[racont]

NP@NYT summarized a long-standing Twitter discussion - he's put in little to no independent work on the story.

Tether has claimed to have audited bank statements from the start. To date, they've never performed a real audit from an internationally recognized auditor.

In Sep '17, Tether paid for Friedman to state that they had ~$350m in USD in certain bank accounts. The bank names and locations were blacked out. If you know how to read audit statements, Friedman bent over backwards to make sure they're not culpable for fraud (whereas normally their function is to rubber-stamp for authenticity). Over the past two months, Tether has issued another $300m in USDT while transparency remains opaque

[wdewind]

> If you know how to read audit statements, Friedman bent over backwards to make sure they're not culpable for fraud (whereas normally their function is to rubber-stamp for authenticity).

Can you expand on this?

[racont]

Auditors sell trust. If an auditor says that the company has $XX in their bank, you're more likely to believe the company. If an auditor is found to lie, you get Arthur Anderson. In a full audit, the auditor bears the risk of fraud, and they get paid for assuming that risk.

In the note (not a formal audit, but literally just a letter) they gave Tether, Friedman consistently uses language like this:

- "We have not performed any procedures or make any conclusion for activity prior to or subsequent to September 15, 2017."

[note: audits are usually for periods of time, not snapshots at a certain point in time]

- "Screenshots from the Client of the balances in each Tether address purportedly controlled by the Client".

- "FLLP ... makes no representations about the Client's ability to access funds from the accounts or whether the funds are committed for purposes other than token redemptions."

Basically, Tether is representing to the world and their clients that Friedman has rubber-stamped the USDT-USD relationship Tether claims. On their website, Tether claimed their bank balances are audited (they're not), and Friedman happens to be an auditor who sent them a letter.

Friedman is saying that "all we know is that Tether had matching funds attributed to their names in certain banks on a certain date."

Tether could very well just have placed those funds in there temporarily, or have a side-letter with these unnamed banks to move funds in and out of the account for a snapshot in exchange for a fee, or have an arrangement via which they've borrowed using the funds as collateral. These are scenarios that either a full audit or a regulatory body would protect against.

-

Note: looks like Tether took down all references to their past audit issues from their website, but they forgot to remove the Friedman letter: https://tether.to/wp-content/uploads/2017/09/Final-Tether-Co....

[wdewind]

Very interesting, thank you