Anyone remember Nick Leeson?
He single-handedly bankrupted Barings Bank, one of the oldest merchant banks in the UK.
The pertinent part of his story is at one point, he fabricated 7.78 Billion Yen credit at the bank handling their accounts, which he reversed later. He just wanted the "proof" of his bank statement.
The thing is, I'm not sure if Tether's holdings are entirely fabricated, partially, or trivially -- just that if someone really wants to keep a charade going, they probably can. I don't trust Tether, and frankly neither should you.
Topic: [2018-06-20]Tether Review Claims Crypto Asset Fully Backed – But There's a Catch (Read 175 times)
June 21, 2018, 10:04:07 AM
June 21, 2018, 03:11:17 AM
"On that date, the law firm said, it is "confident" Tether had more money in the bank than tokens in circulation (specifically, $2.55 billion of U.S. dollar reserves, held at two separate institutions, to cover $2.54 billion USDT). But the report says nothing about the level of collateralization on any date before or since.
In other words, it doesn't purport to show that USDT has been consistently secured over time – or that it is fully backed today."
I think it is good enough.
In other words, it doesn't purport to show that USDT has been consistently secured over time – or that it is fully backed today."
I think it is good enough.
June 20, 2018, 08:48:34 PM
Nearly six months after parting ways with its auditor, Tether has finally produced a third-party report proclaiming that its cryptocurrency is fully backed by U.S. dollars – with some big caveats.
The state of Tether's reserves has been the subject of controversy for months, with online critics claiming the company has been issuing more tokens than it had dollars in the bank – printing money, essentially. Tether has consistently denied this, but has not produced conclusive evidence that it is reserved 1-for-1.
The matter has broad implications for the crypto markets, well beyond the holders of the so-called stablecoin, known as USDT, whose market cap stood at $2.6 billion on Wednesday.
For starters, many have alleged that Bitfinex, the cryptocurrency exchange that shares common owners and managers with Tether, uses USDT to artificially drive up the price of bitcoin. An academic paper released last week supported this view, and the Commodity Futures Trading Commission reportedly subpoenaed Bitfinex and Tether in December.
Also, USDT, which despite the lingering doubts generally trades around $1, has functioned as a substitute for U.S. dollars. Traders use it to quickly move money between crypto exchanges rather than using bank wire transfers, which can be slow and hard to come by.
Given USDT's importance to the ecosystem, then, an independent confirmation that the coin is in fact fully collateralized might be welcome news, undermining the manipulation claims and bolstering market confidence.
But the three-page memorandum released Wednesday is probably not going to settle the debate, given its ample disclaimers and limited scope.
First off, the report is not an audit. It was prepared by a law firm – Freeh Sporkin & Sullivan, LLP (FSS) – not an accounting firm.
That's not for lack of trying, according to Stu Hoegner, Tether's general counsel.
"The bottom line is that an audit cannot be obtained," Hoegner told CoinDesk, claiming that this problem is not unique to his company but one faced by the entire cryptocurrency industry.
He went on:
"The barriers to getting audited are simply too big to overcome right now, and not just for us."
Those barriers include a steep learning curve for auditors in an emerging industry; accounting standards that predated the advent of cryptocurrency, creating uncertainty about how the rules apply; and the resulting need for auditors to exercise judgment, which is "anathema to a lot of large accounting firms. As a CPA, I understand that," Hoegner said.
In this situation, he said, "we've gone for next best thing."
Although FSS used different procedures than an auditor would, Hoegner said, he argued that the "key conclusions are similar to what an audit would generate" – a snapshot of bank balances at a point in time.
But that highlights another issue with the FSS report: it covers only one such point in time, June 1.
On that date, the law firm said, it is "confident" Tether had more money in the bank than tokens in circulation (specifically, $2.55 billion of U.S. dollar reserves, held at two separate institutions, to cover $2.54 billion USDT). But the report says nothing about the level of collateralization on any date before or since.
In other words, it doesn't purport to show that USDT has been consistently secured over time – or that it is fully backed today.
See more: https://www.coindesk.com/tether-review-claims-crypto-asset-fully-backed-theres-catch/
The state of Tether's reserves has been the subject of controversy for months, with online critics claiming the company has been issuing more tokens than it had dollars in the bank – printing money, essentially. Tether has consistently denied this, but has not produced conclusive evidence that it is reserved 1-for-1.
The matter has broad implications for the crypto markets, well beyond the holders of the so-called stablecoin, known as USDT, whose market cap stood at $2.6 billion on Wednesday.
For starters, many have alleged that Bitfinex, the cryptocurrency exchange that shares common owners and managers with Tether, uses USDT to artificially drive up the price of bitcoin. An academic paper released last week supported this view, and the Commodity Futures Trading Commission reportedly subpoenaed Bitfinex and Tether in December.
Also, USDT, which despite the lingering doubts generally trades around $1, has functioned as a substitute for U.S. dollars. Traders use it to quickly move money between crypto exchanges rather than using bank wire transfers, which can be slow and hard to come by.
Given USDT's importance to the ecosystem, then, an independent confirmation that the coin is in fact fully collateralized might be welcome news, undermining the manipulation claims and bolstering market confidence.
But the three-page memorandum released Wednesday is probably not going to settle the debate, given its ample disclaimers and limited scope.
First off, the report is not an audit. It was prepared by a law firm – Freeh Sporkin & Sullivan, LLP (FSS) – not an accounting firm.
That's not for lack of trying, according to Stu Hoegner, Tether's general counsel.
"The bottom line is that an audit cannot be obtained," Hoegner told CoinDesk, claiming that this problem is not unique to his company but one faced by the entire cryptocurrency industry.
He went on:
"The barriers to getting audited are simply too big to overcome right now, and not just for us."
Those barriers include a steep learning curve for auditors in an emerging industry; accounting standards that predated the advent of cryptocurrency, creating uncertainty about how the rules apply; and the resulting need for auditors to exercise judgment, which is "anathema to a lot of large accounting firms. As a CPA, I understand that," Hoegner said.
In this situation, he said, "we've gone for next best thing."
Although FSS used different procedures than an auditor would, Hoegner said, he argued that the "key conclusions are similar to what an audit would generate" – a snapshot of bank balances at a point in time.
But that highlights another issue with the FSS report: it covers only one such point in time, June 1.
On that date, the law firm said, it is "confident" Tether had more money in the bank than tokens in circulation (specifically, $2.55 billion of U.S. dollar reserves, held at two separate institutions, to cover $2.54 billion USDT). But the report says nothing about the level of collateralization on any date before or since.
In other words, it doesn't purport to show that USDT has been consistently secured over time – or that it is fully backed today.
See more: https://www.coindesk.com/tether-review-claims-crypto-asset-fully-backed-theres-catch/
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