Tether

Tether is a Hong Kong-based company known for issuing, among others, USDT, a centralizedWhat is Tether (USDT)? by Mohammad Musharraf (Dec 6, 2023) Ledger Academy. cryptocurrency whose value is supposed to be backed by US dollars.Tether: Fiat currencies on the Bitcoin blockchain (c. 2022) USDT is part of a family of cryptocurrencies called stablecoins.
Run by executives who avoid making public appearances and just somewhere between 11 to 50 employees supposedly managing more than 60 billion USD, they are perhaps the most important company in the cryptocurrency space.
==Origins==
J. R. Willett wrote something called "The Second Bitcoin Whitepaper" in 2012.The Second Bitcoin Whitepaper, vs. 0.5 (Draft for Public Comment) by J. R. Willett (2012) Crypto Chain University. This whitepaper described the MasterCoin idea that would keep track of ownership of all the disparate cryptocurrencies in one place, and eventually resulted in the creation of a functional MasterCoin. Willett received the equivalent of $500,000 in investments by selling MasterCoins starting in 2013 based on the promise that it would launch as a tradable coin. This was as it happened illegal, being an "unregistered securities offering". He never was charged for a crime however presumably because the US Securities and Exchange was not yet on the lookout for this type of cryptocurrency activity.
Three people joined together to create Tether in 2014:
# is best known as a former-child actor; he made some moolah selling a gaming company he founded, which was pioneering in the concept of selling game-based virtual currency that had been 'farmed' by low-wage foreign workers.
#Craig Sellars, who was a computer programmer who had worked on developing MasterCoin
#Phil Potter, who was then an executive at the Bitfinex Bitcoin exchange
Both Pierce and Potter have claimed credit for the idea of Tether. Contrary to Pierce and Potter's great man theory of Tether creation, several similar attempts at creating stablecoins had already taken place: 
* created a physical "Liberty Dollar" in 2005 with Ron Paul's face on it, intended to compete with the US dollar.Ron Paul Coin Minter, Pot Priest, Faces 15 Years in Prison by Tim Murphy (March 21, 2011) Mother Jones. Von NotHaus was convicted of counterfeiting but only served probation.
*Arthur Budovsky created the a digital non-cryptographic currency in 2001. After Budovsky was convicted of violating the New York State banking law in 2006 in connection with Gold Age, he fled to Costa Rica where he created the digital currency that same year. In 2013, the Liberty Reserve was seized by the US government and Budovsky was sentenced to 20 years in prison in 2018.Liberty Reserve Founder Arthur Budovsky Sentenced In Manhattan Federal Court To 20 Years For Laundering Hundreds Of Millions Of Dollars Through His Global Digital Currency Business (May 6, 2016) United States Department of Justice.
==Company executives==
Tether's C-suite (i.e., the senior executives), excluding the Chief Technology Officer (CTO), is notorious for being secretive and not appearing in the media, which is strange for a company managing such a large amount of money as they claim.
===Paolo Ardoino===
Ardoino was the company's CTO from about 2019-2023Paolo Ardoino Twitter (archived from November 16, 2019). He became CEO in October 2023.Paolo Ardoino Twitter (archived from February 17, 2024).Stablecoin Tether promotes tech chief to CEO, taking over from mysterious crypto leader by Ryan Browne (Oct 13 202310:10 AM EDT) CNBC. He is also the CTO for the cryptocurrency exchange Bitfinex. He's the public face of Tether and the one who shows up in Tether's media appearances.
In July 2021, he appeared in a interview in CNBC.CNBC TechCheck with Tether's CTO and general counsel by CNBC Television (21 Jul, 2021) YouTube. He dodged every important question, such as what companies make up their holdings, who their intermediaries are and inquiries about the statement that "Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie."Attorney General James Ends Virtual Currency Trading Platform Bitfinex's Illegal Activities in New York (23 Feb, 2021) New York State Office of the Attorney General.
Like any proper cryptocurrency user, he was thrilled with El Salvador accepting Bitcoin as legal tender, having much of the same views you would come to expect,El Salvador #bitcoin law 1st anniversary 🇸🇻 1/ El Salvador has been extremely brave in adding Bitcoin as legal tender. by Paolo Ardoino (2:38 PM · Sep 7, 2022) Twitter (archived from 29 Mar 2024 07:32:15 UTC). despite the fact that Bitcoin has none of the properties that would allow itself to be suitable for currency use in El Salvador, like a stable price with stable inflation over time and being actually usable in a country where Internet penetration and amount of people actually able to use Bitcoin securely is low.
===Giancarlo Devasini===
Devasini is the company's CFO, as well as Bitfinex's CFO. Not much is known about him, and what little is out there seems unreliable.Giancarlo Devasini is the father of Tether and barely anybody talks about this scammer r/buttcoin (18 May 2022) Reddit. He previously had careers as a plastic surgeon, computer hardware trader and owner of a food delivery service.Tether: the former plastic surgeon behind the crypto reserve currency by Kadhim Shubber & Siddharth Venkataramakrishnan (Jul 14, 2021) Financial Times. Regarding his career as a surgeon he said, "All my work seemed like a scam, the exploitation of a whim." His computer hardware trading involved several instances of shady practices, including counterfeiting Microsoft software for which he paid a US$65,000 fine in 2007 in exchange for cooperating with criminal investigators. In a 2008 blog post deduced to be by Devasini, he expressed admiration for the great Ponzi schemer Bernie Madoff and how he had gotten away with the scheme for so long.
Devasini is clearly the nexus in the incestuous relationship between Tether and Bitfinex, since he is able to transfer funds at will between the two companies by signing off as the CFO of both companies on the same document.
===Jean-Louis Van Der Velde===
Van Der Velde was the company's CEO until October 2023, as well as Bitfinex's CEO. Like the CFO, he's surrounded in mystery. He has a Bitfinex blog post about him making some vague claims, however.Bitfinex Leadership – Jean-Louis van der Velde, Chief Executive Officer (12 March 2018) Bitfinex. His puff-piece biography lists him as a "technologist and serial entrepreneur".J. L. van der Velde Linkedin. He attended National Taiwan Normal University, but presumably did not obtain a degree. His title of CEO purportedly carries little weight, and Devasini is the actual person in charge of Tether. As of 2021, Van Der Velde was still the owner of record of Huashun Electronics, a Chinese-based company that is on a Chinese government list of companies that are "seriously untrustworthy and law violating".Tether’s CEO: from IT sales to calling the shots in crypto land: Jean-Louis van der Velde’s career offered few clues that he would become a key figure in fast-growing industry by Kadhim Shubber et al. (December 17, 2021) Financial Times.
==Controversies==
===Auditing===
In order for USDT's value to remain at 1 USD, people need to know that (1) there's indeed 1 US dollar somewhere in the company's possession for every USDT issued and (2) they can cash out whenever they want. A way for people to be assured that this is indeed the case is to have Tether's reserves be regularly audited by a trusted, independent third party, something they are not good at.
Tether's former auditor from May 2017 to January 2018, Friedman LLP, settled charges with the U.S. Securities and Exchange Commission that it had engaged in "serial violations of the federal securities laws" and numerous instances of "improper professional conduct".Tether's Former Auditor Fined $1M by SEC for Sloppy Accounting by Cheyenne Ligon (Sep 26, 2022) CoinDesk.
In 2021, Tether appears not to have had a functional auditor,Tether General Counsel Tells CNBC Audit Is 'Months' Away by Frances Yue (Jul 21, 2021 at 10:34 a.m. PDT; Updated Sep 14, 2021 at 6:29 a.m. PDT) CoinDesk. but they do publish attestations, in which a third party, Moore Cayman, based in the Cayman Islands (!), says that they indeed have $X when they did the attestation and doesn't go any further than that.Transparency Tether (archived from September 17, 2022). In 2022, all of Moore Cayman's clients were taken over by MHA MacIntyre Hudson, which as of 2023 was under investigation by the UK Financial Reporting Council.Tether's New Accounting Firm Is the Old One, With Baggage: Moore Cayman is now operating under the MHA Cayman name, but the firm's parent is under investigation in the U.K. by Helene Braun (Jan 26, 2022 at 8:37 a.m. PST; Updated May 11, 2023 at 9:59 a.m. PDT) Coin Desk. To get an idea of how worthless these assurances are, there's no better way than reading one of them. If you can't stand the legalese, David Gerard has a blog post about one published in 28 February 2021, explaining why these attestations are not a substitute for a proper audit.Tether produces a new attestation — it says nothing useful (20 March 2021) David Gerard
By 2022, Tether obtained the auditing services of a reputable accounting company, BDO Global, which did at least certify Tether's assets for a single day (30 June 2022):Tether Holdings Limited (10 August 2022) BDO.
But Tether's auditing problems appear to be ongoing, and more likely a feature than a bug.Tether Audit, Promised for 5 Years, Still Months Away, CTO Says (August 28, 2022) PYMNTS.
===Redeeming USDT===
Cashing out or redeeming USDT is a whole different story entirely. Theoretically, Tether themselves will allow you to redeem their stablecoins with them directly. In order to do that, you will need an account with them.Knowledge Base | Redeem TETHER tokens to fiat currency Tether (archived from May 12, 2022). However, in order for your account to be able to redeem cryptocurrencies, you will need to verify your account (also known as completing a Know Your Customer or KYC process), which includes having to pay for this process to be completed.Knowledge Base | Verify an account on Tether Tether (archived from May 12, 2022).
Of course, in reality, redeeming Tether's cryptocurrency with Tether isn't that easy. In the "Redeem TETHER tokens to fiat currency" page, there's this:
Note the use of the word request. In Tether's legal page,Legal Tether (archived from May 12, 2022). the following clause can be seen:
Indeed, there are many stories about not being able to redeem USDT in Tether's official website.Time for bitcoinmarket's quarterly "Has anyone ever _actually_ redeemed tethers"-thread (spoiler: No) by u/temporarymctempton (17 Oct 2018) Reddit. For most people, the way to get back fiat from USDT is finding a buyer willing to exchange real money for USDT in the ever-so-trustworthy cryptocurrency exchanges.
===Unbacked USDT speculation===
Because of Tether's failure to produce a credible audit, there's a fair amount of speculation that USDT may not be backed after all, and that they are lying through their teeth.Tether - New Reserves Breakdown by u/2Panik (07 February 2022) Reddit.Tether’s Reserves Fully Backed; Tether Continues to Lead the Industry with Transparency by u/Visible-Coach (05 December 2021) Reddit.
Most speculation centers around the fact that commercial paper from companies whose identities are not disclosed is part of Tether's reserves.
===Crimes===
In 2017, Bitfinex was the only exchange that traded Tether. At that time Bitfinex's assets were held only in a few Taiwanese banks. Non-Taiwanese banks became increasingly worried that if they accepted transfers from the Bitfinex accounts they could potentially be held liable for money laundering. This functionally deprived Tether of owning any USD assets. Despite this, Tether continued to issue $200 million in new coins.
By 2018, Bitfinex had transferred its assets to a loosely-regulated Puerto Rican bank called Noble Bank International (NBI). According to the bank's founder, Tether did have 1-to-1 dollar assets in the bank when the account was opened, but that same Devasini wanted to invest the assets in corporate bonds (which carry varying levels of risk) rather than USD. Due to a dispute with the other Tether owners over this issue, Devasini received a cashout of $300 million USD that year and NBI failed shortly after that. A blockchain analysis for cryptocurrency trades from March 2017 to the end of March 2018 found that someone was using Tether to manipulate Bitcoin prices and that these manipulations indicated that Tether was not fully backed by USD.Is Bitcoin Really Untethered? by John M. Griffin & Amin Shams (2020) The Journal of Finance 75(4):1913-1964.
In 2019, Bitfinex was accused by the New York State Attorney General of covering up a $1 billion loss of Tether's fiat assets to a shady Panamanian company with whom no contract had been signed.Tether and Bitfinex agree to pay $18.5m penalty after New York probe: State’s attorney-general accused groups of covering up ‘massive’ financial losses by Adam Samson (February 23, 2021) Financial Times. In 2021, Bitfinex agreed to pay a $18.5 million penalty without admitting guilt, and Bitfinex and Tether have been barred from operating in New York.
In August 2021, journalist Zeke Faux was given a confidential partial accounting of where Tether's investments were located. The investments including billions of dollars in short-term loans to Chinese companies, something most foreign companies avoided due to China's opaque financial system and due to what was widely believed to be an ongoing crisis in overdevelopment of housing in China. In October 2021, Tether agreed to pay a $41 million penalty for making false statements about its financial holdings (violating the Commodity Exchange Act).Order instituting proceedings pursuant to section 6(c) and (d) of the commodity exchange act, making findings, and imposing remedial sanctions against Tether Holdings Limited, et al, Docket CFTC No.22-04 (October 15, 2021) Commodity Futures Trading Commission. The Commodity Futures Trading Commission investigation began in 2017, and as the investigation proceeded, so did Tether's statements about financial backing:
*Before February 25, 2019: Tether tokens are "100% Backed: Every tether [token] is always backed 1-to-1 by traditional currency held in our reserves. So 1 USDT is always equivalent to 1 USD."
*February 25, 2019: "Tether Tokens are 100% backed by Tether’s Reserves,” defined as “traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities.
*After the October 2021: "All Tether tokens are pegged at 1-to-1 with a matching fiat currency and are backed 100% by Tether’s reserves. The value of our reserves is published daily and updated at least once per day."Transparency Tether (archived from January 23, 2022).
==Irony overload==
Considering the ideology of a sizeable portion of cryptocurrency users, the irony that coins backed by statist USD are so widely used to keep crypto afloat seems to be completely lost on them. Part of the idea of cryptocurrencies was to establish a decentralized economy out of reach from governments, yet, Tether (and by extension USD or at least the pretense of USD) has become a vital part of the cryptocurrency economy.
==Centralization fans==
Nothing about Tether indicates that they want decentralization, a concept that cryptocurrency users like to pretend they care about.
*Their website is hosted by Cloudflare, which is very much not decentralized by any stretch of the imagination and hated by those who care about decentralization and privacy.
*They can freeze wallets and reverse transactions. Satoshi wept, so much for censorship-resistance.Stablecoin issuer Tether freezes three addresses holding $160 million of assets upon law enforcement request by Frances Yue (Jan 13, 2022) MarketWatch.
==See also==
*Scam
*Liberty Dollar
==Notes== 
==References==
Category:Cryptocurrency
Category:Economics
Category:Internet
Category:Libertarianism
Category:Scams