How have they lost money?
Because Tether is insolvent. They are holding USDT, believing it is worth the same amount in USD, when it is not.
They haven't lost money. They can redeem their USDT through Tether or trade it at 1:1 on the secondary market.
Suggesting this is worse for customers than a 36% haircut is simply insane. You obviously aren't putting yourself in their shoes.
Which one is really worse?
I think these ongoing lies and cover-ups surrounding Tether are worse. Not only is it highly unethical, but as I said, at some point it's all going to come crashing down, and the users of Tether will be hit with much larger losses than a 36% haircut.
If you asked any Tether customer whether they would prefer a 36% haircut today or a chance to exit at 1:1 any time, they'll take the latter every single time. You aren't thinking about customers' best interests. You're only thinking about your own sense of ethics.
The risk of collapse applies to
any custodial exchange. If Tether were shut down and entered liquidation tomorrow, their customers would be completely screwed regardless of any insolvency. Their money would be locked up for many years and bled dry by the courts.
Honestly, I'm not convinced that Tether has ever been printed out of thin air.
See the following court document:
As of the date I am signing this affidavit, Tether has cash and cash equivalents (short term securities) on hand totaling approximately $2.1 billion, representing approximately 74 percent of the current outstanding tethers.
That Tether does not now keep liquid, cash reserves equal to 100 percent of the outstanding tethers is not only disclosed to customers, but hardly a novel concept. Commercial banks operate under a “fractional reserve” system whereby they keep cash on hand representing only a small fraction of customer deposits
They openly admit that they do not have cash to redeem every Tether, and that they are taking part in a "fractional reserve" system like fiat banks do. This is how banks create money out of nothing in the fiat system, and Tether are doing the same with USDT.
You stated that Tether
issues (prints) un-backed USDT, and you've implied this is a practice they regularly engage in. No court documents have ever proved either claim. As far as we can tell, USDT was only ever
issued based on real deposits. The "insolvency" arose when Tether made a payment to Bitfinex in exchange for a loan agreement instead of burning the associated USDT.
Do you see the difference? You are painting this picture where Tether is constantly printing fake money and operating in a completely illegitimate way, but there is really no evidence of that. All the facts point to a one-time hole in Bitfinex's balance sheet that Tether covered with a one-time loan. And they didn't issue Tethers to do it. Like I said, nothing I've seen indicates that Tether has ever printed USDT out of thin air, and nothing indicates a pattern of such behavior either.
Sometimes I feel like much of the ire pointed at Tether = people venting about third party trust issues that apply to a whole swathe of other services.
Oh sure, and don't get me wrong here - I dislike all centralized and custodial exchanges, but Tether are a cut
above[/i] below the rest.
How so? Huobi and Okcoin were caught operating as shadow banks,
using billions of CNY in customer deposits to invest in high yield instruments. In fact, I'm very confident that most exchanges have -- at one time or another -- acted in
very illegal ways with customer money.
It's just that nobody cares unless we're talking about Tether. Why do you demand audits of Tether and no other exchanges? Why is no one out with their pitchforks digging into possibly insolvency at Bitstamp, Kraken, Coinbase?
Mark my words: The next few QuadrigCX-type collapses are going to happen while everyone is staring at Tether.
