First of all link to the transcript: https://www.docdroid.net/Wk3pePO/transcript-may-16-2019.pdf
Bitfinex is still being hesitant to hand over documents to the NYAG. They have struggled to get access to documents relating to the transfer from Tether to Bitfinex, and this suggests to me that either the documents don’t exist or there is a very good reason they are not being shared.
This is directly contrary to what Bitfinex has claimed to the public wherein they have claimed that they have been fully cooperative. https://www.bitfinex.com/posts/356 Archive link: https://web.archive.org/web/20190521220643/https://www.bitfinex.com/posts/356However, I’m sure that there is no reason to think that Bitfinex is hiding something. No reason at all.
Shortly after this we learn very interesting things, Tether’s lawyer admits to Tether investing in Bitcoin:
Luckily we have a sharp judge here who quickly gets to the meet of the issue and correctly points out that this seems contrary to the nature of a “Stablecoin”.
The Tether lawyer responds by confirming what we all suspected since the ToS change is that other assets includes cryptocurrencies:
The Tether lawyer then continues basically saying they will not produce documents and will instead appeal and challenge every single step of the way:
The Tether lawyer then also says that they do not think there is any amount of dollars they need to keep in reserve:
The Tether lawyer then takes the classic Tether defender tactic of it’s okay because banks do it too:
The judge quickly ascertains the issue with this and points out that this effectively means there is no reserves:
The Tether lawyer responds by saying it’s okay, if they need to they’ll earn money some other way, pay it back, and just delay redemptions:
A little further down the NYAG reveals that Bitfinex/Tether executives get lump sum payouts from the unsegregated Tether accounts where no reserves have to be kept:
The NYAG also reveals the juicy tidbit that the largest redemption ever was less than $25 million:
Why is this particularly juicy? Well let’s take a quick trip over to their treasury address on Omni: https://omniexplorer.info/address/1NTMakcgVwQpMdGxRQnFKyb3G1FAJysSfz/1 here it does not take long to find bigger transactions coming in than that like this: https://omniexplorer.info/tx/572792736c6846998ac0b8c532d0317f7d8460886ce900bb6005260ed66cd80a So somethign is seriously amiss here.
Now relevant to this entire document is the issue of disclosure. Tether claims that they are not in the wrong because once they started using other assets they disclosed it. However, is that true? I will contend it is not. Let us consider Tether’s own website: https://web.archive.org/web/20150521003646/https://tether.to/faqs/
In 2015 Tether openly admits to exchanging Bitcoins for Tethers without KYC. Now it is possible, but in my opinion unlikely that they still had sufficient fiat reserves at that point, but I think it is plausible to doubt that and to believe that Bitcoins have often been a part of the backing.
In conclusion: Tether has paid executives dividends out of non-segregated accounts, does not feel a need to keep cash reserves, is buying bitcoins with reserves, and cannot handle a rush to redeem. Their largest claimed transaction is also smaller than multiple apparent redemptions on the blockchain.
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