# Crypto Currency Fraud
**URL:** https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128
**Category:** Unbounded
**Created:** [May 20, 2021, 5:27pm UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128 "2021-05-20T17:27:47Z")
**Posts on this page:** 20
**Page:** 1
### Author:  [@Elliot](https://discuss.criticalfallibilism.com/u/Elliot)
#### Post date: [May 20, 2021, 5:27pm UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/1 "2021-05-20T17:27:47Z")
> **[The Bit Short: Inside Crypto’s Doomsday Machine](https://crypto-anonymous-2021.medium.com/the-bit-short-inside-cryptos-doomsday-machine-f8dcf78a64d3)**
>
> This is the story of a Bitcoin trade — the most financially impactful trade I’ve ever made in my life. It’s also the story of the…
I think he does reasonable analysis about Tether being a fraud that’s inflating the value of other crypto currencies like Bitcoin. I don’t know of a refutation of these claims. I also thought the pro-crypto quotes from prominent Silicon Valley Startups and Rationality type people were notable.
See also patio11’s article on Tether being a huge fraud:
[https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/](https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/)
And Matt Levine:
> **[Things Got Weird for Stablecoin Tether](https://www.bloomberg.com/opinion/articles/2019-04-26/things-got-weird-for-stablecoin-tether)**
>
> Also Uber, Slack and mortgage settlements.
If someone knows a detailed article that makes a reasonable attempt at a counter-argument to these articles, I’d be interested. If that doesn’t exist, I think that says a lot (note: I haven’t really looked; crypto is not a focus for me). Or put another way, if you don’t know of such an article, you definitely shouldn’t buy/own crypto (and if you do know one, you should expose it to criticism before buying/owning crypto).
Also, the article dates (two in 2019) are notable. What, if anything, was refuted within, say, a month of publication? If most or all of this was not refuted, then what have people been doing buying so much Tether and otherwise getting involved with crypto after this information was publicly explained?
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### Author:  [@Max](https://discuss.criticalfallibilism.com/u/Max)
#### Post date: [May 21, 2021, 12:01am UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/2 "2021-05-21T00:01:21Z")
> [@Elliot](#):
>
> If someone knows a detailed article that makes a reasonable attempt at a counter-argument to these articles, I’d be interested. If that doesn’t exist, I think that says a lot (note: I haven’t really looked; crypto is not a focus for me).
I don’t know of a counter-argument, but I have been linked many articles about Tether being fraudulent over the years.
From [https://decrypt.co/50756/bitcoin-no-longer-worlds-most-used-cryptocurrency-tether](https://decrypt.co/50756/bitcoin-no-longer-worlds-most-used-cryptocurrency-tether) (have not fact checked this)
> In 2019, Tether admitted in court documents that its stablecoin was only 74% backed by cash and cash equivalents.
There are articles going back years about Tether being a rort, e.g., [here’s one from Oct 2017](https://medium.com/@bitfinexed/the-mystery-of-the-bitfinex-tether-bank-and-why-this-is-suspicious-a8a6407a1241).
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### Author:  [@JustinCEO](https://discuss.criticalfallibilism.com/u/JustinCEO)
#### Post date: [May 21, 2021, 12:07am UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/3 "2021-05-21T00:07:18Z")
> [@Max](#):
>
> > [@Elliot](#):
> >
> > If someone knows a detailed article that makes a reasonable attempt at a counter-argument to these articles, I’d be interested. If that doesn’t exist, I think that says a lot (note: I haven’t really looked; crypto is not a focus for me).
>
> I don’t know of a counter-argument, but I have been linked many articles about Tether being fraudulent over the years.
>
> From [https://decrypt.co/50756/bitcoin-no-longer-worlds-most-used-cryptocurrency-tether](https://decrypt.co/50756/bitcoin-no-longer-worlds-most-used-cryptocurrency-tether) (have not fact checked this)
>
> > In 2019, Tether admitted in court documents that its stablecoin was only 74% backed by cash and cash equivalents.
>
> There are articles going back years about Tether being a rort, e.g., [here’s one from Oct 2017](https://medium.com/@bitfinexed/the-mystery-of-the-bitfinex-tether-bank-and-why-this-is-suspicious-a8a6407a1241).
I think maybe you are bringing this up as something of a criticism - like, people have been saying it’s a scam for a while, and it’s still around, so maybe it’s not a scam?
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### Author:  [@Max](https://discuss.criticalfallibilism.com/u/Max)
#### Post date: [May 21, 2021, 12:18am UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/4 "2021-05-21T00:18:47Z")
> [@JustinCEO](#):
>
> I think maybe you are bringing this up as something of a criticism - like, people have been saying it’s a scam for a while, and it’s still around, so maybe it’s not a scam?
I was agreeing with Elliot - I think it’s a scam (and have thought that for ~years).
Edit: I didn’t mean to imply that Elliot had made up his mind about Tether being a scam. I think I did, tho.
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### Author:  [@Elliot](https://discuss.criticalfallibilism.com/u/Elliot)
#### Post date: [May 31, 2021, 9:35pm UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/5 "2021-05-31T21:35:32Z")
> **[The Tether Ponzi Scheme](https://www.singlelunch.com/2021/05/19/the-tether-ponzi-scheme/)**
>
> Tether is a fraud on the scale of Madoff or Enron and we’re in the middle of a bubble for the history books. Disclaimer: I have short positions on the cryptocurrency ecosystem, through MSTR a…
> **[The curious case of Tether: a complete timeline of events](https://amycastor.com/2019/01/17/the-curious-case-of-tether-a-complete-timeline-of-events/)**
>
> Tether, the stablecoin pegged to the U.S. dollar, has been mired in controversy. A complete timeline of events tells a full story.
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### Author:  [@Elliot](https://discuss.criticalfallibilism.com/u/Elliot)
#### Post date: [May 31, 2021, 9:39pm UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/6 "2021-05-31T21:39:57Z")
> **[Tether’s first breakdown of reserves consists of two silly pie charts](https://amycastor.com/2021/05/13/tethers-first-breakdown-of-reserves-consists-of-two-silly-pie-charts/)**
>
> For a company with nearly $60B in assets, these pie charts are pathetic.
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### Author:  [@Max](https://discuss.criticalfallibilism.com/u/Max)
#### Post date: [May 31, 2021, 9:46pm UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/7 "2021-05-31T21:46:58Z")
from [Tether’s first breakdown of reserves consists of two silly pie charts](https://amycastor.com/2021/05/13/tethers-first-breakdown-of-reserves-consists-of-two-silly-pie-charts/)
> Specifically, this is a breakdown of the composition of Tether’s reserves on March 31, 2021, when Tether had roughly 41.7 billion tethers in circulation. (As of this writing, Tether now has [nearly 58 billion tethers](https://archive.is/i4Nwl) in circulation.)
Holy shit.
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### Author:  [@Max](https://discuss.criticalfallibilism.com/u/Max)
#### Post date: [May 31, 2021, 10:04pm UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/8 "2021-05-31T22:04:47Z")
The main pie graph sums to 100%, so I suspect that it isn’t showing what % of tethers’ value is backed by what, it’s showing what % of _the backing_ is where.
from [Tether’s first breakdown of reserves consists of two silly pie charts](https://amycastor.com/2021/05/13/tethers-first-breakdown-of-reserves-consists-of-two-silly-pie-charts/)
> According to the first pie chart—the blue one—the majority of Tether’s assets (nearly 76%) are socked away in cash and cash equivalents.
So as a transparency measure it fails to actually show the main thing: what % of tethers’ value is backed by _something_. Fundamentally dishonest and confusing.
[Financial Times – _Tether says its reserves are backed by cash to the tune of . . . 2.9%_ – 14th May 2021, via archive.today](https://archive.vn/8uWmr)
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### Author:  [@Max](https://discuss.criticalfallibilism.com/u/Max)
#### Post date: [May 31, 2021, 10:10pm UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/9 "2021-05-31T22:10:48Z")
> The continued growth at Tether suggests that users are unfazed. “Tethers have always been fully backed,” said Tether’s general counsel Stuart Hoegner in a statement.
via [Tether claims $10bn monthly growth after New York fine - 26 Apr 2021](https://archive.vn/D9jeA)
> As of April 30th, Bitfinex’s attorney claimed that they had cash and short-term securities which would cover ~74% of outstanding tethers. Here’s what their general counsel [swore](http://media.kalzumeus.com/tether-docs/bitfinex-response-to-nyag.pdf) to the court, shortly before April 30th, 2019.
>
> > As of the date I am signing this affidavit, Tether has cash and cash equivalents (short term securities) on hand totaling approximately $2.1 billion, representing approximately 74 percent of the current outstanding tethers.
via [Tether: The Story So Far | Kalzumeus Software](https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/)
same guy quoted in both.
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### Author:  [@Elliot](https://discuss.criticalfallibilism.com/u/Elliot)
#### Post date: [July 21, 2021, 6:38pm UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/10 "2021-07-21T18:38:19Z")
>
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### Author:  [@Elliot](https://discuss.criticalfallibilism.com/u/Elliot)
#### Post date: [August 5, 2021, 6:56pm UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/11 "2021-08-05T18:56:36Z")
>
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### Author:  [@Elliot](https://discuss.criticalfallibilism.com/u/Elliot)
#### Post date: [August 11, 2021, 2:14am UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/12 "2021-08-11T02:14:51Z")
>
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### Author:  [@Elliot](https://discuss.criticalfallibilism.com/u/Elliot)
#### Post date: [August 11, 2021, 3:58am UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/13 "2021-08-11T03:58:18Z")
>
>
> God-like Natural Number Creator Person (TM, R) @kelvinfichter
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### Author:  [@Max](https://discuss.criticalfallibilism.com/u/Max)
#### Post date: [August 12, 2021, 10:14am UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/14 "2021-08-12T10:14:52Z")
My thoughts after reading the thread patio11 linked, starting with the tweet:
> Ok here’s how the Poly Network hack actually worked. If I’m reading the contracts correctly, it’s pretty genius.
the flaw with poly’s smart contracts is not new or super creative – [here is some code I wrote in 2017-18](https://github.com/secure-vote/sv-light-smart-contracts/blob/master/contracts/SVCommon.sol#L209) that handles this case (smart contracts talking to other smart contracts + having limited permissions). (this sorta thing was not hard to know about; there were and are libraries providing this feature.) I guess mb poly didn’t anticipate these contracts talking to each other so didn’t do any permissioning stuff between them, but one contract had admin perms with the other.
i’d like to think poly’s code should have failed an audit (b/c the permissions weren’t granular enough for something complex like cross-chain stuff + operational policies weren’t documented – like what identities would have admin perms in the SC). but TBH IDK if most audits would catch this. there are better strategies anyway.
I disagree with the [quoted tweets](https://twitter.com/kelvinfichter/status/1425217046636371969) use of “pretty genius”. It feels like a problem you’d find in a CTF-type challenge (which exist for ethereum).
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### Author:  [@Elliot](https://discuss.criticalfallibilism.com/u/Elliot)
#### Post date: [August 15, 2021, 6:15pm UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/15 "2021-08-15T18:15:27Z")
> **[How to Cut Down on Ransomware Attacks Without Banning Bitcoin](https://slate.com/technology/2021/06/banning-cryptocurrencies-bitcoin-ransomware-disruption-exchanges.html)**
>
> Making cryptocurrency markets harder to use will have the effect of making them less useful as a ransomware payment vehicle.
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### Author:  [@Max](https://discuss.criticalfallibilism.com/u/Max)
#### Post date: [August 24, 2021, 4:48am UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/16 "2021-08-24T04:48:05Z")
Not directly about crypto, but [Karl Jobst has a new vid about fraud in the retro video game market](https://www.youtube.com/watch?v=rvLFEh7V18A) that’s about market manipulation. Same sort of stuff goes on in crypto (I wonder how much of this has gone on _specifically_ with NFTs).
[ ](https://www.youtube.com/watch?v=rvLFEh7V18A)
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### Author:  [@Elliot](https://discuss.criticalfallibilism.com/u/Elliot)
#### Post date: [October 15, 2021, 5:25pm UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/17 "2021-10-15T17:25:45Z")
>
>
> Bennett Tomlin @BennettTomlin
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### Author:  [@Elliot](https://discuss.criticalfallibilism.com/u/Elliot)
#### Post date: [November 28, 2021, 7:37pm UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/18 "2021-11-28T19:37:59Z")
Bitcoin is not a commodity money. Its value is meant to come from being a medium of exchange and that’s it. That’s bad. See Mises (_Theory of Money and Credit_) and Reisman (_Capitalism_) on commodity and fiat money.
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### Author:  [@Max](https://discuss.criticalfallibilism.com/u/Max)
#### Post date: [November 29, 2021, 10:25am UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/19 "2021-11-29T10:25:16Z")
I didn’t know this, but both books are freely available online:
For _Theory of Money and Credit_: [The Theory of Money and Credit | Mises Institute](https://mises.org/library/theory-money-and-credit/html) (I’m reading this atm)
For _Capitalism_: [https://capitalism.net/CAPITALISM\_Internet.pdf](https://capitalism.net/CAPITALISM_Internet.pdf)
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### Author:  [@Elliot](https://discuss.criticalfallibilism.com/u/Elliot)
#### Post date: [November 29, 2021, 5:24pm UTC](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/20 "2021-11-29T17:24:25Z")
Crypto currency is a bad prep.
It’s meant to be independent of e.g. USD, and that’s supposed to be a major advantage. But the main scenario where USD collapses is where the US government (USG) collapses. In a lot of scenarios where the USG collapses, crypto also collapses. Why? Because crypto relies on infrastructure like electricity, computers and internet access. Many collapse scenarios for USG also involve a lot of infrastructure collapse.
Crypto is also vulnerable to EMP scenarios (from solar flare or nuke).
Gold, in addition to being a commodity money, doesn’t rely on advanced parts of civilization like electricity, computers and the internet.
Another issue is that the USG might be able to permanently harm the value of bitcoin (this also applies to any other specific crypto currency) – so that bitcoin has lower value even after the US government is gone (even if computers, electricity and internet still work fine). But I don’t know how USG would permanently harm the value of gold. USG can make anti-gold laws to lower its value, but they will stop mattering if USG is gone.
How might USG permanently harm bitcoin? By e.g. getting control over crypto software – through political pressure, threats, assassinations, democratic voting, working with a coalition of other governments, arresting people involved who don’t cooperate, etc. – and printing a bunch of new bitcoins for themselves. They could potentially cause massive inflation in bitcoin but not in gold. They could also push other damaging changes to crypto software. They could also just make tax policies that are anti-crypto (generally or specific ones, e.g. rivals to the new crypto the USG makes) enough to drive it to zero. I think them driving people away from bitcoin so it never recovers is much more realistic than doing that with gold. It’s much newer and it’s much harder to revive if it dies (particularly if some new crypto alternatives have already replaced it).
[Next page](https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128.md?page=2)