‘Tether is next’ says short seller who bet against Silvergate, Binance and Signature Bank

In this issue, we delve more into the murky world of corruption within the crypto markets. We bring you an exclusive interview with Marc Cohodes, an experienced short seller, who has raised concerns about the practices of prominent companies like Signature Bank, Binance, and Tether.

Trouble Brewing: Signature Bank and Binance

Earlier this year, Marc Cohodes expressed his apprehension about the operations of Signature Bank and Binance, drawing parallels to the issues he observed at the now-defunct bank Silvergate. Cohodes' predictions turned out to be eerily accurate, as Signature Bank collapsed shortly after his comments.

Additionally, the US Securities and Exchange Commission (SEC) recently filed a lawsuit against Binance, prompting the exchange to urge its clients to withdraw funds as its banking partners abandoned ship.

The Spotlight is Back on Tether

Now, Cohodes has set his sights on Tether, the leading stablecoin issuer. He raises concerns about Tether's inability to provide audits or verifiable proof of its dollar reserves, which back its stablecoins pegged to the US currency.

This lack of transparency has long fueled doubts and skepticism within the industry. Activist short selling firm Hindenburg Research had already questioned Tether's opaque nature of disclosures back in 2021. Furthermore, the New York Times has referred to Tether as "the coin that could wreck crypto."

As many know, at WhaleWire, we have been one of the top voices in exposing the corruption and fraud related to Tether. They’ve played an active role in manipulating the markets by printing unbacked fake USDT, causing the markets to surge, while insiders secretly dumped their coins behind the scenes.

The debate surrounding Tether's reserves centers not on its peg to the US dollar but on the actual dollars backing the stablecoin. While Tether has released what it calls a Consolidated Reserves Report, critics argue that an attestation is not the same as a proper audit. John Reed Stark, former head of the SEC's Internet Enforcement Office, dismissed Tether's latest attestation report as "useless" in terms of due diligence. He emphasized that audits are designed to identify potential risks, while attestations only evaluate the accuracy of the examined data at a specific moment.

Tether's Dominance Amidst Market Turbulence

Despite the ongoing scrutiny from regulators and turbulent market conditions, Tether's USDT stablecoin has continued to dominate the stablecoin market. The recent setbacks faced by Binance's BUSD stablecoin and concerns over USDC's reserves being trapped have further solidified Tether's position as investors seek relative stability amidst volatility.

In fact, after the Binance SEC allegations came out, Tether mysteriously transferred hundreds of millions to the exchange, in an effort to refill the drying up liquidity.

Bitfinex, which is a shady unregulated Chinese exchange, is also owned and managed by Tether, which happened to be the only exchange long on Bitcoin at a certain point during the flash crash immediately after the news. Using unbacked Tether to artificially prop up the markets to decrease the impact will not end well…

The Alleged Nexus: Banks, Exchanges, and Tether

Cohodes points to the interconnectedness between crypto-friendly banks, exchanges, and stablecoin issuers as a cause for concern. He draws attention to Binance's association with Silvergate and Signature Bank, as well as Tether's use of Signature Bank's services. While Tether dismissed the potential impact of Signature Bank's collapse on its entities, Cohodes remains skeptical and raises questions about the broader ecosystem's susceptibility to criminal activities.

“Banks used by Tether always had access to several banking channels and counterparties,” Tether told Bloomberg at the time, adding that its risk controls before Signature’s collapse ensured “our entities wouldn’t be affected” by exposure to Signature.

Cohodes warns investors to be cautious when dealing with exchanges and urges them to pay attention to the potential risks of money laundering and criminal activities facilitated by some entities in the crypto industry. He believes that the ecosystem as a whole is vulnerable to such activities and emphasizes the need for increased awareness and vigilance,

According to Tether's official statement on their website, they also assert that all their tokens are pegged one-to-one with a corresponding fiat currency and are fully backed by Tether's reserves. Tether further emphasizes that the value of their reserves is disclosed daily and updated at least once per day. Thus far, Tether claims that they have never failed to redeem their stablecoin for dollars.

It is important to note, however, that while Tether's attestation is conducted by a sketchy audit firm in the Cayman islands, with 5 anonymous employees, it differs significantly from a comprehensive audit process. An audit typically involves an in-depth examination of data, risks, and compliance matters. On the other hand, attestation reports primarily focus on evaluating and reviewing the reliability of specific information provided.

A Global Menace: Trillions Laundered

Tether has facilitated a massive scale of money laundering within the overall system, amounting to trillions of dollars. These illicit activities are now coming to light and of course, the issue is not exclusive to the crypto sphere. The problem lies in the facilitation of money laundering and the theft of individuals' funds by certain players within the industry. Investors should be cautious when dealing with exchanges and remain vigilant about the activities taking place, as they are enabling criminal entities and perpetuating financial crimes.

The Future of Tether and the Crypto Market

While Tether's stability and future remain uncertain, the company has recently hinted at disclosing financial reports in response to a freedom of information request. As the crypto industry faces increased regulatory scrutiny, the fate of Tether and other stablecoin issuers hangs in the balance. It is imperative for market participants and regulators to address the concerns raised by industry insiders,

In contrast to publicly-traded entities like Silvergate and Signature, Binance and Tether operate as privately-run entities, which means there are no shares available for short-selling. While profiting on this collapse may be more risky, the best advice is to limit your exposure to the crypto markets, especially Bitcoin, which has a 85% volume tie to Tether. Tether is a ticking time bomb, and when it eventually goes bust, it’s effects will be seen across the entire industry, with a magnified 100x greater than Binance or FTX.

What do you think? Do you think that Tether is too big to fail, and will not suffer the same fate as many other Crypto Ponzi’s, or do you think this bubble is about to burst for good. Let us know in the comment section below.

Have an amazing day everyone! Stay tuned for more newsletter articles!