But then what is their end game here? They paid $18m to the NYAG and now have provide quarterly reports describing the composition of their reserves for the next two years.
The ruling the NYAG issued on the case is available here:
https://ag.ny.gov/sites/default/files/2021.02.17_-_settlement_agreement_-_execution_version.b-t_signed-c2_oag_signed.pdfThere are some quotes in it which directly support what I've been saying. Bold for emphasis mine throughout.
Paragraph 20:
Because of Tether’s inability to conduct significant banking activity during this time, it could not itself hold dollars sufficient to back the hundreds of millions of new tethers that had entered the market. Until September 15, 2017, the only U.S. dollars held by Tether ostensibly backing the approximately 442 million tethers in circulation was the approximately $61 million on deposit at the Bank of Montreal.
442 million USDT backed up by $61 million. That's less than 14%
Paragraphs 25 and 26:
Tether and Friedman agreed that Friedman would conduct the verification of Tether’s assets as of September 15, 2017.
On the morning of September 15, 2017, Tether opened an account at Noble Bank. Later that day, Bitfinex transferred $382,446,847.71 from Bitfinex’s account at Noble Bank into Tether’s account at Noble Bank. Friedman conducted its verification of Tether’s assets as of 8:00 p.m. EST.
Tell me you don't find that shady as hell. Bitfinex transfer almost $400 million to Tether on the morning of their audit, which they then release the next day saying "Look. We have $400 million in the bank!"
Paragraph 40:
And so, as of November 2, 2018, tethers were again no longer backed 1-to-1 by U.S. dollars in a Tether bank account, because a substantial portion of the backing in the Deltec account had been transferred to Bitfinex to make up for the funds taken by Crypto Capital, while the corresponding funds transferred from Bitfinex’s Crypto Capital account to Tether’s Crypto Capital account were impaired by Crypto Capital’s actions.
Paragraphs 42 and 43:
On November 1, 2018, Tether made a public statement announcing that it had established a relationship with Deltec Bank & Trust Limited, headquartered in the Bahamas. In that announcement, Tether represented that “USDT in the market are fully backed by US dollars that are safely deposited in our bank accounts.” The announcement also linked to a document on Deltec letterhead and addressed to Tether Limited, dated November 1, 2018, which stated:
Dear Sirs: We hereby confirm that, at theclose of business on October 31, 2018, the portfolio cash value of your account with our bank was US$1,831,322,828.43.
The next day, November 2, 2018, Tether made the first of five transfers ultimately totaling $475 million from its bank account at Deltec Bank to Bitfinex’s account at Deltec Bank.
More "audit" shadiness. Release a statement saying "Look at all these funds we have", and then the next day start transferring them out to Bitfinex instead.
Paragraph 49:
At no time did Bitfinex or Tether disclose to the market that Tether had transferred at least $625 million to Bitfinex, or that Bitfinex had experienced critical liquidity issues because of loss of approximately $850 million to Crypto Capital.
This had been going on for months before the Attorney General finally mandated that Bitfinex come clean about the fact they were insolvent.
If they provide a quarterly report, and if it comes as a full, independent audit of their funds, then I might be inclined to believe that it is not a scam. But their history of completely and repeatedly failing to do this isn't making me hold my breath. I suspect the report they provide will be as disingenuous as the ones they have provided previously, of bank accounts which are funded the morning of the audit and emptied the day after the audit.
