There are still some who claim that Tether has always been fully backed. I have already shown that is not true:
In this post I will summarize the periods where we have sufficient evidence to know for certain that they were unbacked.
Thanks to the NYAG settlement we know that there were unbacked Tethers from March of 2017 until September 15th 2017. In March of 2017 Tether lost access to their US correspondent banking through Wells Fargo, and it would not be until September 15th 2017 when Tether would regain banking with an account at Noble. They held approximately 60 million of their funds in their General Counsel, Stuart Hoegner’s account at Bank of Montreal. The rest was supposedly held in Bitfinex’s account at Noble Bank, however despite the number of Tethers in circulation increasing, that account received deposits from only two clients, neither of whom purchased Tether. It is unclear exactly how Tether was functioning during this period, but it likely involved heavy reliance on Crypto Capital Corp, and even in the best case is extraordinarily dishonest.
The September 15th date is important as well, because that is the date that Tether received their attestation from Friedman LLP. (My Copy) The morning of September 15th Tether finally got a bank account at Noble Bank, they transferred in hundreds of millions of dollars from Bitfinex’s account, and then performed the attestation that evening. The full financial audit that was promised to occur from Friedman LLP never did occur. A Tether spokesperson cited the “excruciatingly detailed procedures” when explaining why the relationship dissolved.
The second period we know for certain that Tether was unbacked is from summer of 2018 until November 1st 2018. This was again revealed as part of the NYAG investigation. Tether had commingled their client and corporate funds. Bitfinex had commingled their client and corporate funds. Bitfinex and Tether had commingled their commingled funds together. Tether and Bitfinex gave over $1 billion in those funds to a shady Panamanian based payments processor named Crypto Capital Corp and would never sign a contract or agreement of any kind. This payments processor is currently implicated in: money laundering for the cartels, bank fraud, wire fraud, embezzling, and counterfeiting. When the funds held at Crypto Capital Corp became inaccessible to Bitfinex, they began robbing Tether’s reserves in order to cover their own shortfall. Each time they would make a ledger notation saying that Tether was owed from the inaccessible funds at Crypto Capital Corp.
On November 1st 2018 Tether announced to great fanfare that they had found banking at the Bahamanian bank Deltec Bank and Trust and included in their announcement a letter (my copy) that claimed that Tether’s ‘portfolio cash value’ at the bank exceeded the numbers of tethers in circulation.
On November 2nd, the day after making this lofty pronouncement about being fully backed, Bitfinex again took hundreds of millions of dollars from Tether’s account. Tether had been ‘fully backed’ for a matter of hours. Tether remained unbacked until February 2019 when Tether changed the definition of ‘fully backed’.
Update: Thanks to a recent CFTC settlement we are now aware that Tether was only backed for about 1 day in 4 during the 26 month period that the CFTC investigated from 2016-November 2018.
Tether will often attempt to confuse the issue by directing you towards their revolving credit facility that began in March of 2019. This facility was started to cover up their previous improprieties and still was deeply problematic without appropriate disclosure surrounding it.
Remember that we know for certain that there have been unbacked tethers. People attempting to claim otherwise are likely ill-informed or arguing in bad faith.
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