On November 1st 2018 Tether proudly proclaimed that they were once again banked, this time with Deltec Bank in the Bahamas (archive). This announcement included a letter (my copy) (archive) signed by someone associated with Deltec that stated that Tether had a ‘portfolio cash value’ of $1,831,322,828 on October 31st. This suggested to all that Tether had the value to back their tethers.
At some point in November of 2018 (my copy)(archive) Tether transferred $625 million from their account to Bitfinex’s, and received in exchange a book notation saying they were owed the same from inaccessible accounts controlled by an unlicensed money transmitter, who Bitfinex had given over $1 billion to without a contract. This effectively made Tether insolvent, as they could no longer access a significant portion of their reserves. There is no evidence that this was disclosed, and the terms and conditions and homepage still said that each Tether was fully backed.
Sometime between February 19th 2019 and March 4th 2019 Tether changed their homepage to now say:
Every tether is always 100% backed by our reserves, which include 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 (collectively, “reserves”). Every tether is also 1-to-1 pegged to the dollar, so 1 USD₮ is always valued by Tether at 1 USD.https://web.archive.org/web/20190304165618/https://tether.to/
On February 26th 2019 Tether updated their terms of service to say:
The composition of the Reserves used to back Tether Tokens is within the sole control and at the sole and absolute discretion of Tether. Tether Tokens are backed by Tether’s Reserves, including Fiat, but Tether Tokens are not Fiat themselves.https://web.archive.org/web/20190304142519/https://tether.to/legal/
On March 19, 2019 Tether and Bitfinex entered into a loan agreement, where Tether would extend a revolving line of credit of up to $900 million to Bitfinex for three years at an interest rate of 6.5%. Digfinex, the parent company of both Bitfinex and Tether put up 60,000,000 shares of iFinex inc. (one of several corporations that compromise Bitfinex) as collateral. This loan agreement was signed by the same people for both companies.
A few days later on March 27th, 2019 the transfer of $625 million was ‘reversed’ as it had been rolled into the loan agreement.
On April 25th the New York Attorney General filed a petition to be granted an ex parte order to (in part) bar these types of conflicted transactions from occurring. This petition is where the public first became aware of these transactions.
Since this time Tether has grown approximately 12 fold. There have been no further audits, attestations, consulting reports, or letters to provide any insight into Tether’s backing.
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