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1/16) Congratulations @bitfinex !



THREAD: @Tether_to 's risk is completely misunderstood and underestimated. Here is a scenario which is not unlikely to happen, we hope it won't.
2/16) There is a 5 step playbook that has played out many times before that could see Tether potentially lose everything. The biggest risk with Tether was NEVER that they didn’t have enough funds. The risk was regulatory.
3/16) 𝗦𝘁𝗲𝗽 1 - 𝗚𝗮𝘁𝗵𝗲𝗿 𝗜𝗻𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻

Currently, the NYAG is pursuing an investigation of fraud. But this may just be the tip of the iceberg. If US authorities have decided to target Tether, this could just be an exploratory probe.
4/16) Alternatively, the information obtained by the NYAG could reveal information that convinces authorities to target Tether even if they were not planning to do so before.
5/16) 𝗦𝘁𝗲𝗽 2 - 𝗦𝗵𝗼𝘄 𝘁𝗵𝗮𝘁 𝗨𝗦 𝗥𝗲𝘀𝗶𝗱𝗲𝗻𝘁𝘀 𝗪𝗲𝗿𝗲 𝗜𝗻𝘃𝗼𝗹𝘃𝗲𝗱

If US authorities can demonstrate that any US residents were customers of Bitfinex or Tether, they can reserve the right to pursue legal action, anywhere in the world.
6/16) They will typically join forces with law enforcement from around the world. We have seen this play out many times before. Examples:
7/16)
Pre-crypto Example: Liberty Reserve in Costa Rica:
bbc.co.uk/news/technolog…

Crypto Example: BTC-E in Greece and other countries:
coindesk.com/btc-e-connecte…
8/16) 𝗦𝘁𝗲𝗽 3 - 𝗖𝗶𝘃𝗶𝗹 𝗙𝗼𝗿𝗳𝗲𝗶𝘁𝘂𝗿𝗲
This US policy allows law enforcement to seize funds suspected of being involved in a crime, and the burden of proof is not on the government -the money is considered guilty until proven innocent.
9/16) Some people call this “seize first, argue later”. Funds can be seized without necessarily charging the owners with wrongdoing.
10/16) US authorities can seek to freeze or confiscate assets held by Tether or Bitfinex at their bank Deltec, in the Bahamas. This is similar to the way funds were seized from Liberty Reserve in Costa Rica.
11/16) 𝗦𝘁𝗲𝗽 4 - 𝗣𝗿𝗼𝘃𝗲 𝗬𝗼𝘂 𝗮𝗿𝗲 𝗡𝗼𝘁 𝗚𝘂𝗶𝗹𝘁𝘆
If funds are seized, business for Bitfinex and Tether would stop and they'd have to defend themselves and prove that the funds were not involved in illegal activity - without funds to pay legal fees.
12/16) 𝗦𝘁𝗲𝗽 5 - 𝗣𝗿𝗮𝘆
Finally, customer of Tether would need to prove that the funds belong to them - and if successful, wait for the funds to be returned.
13/16) How long could that take? MT.Gox happened 5 years ago and the clock is still ticking. But that’s a different situation and different country.
14/16) A more similar situation occurred during Poker Black Friday in 2011. Online poker was a huge business, millions of users, TV deals, totally mainstream.

On 04/15/11 the feds shut down the entire industry overnight - and seized $3b in funds.

pokernews.com/news/2016/04/b…
15/16) For many people this was unimaginable. This was their savings, their livelihoods.

These people were promised their funds back… but many of them are still waiting.
pokertube.com/article/absolu…
16/16) We are huge believers in #stablecoins, but they are terribly misunderstood. There are many risks to users. We can and must provide users with tools that will protect them from these risks - even if they are unaware of them.
h/t 🎩 @EdanYago
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