I think this was a fair criticism of Tether specifically a few years back (and one of the reasons I said "Tether and USDC are both different cases for one thing").
I don't think there is any evidence this is happening now.
In particular the independent reporting shows evidence of assets backing it[1][2]
The report is still quite light on details. They list "commercial paper" under cash and equivalent... Which could mean they lend money to apple short term and get 0.5% interest, or it could be highly speculative lending to Colombian agricultural companies.
Either way, what Tether does is essentially banking ("give us money, we'll hold it and, pinky promise, if you want it back, you'll get it no problem"). The bar for bank transparency and regulation is far, far higher than what Tether presents.
Another crucial detail is that these attestations are not an audit of assets vs liabilities. In the past, Tether has been caught borrowing money in the day of the attestation to give the impression that there's more in their bank account than there really is.
I don't think there is any evidence this is happening now.
In particular the independent reporting shows evidence of assets backing it[1][2]
[1] https://tether.to/en/transparency/#reports
[2] https://assets.ctfassets.net/vyse88cgwfbl/1np5dpcwuHrWJ4AgUg...