Tether Is A Bigger Scam Than FTX, Says Cyber Capital Founder

by

As a seasoned researcher with over two decades of experience in the financial industry, I have witnessed many scandals and fraudulent activities, but none quite like the one that Tether seems to be embroiled in. Justin Bons’ accusations against Tether are not only alarming but also reminiscent of some of the most infamous cases in financial history, including Bernie Madoff and FTX.

In an explosive thread on X, Cyber Capital founder Justin Bons accused Tether of being the largest fraud in crypto history. He believes that the stablecoin issuer’s alleged scandal has surpassed the scandals of both FTX and Bernie Madoff. Bons warned that Tether’s lack of transparency and failure to conduct a proper audit make it a significant threat to the crypto market.

Justin Bons Calls Tether A Scam

As an analyst, I’ve expressed my viewpoint that Tether, with its $118 billion valuation, is a questionable operation. This alleged scheme surpasses the combined size of FTX and Bernie Madoff’s Ponzi schemes. The concerns stem from Tether’s reportedly deceptive business practices. Specifically, there has been no evidence provided to confirm their claimed reserves, nor have they undergone an independent audit. Despite pledging to do so since 2015, I’ve observed that no such audit has materialized. Therefore, I’ve referred to Tether’s stablecoin, USDT, as spurious currency.

Warning Against USDT

Given that USDT (Tether) remains a popular choice among stablecoins within the cryptocurrency market, Bons advises the crypto community to gradually phase out its usage due to potential risks of a devastating crash. “Gradually discontinue your reliance on USDT to prevent it from causing a catastrophe!” he emphasizes.

Furthermore, Bons drew a comparison between the possible downfall of Tether and the catastrophic fall of Terra Luna that occurred in 2022. He cautioned that if Tether were to fail, the consequences could be even more severe. This is due to the fact that the company oversees billions of USDT tokens in circulation, which are believed to be backed by dollar reserves, but lack independent confirmation.

He said, “We have to trust they hold $118 billion in collateral without proof!” Tether has faced regulatory scrutiny before, including a $41 million fine by the U.S. Commodity Futures Trading Commission (CFTC) in 2021 for misleading claims about its reserves. Despite this, Bons pointed out that no real audit of firm’s financial standing has taken place.

Financial Audit Issues

As reported by the founder of Cyber Capital, an auditor was dismissed in 2018 for being overly meticulous. Later on, in 2021, the stablecoin company entered into a partnership with accounting firm BDO to publish a report about its reserves. However, Bons expressed concerns that the report was deceptive.

As an analyst, I would clarify that the document in question is not a traditional audit but rather an accountant’s report, implying it provides less comprehensive review compared to a formal audit. Furthermore, I would emphasize that Tether has never undergone an independent, unrestricted third-party audit of its so-called reserves.

As a concerned crypto investor, I too have raised questions about the governance structure of the company. Specifically, I’ve highlighted that Tether Holdings’ board is composed of merely two individuals, which I believe exposes the company to potential mismanagement. I’ve pointed out that this situation implies that the reserves backing USDT (the stablecoin) are yet to be fully segregated.

Ponzi Scheme Allegations

Additionally, Bons implicated the company in past illicit activities, alluding to its suspected relationship with Crypto Capital – a Panamanian bank that was closed down by authorities due to accusations of laundering funds for Colombian drug cartels. Furthermore, he proposed that the company’s past dealings may have had dubious connections.

As a researcher, I’ve uncovered associations with individuals who were once associated with Ponzi schemes and banking scandals. This implies that the founders of this entity had a past in such illegal activities as Ponzi scheme artists and dishonest gamblers, as well as being disgraced bankers.

Tether’s Legal Troubles & FTX Saga

Additionally, Bons’ accusations arise at a time when the company behind USDT is still grappling with legal issues. On August 9, 2024, Celsius Network Ltd. brought a lawsuit against the stablecoin issuer. This bankrupt crypto lender alleges that Tether has been involved in fraudulent and preferential transfers of Bitcoin valued at over $3.5 billion.

The plaintiffs claimed that this action exacerbated Celsius’ financial difficulties before it went under, but Tether’s CEO, Paolo Ardoino, has dismissed these accusations, labeling the lawsuit as an attempt to extort money, or in simpler terms, a “shakedown.

On September 13, Sam Bankman-Fried, who was previously in charge of FTX, submitted an appeal for a retrial, spanning over 100 pages. SBF claims that Judge Lewis Kaplan made certain biased decisions which restricted his chance to construct a robust defense.

Additionally, Alexandra Shapiro, Kaplan’s attorney, contended that the judge’s actions, such as demanding Bankman-Fried to give a pre-testimony deposition away from the jury, weakened the defense case. Moreover, she suggested that the judge’s remarks might have swayed the jury’s view of the situation.

Contrarily, Tether, along with Circle and other stablecoin providers, have blocked accounts connected to the North Korean hacker collective Lazarus. This action underscores Tether’s dedication to combating illegal activities, even amidst increasing scrutiny regarding transparency issues and legal complications.

Read More

2024-09-14 21:38