BitConnect Closes Exchange as States Warn of Unregulated Sales

One scam down at least, next the Tether printer and BitFinex boys. Clean up in aisle HKG please.

Tether has remained at about $1/coin for a long time. Isn't it liquid if you trade it for BTC then to fiat?

I'm aware that tether's reserves are a little doubtful, but could you elaborate on why Bitfinex is sketchy?

I believe the main concern is whether 1 tether is actually backed by 1 USD. There is a series of articles[0] about why tether and Bitfinex are scary

[0]: https://medium.com/@bitfinexed

If you trade it for bitcoin someone is selling you that bitcoin for tether. That person will go ahead and trade that tether for some other coin.... rinse repeat, but in the end someone is holding that Tether, if exchanges stop accepting tether eventually your only option is to cash out to USD. USDT is basically being used as a trade coin, to avoid cashing out (maybe to avoid taxation) or to speculate on USD with the intent to eventually redeem for USD.

At some point someone will try to cash out on the tether. And that's when we'll find out if Bitfinex really has the USD reserves to back that as they say they have.

But it's getting harder and harder to believe that money really exists.

Tether keeps getting printed by the millions specially when bitcoin is on a downtrend (just today 200M was printed). For some reason I doubt someone wrote them a check for 200M USD today.

Also Bitfinex never completed or released audits they promised.

The more you dig the more it looks like Bitfinex is printing fake money to pump cryptocoins.

For starters, they don't deal in USD at all. They deal in "USDT", which isn't at all USD but a token called a tether that is somehow magically supposed to be pegged so 1 USDT == 1USD that you can... well... I dunno what you can do with a tether but one thing you can't do is turn it into actual fiat money on Bitfinex. You might be able to convert it to cold hard fiat on some other exchange though, but odds are good said exchange will be even more sketchy than Bitfinex.

Better still, the "market cap" for tether is over 1.6 billion USD with 5.5 billion in volume today. What happens when people actually want to turn that 1.6 billion of outstanding tether into dirty fiat? Who is gonna buy all those sells into USD? The exchanges? You think those guys are holding 1.6 billion in actual fiat money?

So if you like the idea that the most active "USD" exchange (bitfinex, according to coinmarketcap) isn't actually trading in "USD" but some kind of funny money that is supposed to always be pegged to the dollar but backed by absolutely nothing at all.... Consider what will happen when the crypto bubble collapse really starts to pick up and all those tether holders want back into filthy dirty American dollars. Good fucking luck.

It's just another facet of what makes the crypto "space" so fascinating. It is just layer upon layer of scams. Scammers scamming scammers. And yet people, even some supposedly smart people here on HN, continue to fall for the crypto scam every day.

PS: for a good time read the tether TOS: https://tether.to/legal/

"Bitfinex’s CEO is also the CEO of a company called Tether Limited"

http://fortune.com/2017/12/05/bitcoin-btc-price-usd-tether-l...

The dotcom bubble wiped out $5T of value. I think the cryptocurrency bubble is still smaller than $1T.

I think that many are not falling for the scams but rather are "momentum investing" and hoping their timing is good.

If $200M was printed today, then it likely doesn't exist. Hilarious that this is going on.

At some point the music has to stop.

The fact that Tether does not guarantee in their terms and conditions that they'll exchange Tether back into equivalent reserve currency makes it _super_ sketchy from my point of view.

The only way that Tether should be considered backed by and equivalent to USD (risk-reduced) is if Tether is contractually obligated to convert it back into USD. Instead, this is what their TOS says:

> 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.

> We make no representations, warranties, or guarantees to you of any kind, including with respect to any right of redemption or exchange of Tethers for any property.

For more on this, see my previous comment exploring the idea of "Tether being worthless": https://news.ycombinator.com/item?id=15997658

Tether just hit a new all time high of $1.07, making the return on investment significantly better than most VC funds.

> One scam down

Did...it just re-launch? With a new token, BCCX?!

https://bitconnectx.co

Just as reference as the comment here was deleted. Pretty important stuff.

http://omnichest.info/lookupadd.aspx?address=3MbYQMMmSkC3AgW...

https://i.imgur.com/BsPSZKO.png

Has it? https://coinmarketcap.com/currencies/tether/#charts

That's only because people wanted to reduce exposure to crypto today, and USDT is the closest approximation to that available for some exchange-committed funds.

How does the printed tether enter the market?

This is pretty unbelievable. And they're running an ICO right now.

I keep trying to wrap my head around the economics of this and maybe give Tether the benefit of doubt. I think the most damning technical detail is that there is no client-side wallet. We can't trade Tether amongst ourselves or engage in any trades that Tether doesn't have at least indirect control of.

I'm guessing the company offers them on some exchange, maybe slightly discounted.

i believe that counts as falling for it

Tether is a scam, 100%. It's fake money materialized out of thin air to pump Bitcoin.

Bitfinex buys cryptos with them on their own exchange. They get free cryptos, and everybody else gets monopoly money in exchange. Tether is such a scam it's unbelievable.

There's a twitter account that tracks the printing of new Tether: https://twitter.com/tetherprinter

There was another $100m invented 11 hours ago, in addition to the $100m created on Monday.

Jesus, they've printed 250 million of them in the last three days!

They don't really "print" a $200million. Finex explanation is that when a user requests USDT they issue new USDT from their USD reserves.

So basically the only thing you could do with Tether is try and offload it to someone else?

Are all tokens issued as part of ICOs like that?

The concept of tether is a good one.

I wish that a reputable company or YC startup would do exactly the same thing but in a very legitamate way.

It seems like they could make a good amount of money by charging withdrawal and transfer fees.

Yes, and yes

Some ICO's may claim other uses for their tokens but I don't think any are really usable at this point

That's what I'm saying. If they are actually able to always trade at very close to USD every day for over a year, does not that show stability in the coin? If it is, in fact, printed money, then it keeps working so far. Just like USD.

Poloniex and Binance let you convert to/from Tether (USDT). Do you consider Poloniex or Binance to be sketchy?

Isn't the entire point of it to be pegged 1USDT === 1USD? Obviously it fails at that by being backed by nothing like enough USD, but what does it being worth $1.07 even mean? Also, where do you sell Tethers given Bitfinex won't exchange them for USD?

You really believe they added $200million to their USD reserves to cover the USDT?

Edit: Where would they get that USD?

You forgot Bittrex.

You can't without difficulty, you have to convert them to BTC or ETH and send them to Coinbase or other reputable exchange then cash out in fiat, in a window where all three securities wallets at respective exchanges aren't in maintenance, network isn't blocked by cryptokittes, and you've passed all AML/KYC including possibly justifying where incoming has came from. There are a lot of people that will find cashing out to fiat very difficult hence why some are parking in Tethers even though they aware of the dubious nature, and thus tether is trading at greater than a dollar. Personally, I wouldn't want to touch tether even for a few minutes, as sod's law it would be my luck that Securities & Futures Commission of Hong Kong or Hong Kong police decide to act just at that moment I buy tethers (well technically the problem will be once it's on TV and value drops to 0).

With a dump truck full of unmarked dollars in small denominations in some dark Bangkok alley, provided by generous institutional investor. Obviously.

Buy BTC with tether, send to GDAX. Sell BTC for real USD

ETH is cheaper, due to transaction fees, although spread might be a little larger.

Yes you can. Tether is an asset on the Omni protocol and is expanding to ERC20

apparent approximation

no link to whitepaper? pff.. amateurs.

Basically I think the tether are fraudulent. I do not have proof but they likely are. What is the best way to make money on them? Can one short tether?

I'm by no means an expert, but I'm wondering why the people responsible behind Tether do this? Why don't they ask people for a dollar for each Tether coin and then store those dollars indefinitely, wouldn't that guarantee that the currency is pegged? They would always be able to exchange the Tether back to a dollar.

Absolutely. Is there any information available on the ownership of Poloniex? Do they provide any proof of reserves?

>> Why don't they ask people for a dollar for each Tether coin

AFAICT they cannot bank in dollars at the moment, which is where the origins of the tether currency lie in the first place. They say that theey have the money to back it... but given they minted a quarter billion over the last three days seems a little less than credible.

Well, someone might do what you describe - or, instead, they might say that they will store those dollars indefinitely but actually spend them. Why should they care about being always able to exchange the Tether back to a dollar, when they can simply take the cash instead?

Unless they would prove to the public and/or competent regulatory authorities that they definitely have done that, they should be considered as "printing" this money.

Proven reserves count, claimed reserves don't. If USDT is "covered" by reserves that are claimed but not verified, then USDT is not covered.

It is possible to short tether on kraken platform...

It turns out to be a lot more profitable if you just make USDT out of thin air...

My friend has met some of Poloniex’s engineers. I think they’re based out of SF.

Though good luck getting paid when shit hits the fan, Kraken will go down along with Tether.

It's hard to catch a falling knife!

Bitfinex should then sell that crypto for real USD on other exchanges. They could make a killing and then somehow launder the money so that when the Tether scam is exposed, they are safe with real hard USDs.

If you're in the UK, try to find a bookie who'll take your bet.

Tether did a fake "audit" to show they were legitimate: https://medium.com/@bitfinexed/the-so-called-tether-audit-th...

The most damning thing for me is that none of the many exchanges trading tethers allow you to trade them for US dollars. The only way to cash out of tether now is to buy cryptocoins and transfer them to a non-tether exchange.

doesn't the fact that its trading at 1.07 mean that tether doesn't have easy access to USD or an easy way to exploit the arbitrage. tether as a company can take USD and print tethers. so they could take USD $100, print 100 tethers, exchange them for USD $107 and walk away with $7 profit. i don't think people would even be mad if they did this. this is exactly what they should be doing to preserve the peg.

I continue to be astounded that the BitFinex boys haven't been locked up for the blatant fraud they've committed. If the feds don't get them, the Russian mobsters will.

It also drives the price of BTC up if you use those imaginary USDT to wash trade BTC. This is beyond a shitshow.

What is absolutely amazing is that, since your comment (only 24 days ago), they granted 500.000.000 new USD tethers.

> Why don't they ask people for a dollar for each Tether coin and then store those dollars indefinitely, wouldn't that guarantee that the currency is pegged? They would always be able to exchange the Tether back to a dollar.

They could do that, but why would they when they can instead ask people for a dollar for each Tether coin and then spend those dollars on crack and hookers?

It's definitely unconscionable, but totally believable to me.

The kind of people who fell for this the first time, are exactly the kind of people who would fall for this the second time.

Nothing can be more legit about a half remembered third hand account from an anonymous Internet source.

My default assumption when I see a cryptocurrency exchange is that it is either fraudulent or incompetently run, because that has been the case overwhelmingly in the past. It takes extraordinary evidence to make me trust one.

They say it's their "institutional investors", they never release who these are (some people say it's Bitfinex themselves), they never release what bank they use or which country is the money deposited in.

It's rotten to the core... The consensus is that they either don't have that money at all (most likely scenario) or that if they do it's all dirty money and they are operating a money laundry scheme....

They don’t have any access to banking.

And yet they still can't name their bank, unless under NDA...

Nothing fishy there.

And apparently this bank isn't asking questions about the tens of millions of USD pouring into its account every day, supposedly...

Good chance the interest rates will wipe you out before the price crashes.

Low trading volume on kraken, easy to wash trade to fix the price where you want.

People have, in fact, been getting mad when it appears they may have been doing this because people are weird like that. (Though I don't think there's enough market depth for that particular Tether-related arbitrage to be profitable, unlike some of the other options.)

Another 100m right now. So 350m in 3 days?

Isn't Tether incorporated in Hong Kong? How lax is HK on financial fraud?

How bad is Bittrex compared to the others?

How does one keep track of each Tether-like coin's fiat backing?