Coldfusion blog

Tether no longer demands commercial paper from stablecoin pools

Tether, the largest stablecoin by market capitalization, claims to have completely purged commercial paper of reserve assets backing its USDT token, though it is still failing to submit to an audit that could prove this claim.

On Oct. 13, Tether published a blog post in which the integrity-challenged firm claimed that as of Oct. 12, it had “eliminated commercial paper from its reserves, replacing those investments with treasury bills. American (T-Bills)”. Tether further claimed that “direct exposure” to Treasuries “now constitutes the majority of Tether’s reserves.”

Commercial paper consists of unsecured promissory notes issued by large corporations seeking to fill short-term financial holes. These IOUs are backed by nothing but the faith that the company in question will still be solvent when the repayment invoice is due.

Tether previously said its commercial paper holdings exceeded US$30 billion in 2021, which would have made Tether the seventh largest investor in the asset class. And yet, no one in US financial circles seemed aware of any entity that entered into such agreements with Tether or its parent company iFinex.

Suspicions were widespread that Tether’s commercial paper was largely issued by flimsy real estate companies like China Evergrande Group, a belief Tether vehemently denied but could never refute due to its ingrained aversion to financial disclosure. In a painfully awkward CNBC interview in 2021, CTO Paolo Ardoino insisted that Tether could not disclose its business partners due to the need to respect their privacy, a stance taken by exactly no one else in the industry. commercial paper space.

Remember that on June 27, Ardoino tweeted about Tether having “reduced its exposure to commercial paper… to ~8.4 billion” and that “all expiring CPs have been turned into US Treasuries.”

Insightful critics have pointed out that as of March 31, 2022, Tether claimed to hold $20.1 billion in commercial paper and certificates of deposit, of which nearly $19 billion matured within 90 days. If Ardoino had been truthful about turning “all expiring CPs” into treasuries by the end of June, Tether’s commercial paper holdings would have totaled $1.2 billion, not $8, $4 billion. Like Teen Talk Barbie, Ardoino apparently believes math class is hard.

(at)test(ation) failed

Last month, a U.S. District Court judge ordered Tether to produce hard evidence of the assets behind its reservations. Tether dismissed the order as “a matter of routine discovery in a baseless case.” We won’t comment on the merits of the lawsuit, but getting accurate data on Tether’s assets would be anything but routine.

In the meantime, we remain bound to take Tether’s word for it regarding the composition of its financial reserves, a dubious proposition given that the company has been caught cooking its books on numerous occasions.

Following a deadly $18.5 million settlement with the New York Attorney General in February 2021, which revealed there were times when Tether “did not hold any reserves to support outstanding links” , Tether was required to submit quarterly reports detailing the reserves behind its assets.

But rather than submit to audits, Tether instead relied on threadbare “attestations” given by Moore Cayman, a small Cayman Islands accounting firm that was later taken over by a British company and renamed MHA Cayman. Tether abandoned MHA Cayman after its March 31, 2022 attestation, transferring its operations to an Italian BDO unit this summer.

In case anyone was counting, BDO Italia is the seventh (or maybe the eighth, it’s hard to keep track) company that Tether has employed in this capacity since September 2017. The last company that Tether hired to do a real audit – Friedman LLP – was terminated before completing its audit due to what Tether claimed were “extremely detailed procedures” that would make an audit “unattainable within a reasonable time.” Five years later, it’s clear that Tether’s definition of “reasonable time” is flexible AF.

Tether’s market capitalization currently stands at $68.4 billion, down from its all-time high of over $83 billion in May this year. As Tether trumpeted its alleged ability to handle billions in USDT redemptions as the “crypto” market crashed, cynics suggested Tether’s recent accounting shakeup might have been necessary because the numbers and the data that MHA Cayman saw this spring might not have been compatible. with those that BDO Italia was asked to approve this summer.

And while BDO is a familiar face in the auditing world, its shine seems to be fading. In July, the same month that Tether began working with BDO, UK financial regulators deemed BDO’s audits “unacceptable”, with a third of its reports “requiring significant improvement”. Among BDO’s biggest flaws? An appropriate level of “skepticism”.

BDO Italia’s only Tether attestation to date includes a list of caveats worthy of a pharma ad, but the main takeaway is this: BDO has only reviewed the documents provided by Tether “limited to a time given as of June 30. We have not performed any procedures or provided any assurances at any other date or time in this report.

Tether loves to play crypto-victim but its refusal to submit to an audit makes it the biggest contributor to its dodgy reputation. There’s a reason your middle school math and science teachers made you show your work on tests: to demonstrate that you didn’t just collect answers from a kid who took the same test! ‘last year. Shame on us for daring to expect a similar level of disclosure from a company whose failure would bring down the already fragile pillars of crypto.

The dark knight of stablecoins always triumphs!

As it has claimed in the past, Tether this week insisted that the sale of its billions of commercial paper was done “without any loss”. That’s Tether’s problem in a nutshell. He can’t just tell a little lie. He must always swing towards the fences. Of course, the global bond market is having its worst year. Of course, everyone takes an absolute dip on their holdings. But Tether? They never left the champagne room, never stopped making it rain. And hey, did you know that Tether keeps the US dollar strong?

One wonders: what other Gordian knots might Tether be able to untie? Has Tether solved the lingering riddle of cold fusion? Has he solved the riddle of the perpetual motion machine? Can he pull swords out of stones like he pulls numbers out of his ass? Say, Paolo!

Given Tether’s pivotal role in artificially inflating the BTC balloon, the lack of freshly minted USDT is seen as one of the primary causes of the crypto market’s inability to thaw the current ‘crypto winter’. “. But now that Tether has closed its BTC lending with crypto exchanges and lending platforms, it’s time again to start minting USDT from scratch and pumping some artificial air into the deflated balloon. of crypto.

Don’t trust. Check. Unless it’s Tether

We will end by noting that one of most ardent catalysts of the “Tether is fully backed” myth is Blockstream CEO Adam Back, who religiously enforces his company’s “Don’t Trust” approach. Check.’ mantra to everything not named Tether. Back does this because, like everyone else in the crypto space, he knows that Tether’s ability to conjure up “money” on command is the only thing keeping the “numbers rising” charade going.

It is fascinating to watch crypto apologists bend over backwards to give Tether the benefit of the doubt while simultaneously demanding that Dr. Craig Wright prove he is Bitcoin creator Satoshi Nakamoto by signing the first blocks on the blockchain. Bitcoin. No other evidence will suffice, no matter how convincing. Small blockers insist that until Wright uses a private key associated with blocks 1-9, his word cannot be trusted.

And yet, these same arch-skeptics suddenly turn into posters for gullibility when it comes to taking Tether at its word that all of its tokens are backed by US dollars or their equivalents (although cracks are forming in that wall of denial).

This month, Tether celebrated its eighth anniversary, which means it has now gone eight years without a third-party audit. Considering everything we discussed above, we encourage readers to start their own accounting firm right now. If current trends persist, Tether will eventually run out of real bean counters to endorse its attestations and hire you to do the job. A lack of verifiable accounting skills is not a dealbreaker; Basically, if you were able to click “I Agree” on your iTunes updates, you qualified to verify Tether’s books.

Follow CoinGeek’s Crypto Crime Cartel series, which dives into the stream of groups from BitMEX to Binance,, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX, and Tether, which co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) market players.

New to Bitcoin? Discover CoinGeek bitcoin for beginners section, the ultimate resource guide to learn about bitcoin – as originally envisioned by Satoshi Nakamoto – and blockchain.