Tether Stablecoin Receives $41M Fine For Fraudulant Cash Reserve Levels + $1M Bounty For Whistleblowers!

I had been warned that this month would be a hard time for Tether and in fact things are likely to get worse than they already have... Now a large fine has been sent to the Tether team, effectively for fraud!

First up we have the news that the US Commodities Futures Trading Commission has issued a $41 Million fine to Tether for misrepresenting the truth about their reserves. They have always advertised that for every Tether coin in existence, they held a 'real' fiat US Dollar, meaning that the 'stablecoin' is tangibly pegged to the US dollar in as meaningful a way as is plausible with the scammy fiat US dollar. In reality, after years of exposure by activists such as @bitfinixed on Twitter, it turns out that they didn't.

Tether's own statement on the subject distances themselves from any major wrongdoing and just says they essentially chose to hold some reserves as non fiat:

Following several years of investigation and access to extensive information about the companies and their operations, the CFTC has concluded its review. The CFTC’s Order found no issues relating to Tether’s current operations. In fact, the Order related to certain disclosures about the reserves from more than two and a half years ago. As the Order recognizes, these issues were fully resolved when the terms of service were updated in February 2019.

As to the Tether reserves, there is no finding that tether tokens were not fully backed at all times—simply that the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times. As Tether represented in the Order, it has always maintained adequate reserves and has never failed to satisfy a redemption request.

However, as others have pointed out, by holding reserves in crypto tokens that generate profit (and that are volatile to a point of actually risking the collapse of the entire 'stablecoin'), a feedback loop is created whereby the price of Bitcoin and other cryptos may have been artificially inflated by the process.

$1 Million Bounty For Whistleblowers

A financial research organisation has offered a sizeable reward for anyone coming forward with information on the true state of Tether's reserve holdings. They highlight that if Tether is lying then it has hugely negative implications for crypto and for specific lending institutions. I highly suggest steering clear of Tether for the forseeable future and using other stablecoins instead!

Hindenburg Research, a forensic financial research firm, today announces it is launching the Hindenburg Tether Bounty Program (the “Program”) – a reward of up to $1,000,000 for information leading to previously undisclosed details about cryptocurrency “stablecoin” Tether’s backing.

Tether is a key underpinning of the multi-trillion-dollar crypto market. Yet despite its repeated claims of transparency, its disclosures around its holdings have been opaque. The company claims to hold a significant portion of its reserves in commercial paper yet has disclosed virtually nothing about its counterparties.

Hindenburg has doubts about the legitimacy of Tether’s backing due to the company’s sparse disclosures.

Tether has been referred to as a “stablecoin” in the crypto space due to the company’s historical claims that it was equivalent to $1 USD and was backed 1-to-1 by “traditional currency” reserves.

Since those claims that garnered it “stablecoin” status were made years ago, Tether subsequently revealed that its coin was backed only by a small percentage of traditional currency, and that much of its backing consists of holdings in commercial paper issued by unnamed counterparties.

Despite multiple regulatory sanctions over its alleged lack of truthful disclosure about its reserves, and despite Tether now having a $70 billion market cap, Tether still refuses to provide transparency to the public on its holdings.

Recent reporting has indicated that Tether’s claims would make it one of the largest holders of commercial paper in the world. But major trading desks stated to the press that they had never worked with them or seen them in the market.

Hindenburg’s program enables users to submit information on Tether’s backing to Hindenburg for a chance to earn rewards in an amount up to $1,000,000, the (“Bounty”).

Hindenburg Research founder Nathan Anderson said: “We feel strongly that Tether should fully and thoroughly disclose its holdings to the public. In the absence of that disclosure, we are offering a $1,000,000 bounty to anyone who can provide us exclusive detail on Tether’s supposed reserves.”

Securities and Exchange Commission Chair Gary Gensler said in September of this year that stablecoins were acting as “poker chips” at the crypto Wild West “casino gaming tables”.

Gensler said he feared that: “[the SEC will] keep bringing these enforcement cases but there’s gonna be a problem, on lending platforms, on trading platforms, and, frankly, when that happens…a lot of people are going to get hurt.”

Hindenburg Research seeks to help advance the public’s knowledge of what it believes is a growing threat to investors by encouraging disclosure related to a crucial part of the crypto markets, which are nearing “systemic” size.

The full terms and conditions of Hindenburg’s Tether bounty program can be found here and should be read closely by anyone considering submitting information to the program.

What do you think? Is this all a hit job on Tether or is there real fraud afoot?

Wishing you well,
Ura Soul

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