Tether is a platform which allows you to store, send and receive digital tokens which are pegged to dollars, euros, and yen person-to-person, globally, instantly, and securely for a fraction of the cost of any alternative. The service conceptually has its hopes in backing popular digital cryptocurrency, such as BTC, with 1-to-1 ratios of existing currencies used in the non-digital realm. Tether Platform currencies are 100% backed by real currency assets, and are stored in the database. Tethers are then redeemable and exchangeable pursuant to Tether Limited’s terms of service, making the conversion rate this: 1 tether USD₮ equals 1 USD. Currently, the platform supports US Dollars (USD₮) and Euros (EUR₮).
Despite being regularly audited, and thus identifying as a transparent platform, many concerns of legitimacy have arisen since the platform has picked up speed. Propaganda suggesting the illegitimacy of the 1-to-1 ratio has recently arisen, casting a negative spotlight on the project, and demanding answers for why a sharp increase of tokens has become available earlier this year. After already being under enormous pressure from these allegations, the company released a public statement titled “Internal Memorandum Regarding Consulting Services”. The document, designed to defend the company’s stance on the legitimacy of their alleged regularly scheduled account audits, brings to light exact figures and records from a past audit, hoping to gain positive attention from the public.The report was written by Friedman LLP (FLLP), and claims to detail the company’s “cash and token balances as of September 15th, 2017”. At the time of writing, Tether’s total market capitalization was approximately $437 million USD.
Following the release of the memo came much scrutiny. As further investigation fell upon whether the address was legally accurate, it immediately became a heated discussion among the community. Perhaps one of the most famous loopholes in the article is the lack of provision to the names of the institutions with which the company conducted its banking. In other words, no specific bank was specified in the report, raising skepticism. Another blemish involving the report is the recurrent use of the phrase “for the benefit of Tether Limited”; many speculate that this is referring to an account suggested to hold more than $60 million USD, in the likely event that the account (being used for Tether) is under another name, since Tether itself cannot get banking. The case of an unknown banker can be dangerous because, in the case of something going wrong, anyone filing for a lawsuit against Tether would be misinformed to what bank they’d file against them in.
Another large cause for speculation is the increase in number of tokens by over 500% since the announcements made regarding Tether’s banking issues. This raised many red flags, not only for the quick action and deflation of the coin, but for the company’s response to everything surrounding the issue. Nothing. To date, the company has not revealed any detailed explanation about how Tether has resolved its banking issues, or whether it has even begun to resolve the issues.
Among these rising speculations comes much propaganda concerning the underlying unknowns belonging to Tether, and whether or not the legitimacy of the coin’s true 1-to-1 ratio really even exists. Today, even though the official Tether site claims to have detailed information about professional banking audits and transparency statements, nothing can be found under public reference as a follow up. The link to the company’s official transparency reports is missing, something the site promises to provide the public with.
Yesterday, a “Tether Critical Announcement” was released to the public informing users of a major theft of over $30 million USD₮ from the Tether Treasury. The hacker is said to have used malicious tactics to accomplish the hack. Tether addresses that they “…will not redeem any of the stolen tokens, and we are in the process of attempting token recovery to prevent them from entering the broader ecosystem.” Tether warns of the hacker’s address, which is posted on the report, and states that “if you receive any USDT tokens from the above address, or from any downstream address that receives these tokens, do not accept them, as they have been flagged and will not be redeemable by Tether for USD.” In response the team has announced that they are (1) suspending back-end wallet services to further investigate and (2) rebuilding the Omni Core. Finally, they assure that “…issuances have not been affected by this attack, and all Tether tokens remain fully backed by assets in the Tether reserve. The only tokens that will not be redeemed are the ones that were stolen from Tether treasury [Monday]. Those tokens will be returned to treasury once the Omni Layer protocol enhancements are in place.”
Surrounded in an ocean of questions and thoughts, what do you think? Is the Tether project corrupt in defying many of their promises made to the public (on the subject of audits and transparency), or are they as they claim to be?