Tether Chronicles

For more than a week, stable currency operator Tether and cryptocurrency exchange Bitfinex have been the focus of attention. Earlier, it was reported that the New York State Attorney General's Office (NYAG) brought Tether and its parent company iFinex Inc. and Bitfinex to court for the reason that Bitfinix used a $80 million loss to cover the $80 million stable currency issued by Tether. The reserve for the USDT.
Both Tether and Bitfinex claim that they are currently "funded" and that "court documents are dishonest and full of false assertions." In addition, Tether said the money "has not been lost, but has actually been seized and protected." ""

Later, Bitfinex revealed that only 74% of Tether is supported by cash and other assets (approximately $2.1 billion), and the remaining 26% of USDT is held by Bitfinex.

Tether has a long and complex history. Tether's predecessor, Realcoin, was co-founded in early 2014 by Brock Pierce, Reeve Collins and Craig Sellars, and is said to be headquartered in the Isle of Man and Hong Kong.

Tether's relationship with Bitfinex was not revealed and made public until early 2017, when Bitfinex's international route was cut off by Wells Fargo and Tether joined the lawsuit against Wells Fargo.

In August 2017, a Bitfinex spokesperson stated that “Bitfinex does not hold Tether” and that Tether is a sister company of Bitfinex, with 30% of the shareholders of the two companies overlapping.

In November 2017, “Paradise Paper” revealed that 2014 Philip Potter and Giancarlo Devasini of Bitfinex were appointed to establish Tether Holdings Limited in the British Virgin Islands. It is now clear that both Bitfinex and Tether are controlled by the parent company iFinex.

Tether's growth is because it provides a much-needed choice for exchanges that have difficulty establishing bank partnerships but need legal currency.

In order to maintain its leading position, Tether and the bank played the role of “cat and mouse”, established a shell company, and cooperated with cryptocurrency payment processors. Whenever a bank account is closed, Tether opens a new account under the name of a new shell company.

Although Tether promised to conduct regular audits to verify its financial reserves, it never provided an audit and claimed that auditing was difficult to achieve. Cameron Winklevos (co-founder of GUSD) has made it clear that it is currently impossible to implement an audit of stable currencies because “there is currently no financial reporting framework for audit eligibility.”

Over the past five years, Tether has published three third-party-certified reports: one from an audit firm, one from a law firm, and the third from a bank in Tether, all of which are reported Confirm that Tether does have the appropriate reserves to support USDT.

In contrast, some of Tether's competitors (TrueUSD, USDC, Paxos, GUSD, etc.) issue audit reports every month through audit firms.

The following is a summary of Tether's history over the past five years.

Year 2014
In July 2014, Tether's predecessor, Realcoin, was announced by Brock Pierce, Reeve Collins and Craig Sellars. The company is headquartered in the Isle of Man and Hong Kong.
“Realcoin will be completely transparent, secure, reliable and protected. Every dollar in our reserve will represent every currency in circulation and can be redeemed as shown. This one-to-one repository will be completely Can be audited."

In November 2014, Realcoin was renamed Tether in order to avoid reminiscent of the altcoin and open beta. Tether also announced its first collaboration with Bitfinex.

“Tether CEO Reeve Collins said that the current number of Tether tokens in circulation will always equal the amount of dollars in their bank accounts.”
In January 2015, Bitfinex allowed its customers to trade Tether.
“Every Tether is supported by the appropriate currency in 1:1, which can be viewed and verified on the Tether.io website and on the blockchain. Tether will be fully transparent and receive audits to prove that it is always 100% is supported by reserves."

In May 2015, bitcoin worth $400,000 was stolen from the Bitfinex exchange.

"Bitfinex's hot wallet has been attacked. However, according to the exchange, the hacking attack may only result in a total fund loss of 0.5%."
In August 2016, the bitcoin worth 72 million was stolen from the Bitfinex exchange. Bitfinex created a BFX token, giving each losing customer a corresponding amount of BFX tokens and claiming that Bitfinex will redeem these BFX tokens as soon as possible at a face value of $1.
“Our goal is to redeem all BFX tokens with a face value of $1. In order to redeem these tokens, we are exploring multiple options: (1) retrieving stolen coins; and (2) external investment by Bitfinex; 3) Operate our trading platform to redeem issued and circulated tokens on a regular basis; (4) Convert BFX tokens to Bitfinex's equity."
In March 2017, Tether stated that it had no contractual rights to redeem Tether or to convert it into French currency in its Terms of Service. The spokesman said that this is because "there may be funds frozen, which is beyond Tether's control."
“There is no contractual right or other right or legal requirement that we redeem or redeem Tether as cash. We do not guarantee any right to redeem or exchange Tether. When you buy, trade, sell or redeem Tether, we cannot Guarantee that you are not lost."

In March 2017, Bitfinex redeemed 100% of all remaining BFX tokens, which were issued after the exchange was stolen for $720 billion.

“A series of factors have brought Bitfinex to this groundbreaking moment, including a sharp rise in equity conversion rates; operating performance in March hit a record high; in support of this opportunity, we decided to reduce our reserves.”

In April 2017, Taiwanese banks and Wells Fargo blocked and rejected all international wire transfers related to Tether.

“The Taiwanese banks we work with have blocked and rejected all international wire transfers to Tether. Therefore, we expect Tether's supply to not increase significantly until these restrictions are lifted.”

On April 12, 2017, Bitfinex sued Wells Fargo for blocking its international wire transfer business, but withdrew the lawsuit a week later, possibly because of time.

“We voluntarily give up our lawsuits, accept the court's judgment, and find that we are better off focusing on existing relationships and development relationships. We are preparing a statement that should be released shortly and will be announced later. Study this issue in more detail."

On April 24, 2017, Tether broke the 1:1 peg to the US dollar for the first time and traded at a 10% discount during the loss of international wire transfers.

“Users eager to get dollar assets may be more willing to sell USDT at a loss, rather than choosing to wait. Not only that, but the cryptocurrency community has also learned from the disaster of Mt. Gox.”

From January to July 2017, the value of Tether in circulation rose from $7 million to $320 million. See below:

In September 2017, Tether first published its audit report (by the New York accounting firm Friedman LLP) , confirming that as of September 15, 2017, Tether had a corresponding $443 million reserve.
“Friedman LLP has been working on a historical balance sheet audit process for Tether Limited. However, due to the significant increase in the number of Tethers in circulation in recent months, we also asked Friedman to analyze our bank deposits intermittently and we have issued and not Repayment of the token balance."

In November 2017, the $30 million USDT was stolen, but the funds were later recovered through an emergency fork and the accounts were blacklisted.

“Tether and Bitfinex have insisted that the two parties are independent. But the leaked document, Paradise Papers, revealed this month that the overseas law firm Appleby helped the two Bitfinex operators, Potter and Devasini, to be founded in the British Virgin Islands in late 2014. Tether company."

During the next three months (November 2017 to January 2018), the value of Tether in circulation rose from $440 million to $2.3 billion. See below:

In January 2018, Tether confirmed that his relationship with the Friedman LLP audit firm had been lifted.
“Considering the overly detailed procedures that Friedman has taken for the relatively simple Tether balance sheet, it is clear that auditing is not possible within a reasonable time frame.”

In January 2018, the CFTC (Commodity Futures Trading Commission) summoned Tether and Bitfinex to investigate whether USDT really had their claimed reserves.

“We often accept legal procedures for investigations by law enforcement agencies and regulators. Our policy is not to comment on any such requests.”

In May 2018, Bitfinex and Tether established a partnership with the Noble Bank of Puerto Rico.

“According to three people familiar with the matter, Noble Bank International, headquartered in San Juan, Puerto Rico, took over the banking business of Bitfinex last year.”

In June 2018, Bitfinex and Tether's chief security officer, Phil Potter, left the two companies.

“With the withdrawal of Bitfinex from the US market, I feel that as an American, it is time to reconsider my status as a member of the executive team.”

In June 2018, Tether released its audit report for the second time (by law firm Freeh, Sporkin & Sullivan) , confirming that Tether had a corresponding $2.5 billion reserve as of June 1, 2018.

“In the face of recent reports, we insist that all circulating USDTs are backed by US dollar reserves, and we are very happy to be able to independently verify this. Our efforts in transparency are far from over.”

In October 2018, Bitfinex and its former bank partner Noble Bank parted ways.

In October 2018, Bitfinex and Tether appeared to have business dealings with HSBC through a private account, Global Trading Solutions, but due to the privacy of the account, it is unclear whether HSBC knows that Bitfinex is doing banking in the company, two companies. The relationship between them is not clear.

“About Bitfinex found a major banking partner at HSBC, if HSBC knows about it and supports the private account, it will quell the tension in the cryptocurrency ecosystem.”

In October 2018, Bitfinex's French currency deposits in HSBC Bank's account were frozen, but Bitfinex claimed that it was not insolvent.

Bitfinex has suspended all US dollar deposits and "expects that the situation will return to normal within a week." Last weekend, the company issued a press release on a broad speculation surrounding the company's banking relationships and financial stability, saying: “Bitfinex is not insolvent.”

In October 2018, Tether's trading price experienced another 10% discount due to increased concerns about banking relations.

“Market watchers speculate that since Tether’s price is trading at less than $0.99 for a week, the current price on the Kraken platform is close to $0.92, and this will lead to a run on Tether.”

In October 2018, Bitfinex said that public sharing of its banking information "will not only harm you and Bitfinex, but also damage the entire digital token ecosystem."

"Disclosing this information will not only harm you and Bitfinex, but will also damage the entire digital token ecosystem. Therefore, please note that disclosure of this information can have serious negative effects."

In October 2018, Bitfinex and Tether established a partnership with Deltec Bank in the Bahamas.

In November 2018, Tether announced its third audit report (by Deltec Bank) , confirming that as of November 1, 2018, Tether had a corresponding $1.8 billion reserve.

In November 2018, Bitfinex began using payment processor Crypto Capital and increased the minimum wire transfer fee.

“Improving the minimum fee seems to be related to the recent difficulties faced by Bitfinex and its payment processor, Crypto Capital, in handling USD and Euro withdrawals. It has been reported that in the past two months, Bitfinex customers experienced before they received the withdrawal. A long delay, some even more than a month."

In November 2018, the US Department of Justice (DoJ) investigated whether the rise in bitcoin in 2017 was driven by Tether manipulation.

“Some traders and scholars believe that when the value of ordinary tokens falls, Tether will be used to buy bitcoin at a critical time. Tether Ltd CEOs JL van der Velde and Bitfinex have previously denied this.”

In December 2018, Bloomberg confirmed that every USDT on the market is actually supported by $1.

“As Tether grew into a multi-billion dollar cryptocurrency market, skeptics began to warn that the digital currency that anchored the dollar in this price did not actually have a lot of cash support. The relevant bank statement reviewed by Bloomberg shows These concerns are untenable."

In March 2019, Tether quietly updated its USDT collateral details, including "cash equivalents" and third-party loans.
“Tether declares that each currency is supported by “reserves (including traditional currency and cash equivalents and other assets and loan receivables provided by Tether to third parties).

In April 2019, the New York State Attorney General's Office (NYAG) sued Bitfinex and Tether, claiming that the two companies "are committing fraud."

"The 23-page document, dated April 24, said the NYAG office had reason to believe that several traders in New York traded on the company's platform, even though Bitfinex claimed to be no longer New York in 2018. The customer provides the service. The document states that NYAG is investigating to disclose "Bitfinex and Tether ongoing fraud" and has requested to provide any documents about Bitfinex's New York customers."

In April 2019, Bitfinex CEO van der Velde called NYAG's lawsuit “full of inaccuracies and false assertions”, saying:

“Bitfinex and Tether were 'in full cooperation with the New York authorities' in the investigation, and the litigation and related materials were “submitted without notice (Bitfinex and Tether) or response opportunities. He continued to assure traders that the allegations of $850 million in losses were "absolutely wrong."

In April 2019, Bitfinex's first chief financial officer assured shareholders that the “frozen” $851 million in funds would be thawed “within a few weeks”.

In April 2019, Bitfinex revealed that only 74% of Tether was funded , saying it was "processing at the same time" requests from NYAG, the US Department of Justice and the CFTC.

In May 2019, the invoice of SDNY accused two individuals involved in Crypto Capital of committing several felony convictions including bank fraud.

“The connection with Fowler is also beyond the US border. Fowler shares Crypto Capital with two other Portuguese companies, and as reported earlier, Crypto Capital handled Bitfinex's legal currency extraction through these two companies.”

In May 2019, Bitfinex plans to raise $1 billion through IEO.

Bitongx shareholder Zhao Dong wrote that the minimum purchase is $1 million and the total supply is $1 billion, and each price is $1. He further claimed that he had received a subscription of $500 million. “Only qualified foreign investors are allowed to invest,” he wrote, and they must make a “soft” commitment to the sale before Sunday.

Reginald Fowler, accused by SDNY, was accused of committing several felony convictions, including bank fraud, and was considered "serious risk of escape."

“The defendant can use millions of dollars in bank accounts around the world. The government obtained a document entitled 'Master US Workbook' through an email search warrant detailing the financial operations of the defendant’s criminal plan as of January 2019. And pointed out that the program received more than $740 million in 2018. The document lists about 60 different bank accounts, held in both US and international banks. As of January 2019, the account balance totaled more than 345 million. Dollar."

Author | Larry Cermak

Compile | Jhonny

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