Largest Fraud in History
Chinese Commercial Paper
Heads I Win, Tails You Lose
Questionable Monetary Transfer
Anyone Seen Tether’s Billions?
Bloomberg columnist Zeke Faux asks Anyone Seen Tether’s Billions?
A wild search for the U.S. dollars supposedly backing the stablecoin at the center of the global cryptocurrency trade—and in the crosshairs of U.S. regulators and prosecutors. Exactly how Tether is backed, or if it’s truly backed at all, has always been a mystery.
There are now 69 billion Tethers in circulation, 48 billion of them issued this year. That means the company supposedly holds a corresponding $69 billion in real money to back the coins—an amount that would make it one of the 50 largest banks in the U.S., if it were a U.S. bank and not an unregulated offshore company.
As far as the regulators are concerned, the size of Tether’s supposed dollar holdings is so big that it would be dangerous even assuming the dollars are real
The only official willing to talk to Faux was Jean Chalopin, the chairman of Deltec Bank & Trust in the Bahamas.
But when I asked Chalopin if he knew for sure that Tether’s assets were fully secure now, he laughed. It was a difficult question, he said. He only held cash and extremely low-risk bonds for Tether. But recently the company had started using other banks to handle its money. Only a quarter of it—$15 billion or so—is still with Deltec. “I cannot speak about what I cannot know,” he said. “I can only control what’s with us.”
After I returned to the U.S., I obtained a document showing a detailed account of Tether Holdings’ reserves. It said they include billions of dollars of short-term loans to large Chinese companies—something money-market funds avoid. And that was before one of the country’s largest property developers, China Evergrande Group, started to collapse. I also learned that Tether had made loans worth billions of dollars to other crypto companies, with Bitcoin as collateral. One of them is Celsius Network Ltd., a giant quasi-bank for cryptocurrency investors, its founder Alex Mashinsky told me. He said he pays an interest rate of 5% to 6% on loans of about 1 billion Tethers. Tether has denied holding any Evergrande debt, but Hoegner, Tether’s lawyer, declined to say whether Tether had other Chinese commercial paper.
The strange thing is that, at least for now, most participants in the crypto market, including some very large and sophisticated operators, don’t seem to care about any of the risks. Just last month, traders bought $3 billion in new Tethers, presumably sending billions of perfectly good U.S. dollars to the Inspector Gadget co-creator’s Bahamian bank in exchange for digital tokens conjured by the Mighty Ducks guy and run by executives who are targets of a U.S. criminal investigation.
Chalopin's Two Claims to Fame
- A former child actor who’d missed a penalty shot in The Mighty Ducks.
- Creator of Inspector Gadget
Dismissed as FUD
Every bit of this, including the loans, the Chinese paper, and the fact that an investigation cay only locate $15 billion of an alleged $69 billion in assets is of course dismissed as FUD by crypto enthusiasts.
FUD stands for Fear, Uncertainty, Doubt
Fraud, missing money, Chinese paper, criminal investigations, who cares?
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