Is the Tether cryptocurrency above the law?
Tether has zero credibility and there's no reason to trust the value of USDT.
After being repeatedly accused of not having enough funds to back up its circulating supply, Tether has made several attempts to reassure users that every USDT in circulation is safely backed up by real US dollars.
This is increasingly hard to believe. It abruptly terminated its first independent audit before completion, and now has outrightly declared that it will not be undergoing an audit and that users will simply have to trust it, end of story.
In a recent so-called transparency report, it said, "All Tethers in circulation are fully backed by USD reserves. Full stop." At the same time Tether's general counsel said, "The bottom line is an audit cannot be obtained."
For anyone wanting a conclusive answer to the sordid Tether saga, this looks like the end of the road. Tether's last word on the issue came in the form of a completely meaningless letter from the FSS law firm.
The letter included a bunch of numbers, but none of them matter. No matter how you slice it, this is just another case of Tether saying USDT is completely backed, while refusing to provide any actual evidence.
The above confirmation of bank and tether balances should not be construed as the results of an audit and were not conducted in accordance with Generally Accepted Auditing Standards... FSS makes no representation regarding the sufficiency of the information provided to FSS."
Staying above the law
Tether has never managed to give a satisfactory explanation for why it can't get an audit, but it has offered some bizarrely inadequate reasons. Along with the law firm's meaningless letter, that's the end of the story.
Now that it's committed to washing its hands of the matter, the next followup on the Tether saga, if there ever is one, will probably have to take the form of a law enforcement raid on Tether offices. This might not happen for a very long time, or ever.
The Freeh, Sporkin and Sullivan law firm has sterling credentials on paper, with Freeh and Sullivan respectively being a former FBI director and federal judge.
They've also been closely involved with the Hong Kong-based Imperial Pacific Holdings company, which operates a highly mathematically improbable casino on the remote US territory island of Saipan. Even while the casino itself was still under construction it got permission to start operating in a small room in a nearby mall. Immediately after it started operating, that makeshift casino with less than 20 tables was apparently seeing billions of dollars of business every month.
Both former FBI director Freeh, and former federal judge Sullivan, were on the Imperial Pacific payroll, and now their law firm is working with Tether, which is also based in Hong Kong.
One explanation for these kinds of numbers is that the Imperial Pacific casino on Saipan is up to its eyeballs in money laundering. Another explanation is that it's catering to a lot of high rolling billionaire ghosts. The FBI doesn't seem to believe in ghosts, and raided the Imperial Pacific offices in March 2018.
There's apparently no connection between Tether and Imperial Pacific, other than both of them being based in Hong Kong, and having connections via the FSS law firm.
It's quite a bad look though, which makes one wonder why exactly Tether chose to hire FSS to write that meaningless letter.
Perhaps it was because Tether thought a law firm staffed by a former FBI director and a former US federal judge gave that letter some credibility (although zero times zero is still zero). Or perhaps it's because Tether is ready to move into its next exciting business phase – openly operating above the law and getting by with a little help from friends in high places.
It's safe to assume that Tether is not fully backed and never will be. USDT should probably only be handled sparingly and for as brief a time as possible, and only when there's absolutely no alternative.
USDT might not be going down any time soon. But you don't know where it's been, and the stuff might be toxic.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, NANO