They are not fake, they have all of them. People from the US just can't access them anymore. Tether is the workaround so they can.
To add to the excellent summary of patio11:
The other side of the coin is that more and more exchanges are using Tether (USDT) as the only thing pegged to the FIAT world in any way (value wise), not having to deal with actual dollars and banks makes the legal side of running an exchange a lot easier and cheaper. So a lot of exchanges are supporting USDT for a reason way bigger than simply providing a trading marketplace for them. Think about exchanges like Bittrex and Poloniex, which volume wise are huge and don't offer any real dollars or euros.
Who gave them all that USD? Where are they keeping it? They've been shunned by their US banking partners. They've basically been printing Tethers 50m at a time. The only thing they've released which attempted to show that they actually had the USD was something they called an "audit" which explicitly said "this is not an audit" [0] on the second page.
When you go to withdraw from Tethers it basically says "if you don't have more than $50k in claims, go away" [1]. Suffice it to say that most of their customers don't have that.
My guess is that Bitfinex, through a combination of wash trading and Tethers, have been pushing up the price of Bitcoin and they've basically been running a Ponzi scheme.
I’m still wrapping my bed around the concept of Tethers, but I don’t see [1] as problematic. That’s the same way that ETFs work — they ensure value parity by guaranteeing that you can redeem blocks of them for the corresponding assets. But to ensure the ETF shares aren’t all redeemed this way, they limit it to large blocks of shares. That way, smaller investors can still sell their (smaller blocks of) ETF shares for dollars at par, since any divergence would be an arbitrage opportunity that a bigger trader can exploit.
The requirement to redeem in large blocks doesn’t change that logic, and still ensures that the smaller trades happen at par.
I agree it's not problematic by itself, but together with the other allegations (including plenty I haven't listed) and it starts to paint a picture that they do not have USD to back up every single one of their Tethers.
> When you go to withdraw from Tethers it basically says "if you don't have more than $50k in claims, go away" [1]. Suffice it to say that most of their customers don't have that.
This is not how most people redeem tether, they go to any of a wide range of exchanges (kraken, poloniex, bittrex, etc) and trade whatever amount (from a dollar or whatever the minimum trade amount is).
Do you not see that inability to redeem for Dollars (AND the fact that most people aren't doing this but rather pumping these so-called-$-backed-tokens into other cryptos) could potentially be catastrophic if they were created without organic investment? They would literally be fake money priced at $1 buying $1 of BTC.
It is the definition of inflation: increased money supply. Except it's priced in $, which hasn't actually inflated. So if the bubble pops and the money is found to be fraudulent, then it equates to money supply shrinking. Artificial demand removed..
I 100% agree with you how risky it is and how hard to prove this is for bfx. It's very dangerous and there is a lot of money on the line (not just the tethers themselves, USDT reaches for and beyond bfx).
However I don't think it's obvious that this thing will implode, based on the information we have we can only speculate. Pointing to screenshots about being unable to withtdraw tethers is a red herring and has nothing to do with whether tether will implode.
It's not hard at all. There's a few, very basic things that would change my tone:
1) Let users exchange USDT for USD no matter the denomination or status. If they can't do that, remove the thing that says "You always have 24/7 access to
our balance" from the website marketing.
2) Release an official audit (that doesn't say "this is not an audit")
3) Explain the large amounts of Tethers being minted. If they are legitimate, who is pumping $100m into Tethers almost every 3 days? No need to be specific, but records would be nice.
4) Tell us who their banking partners are that are holding the USD.
5) Put their transparency page back up [0]. Bonus points if they actually keep the "Shareholder Equity" number negative in the interest of transparency, or explain why it might have gone negative.
> If they can't do that, remove the thing that says
This again, is related to their marketing and not actually to their solvency (red herring).
> Release an official audit (that doesn't say "this is not an audit")
Lack of proof !== proof of insolvency.
And for all the other ones:
They are not entitled to tell you everything. The fact that choose not to is in NO way proof that they are insolvent.
I 100% agree that based on your list one might choose not to trust them. Just don't go screaming "they've basically been running a Ponzi scheme" with the only proof being them not telling you what you want to know about their operations.
