Tethers are not money and are not monetary instruments. There is no contractual right or other right or legal claim against us to redeem or exchange your tethers for money. We do not guarantee any right of redemption or exchange of tethers by us for money.” -Tether ToS 2017 and prior

Since the original posting of that statement, Tether has changed its terms of service agreements because they said that the original ToS was “widely misunderstood as meaning that Tethers are not redeemable at Tether’s whim or that Tethers are not backed by their underlying assets.”

So, what’s the deal with Tether anyway? The opening quote there really caught my eye because, isn’t Tether supposed to be just that? A Tether for the US Dollar, to exchange at a whim as needed? This prompted me to do some additional research.

In this article, I won’t go down some of the rabbit holes that people past have gone, but I do want to consider a few things in regards to Tether. I’m just going to bring up a few pieces of “food for thought” and allow you to make your own assumptions based on what is presented. I will insert some of my opinions based on the information provided, but I will mark them as such. For full transparency, I am not a day trader and have never “Tethered out” (and after this, never will).

Early Beginnings

Tether started out as a startup company called RealCoin, based out of Santa Monica, California in 2014. It was founded by Brock Pierce a former Disney Channel Child star who also had ties that were recently severed with EOS and has an estimated net worth of $700 million – $1.2 billion as a result of Crypto. Software engineer Craig Sellars and entrepreneur Reeve Collins were also in the mix during this initial inception. During my research, I found nothing in regards to Brock Pierce’s connection to Tether (or RealCoin) on his Wikipedia page. His LinkedIn page states that he is still working with Tether (they rebranded in Nov. 2014), but he lists himself as an advisor there for only a year. The laundry list of questionable events with Brock continues and can be found elsewhere through a quick Google search. Some of these listings include; Child Sex Scandals, Missing persons, Dealings with Goldman Sachs in 2006 (prior to the 2007 market crash), etc.

Tether’s purpose was to create a Crypto tied to the United States Dollar at a 1:1 ratio to allow for fast stable storage, sending and receiving across exchanges, platforms and wallets. You are supposed to be able to sign-up and register online with them, but I’ve found posts that have gone back to 2017 and prior that state registrations are closed. Visiting the site to sign up, you can see the following message:

Some questions I have to ask myself and hopefully you will too (and if you can answer them with a yes, please contact me, I’m interested): Have I ever had a Tether wallet? Do I know anyone who has a Tether wallet, presently? Do I know anyone with a Tether account? Have I ever purchased Tether directly through their site?

Remember the old ToS? Here is what they say now:

“Absent a reasonable legal justification not to redeem Tether Tokens, and provided that you are a fully verified customer of Tether, your Tether Tokens are freely redeemable.”

Provided that you are a fully verified customer of Tether, there is no record since late November of 2017 in regards to accounts being created.

Opinion: What’s scary about this is that if I want to redeem my Tether (that I personally don’t have) to the company themselves, I have no legal ability to do so. Ever.

Note: I am aware that of the original November 19th 2017 wallet shutdown due to transactions and the limited wallet services message of December 19th 2017, as well as their restriction to United States residents. Keep this information for later.

Reading through the whitepaper, I noted the Technology Stack and Process which I have pasted below:

“Each tether issued into circulation will be backed in a one­-to-­one ratio with the equivalent amount of corresponding fiat currency held in reserves by Hong Kong based Tether Limited. As the custodian of the backing asset we are acting as a trusted third party responsible for that asset. This risk is mitigated by a simple implementation that collectively reduces the complexity of conducting both fiat and crypto audits while increasing the security, provability, and transparency of these audits.”

As the custodian of customer assets, Hong Kong based Tether Limited had its banking services severed by Wells Fargo in April of 2017. Currently, it has been confirmed that Tether has holdings within Noble Bank of Puerto Rico. If you follow the BitMex Blog I linked, you will see the following:

“The founder and CEO of Noble Bank, John Betts, was also behind the 2014 Sunlot Holdings move to take over and potentially rescue MtGox. Sunlot was backed by Brock Pierce, one of the founders of Tether.”

It Seems Brock Pierce has come full circle in many ways. Unfortunately, this is another rabbit hole I did not want to go down in this article, but it seems to come up so I included it.


The Flow of Funds

  • Step 1: User deposits fiat currency into Tether Limited’s bank account.
  • Step 2: Tether Limited generates and credits the user’s tether account. Tethers enter circulation. Amount of fiat currency deposited by user = amount of tethers issued to user (i.e. 10k USD deposited = 10k tetherUSD issued).
  • Step 3: Users transact with tethers. The user can transfer, exchange, and store tethers via a p2p open­source, pseudo­anonymous, Bitcoin­based platform.
  • Step 4: The user deposits tethers with Tether Limited for redemption into fiat currency.
  • Step 5: Tether Limited destroys the tethers and sends fiat currency to the user’s bank account.

“Users can obtain tethers outside of the aforementioned process via an exchange or another individual. Once a tether enters circulation it can be traded freely between any business or individual. For example, users can purchase tethers from Bitfinex, with more exchanges to follow soon. The main concept to be conveyed by the Flow of Funds diagram is that Tether Limited is the only party who can issue tethers into circulation (create them) or take them out of circulation (destroy them). This is the main process by which the system solvency is maintained.”

Step 4 and 5 look interesting to me, as does their system of solvency. The main process of their Proof of Solvency work is ONLY maintained if tokens are generated into circulation AND destroyed once taken out of circulation. Steps 4 and 5 outline the process by which they are destroyed. Unfortunately, there is only one record of Tether Limited destroying tethers. In addition, there are not any records of users depositing Tether for redemption into FIAT currency. I looked around and could only find one entry on their wallet through Omni which states an amount of 30,000,000 USDT was “revoked” and destroyed (this was not engaged by any regular user).

Furthermore, for clarity, it talks about the user having to deposit FIAT and then coins are generated. If the user deposits Tethers, then coins are burned. This is clear, but the model they have drawn out on their site doesn’t support the way the entire structure of the organization is set to operate based on their whitepaper.

Opinion Note: Their Block Explorer has stated that it’s been “Under construction” for an extremely long time now, which doesn’t seem like there is much care to having the site well maintained.


The First Audit

Tether Limited has been under a lot of pressure to provide proof of their USD to USDT reserves. Unfortunately, they have not done a great job providing the requested information. On January 27th 2018, the relationship with Friedman LLP (auditing group) had been severed. The Statement released to Coin Desk was as follows:

“We confirm that the relationship with Friedman is dissolved.  Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable time frame. As Tether is the first company in the space to undergo this process and pursue this level of transparency, there is no precedent set to guide the process nor any benchmark against which to measure its success.”

Recently, the company I work for went through a security and coding audit (healthcare). This audit took months to perform and was extremely detailed in their findings. They went through everything, and I mean everything. An audit is as such. It is an excruciatingly detailed procedure by which to examine an account, process or operational workflow. This statement was from January, going into June we had not seen a “simple balance sheet” of Tether being produced since that “unreasonable time frame.”

Reading the next line down, I was personally floored by this statement. Tether’s entire business practice is based on their system of solvency where the flow of funds is intended to be a transparent process. Every dollar is supposed to be accounted for, every financial move this company was built on was intended to be pursued at this major level of transparency. If the process is so transparent, and seamless, then why are there no deposit slips for the last prints of Tether? Or any Tether prints for that matter?

I wonder if it has anything to do with the timeline of events as follows:

  • April 2017 – Banking relationships in Taiwan severed
  • May 2017 – 60 Million in Tether Printed
  • June through July 2017 – 200 Million in Tether Printed
  • September – 120 Million in Tether Printed
  • September through December – (Printing Continues)
  • By December 15th of 2017, 1 Billion USDT were printed in total, after their loss of banking relationship in Taiwan, at which time they were only 50 million Tether.
  • January 2018 – The relationship with Friedman LLP was severed. Then, shortly after, Tether prints an additional 1.2 billion
  • Between January and Today, there are 3 billion in Tether that have been printed in total.

Please digest the information presented and take what you will.

Opinion: Apparently, Tether Limited doesn’t take too kindly to people inquiring about their business practices when customer money is at risk:


“We have also read online about many outlandish conspiracy theories suggesting that Tether is not backed 1:1 by currency on deposit with banking institutions. Any such claim is unequivocally false, and the audits will bear that out. Our Terms of Service have been carefully picked apart by various malcontents and twisted to suggest that Tethers would not be redeemable for currency on some bizarre, malicious whim by Tether. That is untrue. While we reserve the right not to redeem for any particular customer, as we must, we will not do so for no reason. We have a duty to try to ensure that our service is not being used by persons from sanctioned countries, that is otherwise on a sanctions list, or that has some background check problem. In short, redemptions will not be unreasonably denied, but we reserve the right to selectively deny redemption and creation of Tethers on a case-by-case basis. As such, this policy, which is necessary from a regulatory perspective, has no bearing on our presentation of the liabilities of the company. The company considers all tethers outstanding to be liabilities for presentation on the balance sheet for which there is always an equivalent amount (or greater) held in assets to back those presented liabilities. Full stop.”

Opinion: As a member of the workforce, who works at a company, it’s important for me to maintain a level of professionalism and care about the image of the organization at which I am employed. Apparently Tether Limited is getting really flustered with people questioning their non-response to a complete lack of transparency on their part. Usually, the best way to shut the world up at large, is to produce evidence that debunks the allegations.

In Tether’s attempt to do so, the following and most recent “Audit report” was procured by Freeh, Sporkin & Sullivan LLP.

Before we go any further, let’s take a look at a couple of the members of this law firm:

Note: This page no longers exists on the bank website, but I was able to grab a screenshot from google’s cache:

Eugene R Sullivan is an advisor for Noble Bank International, which  had ties to Sunlot and Brock Pierce, (once again) after the Mt. Gox hack. They are also the ones who seem to be the main custodian of Tether’s funds per the BitMex blog post (linked earlier).

Eugene R. Sullivan shows up on the most recent Audit report as a member of one of the banks that houses Tether’s money. It’s interesting that they removed the webpage (shortly after the audit) showing his relationship with Noble Bank Intl.

Now what about this guy Freeh? Louis Freeh was the former FBI director from 1993 through 2001. He was the originator of the Carnivore program designed to electronically survey citizens and had also pushed for law enforcement’s access to encryption keys for United States Citizen’s communications. He was also at the head of the Waco coverup. His main connection lies with Sunlot and the Freeh Group to attempt to take over and revive Mt. Gox. Again, Brock Pierce in the mix.

The Final Audit

What about the final audit? The audit is located here

Dropping any particular bias that we may have, let us look at the last two pages of the audit:

  1. FSS is not an accounting firm and did not perform the above review and confirmations using Generally Accepted Accounting Principles.
  2. The above confirmation of bank and tether balances should not be construed as the results of an audit and were not conducted in accordance with Generally Accepted Auditing Standards.
  3. FSS makes no representation regarding the sufficiency of the information provided to FSS and all inquiries made by FSS have been directed to the Client and/or third party personnel responsible for maintaining such information, and the data has been obtained from the Client and/or third party personnel responsible for maintaining such information.
  4. FSS procedures performed are not for the purpose of providing assurance and are limited to the findings listed above as of June 1st, 2018, Close of Business. FSS has not performed any procedures or made any conclusions for activity prior to or subsequent to June 1st, 2018, Close of Business.
  5. FSS did not, as part of the Engagement, arrive at any conclusions as to Tether’s compliance with applicable laws and regulations in any jurisdiction.
  6. FSS has assumed, without further inquiry, that the bank personnel providing the confirmations were duly authorized to provide such confirmations, and that the confirmations were correct.

Opinion: Basically, FSS is saying that they are not an accounting firm and had not performed the audit under accepted accounting guidelines. They go on to say that the balances listed are not viable or in accordance with anything. They say that they cannot back the information that they provided, nor are the procedures viable for any assurances prior to the June 1st date. In addition, as a law firm, they did not create any connection to lawful compliance with regulations and they are assuming the personnel confirmed the information that they, seem to assume.

Everyone who has ever had deal with an audit knows that the audit performed in the linked document was not a full audit. A financial audit is supposed to provide a cash balance on the balance sheet along with information on the liabilities, this was not provided as the result of this audit.

Another line in the report states: As per the letter of engagement, FSS selected the dates for balance confirmations without prior notice to or consultation with Tether.

Opinion: I find this irrationally funny, because Tether Limited hired them to perform the audit. They were well aware and ready for the law firm to perform the audit without “prior notice”.

Let’s remember that lawyers hired on by a client, like doctors, have their own Hippocratic oath to adhere to, and are forbidden by law to disclose information that may harm their clients:


I will maintain the confidence and preserve inviolate the secrets of my client, and will accept no compensation in connection with the business of my client unless this compensation is from or with the knowledge and approval of the client or with the approval of the court.


Lawyers may not reveal oral or written communications with clients that clients reasonably expect to remain private. A lawyer who has received a client’s confidences cannot repeat them to anyone outside the legal team without the client’s consent. In that sense, the privilege is the client’s, not the lawyer’s—the client can decide to forfeit (or waive) the privilege, but the lawyer cannot.

The privilege generally stays in effect even after the attorney-client relationship ends, and even after the client dies. In other words, the lawyer can never divulge the client’s secrets without the client’s permission, unless some kind of exception (see below) applies. (United States v. White, 970 F.2d 328 (7th Cir. 1992); Swidler & Berlin v. United States, 524 U.S. 399 (1998).)

An auditor that’s performing an audit as a hired third party, is not allowed to present false information about any findings in the audit. If an auditor finds anything questionable during the audit proceedings, they are required to report it or dissolve the relationship and walk away from what is considered a bad professional relationship. An Auditor provides information that can and is extracted by government agencies and is required to honestly report on any liabilities found within the scope of the audit.

In simple terms: A lawyer is paid to protect and lie for you, and auditor is not.

Final Thoughts

Opinion: So, we’ve gathered that the most recent “audit” was provided by a law firm, with ties to the holdings of Tether through Noble bank, with ties to Mt. Gox class action lawsuit through Sunlot and are all connected to Brock Pierce, the founder of RealCoin, now known as Tether Limited. Furthermore, the audit wasn’t an actual audit, as the lawyers hired by Tether limited confirmed that this was not in fact, an actual financial audit. This just all seems very incestuous and crazy to me.

Why Tether limited would go to all this trouble to prove a point isn’t beyond me. They could easily hire a third-party audit firm to provide the requested information and be done with it. They are consciously choosing not to do so by picking up a more complicated path in an effort to stifle rumors and concerns with their business operating procedures.

At the end of the day, they have a digital printing press that makes more money where (it seems) there is none. The wealth and deceit continue for Tether as long as they can keep printing more money. To print more money, they need more time. If the operations are not by the book, they will stall and continue to create more distractions and buy more time.

I hope you enjoyed reading this article. I must admit there is a lot of information out there with Tether and all the players. There are some valuable sites and accounts which dedicate themselves to unraveling Tether as a whole. My intention was to bring you some interesting facts and information that is readily accessible by anybody, but most importantly, as a writer, I hope to inspire you to think more and question everything.