The Daily Hodl
  • FEATURES
    • News
    • Bitcoin
    • Ethereum
    • Ripple and XRP
    • Altcoins
    • Trading
    • NFTs
    • Blockchain
    • Futuremash
    • Regulators
    • Scams
    • Crypto 101
  • HODLX
    • Latest Stories
    • FAQ
    • Submit Guest Post
  • INDUSTRY ANNOUNCEMENTS
    • Latest
    • Press Releases
    • ChainWire
    • Sponsored Posts
    • Submit Your Content
  • CRYPTO MARKETS
    • Bitcoin (BTC)
    • Ethereum (ETH)
    • Binance Coin (BNB)
  • BEGINNERS
    • What Is Bitcoin?
    • What Is Blockchain?
    • What Does Hodl Mean?
    • How to Pay Your Bills with Bitcoin
    • Best Bitcoin FAQs
    • Example of Bitcoin’s Purpose
    • Cryptocurrency Has Multiple Meanings
    • Authenticator Alert – Securing Your Crypto
  • SUBMIT
    • Guest Post
    • Press Release
    • Sponsored Post
    • Advertise
  • EMAIL ALERTS
  • DAILY HODL MIX
No Result
View All Result
  • FEATURES
    • News
    • Bitcoin
    • Ethereum
    • Ripple and XRP
    • Altcoins
    • Trading
    • NFTs
    • Blockchain
    • Futuremash
    • Regulators
    • Scams
    • Crypto 101
  • HODLX
    • Latest Stories
    • FAQ
    • Submit Guest Post
  • INDUSTRY ANNOUNCEMENTS
    • Latest
    • Press Releases
    • ChainWire
    • Sponsored Posts
    • Submit Your Content
  • CRYPTO MARKETS
    • Bitcoin (BTC)
    • Ethereum (ETH)
    • Binance Coin (BNB)
  • BEGINNERS
    • What Is Bitcoin?
    • What Is Blockchain?
    • What Does Hodl Mean?
    • How to Pay Your Bills with Bitcoin
    • Best Bitcoin FAQs
    • Example of Bitcoin’s Purpose
    • Cryptocurrency Has Multiple Meanings
    • Authenticator Alert – Securing Your Crypto
  • SUBMIT
    • Guest Post
    • Press Release
    • Sponsored Post
    • Advertise
  • EMAIL ALERTS
  • DAILY HODL MIX
No Result
View All Result
The Daily Hodl
No Result
View All Result

Bitcoin Soars Above $5,400 As Crypto Markets Shrug Off Bitfinex Scandal and Tether’s Lawyer Refutes Harm to Traders

by Daily Hodl Staff
May 2, 2019
in Trading

Tether remains the dominate stablecoin and is the eighth largest cryptocurrency with a total market cap of $2.79 billion, despite recent allegations made by the New York Attorney General’s office that the operator of Tether and crypto exchange Bitfinex, iFinex Inc., has engaged in fraud.

An affidavit filed by Tether’s lawyer reveals that USDT, the most widely used stablecoin by Bitcoin and crypto traders, is not fully backed the US dollar. Its cash and cash equivalents of $2.1 billion represent around 74% of Tether. The admission is contrary to Tether’s earlier assertions that the stablecoin, which allows crypto traders to escape price volatility in Bitcoin and various altcoins, was 100% backed by US dollars. 

The company’s General Counsel Stuart Hoegner explains,

“As of the date [April 30] I am signing this affidavit, Tether has cash and cash equivalents (short term securities) on hand totalling approximately $2.1 billion, representing approximately 74 percent of the current outstanding tethers.”

Tether’s legal representative Zoe Phillips asserts that Tether does not need to hold $1 for every USDT that is issued.

Phillips also refutes the accusations made last week by the New York Attorney General that Tether has harmed traders and that Tether and Bitfinex established a conflict with respect to a $900 million revolving line of credit.

The NYAG says Bitfinex is missing $850 million because it engaged a third party in Panama where it held commingled customer and corporate funds, and that the Panamanian company, Crypto Capital, is refusing to return the funds.

Says Phillips,

“The Attorney General’s allegations in this matter center on a supposedly ‘conflicted’ $900 million revolving line of credit that Tether recently entered into with Bitfinex. The preliminary injunction prohibits Bitfinex from accessing this line of credit indefinitely.

According to the Attorney General, the line of credit needed to be frozen because it improperly impairs the reserves Tether would use for redemptions. The Attorney General appears to believe that Tether must hold $1 in cash fiat currency for every dollar of tether. These allegations are wrong on multiple levels.

For starters, contrary to the portrayal in the Attorney General’s motion papers of a “conflicted” transaction, the terms were negotiated on an arm’s length basis on commercially reasonable terms, with each company represented by sophisticated, independent counsel. The line of credit earns interest, and is backed by the ownership shares in the parent company of Bitfinex, one of the largest virtual currency exchanges in the world.

More fundamentally, the Attorney General has no authority to dictate how Bitfinex and Tether do business with one another, or the amount of reserves that Tether must hold. The Martin Act is an antifraud statute enacted to ensure that there is proper disclosure about the risks associated with the sale of securities and commodities. So long as there is disclosure, the members of the public can decide for themselves whether to buy or sell. Here, there was disclosure of the relevant information. Tether states plainly on its website that tethers are backed by reserves in various forms, specifically including ‘loans’ to ‘affiliated entities.’ This fact was widely covered in industry press. Any tether holder dissatisfied with this arrangement could have freely redeemed his or her tethers for cash, or exchanged their tether for another virtual currency on various virtual currency platforms, and can still do so today.

While the Attorney General claims it needed to take ‘immediate action to protect New York investors,’ it has not named a single one harmed in any way. Nor could it. There are no ‘investors’ in tether. Further, the value of Tether’s reserves is more than sufficient to cover the outstanding tether in the market. In fact, Tether’s reserves of cash and cash equivalents alone (without the line of credit) would cover approximately 74 percent of the outstanding amount of tether. This sort of ‘fractional’ reserving arrangement is similar to how commercial banks work. No bank holds in liquid cash more than a small percentage of depositors’ money. The funds are invested. The markets clearly remain confident in tether, as it currently trades just shy of $1 dollar per U.S. Dollar tether — even after the Attorney General’s highly inflammatory and misleading public application. Any suggestion that tether holders face liquidity risk is unsupported speculation. 

Hoegner characterizes crypto traders as being astute about the risks of Tether.

“Market participants appear to understand that tether is not at risk. The Attorney General’s ex parte, highly inflammatory, and misleading application was widely covered in the press, including an article in the Wall Street Journal.”

Bitcoin dropped nearly 6% in a matter of minutes, from $5,526 to $5,197, after the NYAG accused Bitfinex of engaging in a coverup to hide a loss of $850 million.

Bitcoin is currently trading at $5,473, at time of publishing, according to data compiled by CoinMarketCap

You can read the full affidavit here.

[the_ad id="42537"] [the_ad id="42536"]
Check Latest News Headlines


 
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Submit a Press Release

Industry Announcements

  • Addressable Raises $7.5 Million To Enable Web 3.0 Companies To Acquire Users at Scale
    January 31, 2023
  • SIMBA Chain Awarded $30 Million US Air Force STRATFI
    January 31, 2023
  • Bunzz Raises $4.5 Million Seed Round To Expand Its Smart Contract Hub for DApp Development
    January 24, 2023
  • Dogecoin and Shiba Inu Better Watch Out – Floki Just Had Three Big Things Happen for It
    January 24, 2023
  • Crypto Marketing – What Initiatives Will Bring More Value and Users in 2023
    January 23, 2023
  • Make Crypto Payments on BChat Web 3.0 Messenger – BChat Integrates Beldex Wallet
    January 22, 2023
  • KEY3.id Supports Multi-Chain Transaction, Partnership With KuCoin Wallet, CoinHub Wallet and Wallet3 To Launch 2023 Lucky Transaction Campaign With Over 30,000 Participants on Social
    January 20, 2023
Submit a Guest Post
ADVERTISEMENT
Bitcoin
$23,001.16
$23,001.16
1.24%
Ethereum
$1,580.67
$1,580.67
1.1%
Cardano
$0.387299
$0.387299
4.21%
XRP
$0.406491
$0.406491
3.14%
Dogecoin
$0.095462
$0.095462
9.46%

Spotlight

  • Web 3.0 Adoption Requires Education, Better Security and Realistic Expectations
    January 25, 2023
  • Anthony Scaramucci’s Skybridge Capital Suffers 39% Loss in 2022 Amid Brutal Crypto Bear Market: Report
    January 28, 2023
  • Analyst Benjamin Cowen Says Bitcoin Could Be on Cusp of Major Trend Shift As Potential Repeat of 2019 Appears
    January 31, 2023
  • Analyst Benjamin Cowen Issues Crypto Warning, Says Bitcoin (BTC) Rally Likely Unsustainable – Here’s Why
    January 24, 2023
DON'T MISS A BEAT
Crypto headlines delivered daily
to your inbox
BTC, ETH, XRP news alert options
By joining The Daily Hodl news list you agree to our
Terms and Conditions and Privacy Policy.
Featured Image: Shutterstock/Billion Photos

Cryptocurrency news and analysis, covering Bitcoin, Ethereum, Ripple, XRP, altcoins and blockchain technology

Categories

Bitcoin • Ethereum • Trading •
Ripple and XRP • Altcoins •
Blockchain • Regulators •
Scams • Crypto101 • HodlX •
Futuremash •
Industry Announcements

ABOUT US | EDITORIAL POLICY | PRIVACY POLICY
TERMS AND CONDITIONS | CONTACT | ADVERTISE

JOIN US ON TELEGRAM

JOIN US ON TWITTER

JOIN US ON FACEBOOK

COPYRIGHT © 2017-2023 THE DAILY HODL

No Result
View All Result
  • FEATURES
    • News
    • Bitcoin
    • Ethereum
    • Ripple and XRP
    • Altcoins
    • Trading
    • NFTs
    • Blockchain
    • Futuremash
    • Regulators
    • Scams
    • Crypto 101
  • HODLX
    • Latest Stories
    • FAQ
    • Submit Guest Post
  • INDUSTRY ANNOUNCEMENTS
    • Latest
    • Press Releases
    • ChainWire
    • Sponsored Posts
    • Submit Your Content
  • CRYPTO MARKETS
    • Bitcoin (BTC)
    • Ethereum (ETH)
    • Binance Coin (BNB)
  • BEGINNERS
    • What Is Bitcoin?
    • What Is Blockchain?
    • What Does Hodl Mean?
    • How to Pay Your Bills with Bitcoin
    • Best Bitcoin FAQs
    • Example of Bitcoin’s Purpose
    • Cryptocurrency Has Multiple Meanings
    • Authenticator Alert – Securing Your Crypto
  • SUBMIT
    • Guest Post
    • Press Release
    • Sponsored Post
    • Advertise
  • EMAIL ALERTS
  • DAILY HODL MIX

© 2023 The Daily Hodl