Whatever the investigation in New York turns up, Tether’s short history is already replete with strange criminal characters, unsolved hacks, sudden switches between overseas banks, and huge, unexplained losses. There’s likely more to come.
As a connective tool for the larger crypto economy, the potential of Tether was clear. The class-action lawsuit puts it simply: “Tether’s promises were the foundation of USDT’s value. If Tether were telling the truth, a USDT would combine the best aspects of fiat currency and crypto-assets: It would be stable and safe like the U.S. dollar but also, like other crypto-assets, easily transferable across different crypto-exchanges, and free from many government regulations.”
That perception of stability was always a myth. In 2016, someone hacked into Bitfinex and stole 120,000 Bitcoins, which resulted in Bitfinex cutting more than a third of the value off each customer’s account—although, reportedly, not for a favored few.
Tether had long claimed that for every USDT it put into circulation, it would have one U.S. dollar in the bank. But after years of evasions and refusals to release a complete audit of its finances, a Tether lawyer finally admitted, in a 2019 court filing, that Tether was only 74 percent backed—a number that seemed to include cash, securities, Bitcoin, and other money owed to Tether. Tether’s continued refusal to fully audit itself, combined with its feverish printing of new coins, has led many critics to question even this 74 percent number.