Before Tether's ToS revision in February, the business model relied on exit scam

o_e_l_e_o

legendary

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Quote from: DavideBaldini on September 11, 2019, 10:41:51 AM

Tether's ToS were revised in February 2019 (see appeal to NYAG, page 16 of pdf) to allow its reserves to include credits alongside with US dollars.

It's shocking, really. After blatantly lying for years about all USDT being backed up 1-to-1 with USD, they changed it to be being backed up 1-to-1 with "cash equivalents", to then being backed up 1-to-1 with literally anything they want, from cash, to other cryptocurrencies, to interest on loans, even interest on loans they have made to themselves.

They print USDT out of thin air, "loan" $850 million to themselves so they don't become insolvent, and then claim that your USDT is backed up by the money they are going to pay to themselves to pay off the interest on the loan they gave to themselves with the USDT they printed out of thin air. Disgustingly shady and unethical. It's even worse than the money printing behavior you see from fiat banks. Only a fool would be holding any part of their assets in USDT or holding any bitcoin or other crypto on Bitfinex. Both are almost certainly insolvent and are artificially propping each other up.

squatter

legendary

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STOP SNITCHIN'

Quote from: DavideBaldini on September 11, 2019, 10:41:51 AM

Tether's ToS were revised in February 2019 (see appeal to NYAG, page 16 of pdf) to allow its reserves to include credits alongside with US dollars. Before this revision, all issued tethers were contractually covered in full by USD deposits at any given time, and these deposits could not contractually be spent by the company. The ToS included a clause to allow the company to not redeem the tokens, temporarily or permanently, at its discretion.

I seem to conclude that the business model was a planned exit scam.

It probably had more to do with Bitfinex losing $850 million to a law enforcement seizure. Bitfinex was insolvent and desperate to fulfill its fiat obligations, so they turned to Tether for a loan. Tether obliged because both companies are run by the same people, after all. That's why their terms were changed -- to account for the gaping hole in their balance sheet.

audaciousbeing

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Concluding its an exit scam model is kind of farfetched because if that is the case, they would not even wait to be caught in the debacle for them to start giving explanation. The clause that does not mandate to redeem the tokens was just there to protect themselves just like the banks would include those tiny things on their Terms of Service that no one reads just to absolve themselves from any liability should it happen but we all know that the moment you lose money despite you appending your signature, they will be forced to find solution to it especially when you involve the central bank personnel. Its really good that they have updated the ToS to giving some form of credence to what they are offering but either way, I don't think that was their intention from the start.

Kemarit

legendary

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It has been suspected that Tether has been running on fractional reserves for years. And when all this brouhaha happened, they immediately admit to it. Not to exit scam though, but they have been misleading us for years but with this case, everything will be scrutinized and show how flawed their business model was.

DavideBaldini

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Tether's ToS were revised in February 2019 (see appeal to NYAG, page 16 of pdf) to allow its reserves to include credits alongside with US dollars. Before this revision, all issued tethers were contractually covered in full by USD deposits at any given time, and these deposits could not contractually be spent by the company. The ToS included a clause to allow the company to not redeem the tokens, temporarily or permanently, at its discretion.

I seem to conclude that the business model was a planned exit scam.

As of April, Tether's USD reserves cover 68% of all issued tokens. (page 78 of pdf) From page 79, distrust in Tether is claimed to provoke distrust in all crypto currencies:

Quote

The Attorney General’s ex parte, highly inflammatory, and misleading application was widely covered in the press, including an article in the Wall Street Journal. See Paul Vigna, Bitfinex Used Tether Reserves to Mask Missing $850 Million, Probe Says, Wall Street Journal (April 25, 2019) (copy attached as Ex. H). This coverage resulted in an approximate loss of $10 billion across dozens of cryptocurrencies within one hour. See Ryan Browne & Eustance Huang, Cryptocurrencies shed $10 billion in an hour on worries over ‘stablecoin’

Topic: Before Tether's ToS revision in February, the business model relied on exit scam (Read 137 times)