Former head of Circle minted Tether himself, says it’s legit

Former head of Circle, Dan Matuszewski, went on a podcast called On the Brink with Castle Island to give his opinions and experiences minting the Tether stablecoin. Matuszewski firmly stated that there is nothing true about the allegations of Tether driving Bitcoin’s 2017 bull run.

“I say this as someone who created and redeemed billions of tether over the course of my life and specifically created it in 2017”

In 2017, there was price descrepancy between Bitcoin on Coinbase and on Bitfinex, which created arbitrage incentives. Matuszewski said he took advantage of this by minting Tether himself, but did not specify how he went about doing it.

“I can tell you that billions of dollars were sent in to make it like that”

Bitfinex had discounted Bitcoin compared to Coinbase, so people would sent in USD to Tether which was minted into USDT. Afterwards, they would transfer the Bitcoin to Coinbase and sell it for a profit. The reason this worked is because Coinbase was so popular, so the demand for Bitcoin was clearly there without the arbitrage incentives.

Matuszewski noted that a major difference between USDT and Circle’s USDC is that Tether is more willing to fight against regulatory scrutiny. From what Matuszewski said, something like USDC would have KYC (know your customer) restrictions on chain were USDT would not, and would fight against being force to implement them.

There is no easy access portal to submit USD in exchange for USDT, so the process would likely involve contacting Tether directly. It would be much easier for Tether to take USD from large net worth customers, mint a bunch of USDT and not involve proof of identity in the process than it would be for them to make a widely accessible web portal.

Tether is still popular in markets like Asia, because USD-BTC is a popular trading pair and USDT is harder to trace than things like the Renmimbi. Emily Parker, cofounder of Longhash mentioned on the Unchained podcast with Laura Shin that before people in China buy Bitcoin, they usually exchange their cash for USDT.

The lawsuit Bitfinex & Tether expected has arrived

This morning, a class action lawsuit was filed against iFinex companies, Bitfinex and Tether claiming they have caused over 1 trillion in damages. To those who follow the companies, this comes as no surprise. Just last week they released statements about how “mercenary lawyers” were going to sue them based off of “bogus studies.” 

Lawyers in the case against iFinex are the same ones who took Craig Wright down in Florida. The plaintiffs accuse Bitfinex and Tether of running a fraudulent pump-and-dump and money laundering scheme. 

“This action concerns a sophisticated scheme that coopted a disruptive innovation — cryptocurrency — and used it to defraud investors, manipulate markets, and conceal illicit proceeds.”

Bitfinex and Tether’s defense

In nearly identical statements released by Bitfinex and Tether last week, they claimed to expect a lawsuit based off of an “unpublished and non-peer reviewed paper.” Using words like “vigorously disputes” and “flawed assumptions,” the companies held a very offensive stance. 

iFinex companies implied in the press releases that the lawsuit against them was undermining the entire digital token community. Though they had many colorful words to say, they provided no evidence to back anything up. 

Community responses 

Crypto Loomdart, a popular trader in the community pointed out that the lawsuit insinuated that price is lower now than it would have been without the manipulation. 

 

Others are under the impression that tether is one of the only things that can make Bitcoin pump 

“Only Tether can pump bitcoin by printing”

 

Tether and Bitfinex expect “meritless” lawsuit

Tether and Bitfinex are so closely tied that they plagiarized each other’s press release about expected upcoming lawsuits. Both iFinex companies used Trump-esque language, calling their accusers meritless and claiming new information was based off of a bogus study. 

They claim to be targeted by “mercenary” lawyers, who by definition are interested in making money and ignoring ethics. 

“It is irresponsible to suggest that Tether enables illicit activity due to its efficiency, liquidity and wide-scale applicability within the cryptocurrency ecosystem.” 

Tether & Bitfinex controversy 

News of additional lawsuits came shortly after Bitfinex and Tether won a motion to halt turning over documents in the New York Supreme Court. Bitfinex had been accused of creating Tether out of nothing in April 2019 and was sued by the New York Attorney General Letita James. 

The story goes that Bitfinex was processing transactions through Crypto Capital, who’s funds were seized by various governments. Since Bitfinex couldn’t get their money back, they decided to take an approximate $625 million loan from Tether. Tether continued to print their currency, even with the large deficit. 

James’ office isn’t happy about the iFinex not having to turn in documents and believe that they have been stalling the entire time. 

“Respondents have been crystal clear that their litigation strategy is to delay this process as long as they can, by procedural maneuvers and duplicative motion practice”

Reactions from the community 

Sam Bankman-Fried, CEO of Alameda seemed to identify with iFinex’s defense against allegations.

“The TL;DR: USDT issuances sometimes come with BTC price increases because people create USDT to buy BTC, nothing shady required to explain that.”

Others aren’t believing the plea of innocence

“Bitfinex new tactic: attempt to preemptively discredit any person on earth who at any point might sue them”

LEO, Bitfinex’s proprietary coin felt the pain of lawsuit news, with price dropping 5% soon after the announcement.

Bitfinex's exchange coin dropping 5% in value after expected lawsuit announcement