What you are about to read is an update of the Tether case covered extensively by CryptoHQ in the last several days. We do our best to keep our readers informed and up to the date and will continue to do so in the future given the sensitive aspect of the topic.
Before reading further, we recommend to first check out our first two articles on the subject:
Transparency, Accountability, And Responsibility
As mentioned in our last article, Tether and Bitfinex PR representative Ronn Torossian published a blog on December 1, 2017, responding to all critics across all communication channels.
Among others, the PR representative compared the cryptocurrency industry with the ‘budding’ cannabis business. He said:
As with the cannabis industry, traditional banks and regulators are trying to figure out how to handle the growth of the crypto market. Many banks won’t accept money from cryptocurrency exchanges, including Bitfinex. As a result, Bitfinex did lose a number of U.S.–based banking relationships, but was able to maintain and add to its roster of banking partners around the world, providing the vast majority of its customers with a diversified and resilient banking network to provide consistent liquidity.
In the same blog, Mr. Torossian also ‘blitzed’ the Bitfinex and Tether critics focusing on the critic with the loudest voice, Bitfinex’ed: “Who is Bitfinex’s biggest critic? An anonymous online Twitter user who throws allegations around without ever revealing his or her own identity. As a communications professional myself, I know that whenever someone lobs accusations and attacks behind the veil of anonymity, one has to question their motives.”
Even though the PR representative mentioned how Bitfinex ‘has demonstrated it’s committed to the foundational principles of transparency, accountability, and responsibility,’ the real facts seem to contradict him. There are still many questions left answered concerning how both companies run their respective businesses. The most important one is who do Bitfinex and Tether bank with?
Describing Bitfinex, the Wikipedia page uses the word ‘opaque,’ which is hardly similar to principles like ‘transparency, accountability, and responsibility.’
Bitfinex Threatens With Legal Action Against Critics
Mr. Torossian’s blog though was just the beginning in terms of critics’ retaliation. According to a CoinDesk article published on December 4, 2017, Bitfinex has hired international law firm Steptoe & Johnson and is threatening critics with legal action.
Bitfinex legal counsel Stuart Hoegner stated: “To date, every claim made by these bad actors has been patently false and made simply to agitate the cryptocurrency ecosystem. As a result, Bitfinex has decided to assert all of its legal rights and remedies against this agitator and his associates.”
At the time of the article, Bitfinex’ed is seeking donations to defend himself against the lawsuit:
I am officially seeking donations to defend myself against Bitfinex’s frivolous lawsuit, rather than showing their numbers they seek to silence me.
I appreciate all the support you all have given me.
— Bitfinex’ed🔥 #DontGetTethered (@Bitfinexed) 4 decembrie 2017
“Best to be prepared,” Bitfinex’ed said, as per a Bitcoin Magazine article. “If this is [a] big bluff on their end then money goes to charity, I can’t hold the bitcoins while whistleblowing.”
The critic also commented on the cryptocurrency exchange’s decision to fight back with lawsuits: “Why don’t they just open their books? What are they afraid of? They are going to have to do that in discovery and litigation anyhow.”
Bloomberg’s 1 Million Tether Dollar Story
Meanwhile, on mainstream media channels, more and more news agencies are covering the Tether story raising concerns about the USDT legitimacy.
One such story was published yesterday, December 5, 2017, by Bloomberg, covering a very interesting customer case who wanted to exchange 1 million USDT into real US Dollars.
According to editor Matthew Leising, Oguz Serdar allegedly tried Tether, ‘but came away disappointed.’ In early November, Mr. Serdar went on to exchange 1 million USDT into USD but was refused.
The customer received the following reply from Tether Limited: “Due to ongoing banking difficulties we are only able to process requests for verified corporate customers.”
Even though the company gave reassurance every USDT is backed by the US Dollar, it refused to disclose “its banks and instead recommended in an email that he should try to sell on one of the exchange partners it lists on its website,” as per the customer’s story. Most of the exchanges, however, don’t have a USDT/USD listing. The only viable and established option is Kraken, an illiquid market in terms of USDT/USD: only $2 million worth of volume in the last 24 hours, according to CoinMarketCap data.
“The demand side is entirely empty there. You try to sell $1 million of U.S. dollar tether, the price crashes to zero, so you don’t do that,” Mr. Serdar explained.
Mr. Torossian reacted to Serdar’s accusations saying the customer “doesn’t have any money with us and he never did.” Nevertheless, in the very next phrase, the PR representative seems to contradict himself mentioning customer flags and the possibility of review, therefore admitting Mr. Serdar had or still has Tethers at his disposal: “The customer in question was flagged as suspicious because of numerous irregularities. If this customer wishes to complete our KYC (Know Your Customer) process properly, we may review this matter further. Until that time, this individual will not be permitted to do business with us.”
Eventually, Mr. Serdar exchanged his Tethers to Bitcoins and alerted U.S. Treasury Department and the Justice Department.
“I don’t think they have even $100 million or $200 million in a legitimate country. It’s the elephant in the room, but a lot of people don’t want to talk about it because they’re invested in it,” the customer added.
More Money, More Problems
Already, 50 million USDT have been issued in December alone. And Bitcoin is keep making new all-time highs just passing the $13,000-mark, according to CoinMarketCap.
Yet, on one of the largest Bitcoin exchanges out there, problems are ‘piling up.’ Users submit more and more reports on Bitfinex subreddit talking about ‘stuck’ withdrawals and ‘unresponsive’ support.
To use Tether terminology, Bitfinex is ‘backed’ in one way or another by USDT. There are obvious connections between the cryptocurrency exchange and Tether Limited revealed in our previous articles, EVEN THOUGH the management isn’t very transparent about it.
Unfortunately, with Bitcoin ever surging, the Bitfinex case is not singular. The whole exchange business seems to have serious issues of processing times and ‘unresponsive’ support. Bittrex is another example as shown in this Bitcointalk topic, while Kraken, Poloniex, Coinbase and all the major Korean exchanges are experiencing downtime when transaction volume is at its peak. EVEN THOUGH the revenue of all these companies is skyrocketing due to trading and withdrawal fees.
Is it too much to ask to invest a part of that skyrocketing revenue in the platform and support?
Stay tuned for more updates.