This rumor has been debunked. We had a glance at tether financials when the whole bitfinex IOU swap happened. Tether is backed 1:1 but they have reserves in investments, claimed to be mainly A2. Thats what people had a problem with.

If thats a problem ok, but insurance companies invest their payout holdings in commercial paper as well and theres not much of a public outcry.

Tether claims to be backed 1:1, but claims to have reserves in investments, which are, yes, claimed to be mainly A2.

We have zero evidence of any of these being true other than the word of Tether executives, who have lied about their backing before, as determined in court.

(Also, this is only the latest claim in a series of gradual backtrackings on earlier, fraudulent claims about their reserves.)

Their financials were shown to the new york attorney generals office who then reached a conclusion and settlement which you can read. What they did wrong was issue an IOU to bitfinex which was hacked. Not run up a 10:1 reserve market pumping scheme like tin foil hat wearers claim. Theres lots to say about tether thats bad, but thats not it.

It is worth pointing out that the conclusion and the settlement covers a time before Tether did a massive 10× growth in total circulating currency, and the reserves accounting of the latter phases are not well-established. By Tether's own (very sparse, compared to standards in the financial industry) reporting, ~75% of its reserves are "commercial paper," without any further identification of what commercial paper its holding. And if true, this would make it one of the largest holders of commercial paper, and yet no one has come forward to corroborate transacting commercial paper with Tether.

Since there's no information on what it's holding, it has fueled suspicion that a lot of the holdings are in things like cryptocurrency scam-like companies, or as another theory holds, invested in Evergrande property notes. Tether hasn't released any information that would favor or disfavor these hypotheses.

...and lied about it. That part is pretty important.

(And you are severely understating what they did, as well.)