So they don't even have to perform shenanigans.
They can just buy $1 par debt at $0.01 from Bob's Used Cars and value / declare it at $1. It's a super shady move, and would shake confidence if known, but would seem legally defensible. ("We valued it at a fair price. It turned out we were wrong and overvalued it. Oops.")
They could probably declare it at >$1 if they really wanted to, but why do hard fraud instead of easy fraud?
They are unregulated, but they're now required to publish a breakdown of their assets.
Before, they could have said "We have billions and billions in assets." Now, they're required to enumerate and value their assets, to the extent required to publish the breakdown, as part of a legal agreement.
So I guess before it could have been riskless fraud. Now, it's more risky fraud. And overvaluing assets seems like an easy way to keep the wheels turning without obviously pissing off a state AG.
Deltec, the bank that Tether bought, has a desk specializing in zombie debt, so it's entirely possible they have loads of debt bought for pennies on the dollar, that they have through accounting/market shenanigans recognized at par as their "commercial paper".