If you shrugged at the $30 Billion collapse of FTX, here comes the next wave--and it's a LOT worse

If you've been paying attention you've heard about the collapse of cryptocurrency trading firm FTX, founded a mere three years ago but which was "valued" at roughly $32 Billion.

Admittedly that was a fictitious valuation, but it's clear that a few billion dollars in investor funds have essentially vanished.

But it turns out another crypto firm--far larger than FTX--is (and always has been) run by people even shakier than FTX founder and Democrat darling Sam Bankman-Fried.

The whole explanation is at Revolver News, and it's a riveting read, well worth your time.  Below is an edited version of about a third of it.  What's amazing is that in the face of obvious signs of blatant fraud, government "regulators" have turned a blind eye.  And yes, there appears to be a reason.

The story involves the third-largest crypto-currency on the planet, one you’ve probably never heard of.  And if you thought the goofy snowflakes at FTX were bad, it's about to get a lot crazier.

The "currency" is called Tether, a.k.a. "USDT," and it's issued by a company called BitFinex.  In the crypto world Tether is touted as a “stablecoin”--a cryptocurrency that's supposedly pegged to the value of the U.S. dollar.  This is designed to reassure buyers, because of that "pegged to the U.S. dollar" line.

While most cryptocurrencies fluctuate wildly in price, Tether is supposed to stay at one U.S. dollar.  See?  Reassuring, citizen!  Don't ask how that's supposed to happen.  Certainly the crypto firms don't ask.  There may be a reason.

"But wait...if the price of Tether doesn't rocket upward, how can people make fortunes with 'em?

Good question, and we'll get to that later.  For now all you need to know that Tether is used by "traders" on cryptocurrency exchanges like FTX to buy other crypto currencies, without having to use actual U.S. dollars.  This allows people to amass money without leaving the paper trail you'd get if you used a bank account.

This, of course, was the lure of crypto from the beginning.  The idea was that unlike national currencies, which could be printed in any amount by corrupt governments, crypto was different.  See, because it would be traded on the open market, governments couldn't devalue it by printing money.

Also, not going thru a bank avoided leaving a paper trail, which made crypto ideal for drug cartels and other illegal operations.

There are several USD stablecoins but Tether is by far the most popular. Analysts say Tether has the third highest market cap of any crypto currency at $66 billion, trailing only Bitcoin and Ethereum.  About half of all bitcoin trades globally are executed using Tether.

"Wait, you still haven't explained how, if there's no open market for Tether, people make money on it."

Ah, well...turns out firms like FTX buy hundreds of millions of dollars worth of Tether from the parent company, Bitfinex.

"But what's the *source* of Tether that limits the supply?"

Ah, well...there isn't a limit.  The company takes an "exchange's" dollars and credits the buyer's account with that many Tether "tokens" or coins.

"Ah, so I guess the company invests the income so it'll have the funds to cash out buyers when they finally decide to retire, eh?"

Um...well...uh...sure, you bet.

A shill website for crypto investors explains that Tether "is a tool for onboarding new money, managing and growing liquidity, pricing digital assets, and generally oiling crypto markets to keep them smooth."

If you're still a bit unclear on how those things actually happen ("managing liquidity"?  "Pricing digital assets"?), maybe crypto isn't right for you.

But in crypto-world vagueness isn't a cause for alarm: At the start of 2018 Tether claimed to have a market capitalization of one BILLION dollars.  Today it claims to have a capitalization of over $70 billion.

That works out to an annual growth rate of around 1700 percent.  Hmmm....

The shill website goes on to explain that practically every crypto exchange supports USDT trade in some form.  But then it adds a slightly disturbing note:
   "The makeup of Tether’s reserves and its inner workings are yet to be disclosed in clear detail."

As you'll see, that's a huge understatement.  The shill website touches on this:
   "Still, the question of who exactly buys Tether directly from its parent company Bitfinex has remained unanswered since its inception way back in 2014.

Earlier this year a firm called Protos investigated, and found that just two companies--Alameda Research and Cumberland Global--were responsible for injecting roughly two-thirds of all Tether into the crypto ecosystem.

Alameda Research, as many now know, is the "trading firm" founded by Sam Bankman-Fried before he founded FTX. Both firms collapsed, after allegedly using customer cash to fund risky "investments."

The inner workings of Tether remain remarkably opaque. New Tethers are supposed to only be "minted" [?] and added to the crypto ecosystem when a buyer gives the parent company dollars "to create them."

If you sense something a bit...off...with that notion, maybe crypto isn't for you after all, citizen.

It turns out there's no proof that the company that issues Tether has even a fraction of the assets needed to support the supposed one-dollar pegged value.  

Despite first being offered eight years ago, the company that actually issues the coins has never been audited *in any way.*  Back in 2017 the company promised it would release an audited statement, but that never happened.  When the Wall Street Journal asked the company how that audit was coming along, the answer was "It's Still Months Away.”

   "The company has been promising an audit since at least 2017. An audit is “likely months away," said Paolo Ardoino, chief technology officer of Tether Holdings Ltd., which issues the tether coin that recently carried a market value of $68 billion."

   "Instead of a full audit, Tether, like other leading stablecoins, publishes an “attestation” showing a snapshot of its reserves and liabilities, signed off by its accounting firm.

A big problem is that the numbers used for the snapshot" are provided by the company’s management for a specific date and time without examining the transactions before or after that date.  This allows related companies to make transfers that paint an unduly rosy picture.

For example,  the Commodity Futures Trading Commission said that in 2017, hours before accounts examined the numbers for the "attestation" of Tether Holdings, its sister company, Bitfinex, transferred $382 million to its bank account.

Of course we're sure there was a sound business reason for that.  No one asked, but if they had, there would have been a sound business reason.  Nothing to raise any alarms, eh?

Think about that:  Back in 2017, when Tether’s total market cap was still under $1 billion, execs did a last-minute transfer of $382 million from its parent company hours before a non-audit "attestation" of its assets.  And yet with this information the CFTC did NOT demand an immediate audit.  Cuz...

That 2017 "quirk" led the CFTC to fine Tether $41 million last year, without the company admitting any wrongdoing.  In addition the company paid an $18.5 million fine to New York state to settle claims that it misrepresented its reserves.

As a condition of the settlement, Tether and its associated Bitfinex exchange agreed to cease operations in New York.

Strangely, the CFTC did not require, as a condition of the settlement, that Tether account for what should be billions of dollars of assets.  A cynic might easily conclude that the company made a political payoff that allowed it to stay in business.  But that's just conspiracy-talk.

So to review:  Crypto exchanges pay Tether Holdings dollars and receive Tethers, which are used as currency on crypto exchanges to buy bitcoin or other cryptocurrency--which can then be sold to other buyers.  And the total effort to "create" Tethers is to declare "Here they are, and where would you like us to send 'em?"

Sounds perfectly fine to me.

The Revolver News article goes on to wrap up some loose ends about why regulators--who clearly know the company is a scam--have allowed such an obvious scam to continue.  And the conclusion is...have you already guessed?  It's that the CIA is using the firm as a source of intel on drug cartels and revolutionaries around the globe.

I'm highly skeptical, but it's happened before...often.  That sounds a lot like burning the antique furniture to make tea--totally not worth tolerating the hundreds of billions of dollars in vanished funds.  But then again, the CIA provably does shit like that, often.  They smuggled tons of cocaine from Columbia to Mena, Arkansas when Bill Clinton was governor.

Source.