is now backed with what is claimed on the website.
So why it was so hard to publish an audit during all this time? If they wanted to hide something ok but if it wasn't the case, then why?
USDT is now backed on the Bitfinex loan: backed to something that may never come, not really different to the fractional reserve.

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May 15, 2019, 09:52:02 AM
 #24

So lets me get this correctly.
USDT was truly backed 1:1 with USD and the NYAG verified it. Until the loan to Bitfinex.
USDT is now backed with what is claimed on the website.
So why it was so hard to publish an audit during all this time? If they wanted to hide something ok but if it wasn't the case, then why?
USDT is now backed on the Bitfinex loan: backed to something that may never come, not really different to the fractional reserve.

It is not that simple. The NYAG claims that as of now USDT is 74% backed up with cash or cash equivalents. On top of that there is a line of credit agreement for $900 million with Bitfinex, which lasts for 3 years at an annual interest rate of 6.5%. Out of that $625 million is claimed to have been transferred already. Now this doesn't mean that USDT was 100% backed up prior to the loan. It also doesn't mean that the funds already transferred to Bitfinex came from the cash reserves of USDT (need some clarity on this).

The Bitfinex official statement mentions that around $850 million in customer funds were made "temporarily" inaccessible by the authorities. But the NYAG has said that this is false.

This is very confusing situation for me. I just have one advise for all. Stay out of Bitfinex and USDT, until they conduct a third party audit.
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May 15, 2019, 10:49:03 AM
 #25

So why it was so hard to publish an audit during all this time? If they wanted to hide something ok but if it wasn't the case, then why?

https://www.coindesk.com/tether-confirms-relationship-auditor-dissolved

I've no idea what a proper audit consists of, but it may be nothing like the type of thing we're used to. There might be liability issues and monstrous amounts of detail and info needed.

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May 15, 2019, 06:00:56 PM
Merited by PrimeNumber7 (1)
 #26

So lets me get this correctly.
USDT was truly backed 1:1 with USD and the NYAG verified it. Until the loan to Bitfinex.
USDT is now backed with what is claimed on the website.

As I recall, Tether actually changed its terms to reflect this months ago. Very few people took notice, although I saw a thread about it at the time. It looks like they changed the terms when the loan took place. From the looks of it, the AG wasn't being entirely forthright in its claims, but regardless, Bitfinex had to go into damage control mode once the news broke.

So why it was so hard to publish an audit during all this time?

Their legal counsel came out and said that the major auditing firms won't touch them. They have made some attempts to provide alternative proof.

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May 18, 2019, 11:16:01 AM
 #27

Suuureee!  Very rich very smart people are gonna send a billion dollars to a company that lost 850 million dollars entrusting it to a money laundering operation.      Roll Eyes Grin
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May 18, 2019, 04:04:57 PM
 #28

They have made some attempts to provide alternative proof.
I would encourage everyone to view the letter they released here: https://tether.to/wp-content/uploads/2018/11/Tether-Letter.pdf. To me, it looks even worse than if they had said nothing. An unheard of bank based in a tax haven. "Portfolio cash value" was deliberately worded to ensure that it didn't imply 1-to-1 with USD, which Tether were still claiming at the time of release. "Based on information"? Information from who? Verified how? It has no names and no signatories.

It reads like something which could have been written by a child in under 15 minutes.

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May 18, 2019, 07:52:28 PM
 #29

They have made some attempts to provide alternative proof.
I would encourage everyone to view the letter they released here: https://tether.to/wp-content/uploads/2018/11/Tether-Letter.pdf. To me, it looks even worse than if they had said nothing. An unheard of bank based in a tax haven. "Portfolio cash value" was deliberately worded to ensure that it didn't imply 1-to-1 with USD, which Tether were still claiming at the time of release. "Based on information"? Information from who? Verified how? It has no names and no signatories.

It reads like something which could have been written by a child in under 15 minutes.
It is on Deltec's letter head,  the letter was released very publicly, and Deltec did not refute the letter. Based on this, I would conclude the letter was in fact written on behalf of Deltec. The name of the person does not matter IMO because it was speaking on behalf of the company, even if this would be unusual in other parts of the world.

Deltec is the name of the Bank tether is/was using. They are disclosing the value of assets held at the bank. I don't see the words "based on information" in the letter.

It would be unusual for an entity to have $1.8 billion in a "checking account" if they are not spending this money on a regular basis. I would expect most of this money to be invested in short term US government (or other very high credit rating) US dollar denominated bonds/notes maturing within a few months, or possibly a series of CDs. 

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May 20, 2019, 09:18:23 PM
Last edit: May 20, 2019, 09:39:59 PM by squatter
Merited by o_e_l_e_o (1)
 #30

It is on Deltec's letter head,  the letter was released very publicly, and Deltec did not refute the letter. Based on this, I would conclude the letter was in fact written on behalf of Deltec. The name of the person does not matter IMO because it was speaking on behalf of the company, even if this would be unusual in other parts of the world.

I'm pretty sure it's unusual anywhere in the world to sign without a name.

I have no doubt the letter was authentic, however -- the chairman of the bank confirmed its authenticity. It's telling that no bank executive wanted to be associated with the letter, though, and they initially would not confirm the relationship existed.

I would encourage everyone to view the letter they released here: https://tether.to/wp-content/uploads/2018/11/Tether-Letter.pdf. To me, it looks even worse than if they had said nothing. An unheard of bank based in a tax haven. "Portfolio cash value" was deliberately worded to ensure that it didn't imply 1-to-1 with USD, which Tether were still claiming at the time of release. "Based on information"? Information from who? Verified how? It has no names and no signatories.

It reads like something which could have been written by a child in under 15 minutes.

I remember when that letter came out. It looked ridiculous.

At the same time, this was a phase of heavy scrutiny towards Tether. I remember Bitfinex'd was quite popular at the time. They seemed pretty desperate to produce something that showed adequate cash on hand, knowing that they couldn't produce an audit.

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May 20, 2019, 10:47:00 PM
 #31

It is on Deltec's letter head,  the letter was released very publicly, and Deltec did not refute the letter. Based on this, I would conclude the letter was in fact written on behalf of Deltec. The name of the person does not matter IMO because it was speaking on behalf of the company, even if this would be unusual in other parts of the world.

I'm pretty sure it's unusual anywhere in the world to sign without a name.

I have no doubt the letter was authentic, however -- the chairman of the bank confirmed its authenticity. It's telling that no bank executive wanted to be associated with the letter, though, and they initially would not confirm the relationship existed.
If you ask BB&T, or any other bank, if x person or y company has an account/relationship with the bank, they will neither confirm nor deny the existence of any banking relationship. The only exceptions to this is if the customer explicitly allows for such disclosure, or if the bank receives a subpoena, court order, or similar legal process.

You also do not know that "no bank executive wanted to be associated" with the letter because you do not know Deltec's normal processes for producing such letters.

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May 20, 2019, 11:53:04 PM
 #32

It is on Deltec's letter head,  the letter was released very publicly, and Deltec did not refute the letter. Based on this, I would conclude the letter was in fact written on behalf of Deltec. The name of the person does not matter IMO because it was speaking on behalf of the company, even if this would be unusual in other parts of the world.

I'm pretty sure it's unusual anywhere in the world to sign without a name.

I have no doubt the letter was authentic, however -- the chairman of the bank confirmed its authenticity. It's telling that no bank executive wanted to be associated with the letter, though, and they initially would not confirm the relationship existed.
If you ask BB&T, or any other bank, if x person or y company has an account/relationship with the bank, they will neither confirm nor deny the existence of any banking relationship. The only exceptions to this is if the customer explicitly allows for such disclosure, or if the bank receives a subpoena, court order, or similar legal process.

That's the point. Tether obviously requested this letter from Deltec. The fact that Tether published it suggests that Deltec was explicitly allowed to disclose their relationship.

It's reasonable that as a matter of protocol, a bank wouldn't confirm whether any relationship existed. I'm not surprised about that.

But you can't blame people for being skeptical when the letter looks like a grade schooler produced it and then the bank denies that any relationship existed. Bitfinex'd must have felt on top of the world at that point. Cheesy

You also do not know that "no bank executive wanted to be associated" with the letter because you do not know Deltec's normal processes for producing such letters.

I'm guessing there is no "normal process" for that. It's a bizarre request.

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May 21, 2019, 12:05:17 AM
 #33



You also do not know that "no bank executive wanted to be associated" with the letter because you do not know Deltec's normal processes for producing such letters.

I'm guessing there is no "normal process" for that. It's a bizarre request.
I think you hit it right on the head a few posts up:
They seemed pretty desperate to produce something that showed adequate cash on hand, knowing that they couldn't produce an audit.

There were a number of news stories in the press speculating about tether's solvency, and I am guessing some number of customers were asking for documentation to support solvency so they can account for keeping money in tethers or on deposit at bitfinex to trade with.

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o_e_l_e_o
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May 21, 2019, 10:12:36 AM
 #34

I have no doubt the letter was authentic, however -- the chairman of the bank confirmed its authenticity. It's telling that no bank executive wanted to be associated with the letter, though, and they initially would not confirm the relationship existed.
This is my point. I'm not claiming that the letter is counterfeit, or wasn't released by Deltec as Tether stated. I'm claiming that Deltec bank aren't exactly a well known or reputable institution, which is evidenced by the sheer lack of professionalism throughout that letter. The lack of a name and a single wavy line for a signature is just the icing on the cake, so to speak.

They seemed pretty desperate to produce something that showed adequate cash on hand, knowing that they couldn't produce an audit.
This is it exactly. At any point, they could have completely quashed the rumors and silenced their critics immediately by simply submitting to an independent audit. Their continued refusal to do so was shady enough in and of itself, and this letter did nothing to address those (now confirmed) rumors.

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May 22, 2019, 01:17:02 AM
 #35

https://www.theblockcrypto.com/2019/05/21/tether-admits-in-court-to-investing-some-of-its-reserves-in-bitcoin/

This affair just keeps on giving. Ifinex admit to putting some of Tether's reserves into buying BTC as everyone loves 'backing' that stable.

I cannae wait for this cancer to be plopped in the dish and fed into the incinerator.

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May 22, 2019, 02:09:39 AM
 #36

https://www.theblockcrypto.com/2019/05/21/tether-admits-in-court-to-investing-some-of-its-reserves-in-bitcoin/

This affair just keeps on giving. Ifinex admit to putting some of Tether's reserves into buying BTC as everyone loves 'backing' that stable.

I cannae wait for this cancer to be plopped in the dish and fed into the incinerator.
The article has the actual transcript at the bottom. On page 27, "Miller" (David Miller, attorney for Bitfinex/Tether) talks about how money is fungible and that there are no separate bank accounts for money holding reserves and corporate money comprised of profits, or money that is excess capital.

Tether is a crypto company, and I have every reason to believe every crypto company has some company money invested in bitcoin.

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May 22, 2019, 03:40:51 AM
Last edit: May 22, 2019, 03:54:46 AM by figmentofmyass
Merited by PrimeNumber7 (1)
 #37

https://www.theblockcrypto.com/2019/05/21/tether-admits-in-court-to-investing-some-of-its-reserves-in-bitcoin/

This affair just keeps on giving. Ifinex admit to putting some of Tether's reserves into buying BTC as everyone loves 'backing' that stable.

I cannae wait for this cancer to be plopped in the dish and fed into the incinerator.

apparently this story was blown way out of proportion. when i first saw the headlines about this, i was ready to fling endless shit at tether. i assumed this was surely confirmation they were, in fact, manipulating the market and running a fractional reserve/shadow bank.

as it turns out, they own ~0.075 BTC, which they need to process USDT transactions using the omni protocol. see here: https://twitter.com/alistairmilne/status/1130941040460992513

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May 22, 2019, 05:43:29 AM
 #38

https://www.theblockcrypto.com/2019/05/21/tether-admits-in-court-to-investing-some-of-its-reserves-in-bitcoin/

This affair just keeps on giving. Ifinex admit to putting some of Tether's reserves into buying BTC as everyone loves 'backing' that stable.

I cannae wait for this cancer to be plopped in the dish and fed into the incinerator.

apparently this story was blown way out of proportion. when i first saw the headlines about this, i was ready to fling endless shit at tether. i assumed this was surely confirmation they were, in fact, manipulating the market and running a fractional reserve/shadow bank.

as it turns out, they own ~0.075 BTC, which they need to process USDT transactions using the omni protocol. see here: https://twitter.com/alistairmilne/status/1130941040460992513
If this is the extent that Tether owns bitcoin, it probably would have been better to mention the bitcoin owned was used to pay transaction fees, or business expenses that can only be paid in bitcoin as opposed to an investment.

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May 22, 2019, 08:45:55 AM
 #39

as it turns out, they own ~0.075 BTC, which they need to process USDT transactions using the omni protocol. see here: https://twitter.com/alistairmilne/status/1130941040460992513

That geezer is a flat out out and out Bitfinex shill. I'd be interested in hearing it from anyone other than him. If it's only from him then it's suspect in the extreme. If it was only that it wouldn't have been mentioned in court.

There's the quote from the transcript - “Prior to the April 24th order … Tether actually did invest in instruments beyond cash and cash equivalents, including bitcoin, they bought bitcoin.”

It may not be a significant amount, that's not outlined, but why do we have a price explosion every time Bitfinex has a problem of some sort?

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May 22, 2019, 02:49:40 PM
 #40

If it was only that it wouldn't have been mentioned in court.
Exactly. When we are talking about deficits of hundreds of millions or even billions of dollars, no judge is going to care about 0.075 BTC (<$600). There is also a big difference between holding bitcoin as it is needed for normal business operations, and investing in to bitcoin, which is what the transcript says. $600 could barely be called an investment for an average citizen - it certainly isn't for a multi billion dollar company.

More details are needed for clarification, but I'd be very surprised if said details were in Tether's favor.

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