Tether, a stablecoin in the cryptocurrency market that claims to be fully backed by US dollars, is now under scrutiny as it is believed to be a criminal house of cards, waiting to come crashing down.
Supporters Leave Customers High and Dry
Many supporters of Tether, including the founder of 3 Arrows Capital and the founder of Celsius, who claimed that Tether is fully backed and can be redeemed for USDT, have left customers and investors high and dry.
Binance as Tether's Bank?
CZ Binance, the largest crypto exchange, has been a vocal supporter of Tether and has met with the architects of USDT. It is believed that Binance is Tether's bank, providing them access to international banks, including those in the US.
Suspicious Deposits and Reserves
Data Finnovation, a crypto investigator and blockchain analyst, analyzed and deciphered deposits and reserves of two of the US's biggest crypto banks, Silvergate and Signature, which suspiciously matched Tether deposit and reserves over the past four years. They suggest that maybe Tether's commercial paper consists of obligations of whoever owns these USD deposits.
Binance's Use of a Defunct Seychelles Shell Company
The largest crypto exchange, Binance, is using a defunct Seychelles shell company to get these banking relationships within the United States. Binance was using a loophole, a shell cover company that could get a banking relationship with Silvergate, but regulators did not like this, so in September 2021, Key Vision Limited and Binance were struck off via the International Business Companies Act.
Bank Fraud Suspicions
As regulators step in, it is believed that Binance was not able to open a US bank account under its own name, and US customers were not allowed to trade on the platform. It appears to be bank fraud as Binance was using Key Vision as a front.
Although the question of whether Tether is fully backed by billions of US dollars or not is probably the biggest mystery in the crypto space, it is clear that Tether is not as secure as it claims to be. As the cryptocurrency market continues to evolve and mature, it is essential that investors are vigilant and conduct their research to avoid falling victim to scams or Ponzi schemes
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