Last week Tether was fined $42.5 million for making misleading claims on the underlying value of funds under management, from 2016 to 2018. During the period, over 75% of the time, Tether was more or less short on funds - meaning your Tether dollars didn't worth as much as you thought them to worth. Unfortunately, the CFTC report doesn't go any further than that - specifically, how much each Tether actually was worth. With the Tether boing the most widely traded pair to Bitcoin and many other major crypto-assets, it's profound that this is bad new for the whole crypto-market.

What Tether is supposed to be doing

Tether was supposed to be acting the same way a money market fund does; investing your money in bank deposits or similar instruments, and making some money out of the receivable interest. Soon though, that income was not enough, and Tether decided to change its investment strategy from bank deposits to commercial debt from highly rated issuers. According to their last report, only 10% of your money are invested in bank deposits - and 4% invested in other crypto, including Bitcoin.

For transparency, Tether was also supposed to be issuing detailed financial status reports monthly, just like any other mutual fund company is. Instead of that Tether is issuing a consolidated daily report, presenting simply how the funds are allocated, and a more detailed (supposedly audited) report every now and then - the most recent is dated on June 30th.

The 'audit report' has issues

First, the audit is performed by a relatively small franchised auditing firm. This means there is only a loose obligation for keeping auditing standards. Moreover, even that report is leaving unaudited important statements in the financial report, with the most important being how many Tether coins are really issued and outstanding - Tether may easily be wrapping and unwrapping issued tokens among the blockchains at will. Third, the audit report only examines whether Tether is correctly calculating commercial paper value at principal plus interest to date, but doesn't move further about whether commercial paper is correctly classified in regards of risk ratings, or not. Tether is rumored to own huge amounts of debt from Chinese construction companies, that is considered a high risk investment. If such rumors are proven to be true, and those debts are not repaid, Tether may be losing even 20% of its value, if not more.

Tether may be deep inside price fixing schemes

With Tether counting for about 15% of the daily Bitcoin volume across all pairs, the company issuing it, may very well be involved in the price fixing schemes pumping and dumping Bitcoin's price at will, and at no cost - the contrary, they may very well increasing the value of that 4% held in crypto. Bitfinex - the sister exchange owned by the same owners - was fined another $1.5 million for facilitating suspicious margin transactions on the BTC/USDT pair, financed by Tether.

Up until now it was evident that Bitcoin price was a result of a series of pumps and dumps. Now we get an idea about who are the guys behind these pumps and dumps. The only sure thing is that when they are done, it's the suckers (that's you) who will be left holding (or HODLing) the bag.