The Bitcoin Papers are a series of articles published on CrytoHQ for the sole purpose of informing all potential cryptocurrency investors about troubling questions left unanswered that could sooner or later backfire. Those entitled have avoided answering those questions thus far causing major concerns around the crypto-sphere. We can only guess why they refuse to prove their claims, nevertheless, we will try to be as objective as possible avoiding any direct accusations. The reader will ultimately be the judge, at least till the questions are properly answered. We do NOT deserve your praise for what you are about to read. The people – journalists or just simple cryptocurrency enthusiasts – who thoroughly researched such sensitive topics before us deserve ALL the praise. We only collected information from such sources, aggregated and reorganized it so our readers can easily understand the nature of the problem. We will make sure to mention all the sources inside and at the end of each article. Last but not least, if those entitled answer the pressing questions we are about to ask, we will update the articles or write new ones as soon as we are able.
When accessing some of today’s largest cryptocurrency exchanges on the web, an experienced trader or investor will quickly notice an ‘oddity:’ the most important digital currencies aren’t actually listed in USD but in something indexed as USDT. A quick Google search solves part of the problems. USDT IS a cryptocurrency like Bitcoin and Ethereum listed on CoinMarketCap as Tether. Its value is constantly around 1 USD so a novice can assume USD and USDT are in one way or another the same. But are they? Not if we analyze closely their official website.
What is Tether aka USDT?
According to tether.to, USDT is a stable currency that ‘converts cash into digital currency, to anchor or tether the value to the price of national currencies like the US dollar, the Euro, and the Yen.’ Most importantly, Tether is 100% backed: ‘Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD.’ Why not use USD then or other Fiat currencies? The answer is pretty simple: in most countries – that includes ALL Western states – the cryptocurrency market is unregulated, thus opening an exchange that handles millions and even billions in real cash is quite problematic. Therefore, some decided it’s better to simply avoid the current monetary system and do all their trading exclusively in cryptocurrency without listing any Fiat currencies. Poloniex and Bittrex are just two of the most important exchanges that function in this manner. Bitfinex is another major player in the industry that had banking issues dating to April 2017. As a result, most of the traders had to use USDT instead of Fiat. The exchange allegedly solved the issue and since November 21, 2017, individual users can now ‘access USD wires for deposits and withdrawals,’ according to the PR representative on reddit. On such exchanges, traders use Tether to buy and sell Bitcoin and strongly believe 1 USDT is worth 1 USD. Yet, the Legal page seems to contradict this kind of beliefs: “Once you have Tethers, you can trade them, keep them, or use them to pay persons that will accept your Tethers. However, Tethers are not money and are not monetary instruments. They are also not stored value or currency. There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers.” Unfortunately, in today’s cryptocurrency market, such statements are status-quo in an attempt to avoid regulations and possible class lawsuits when something goes wrong (see Tezos case for example). Such Terms of Service are also an open invitation to unlawful behavior as the issuing party isn’t responsible if investors can’t redeem or exchange their tokens for ‘money’. To summarize this sub-chapter, are Tethers money? According to the official Legal page, NO! Nevertheless, in some odd way, USDT is backed by the US Dollar. EVEN THOUGH Tethers ‘are also not STORED value or CURRENCY.’ And DO remember, on the main page, Tether is a ‘stable currency!’ What is Tether? The most simple and honest answer is: WE DON’T KNOW! And nobody does EXCEPT the individuals behind the cryptocurrency.
Who Owns Tether?
Since we don’t know the WHAT, maybe we can solve the WHO. Who owns Tether? Tether represents the company Tether Limited, as per the official website. The company ‘is incorporated in Hong Kong with US offices in Santa Monica, CA and on the East Coast.’ No other specific details are provided, no actual Hong Kong address, and no information about the persons who manage the company. Only a Media representative named Ronn Torossian. Mr. Torossian is also the PR representative for cryptocurrency exchange Bitfinex, which isn’t a surprise to those who read about the topic before. The connections between Tether Limited and Bitfinex aka iFinex Inc. are well-documented by those researching the ‘Tether case.’ Both companies had banking issues in April 2017 and both sued Wells Fargo, the bank that limited their ability to move funds worldwide, as Bitfinex’ed showed in an extensive Medium blog about the case. Last month, leaked documents known as Paradise Papers proved there is a clear connection between the exchange and the company issuing Tethers. According to the Offshore Leaks Database, Tether Holdings Limited was established on September 5, 2014, in the British Virgin Islands. The data also shows the registered office is in British Virgin Islands and the company’s business/mailing address is established in Ontario, Canada. Mr. Phillip Potter presented earlier this year by Bloomberg as the CEO of Bitfinex is the director of Tether Limited while Giancarlo Devasini – Bitfinex CFO as per Reuters – is a shareholder. Furthermore, Mr. Jean-Louis van der Velde who is CEO at iFinex Inc. – the company that owns and operates Bitfinex – allegedly is Tether CEO, according to a documented provided by @ArmandBouillet on Twitter:
ReeveC claims to be CEO of @Tether_to . It even says so in his twitter bio. The truth? @ReeveC is lying about his position within Tether in order to conceal their connection with @bitfinex. This confirms JL van der velde is CEO of both Finex & Tether pic.twitter.com/xj6sRVkdmA
— AB33 [#DontGetTethered] (@ArmandBouillet) November 18, 2017
Mr. Reeve Collins modified his Twitter profile shortly thereafter eliminating the ‘CEO and Co-Founder @Tether_to’ part.
So I’m not sure how I got pulled into the @Tether_to mess/conspiracy but I’m NOT an investigative reporter. Last time I’ve seen this much CEO confusion it involved TLC & CoinTelegraph, but hey this is #Bitcoin. For more on #Tether $USDT follow @ArmandBouillet & @Bitfinexed pic.twitter.com/BUUjDks7dt
— Tone Vays [#HODL] (@ToneVays) November 18, 2017
Mr. Collins tweeted afterward:
I’ve not been involved with Tether since 2015. However there is no reason to doubt the integrity of the individuals now running it. They have massive (financial/legal/moral) incentives to run it as cleanly as possible so I would doubt the speculation that suggests anything but.
— Reeve Collins (@ReeveC) November 18, 2017
Interestingly enough, Mr. Jean-Louis van der Velde is presented on the Tether website as a partner. That’s perfectly fine given the Legal page where Tether Limited appears both as owner and associate. As a conclusion for this sub-chapter and the first part of the Tether case, who owns Tether? A good answer would be Bitfinex. Yet, not being 100% transparent on this matter and citing sources like Paradise Papers is definitely another cause for concern. If Tether had been an ICO, a rational investor would have already made up his mind whether to invest or not. No transparency on who runs the project? That’s definitely a case closed, ‘no way I’m investing my money here’ type of deal.
The second part of the story is NOW available. Check it out: The Bitcoin Papers: To Tether Or Not To Tether… Continued