Re:Bitfinex and Tether required to end all trading activity ...
by ac29 on Tuesday February 23, 2021 @08:01PM
(#26245272)
This case stops short of proving exactly what percent they are currently backed at - there is almost certain some level of "legit" deposits (Tether has value in evading capital controls). The weight of evidence is strongly in favor of past financial crime, and the imposed transparency requirements suggest NYAG suspects these issues are ongoing. I dont suspect they will ever provide satisfactory evidence of legitimacy, and the DOJ is almost certainly investigating them by now.
Which is insane. Those are customer funds, that Bitfinex owes to their customers, if they choose to withdraw from their ecosystem.
They aren't a personal piggybank for them to dip into as they please.
This is not at all like fractional reserve banking, where a financial liability (customer deposts) are used to print dollars (in the form of loans), because customer deposits can be called back anytime, while loans cannot.
With Tether, if Bitfinex takes a dollar a customer deposits, and then prints and sells a USDT, and the customer withdraws their deposit, they have to destroy a USDT, in order to maintain the 1:1 peg. There is zero evidence that they are doing this at anywhere near the rate they claim.
Ironically, what they are doing is very similar to a double-spend.