January 23, 2022
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Tether scandal: greatest threat to the cryptocurrency ecosystem

Crypto markets have grown significantly over the past few years. Most believe that this rise in prices is a consequence excessive printing of money by central banks; and heightening fears of inflation in traditional financial markets.

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Although these factors may have playedTo a certain extent, the main engine of the bull market was the mysterious stablecoin known as Tether. Tether has been controversial for years as the company behind it continues to spread misinformation, fire auditors, and refuse to provide any real transparency about its reserves.

This story is gaining more and more from year to year.publicity, but most die-hard bitcoin maximalists deny it. They often refer to it as "fear, uncertainty and doubt" and are doing their utmost to defend an unregulated, fully centralized, fiat counterfeiting company founded in China by a mysterious group of convicted criminals.

This is not a story about some tiny fraudulentcompanies. Tether has a market capitalization of nearly $ 74 billion now, making it one of the biggest financial crimes in history. This is a ticking time bomb, and this article will provide a quality summary of why Tether poses a systemic risk that cannot be ignored or underestimated.

Does this seem legitimate to you?

The problem with Tether is that the company createsunsecured US dollars, transfers them to dubious unregulated crypto exchanges and then injects them into various cryptoassets, mainly Bitcoin.

Unlike the generally accepted standard for other stablecoins, Tether has very poor transparency and has been convicted of lying dozens of times.

Tether only has 29 employees

According to Tether's LinkedIn page, the company has only 29 verified employees, making it the most valuable company per employee worldwide. Well, not at all suspicious!

It reminds me of Bernie Madoff, who createdthe largest pyramid in history. In the early 2000s, Bernie Madoff held the record with just 28 employees. The fewer employees, the fewer potential whistleblowers.

: LinkedIn

Metamorphoses of the Tether website

Until March 2019Tether was said to be backed by dollars one-to-one. Then the information on the site changed, and it began to say that the cryptocurrency is 100% backed by reserves, which means that they can also include non-monetary assets (or cash equivalents) and loans.

: Medium

The problem is, no one has any idea whatthese are reserves in fact. The company refuses to release any audit results and only shows pie charts that can be done in 10 minutes in Microsoft Paint.

The company published such a pie chart of its $ 42 billion crypto reserves in May 2021.

: Medium

According to JPMorgan, information reported by Tethervery unrealistic. It follows that the company has become one of the world's largest investors in the American commercial paper market, along with such investment funds as Vanguard and BlackRock, and far exceeding the investments of technology giants like Google, Microsoft and Apple.

Tether currently claims to be the 7th largest holder of commercial paper worldwide and expects to be the “largest” by the end of 2021.

“We got a lot of questions and heard a lot of discussion, but we didn't see any active participation,” said Deborah Cunningham of Federated Hermes.

“We hadn’t even heard of them until last week,” said a trader at a major bank. "This is news to us."

Tether is actually only 2.9% securedcash, which is very different from the previously announced one hundred percent cash collateral. Unfortunately, most crypto traders are too focused on their desire for the market to grow, and do not want to admit the inconvenient truth that Tether does not have sufficient reserves and the company supports the entire crypto market with fake money.

Ethereum and Ripple CEOs Raise Concerns

Even the leaders of some cryptocurrencies are expressing concern about Tether. I am sure if Satoshi was with us, he would be in solidarity with them.

Vitalik Buterin said on the Tim Ferriss Show podcast:

"I think the Bitcoin ecosystem has its own time bombs like Tether."

And the attorneys for Brad's Ripple executivesGarlinghouse and Chris Larsen recently called on the US Securities and Exchange Commission to investigate and demand important documents from iFinex, the Chinese firm that operates Tether and Bitfinex.

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Tether drives the market

Many Tether advocates argue that even if this cryptocurrency disappears, other stablecoins will quickly take its place and the market will not collapse in the least. They say Tether has zero impact on the market.

While there are other stablecoins trying to follow the corrupt path of Tether, such as USDC, Tether still has a significant market dominance.

The share of USDT volume is often between 50% and 80%,which is more than any other cryptocurrency on the market. The data from the exchanges clearly shows that USDT is the main factor driving the price of bitcoin, which is a serious cause for concern.

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Bitfinex is actively involved in this price manipulation and scam. Looking at the data, Tether accounts for almost 75% of the exchange's volume.

The suspicions became even more convincing when the “heavenlydocs disclosed that Tether and Bitfinex are controlled by the same Chinese company known as iFinex Limited. Tether and Bitfinex have lied for years, claiming that they each have their own independent business, but this leaked documents proved otherwise.

The Correlation Between Bitcoin Price And Tether Issue Is Striking

Note that Bitcoin only grows during periods when Tether pours hundreds of millions of dollars into it. And when that stops, we see a significant correction in the market.

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The emission of Tether supports the growth of the market.In court documents, there are leaked conversations of Bitfinex top managers, where, among other things, there is a recognition that "bitcoin can go below $ 1,000 if we don't do something quickly."

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Immediately after New York's attorney generalannounced an agreement with Tether, bitcoin lost 25% of its market capitalization in just a few days. When Tether posted a dubious pie chart of its fake reserves, Bitcoin plunged another 53% and lost $ 250 billion in market capitalization.

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To calculate the true value of Bitcoin,Tether with all its counterfeit money should be removed from the equation. My guess is that when Tether finally merges, Bitcoin will lose most, if not all, of its gain during the bull market.

What New York attorney general found out about Tether

In February 2021New York State Attorney General Laetitia James said she has reached an agreement with Tether. Immediately after the news was released, Tether's puppets began shouting that the company had been cleared of all charges and that it "proved that it had not done anything illegal." However, this is not true.

In fact, the agreement required Tether to conduct a quarterly audit for the next two years, end all business in New York, and pay nearly $ 20 million in fines.

Here are direct quotes from the Attorney General's report:

"Bitfinex and Tether defrauded customers and the market by exaggerating their reserves and holding back an estimated $ 850 million in losses worldwide."

"Bitfinex and Tether irresponsibly and illegally hid huge financial losses to prevent their scheme from collapsing and to protect their financial performance."

"Tether's claims that its virtual currency was always fully backed by US dollars were false."

“The investigation into the office of the Attorney General showed thatsince at least mid-2017, Tether did not have access to banking services anywhere in the world, and therefore for a long time did not have the reserves to provide circulating tethers with dollars at a one-to-one rate, contrary to the statements. "

Paid advertisers and Tether advocates

As with other fraud scandals,Tether's exposure is met with strong opposition from those directly profiting from it. In particular, many bitcoin maximalists have launched fierce disinformation campaigns to label this controversial topic as "just fear, uncertainty and doubt."

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Adam Back Is a prominent defender of Tether. Why? - you ask. If you dig into the biography of Adam Beck, you can see that he is the founder of Blockstream.

In this audio, Zane Tackett, manager of Bitfinex,reports that Tether was one of four seed investors in Blockstream. Blockstream wants to be the foundation for Bitcoin's financial infrastructure. Back loves to defend Tether, but doesn't anyone see a conflict of interest? The company he works for is funded by Tether.

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Samson Moe - Strategic Director of Blockstream, soit is understandable why he also strongly supports Tether. He wrote thousands of tweets criticizing Tether's opponents, and has unwaveringly spread the word that Tether is legitimate and fully secured, despite New York's attorney general's claim to the contrary.

I could write an entire article on Blockstream and how this corrupt company is desperate to take full control of the Bitcoin network. Her involvement in protecting Tether is unsurprising.

They are a group of criminals trying to take over every aspect of the network and silence anyone who gets in their way.

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Peter McCormack Is another protector of Tether. He hosts a podcast about Bitcoin and constantly tweets which Tether is legitimate.

He is closely associated with Tether, to the extent that the company even paid him lawyers in a high-profile case, which is very suspicious.

Peter also interviewedone of the leaders of Tether Paolo Ardoino and the lawyer of the company Stuart Högner. He did not ask a single question about the contradictions, but he defended them on various points. In essence, this episode of his podcast was just a paid ad to restore their reputation.

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Anthony Pompliano at first called Tether the greatest scam instories and expressed concern that the stablecoin was not actually pegged to the dollar one-to-one, but then turned into its ardent supporter and began to advise its subscribers not to read articles about it.

He and others believe that if you stay inignorance and urge their followers to do this, then their scheme will live and live. His connections to BlockFi and Blockstream, as well as his paid fraudulent advertising and investments, make him vulnerable to big losses if Tether collapses, so he is now giving full support to this scam.

There are also dozens of other public peoplewho enjoy being Tether's puppets, including Dan Held and Nick Carter, who are closely associated with Tether and clearly receive money from it. These people should not be trusted.

Crime in traditional financial marketsmanages to continue for a long time for the same reasons. Insiders and elites who profit from them are not interested in calling a spade a spade. For me and some other critics of Tether, our moral is to protect investor capital by warning of risks.

The fate of Tether and its impact on crypto markets

Consumer Protection Law

Members of the United States Congress have announced a consumer protection bill to strengthen oversight and regulation of existing stablecoin issuers and related service providers.

Banking Restriction and Security Lawstablecoin licensing (STABLE) seeks to protect communities without or with insufficient access to banking services from traditional lending risks, as well as other challenges to consumer rights such as disproportionate impacts, predatory lending and digital discrimination.

In short, American regulatorsare considering a new bill that defines stablecoins as securities. If the bill passes, Tether could await a lawsuit from the US Securities and Exchange Commission, which will be another nail in its coffin.

What happens if Tether crashes?

No one can predict the future, but you canmake assumptions based on the available data. It is quite clear that all crypto markets are held on Tether. If it becomes insolvent, we are likely to see a cryptocurrency liquidity crisis that will cause intense panic and fear among investors.

Money will not just flow to other stablecoins, butrather destabilize the entire market. The heavy reliance of major exchanges on USDT also underscores how much the market relies on fake volume and fake demand, which is not great at all.

If the crypto community is not properlyprepare for the insolvency of Tether, then we may see a real apocalypse in the markets. This includes the suspension by exchanges of trading and withdrawal of funds, excessive panic and fear, a collapse in prices due to the flight of investors, new government regulations and even a freeze by banks of all deposits associated with Bitcoin.

Conclusion

I'm a big fan of cryptocurrencies and would prefer this market to be organic. Unfortunately, human greed prevailed and Tether became one of the greatest scams in history.

I totally agree with this tweet from Jason Calacanis:

“In the case of fraud, whether Madoff or Theranos, the classic scenario is to attack critics, dodge questions, and claim that you are being stalked.

If you are not a fraud, you will simply answer all the questions, deliver the product and / or let a reputable firm audit your accounts. ”

Tether has been an active participant in crypto markets since 2014., however, the company refuses to answer the simplest questions and to be audited by a reputable firm, and it has been repeatedly caught in a lie. If she really were legitimate, she would have proven it long ago.

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