[tim333]

There is some guess work here but I'm refereeing to Tether the company https://tether.to/ which issues tokens I was refereeing to as tethers with the symbol USDT, and its affiliated entities. They used to have them backed 1:1 by real US dollars and still are I think over 50% backed by real USD but due to various issues it's not 1:1 any more. They now say:

>Every tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities.

The worry is instead of one US dollar coming in and one USDT being issued that an IOU from an insider or "affiliated entity" comes in saying I owe you a hundred million USD, Tether issues them 100 million USDT in return and then they punt it on buying bitcoin. Assuming bitcoin double the entity can pay back and bank $100m in profits which is obviously tempting for some less ethical people. The danger is bitcoin falls, they can't repay and default on the IOU.

This is hypothetical - they may be doing everything above board but they seem a little shifty and have admitted in court doing some questionable stuff https://www.fxstreet.com/cryptocurrencies/news/tether-usdt-a...