The 2019 Tether FUD Explained
There has been a lot of news about Tether “losing” $850 million, and Tether’s responses. Here is an overview of the Tether investigation and a collection of official documents.
The idea of this page is simply to provide a quick overview and the official documents so you can make up your mind based on the facts and not the talking points.
Tether Investigation Summary
First, here are the basics of what you need to know:
- iFinex Inc: the company that owns Bitfinex and Tether.
- NY AG: The New York Attorney General. New York has historically been at the frontlines of crypto enforcement.
- What happened? Tether had always been said to be backed in a 1:1 ratio of dollars and Tethers, however it seems one bank account Tether was using had its assets seized and $850 million was “lost” or “seized” (the NY AG calls it “lost,” iFinex calls it “seized and safeguarded”). Also notable is that later, in response to the accusations, an iFinex lawyer later came out and said Tether was only back 74% by dollars and securities.
- Why does this matter? Tether is the stable coin (dollar substitute) with the highest market cap in crypto. It becoming destabilized could cause a nasty ripple effect in the crypto markets. Meanwhile, Bitfinex is a high volume crypto exchange, and Bitfinex becoming destabilized could have a negative impact on the markets. The investigation could lead to information or lawsuits that impact Tether and/or Bitfinex in positive and/or negative ways.
- OPINION – What is the takeaway? There is no super clear takeaway, and that is why I wanted to present a short summary and let the official documents do the rest of the talking. For me I’m torn between being bullish on the fact that Tether is finally pretty much confirmed to be backed by dollars minus money that was seized, and bearish on there being an investigation and knowing that Tether isn’t just flat out backed 1:1. Is knowing Tether is mostly backed more of a positive than knowing it isn’t fully backed by dollars? Will additional information and actions make things better or worse? These are the unknowns.
The Official Documents
The official Press Release from the New York Attorney General (NY AG): Attorney General James Announces Court Order Against “Crypto” Currency Company Under Investigation For Fraud. The official court order is included as a link in this document.
The official statement from iFinex: Bitfinex Responds to New York Attorney General’s Actions. This statement was repeated on other iFinex owned properties like Tehter.to.
The official affidavit by Stuart Hoegner, an iFinex lawyer, in response to the NY AG Letter: new york county clerk 04/30/2019 10:12 am – Unified Court System [PDF]. For the gist, see Coin Desk’s Tether Lawyer Admits Stablecoin Now 74% Backed by Cash and Equivalents.