1 00:00:05,500 --> 00:00:07,900 Welcome back everyone. I am Caspian Sea. 2 00:00:07,900 --> 00:00:09,800 I'm joined as usual by my partner in crime, mr. 3 00:00:09,800 --> 00:00:11,300 Bennett Tomlin. I know he's good. 4 00:00:11,300 --> 00:00:13,700 No, I'm good going to keep moving on today. 5 00:00:13,700 --> 00:00:17,400 We're doing an episode about our favorite topic. 6 00:00:17,800 --> 00:00:23,200 Tether lately. Heather has well been making a 7 00:00:23,208 --> 00:00:26,400 lot of noise with all this contagion going on with all of 8 00:00:26,400 --> 00:00:29,100 these companies getting liquidated and going bankrupt. 9 00:00:29,800 --> 00:00:33,900 Tether has Talking about how they're totally solvent they're 10 00:00:33,900 --> 00:00:37,800 totally fine and we want to talk about a few things. 11 00:00:37,800 --> 00:00:40,600 You want to talk about their loan to Celsius that they 12 00:00:40,700 --> 00:00:43,800 supposedly over collateralized by roughly 30%. 13 00:00:45,000 --> 00:00:48,400 We want to talk about some discrepancies that we've seen in 14 00:00:48,500 --> 00:00:54,500 their transparency reports. They're at a stations and we 15 00:00:54,500 --> 00:00:58,500 want to talk about a recent interview that the group did 16 00:00:58,500 --> 00:01:00,300 that mr. Paulo Arduino. 17 00:01:00,500 --> 00:01:04,500 Did on CNBC Tech check with Deirdre Bosa. 18 00:01:04,800 --> 00:01:06,600 So we're going to link to that. You should watch the whole 19 00:01:06,600 --> 00:01:08,400 interview. It's only 7 minutes or so eight 20 00:01:08,400 --> 00:01:10,500 minutes, something like that. But we're going to talk about 21 00:01:10,500 --> 00:01:15,700 these three things just to kind of review where tethers at, what 22 00:01:15,700 --> 00:01:20,300 the risks remain to be and what we expect to see, I guess, kind 23 00:01:20,300 --> 00:01:23,300 of nothing crazy, but a proper review. 24 00:01:23,300 --> 00:01:28,500 So so let's get started with the the Celsius loan and liquidation 25 00:01:28,500 --> 00:01:31,500 process. So Bennett can Ahead and get us 26 00:01:31,500 --> 00:01:32,500 into that. Well, sure. 27 00:01:32,500 --> 00:01:35,700 Let's start with the most basic parts. 28 00:01:35,900 --> 00:01:40,500 Tether was the lead Equity investor in Celsius is series a 29 00:01:40,600 --> 00:01:46,300 and so is a part owner of Celsius besides this, we knew 30 00:01:46,300 --> 00:01:50,000 from the past and have talked about before on this show how 31 00:01:50,000 --> 00:01:53,100 tether extended secured loans to various other crypto companies 32 00:01:53,100 --> 00:01:57,800 including Celsius, the way these would work peers to be that 33 00:01:57,800 --> 00:02:03,200 Celsius, Babel Finance, next So whoever would put up about say 34 00:02:03,200 --> 00:02:07,000 1.3 billion dollars worth of bitcoin handed over to tether 35 00:02:07,000 --> 00:02:10,699 and tether would then extend them a loan of about a billion 36 00:02:10,699 --> 00:02:13,200 tethers at I think it was like a six percent interest rate or 37 00:02:13,200 --> 00:02:16,100 something is what mission ski said, the loan from tether was 38 00:02:16,600 --> 00:02:18,400 and then, yeah, that was the Lone. 39 00:02:18,700 --> 00:02:22,800 What ended up happening is when Celsius was having all of these 40 00:02:22,800 --> 00:02:27,500 liquidity issues, they were unable to post additional 41 00:02:27,500 --> 00:02:31,700 collateral to tether and so tether to Tekt, the value of 42 00:02:31,700 --> 00:02:35,400 their reserves which this loan was a part of supposedly was 43 00:02:35,400 --> 00:02:38,900 able to liquidate the collateral above, the face value of the 44 00:02:38,900 --> 00:02:41,400 loan and still return. Some of it to Celsius. 45 00:02:42,600 --> 00:02:47,200 This liquidation B, tether may have been what ended up putting 46 00:02:47,200 --> 00:02:50,700 some of Celsius has other loans in positions into danger. 47 00:02:51,000 --> 00:02:52,800 I think it was during the contagion episode but it might 48 00:02:52,800 --> 00:02:54,400 have been when Dirty Bubble media was on. 49 00:02:54,600 --> 00:02:57,800 We talked about how tethered liquidating this loan to Celsius 50 00:02:57,800 --> 00:03:00,300 and selling this one point three billion dollars. 51 00:03:00,400 --> 00:03:01,900 Worth of bitcoin into the market. 52 00:03:01,900 --> 00:03:04,400 May have been one of the things that was really pushing down the 53 00:03:04,400 --> 00:03:07,600 price of Bitcoin during that period where Celsius shut off 54 00:03:07,600 --> 00:03:10,100 withdrawals and ended up threatening their maker doubt 55 00:03:10,100 --> 00:03:12,300 position. Because people remember during 56 00:03:12,300 --> 00:03:15,900 that period Celsius spent a lot of that threat of having their 57 00:03:15,900 --> 00:03:19,000 maker down loan liquidated and that was a wrapped Bitcoin 58 00:03:19,000 --> 00:03:20,700 position. I know we've discussed it 59 00:03:20,700 --> 00:03:22,400 before, but can you just go over? 60 00:03:22,400 --> 00:03:24,700 What maker Dow is so that everybody is caught up here. 61 00:03:24,900 --> 00:03:27,300 Sure make, or do is a stable coin? 62 00:03:27,300 --> 00:03:30,300 That's basically based entirely around the idea of peace. 63 00:03:30,500 --> 00:03:33,600 Kind of secured loans, that tether is giving people you over 64 00:03:33,600 --> 00:03:36,500 collateralize, a position with cryptocurrency. 65 00:03:36,700 --> 00:03:39,600 So in Celsius is case they were using wrapped Bitcoin here. 66 00:03:39,700 --> 00:03:42,000 And so they put up about the same as what tether required 67 00:03:42,000 --> 00:03:46,900 about 30% over and then you get extended a loan in die which is 68 00:03:46,900 --> 00:03:50,200 a stable coin, effectively collateralized by these loans 69 00:03:50,200 --> 00:03:53,100 and then you can use that as a stable coin often. 70 00:03:53,100 --> 00:03:56,100 It's used to effectively lever up in the cryptocurrency 71 00:03:56,100 --> 00:03:58,700 ecosystem, right? You take the crypto, you own, 72 00:03:58,800 --> 00:04:01,200 you put it up as collateral so you can Keep your exposure to 73 00:04:01,200 --> 00:04:03,300 that. You get this new stable coin. 74 00:04:03,300 --> 00:04:06,300 In this case, basically the same whether it's tether or die, you 75 00:04:06,300 --> 00:04:09,200 use that to purchase more crypto or to do other crypto trading 76 00:04:09,200 --> 00:04:11,500 and things like that. And in doing so, effectively 77 00:04:11,500 --> 00:04:14,400 increase your exposure as a whole, by increasing the 78 00:04:14,400 --> 00:04:17,899 leverage in the system. So tether supposedly liquidated 79 00:04:17,899 --> 00:04:20,899 their loan and Celsius got in trouble because of it. 80 00:04:21,000 --> 00:04:24,200 Well, I think when most people consider loans, now there's the 81 00:04:24,200 --> 00:04:27,300 obvious ones that probably everyone is familiar with is a 82 00:04:27,300 --> 00:04:30,200 mortgage which are generally over collateralized. 83 00:04:30,600 --> 00:04:34,300 So you'll put down however much the home is worth. 84 00:04:34,300 --> 00:04:37,300 Let's say the home is worth a million dollars, you would put 85 00:04:37,300 --> 00:04:40,100 down ten twenty percent, something like that. 86 00:04:40,400 --> 00:04:43,900 And then the bank would extend the rest of the value of that 87 00:04:43,900 --> 00:04:46,600 home to you, with the understanding being that, you're 88 00:04:46,608 --> 00:04:49,200 going to make payments on that. For the remainder of the, it 89 00:04:49,207 --> 00:04:52,300 could be 15 years, 30 years, who knows you're going to pay that 90 00:04:52,300 --> 00:04:54,400 out. And if you don't, if you stop 91 00:04:54,400 --> 00:04:56,800 paying their going to take your house from you, and so now they 92 00:04:56,800 --> 00:04:58,600 have over collateralized that loan. 93 00:04:59,200 --> 00:05:02,900 But normally Loans are not necessarily over collateralized. 94 00:05:02,900 --> 00:05:05,000 If we're talking about business loans, if we're talking about 95 00:05:05,000 --> 00:05:08,000 personal loans, if we're talking about a lot of different loans, 96 00:05:08,100 --> 00:05:09,900 they're not actually over collateralized their 97 00:05:09,900 --> 00:05:12,500 collateralized to some degree. Right? 98 00:05:12,700 --> 00:05:17,600 When I think of most loans, either it's unsecured or the 99 00:05:17,600 --> 00:05:20,900 individual genuinely does not have the capital necessary to 100 00:05:20,900 --> 00:05:23,300 over collateralize alone. So, when you're talking to me 101 00:05:23,300 --> 00:05:26,300 about all this over collateralization, the only 102 00:05:26,300 --> 00:05:29,500 other example in my head, where over collateralization is the 103 00:05:29,500 --> 00:05:31,700 norm. Which is like margin trading. 104 00:05:31,800 --> 00:05:34,400 You know, leverage trading, options, trading, that kind of 105 00:05:34,400 --> 00:05:36,900 thing. It's like, oh, this is these are 106 00:05:36,900 --> 00:05:40,900 prime examples of when you need to be over collateralized 107 00:05:40,900 --> 00:05:44,100 because the broker might need to call it in and take everything. 108 00:05:44,500 --> 00:05:48,200 And so it sounds to me like you're suggesting, that's what 109 00:05:48,200 --> 00:05:50,600 this over collateralization is all about. 110 00:05:50,600 --> 00:05:53,200 It's all about Levering up, Levering up. 111 00:05:53,300 --> 00:05:54,500 Yes. So I think you made a couple of 112 00:05:54,500 --> 00:05:58,100 points of them and then dissect a little bit like a revolving 113 00:05:58,100 --> 00:06:01,200 line of credit extended to a business is not Necessarily 114 00:06:01,200 --> 00:06:04,600 collateralized, but in many cases will be by, for example, 115 00:06:04,600 --> 00:06:07,600 partial ownership, some amount of equity in that business 116 00:06:07,600 --> 00:06:10,400 itself and we're saying over collateralized. 117 00:06:10,400 --> 00:06:14,100 But we really shouldn't be and we talked about this back. 118 00:06:14,100 --> 00:06:17,900 When Francis Coppola was on back at like episode 20, the bank of 119 00:06:17,900 --> 00:06:20,300 international settlements, basically says that, 120 00:06:20,300 --> 00:06:23,700 cryptocurrency is too volatile to be used as loan collateral 121 00:06:23,700 --> 00:06:26,100 because you can't be confident that you're going to be able to 122 00:06:26,108 --> 00:06:28,400 liquidate it, right. And like we've seen with a whole 123 00:06:28,400 --> 00:06:30,300 bunch of these loan platforms that were exposed. 124 00:06:30,400 --> 00:06:33,200 Three hours capital, and all these other ones, that many of 125 00:06:33,207 --> 00:06:36,200 them, despite the loan initially appearing, adequately 126 00:06:36,200 --> 00:06:38,300 collateralized. When they went to liquidate, 127 00:06:38,300 --> 00:06:41,500 there was not adequate liquidity for that loan to actually be 128 00:06:41,900 --> 00:06:45,100 adequately collateralized that even appears to be what's going 129 00:06:45,100 --> 00:06:47,900 on with the coin Flex, Roger ver dispute, right? 130 00:06:47,900 --> 00:06:49,700 That when they finally liquidated the collateral, in 131 00:06:49,707 --> 00:06:52,100 his Futures account, they ended up with a deficit because they'd 132 00:06:52,100 --> 00:06:54,000 extended too much to him, effectively. 133 00:06:54,200 --> 00:06:56,900 And so, we're saying over collateralized, put these are 134 00:06:56,900 --> 00:06:59,200 not really over collateralized there. 135 00:07:00,400 --> 00:07:02,700 Aged, hopefully, the bank of international settlements would 136 00:07:02,700 --> 00:07:05,000 say no, but we'll say they are for this. 137 00:07:05,200 --> 00:07:09,000 And the issue with crypto collateralized loans, like we 138 00:07:09,000 --> 00:07:11,300 kind of talked about. In our contagion issue is what 139 00:07:11,300 --> 00:07:14,500 you're leading into now is that it is generally used as a way of 140 00:07:14,500 --> 00:07:17,000 Levering up. It's trying to maintain 141 00:07:17,000 --> 00:07:19,900 exposure, to your crypto asset, and still get an asset. 142 00:07:19,900 --> 00:07:23,800 You can use to continue to trade interact and increase your 143 00:07:23,800 --> 00:07:25,500 exposure to the crypto ecosystem. 144 00:07:25,800 --> 00:07:28,100 And I think the other example that we do commonly, see that 145 00:07:28,100 --> 00:07:31,900 looks kind of similar to this. Borrowing against your stocks, 146 00:07:32,000 --> 00:07:33,500 right? Like we've seen a lot of Elon 147 00:07:33,500 --> 00:07:36,100 Musk, for example, put up a bunch of Tesla stock as 148 00:07:36,100 --> 00:07:38,100 collateral have a bank, extend him alone. 149 00:07:38,400 --> 00:07:41,900 And then that is kind of vaguely similar to what we see a lot of 150 00:07:41,907 --> 00:07:44,600 these cryptocurrency places doing on that note. 151 00:07:44,600 --> 00:07:48,400 I'm going to go ahead and jump into the actual so tether 152 00:07:48,400 --> 00:07:52,900 released a statement on July 8 and and I'm not going to read 153 00:07:52,900 --> 00:07:55,800 the whole thing but I am going to read a part of it will link 154 00:07:55,800 --> 00:07:57,500 to it. In case you want to feel the 155 00:07:57,500 --> 00:08:00,200 full Wrath of tether, and there's a couple weird. 156 00:08:00,300 --> 00:08:03,900 Things in this statement to me. But first the tether loan that 157 00:08:03,900 --> 00:08:07,400 was taken out by Celsius wasn't over collateralized Loan 158 00:08:07,500 --> 00:08:12,400 denominated in Bitcoin, at 130 plus percent and the decision to 159 00:08:12,400 --> 00:08:14,300 liquidate the collateral to cover. 160 00:08:14,300 --> 00:08:17,100 The loan was a part of the original terms of the agreement 161 00:08:17,100 --> 00:08:20,400 between the two entities and reconfirmed in writing before 162 00:08:20,400 --> 00:08:22,100 the start of the liquidation event. 163 00:08:22,500 --> 00:08:25,400 This process was carried out in a way to minimize as much 164 00:08:25,400 --> 00:08:29,300 possible any as much possible, any impact on the markets and in 165 00:08:29,300 --> 00:08:34,000 fact, Once the loan was covered, tether return to the remaining 166 00:08:34,000 --> 00:08:37,299 part to Celsius as per its agreement. 167 00:08:38,799 --> 00:08:44,500 Okay, if I have taken out a short position or a margin loan 168 00:08:44,500 --> 00:08:51,000 to buy stock and the bank margin calls, me, they take it, they 169 00:08:51,000 --> 00:08:55,000 don't send anything back. They take my collateral that 170 00:08:55,000 --> 00:08:58,700 loan is done and I've been liquidated, never will The 171 00:08:58,700 --> 00:09:01,400 Brokerage send me anything back. Help me understand why they're 172 00:09:01,400 --> 00:09:04,000 sending Capital back after. They've liquidated, a company. 173 00:09:04,200 --> 00:09:07,400 I mean, presumably because it's part of the written agreement, 174 00:09:07,400 --> 00:09:10,500 they have with Celsius. Is that after the liquidation? 175 00:09:10,500 --> 00:09:13,900 Since presumably, like their maximum loan-to-value ratio is 176 00:09:13,900 --> 00:09:17,000 at a point, well above one to one, they probably included in 177 00:09:17,008 --> 00:09:20,400 the agreement that when the liquidation is completed tether 178 00:09:20,400 --> 00:09:22,300 will send the remainder to Celsius. 179 00:09:22,300 --> 00:09:24,900 I don't think that Parts particularly unbelievable here 180 00:09:25,400 --> 00:09:28,300 but there's a more troubling aspect to this loan that I think 181 00:09:28,300 --> 00:09:32,100 we need to touch on here. And this kind of goes back to 182 00:09:32,500 --> 00:09:36,600 tether was one of the lead investors in Celsius tether. 183 00:09:36,600 --> 00:09:42,800 Owns a portion of Casillas Celsius used customer deposits 184 00:09:42,900 --> 00:09:46,700 these Bitcoin to get this loan extended in tether. 185 00:09:47,900 --> 00:09:52,900 And when the time came tether, sold customer deposits from a 186 00:09:52,900 --> 00:09:57,900 company, they own a part of into the market and just liquidated 187 00:09:57,900 --> 00:10:00,500 them protecting tethers reserves. 188 00:10:01,000 --> 00:10:04,700 But selling the customer deposits of a company that 189 00:10:04,700 --> 00:10:10,400 tether partially owns. That is a Morally challenging 190 00:10:10,400 --> 00:10:14,700 position to be in and I think that's a detail that hasn't 191 00:10:14,700 --> 00:10:17,500 gotten as much attention yet in this story. 192 00:10:17,500 --> 00:10:20,400 Is that like the fact that tether extended the loan in the 193 00:10:20,400 --> 00:10:23,200 first place and was willing to basically take these customer 194 00:10:23,200 --> 00:10:25,600 deposits from Celsius and do this and give them this loan 195 00:10:25,600 --> 00:10:28,600 that they knew could be liquidated itself has problems, 196 00:10:29,100 --> 00:10:32,600 but then that they actually did liquidate it and sell these 197 00:10:32,600 --> 00:10:35,300 customer Bitcoins that had been extended to them by Celsius, 198 00:10:35,500 --> 00:10:40,400 feels real, bad morally. Yeah, that's pretty ambiguous 199 00:10:40,400 --> 00:10:43,400 but I would say, from a business perspective, I am like, okay, 200 00:10:43,400 --> 00:10:46,600 well obviously they're going to do that before you move on from 201 00:10:46,600 --> 00:10:48,800 this, I do have a couple of other thoughts on this loan 202 00:10:49,200 --> 00:10:51,200 before this episode comes out another episode. 203 00:10:51,200 --> 00:10:53,600 We recorded just a couple days ago will be out in which we 204 00:10:53,600 --> 00:10:57,700 discuss a lawsuit filed by Jason Stone against Celsius in it. 205 00:10:57,700 --> 00:11:00,800 He alleges the original loan from together to Celsius was 206 00:11:00,800 --> 00:11:04,200 effectively a bailout for Celsius because they had ended 207 00:11:04,200 --> 00:11:06,500 up in solvent by not appropriately accounting for 208 00:11:06,500 --> 00:11:11,300 user funds and using user funds to This is not the only time 209 00:11:11,300 --> 00:11:13,200 together has been accused of doing this. 210 00:11:13,500 --> 00:11:15,900 In December of twenty twenty. Decrypt ran an article 211 00:11:15,900 --> 00:11:19,200 discussing a whistleblower allegation about Babel Finance, 212 00:11:19,500 --> 00:11:21,900 another crypto lending platform at the time that was really 213 00:11:21,900 --> 00:11:25,300 popular in China. This platform had supposedly 214 00:11:25,300 --> 00:11:29,500 taken customer deposits had, begun trying to lever up using 215 00:11:29,500 --> 00:11:33,900 them to trade and payout higher yields, when they ended up in a 216 00:11:33,900 --> 00:11:37,300 position within adequate liquidity, tether stepped, in 217 00:11:37,500 --> 00:11:39,500 bailed them out. And kept them going. 218 00:11:40,700 --> 00:11:44,100 And I think this kind of points to something we've discussed for 219 00:11:44,100 --> 00:11:48,800 years at this point, which is that tether is not just a dollar 220 00:11:48,800 --> 00:11:51,400 Peg. Token together is not just its 221 00:11:51,400 --> 00:11:54,600 market cap. Tether is like this integral and 222 00:11:54,600 --> 00:11:59,400 in jewess part of the crypto industry that gets in and is 223 00:11:59,400 --> 00:12:01,600 connected to so many other pieces. 224 00:12:01,800 --> 00:12:05,400 So we're talking about all this kind of in sexual stuff. 225 00:12:05,400 --> 00:12:08,400 All of this weird backing secured loan. 226 00:12:09,000 --> 00:12:12,500 And Paolo went on with Deirdre, and she asked a lot of these 227 00:12:12,500 --> 00:12:16,000 questions directly to him. Let's start talking about some 228 00:12:16,000 --> 00:12:19,100 of the main points that stuck out the most to us. 229 00:12:19,500 --> 00:12:22,700 Where do we want to start? I would be nervous going on. 230 00:12:22,700 --> 00:12:25,400 CNBC right? Like people, get nervous going 231 00:12:25,400 --> 00:12:28,200 on major Network TV. Let's, let's not read too much 232 00:12:28,200 --> 00:12:30,600 into his tone and focus more on like his words. 233 00:12:31,000 --> 00:12:32,500 Let's start at one specific place. 234 00:12:32,500 --> 00:12:36,600 I got a starting point is a year ago when stew and Paulo went on 235 00:12:37,000 --> 00:12:42,300 Stu said Wendy asked for the timeline that the audit would be 236 00:12:42,300 --> 00:12:45,900 coming in months. If not years, when Paula was 237 00:12:45,900 --> 00:12:49,200 recently on, he was asked follow-up questions about that 238 00:12:49,200 --> 00:12:52,900 audit. He said that they currently had 239 00:12:52,900 --> 00:12:57,900 a big 12 auditor performing the audit, which is not a term that 240 00:12:58,300 --> 00:13:02,100 everyone knows this. There are four big auditing 241 00:13:02,100 --> 00:13:04,600 firms. It is called the Big Four. 242 00:13:04,600 --> 00:13:07,500 It used to be the big five used to be the big 8. 243 00:13:07,500 --> 00:13:10,200 There have been different Moments in time where there were 244 00:13:10,200 --> 00:13:14,600 more of these Auditors than now. But right now, it's four of 245 00:13:14,600 --> 00:13:17,300 them. It's Ernst & Young, it's KPMG. 246 00:13:17,300 --> 00:13:20,400 It's Deloitte and pricewaterhousecoopers. 247 00:13:20,400 --> 00:13:25,100 So those are your big for big 12 is not a fucking thing. 248 00:13:25,500 --> 00:13:28,300 It's not a real fucking thing. It's totally made up. 249 00:13:28,300 --> 00:13:30,800 And, and, and I'm mentioning this. 250 00:13:30,800 --> 00:13:35,200 And I'm so glad Deirdre called this out because he's been 251 00:13:35,200 --> 00:13:38,400 repeating it all over the place. He's saying we've got a big 252 00:13:38,400 --> 00:13:39,200 problem. Twelve auditor. 253 00:13:39,200 --> 00:13:43,600 We've got a top 12 auditor there isn't such a thing, there's no 254 00:13:43,600 --> 00:13:47,100 such thing, stop, listen saying that. 255 00:13:48,000 --> 00:13:51,200 I'm sure there is some list that this auditor was ranked number 256 00:13:51,200 --> 00:13:52,800 12 on. And that's what, who fucking 257 00:13:52,800 --> 00:13:54,900 cares. I don't know where the list is, 258 00:13:54,900 --> 00:13:57,600 but it probably exists. So yeah, thanks said, they hired 259 00:13:57,600 --> 00:13:59,400 a big 12 auditor which first of all. 260 00:13:59,400 --> 00:14:01,700 Let's pause for a second. Even among the big four 261 00:14:01,700 --> 00:14:05,500 Auditors, there is a wide range of quality and diligence among 262 00:14:05,500 --> 00:14:09,000 their franchises, right? Like the u.s. domicile, Ones 263 00:14:09,200 --> 00:14:12,900 which still have quite a few ethical and other problems. 264 00:14:12,900 --> 00:14:15,900 This is it. They're so impressed Aces so 265 00:14:15,900 --> 00:14:19,600 important because she asked if they reached out to the big four 266 00:14:19,700 --> 00:14:21,600 and his response wasn't. Yes. 267 00:14:21,600 --> 00:14:24,700 We did. His response was yes in certain 268 00:14:24,700 --> 00:14:25,900 jurisdictions. Yeah. 269 00:14:25,900 --> 00:14:29,700 And so even across the like different jurisdictions, you'll 270 00:14:29,700 --> 00:14:33,100 see a wide variance in the diligence and quality of the 271 00:14:33,100 --> 00:14:35,600 audit, the China hustle, which we've talked about before, kind 272 00:14:35,600 --> 00:14:40,900 of gets into how the big Force. Franchises were auditing numbers 273 00:14:40,900 --> 00:14:45,100 that were completely untethered. From reality Paolo, says that 274 00:14:45,100 --> 00:14:48,900 they discussed with the big four, but did not like ever 275 00:14:48,900 --> 00:14:50,600 engage with the big for the big four. 276 00:14:50,600 --> 00:14:53,700 Our not auditing together in any jurisdiction. 277 00:14:53,700 --> 00:14:57,700 They're scared, they're scared of auditing cryptocurrencies. 278 00:14:58,000 --> 00:15:00,200 That's that was the claim. They're scared of auditing 279 00:15:00,200 --> 00:15:03,300 cryptocurrency. Companies not not they're scared 280 00:15:03,300 --> 00:15:06,000 of auditing tether. In particular which is a 281 00:15:06,000 --> 00:15:07,800 probably a lot closer to the truth. 282 00:15:08,800 --> 00:15:11,200 They're scared of auditing cryptocurrencies in general, 283 00:15:11,200 --> 00:15:13,200 which again, Deirdre paused on and said. 284 00:15:13,700 --> 00:15:15,500 Sorry, what did you say? They're scared. 285 00:15:15,800 --> 00:15:18,500 And he was like, yeah, it's queer like, was about okay. 286 00:15:18,500 --> 00:15:21,300 That many Auditors were afraid of the reputation risk of 287 00:15:21,300 --> 00:15:24,400 working for tether, and especially of signing off on 288 00:15:24,400 --> 00:15:26,500 their current books. But, like, that's another 289 00:15:26,500 --> 00:15:29,700 important thing to remember is they're saying top 12, which is 290 00:15:29,700 --> 00:15:32,500 already not a thing wrong with eight below, what people 291 00:15:32,500 --> 00:15:35,000 actually consider the top. And depending on what 292 00:15:35,000 --> 00:15:38,900 jurisdiction, that top 12 is operating in their He'll be a 293 00:15:38,900 --> 00:15:41,100 massive variation, even for that own, right. 294 00:15:41,100 --> 00:15:42,900 How did her among their different franchises? 295 00:15:42,900 --> 00:15:45,200 Right? Like if for example, there 296 00:15:45,200 --> 00:15:48,000 London office is generally considered pretty passable 297 00:15:48,200 --> 00:15:51,000 there, for example. Cayman Islands office might not 298 00:15:51,000 --> 00:15:54,900 have that same reputation. Hypothetically just saying not 299 00:15:54,900 --> 00:15:58,300 that I'm suggesting that. But they have a top 12 auditor, 300 00:15:58,300 --> 00:15:59,500 but they can't tell us who it is. 301 00:15:59,500 --> 00:16:01,800 Because if they tell us cast and I are going to call them in, 302 00:16:01,800 --> 00:16:04,100 annoy the auditor and then, the auditor will stop working for 303 00:16:04,100 --> 00:16:06,600 tether which, by the way, I want to make this clear and I don't 304 00:16:06,600 --> 00:16:08,700 know, maybe been at you have a different, you may Be of a 305 00:16:08,708 --> 00:16:11,200 different experience. I never have called any of 306 00:16:11,200 --> 00:16:13,800 tethers Auditors. Never in my life, I've never 307 00:16:13,800 --> 00:16:15,900 planned. I've never been to imagine other 308 00:16:15,900 --> 00:16:18,700 journalists have, like, as part of writing articles, back, when 309 00:16:18,700 --> 00:16:20,500 Friedman was supposedly, auditing them. 310 00:16:20,800 --> 00:16:24,600 I imagine journalists have called the auditor to ask. 311 00:16:24,600 --> 00:16:28,200 Are you performing an audit? And I imagine that's a normal 312 00:16:28,200 --> 00:16:30,100 thing. That Auditors have to deal with 313 00:16:30,100 --> 00:16:33,100 is journalists or other people calling and asking about a 314 00:16:33,108 --> 00:16:35,100 company. It seemed like a pretty normal 315 00:16:35,100 --> 00:16:38,400 part of the job. Imagine most auditing. 316 00:16:38,600 --> 00:16:41,100 You're not going to tell people a bunch of details over the 317 00:16:41,100 --> 00:16:42,900 phone. The most will probably do if 318 00:16:42,900 --> 00:16:44,500 it's already public. Knowledge is go. 319 00:16:44,500 --> 00:16:46,500 Yes we can't. Confirm so-and-so is one of our 320 00:16:46,500 --> 00:16:49,200 clients but we don't discuss ongoing engagements beyond that, 321 00:16:49,200 --> 00:16:50,500 right? It's not like the Auditors are 322 00:16:50,500 --> 00:16:53,200 going to suddenly start going over the phone to a journalist. 323 00:16:53,300 --> 00:16:55,400 Oh yes, we're auditing them. They have this match of this 324 00:16:55,400 --> 00:16:57,200 security. This much of this security. 325 00:16:58,800 --> 00:17:00,900 Yes, here's the audit. It's right in front of me. 326 00:17:01,300 --> 00:17:04,300 There is claiming that the reason they can't tell us who's 327 00:17:04,300 --> 00:17:07,900 doing the audit is because the auditor will no longer do it. 328 00:17:07,900 --> 00:17:13,700 If people Know who's doing it. Which is like this is bitfenix 329 00:17:13,700 --> 00:17:15,200 and tethers banking all over again. 330 00:17:15,200 --> 00:17:17,400 Where I can't tell you where we bank, because if we tell you 331 00:17:17,400 --> 00:17:19,700 where we Bank, the bank accounts will get shut down right. 332 00:17:19,700 --> 00:17:21,700 And I didn't I didn't let you get to the last part of this, 333 00:17:21,700 --> 00:17:24,800 which is funny to me that after saying, you know, they're 334 00:17:24,800 --> 00:17:26,500 getting audited. They're definitely, they're 335 00:17:26,500 --> 00:17:27,900 ready. They're all lined up and it's 336 00:17:27,900 --> 00:17:31,300 ready to get done. Now, this this audit from a big 337 00:17:31,300 --> 00:17:35,000 Club auditor, what's the? Which means they must know who 338 00:17:35,000 --> 00:17:37,300 the auditor is, right? Like if they're describing them 339 00:17:37,300 --> 00:17:41,500 as Big 12, they must exist in be top 12 on a Somewhere. 340 00:17:41,600 --> 00:17:45,200 So they it has to like exist as an engagement or they're just 341 00:17:45,200 --> 00:17:48,600 flat out lying. Right so okay fine. 342 00:17:48,700 --> 00:17:51,400 They've engaged with this auditor but a year ago they said 343 00:17:51,400 --> 00:17:56,000 it was a few months away. And this time when asked, if 344 00:17:56,100 --> 00:18:01,000 this would be a few months away years, Paulo said, I don't know. 345 00:18:01,700 --> 00:18:03,800 I just don't, I don't know what to say about this. 346 00:18:03,800 --> 00:18:07,400 It's the blind leading, the blind over their tether. 347 00:18:07,400 --> 00:18:10,300 I don't know how you go on National Television. 348 00:18:10,400 --> 00:18:12,900 Television International television and you're not 349 00:18:12,900 --> 00:18:16,300 prepared to answer pretty simple questions like that, you know, 350 00:18:17,500 --> 00:18:21,700 well and like what keeps your token Tethered to the dollar and 351 00:18:22,400 --> 00:18:25,700 and and that's so we'll move on from the interview because I 352 00:18:25,708 --> 00:18:27,700 think we touched on kind of the most is there. 353 00:18:27,700 --> 00:18:29,700 Another part that you think particularly sticks out to you 354 00:18:29,700 --> 00:18:32,100 before we move on? No, not particularly. 355 00:18:32,100 --> 00:18:35,700 The one part that I do want to draw attention to is that 356 00:18:35,700 --> 00:18:40,000 Deirdre ask Paolo if their asset management was handled by an 357 00:18:40,000 --> 00:18:42,300 external. Firm that manage their reserves 358 00:18:42,300 --> 00:18:46,400 for them and Paolo said, no, it was entirely internal. 359 00:18:46,600 --> 00:18:50,700 So that means our friends Silvio di Stefano who's named tether is 360 00:18:50,700 --> 00:18:54,800 suing to keep a secret must be managing an incredible team of 361 00:18:54,800 --> 00:18:58,000 traders who pull off miraculous stunts on a daily basis. 362 00:18:58,000 --> 00:19:02,100 And this gets us into finally the last part of our update 363 00:19:02,200 --> 00:19:05,900 which is that. Now again you can listen to all 364 00:19:05,900 --> 00:19:07,600 of our old episodes about tether. 365 00:19:07,700 --> 00:19:10,300 I think we've done four or five at this point. 366 00:19:10,400 --> 00:19:14,200 Ain't So quite a few episodes about them specifically and 367 00:19:14,200 --> 00:19:19,600 there's a couple hours worth of listening there but lately we've 368 00:19:19,600 --> 00:19:23,500 noticed in their transparency there at a stations that were 369 00:19:23,500 --> 00:19:24,700 forced upon them. By the way. 370 00:19:24,700 --> 00:19:27,000 These aren't they're not doing this willingly, they don't like 371 00:19:27,000 --> 00:19:29,800 doing it. It was they are forced to 372 00:19:29,800 --> 00:19:33,400 quarterly do at a stations that they have to show to the public. 373 00:19:33,400 --> 00:19:35,400 Don't get confused. Don't let them pretend they're 374 00:19:35,400 --> 00:19:38,800 doing this to be the kings of unrivaled transparency. 375 00:19:39,100 --> 00:19:40,800 They're doing it because the New York attorney, Instead, if you 376 00:19:40,808 --> 00:19:43,600 don't do this, you're fucking toast Bros. 377 00:19:44,100 --> 00:19:48,400 So they decided to, you know, play by the rules at least in 378 00:19:48,400 --> 00:19:51,100 that sense. But what we've noticed is that 379 00:19:51,100 --> 00:19:53,500 their assets and we're not the only ones who have noticed this. 380 00:19:54,400 --> 00:20:00,300 Patrick Mackenzie who you can follow at patio PA TI o 11, 11 381 00:20:00,400 --> 00:20:04,000 on Twitter Patrick Mackenzie has repeatedly pointed out that 382 00:20:04,000 --> 00:20:07,600 their assets over liabilities are essentially like less than 383 00:20:07,600 --> 00:20:11,400 1% if you're a stable coin, if your assets Over liabilities dip 384 00:20:11,400 --> 00:20:14,200 below like one. If you if you get below a dollar 385 00:20:14,200 --> 00:20:18,900 of assets over liabilities, if you go to zero or negative one 386 00:20:19,100 --> 00:20:22,200 that makes you insolvent. The interesting part here is 387 00:20:22,200 --> 00:20:26,700 that tether has gone from a market cap of roughly 80 billion 388 00:20:26,800 --> 00:20:32,000 to sixty six billion tether has apparently sold all of their 389 00:20:32,200 --> 00:20:33,600 commercial paper for some reason. 390 00:20:33,600 --> 00:20:37,000 I mean it was all great. Apologies, they've sold a bunch 391 00:20:37,000 --> 00:20:39,500 of their commercial paper, which they shouldn't even be doing 392 00:20:39,500 --> 00:20:41,500 because it was such perfect. Beautiful commercial paper and 393 00:20:41,500 --> 00:20:45,200 it was hardly even a risk. They said, but to get critics 394 00:20:45,200 --> 00:20:47,000 like us to shut up. Apparently, just because of 395 00:20:47,008 --> 00:20:49,500 people like us, they're going to move away from this. 396 00:20:50,100 --> 00:20:52,000 This really beautiful commercial paper. 397 00:20:52,000 --> 00:20:54,500 That's giving them this great yield and they're going to move 398 00:20:54,500 --> 00:20:56,300 it all into us. Treasuries. 399 00:20:56,500 --> 00:21:00,700 So they're selling off all of this essentially riskier asset 400 00:21:00,700 --> 00:21:04,000 class with higher yield and selling it into a lower, 401 00:21:04,000 --> 00:21:08,200 yielding less risky asset class. Meanwhile, their market cap is 402 00:21:08,200 --> 00:21:12,200 dropping precipitously. Also let's not forget they have 403 00:21:12,200 --> 00:21:15,100 equity in Celsius which is now pretty much gone belly-up. 404 00:21:15,100 --> 00:21:17,300 I think we can all agree. It's seems like it's going to go 405 00:21:17,300 --> 00:21:20,500 bankrupt here, so they have equity and companies going. 406 00:21:20,500 --> 00:21:24,500 Bust, they've lent out to 3ac, they've lent out to Celsius. 407 00:21:24,500 --> 00:21:27,100 They've lent out to X y&z company. 408 00:21:27,100 --> 00:21:32,500 That's probably dead in the water already and yet, and yet, 409 00:21:32,500 --> 00:21:38,000 this this DeStefano guy has managed to keep their assets 410 00:21:38,000 --> 00:21:40,300 over liabilities, almost exactly. 411 00:21:40,500 --> 00:21:45,300 The same throughout all of this. It's unreal, it's unbelievable. 412 00:21:45,300 --> 00:21:49,800 It is amazing, amazing. It is literally unbelievable. 413 00:21:50,100 --> 00:21:51,300 You're right. And there's a few different 414 00:21:51,300 --> 00:21:53,400 things here. There should be a cost for them 415 00:21:53,400 --> 00:21:55,900 rolling these assets, right? The commercial paper, they've 416 00:21:55,900 --> 00:21:58,900 rolled over which we can see because the duration and the 417 00:21:58,900 --> 00:22:01,300 attestation suggest that they are still purchasing new 418 00:22:01,300 --> 00:22:04,100 commercial paper, they're rolling some portion of it and 419 00:22:04,100 --> 00:22:06,600 not just taking the cash and moving it into treasuries. 420 00:22:06,800 --> 00:22:08,600 So there's a cost associated with that. 421 00:22:08,900 --> 00:22:11,800 There's also the changing in rates environment that has been 422 00:22:11,800 --> 00:22:14,500 occurring. Like, underneath the Bonds 423 00:22:14,600 --> 00:22:17,200 commercial paper in treasuries, they own as rates have gone up 424 00:22:17,200 --> 00:22:19,400 the face value of the things they own we would expect would 425 00:22:19,400 --> 00:22:23,600 go down and their long-term Position will improve as they 426 00:22:23,600 --> 00:22:25,500 roll into the new higher-yielding stuff because 427 00:22:25,500 --> 00:22:28,700 their overall yield will go up, but the stuff they're holding as 428 00:22:28,700 --> 00:22:30,800 the rates go. Its face value goes down in 429 00:22:30,800 --> 00:22:33,500 there in potentially more challenging position to roll it. 430 00:22:33,700 --> 00:22:37,900 And so like there's several of these factors that contribute to 431 00:22:38,400 --> 00:22:40,800 and like the bond market has gotten hammered Because of the 432 00:22:40,800 --> 00:22:44,700 rising rates and bond ETFs back, part of tether, you mentioned 433 00:22:44,700 --> 00:22:49,600 Celsius Equity, infinite Fleet Equity from Samson Mi little 434 00:22:49,600 --> 00:22:51,500 game. You mentioned the loans to 435 00:22:51,500 --> 00:22:52,700 Celsius. We don't actually know if they'd 436 00:22:52,700 --> 00:22:56,000 blown 23 AC we just know 3 AC was getting a bunch of tethers 437 00:22:56,000 --> 00:22:58,600 issued to them. We do know that they had in the 438 00:22:58,600 --> 00:23:01,600 past at least issued loans to babble Finance which is another 439 00:23:01,600 --> 00:23:03,900 lending platform that shut off withdrawals. 440 00:23:03,900 --> 00:23:08,400 And we have not heard that tether liquidated that loan and 441 00:23:08,400 --> 00:23:10,200 so like you're right, there's a bunch of things in here. 442 00:23:10,300 --> 00:23:14,200 Here that seemed like we would expect their value to sometimes 443 00:23:14,200 --> 00:23:18,100 change yet tether who says the update the transparency page 444 00:23:18,100 --> 00:23:21,400 every single day shows basically the exact same shareholder 445 00:23:21,400 --> 00:23:25,000 Capital cushion. This isn't the only problem with 446 00:23:25,000 --> 00:23:28,300 tethers transparency Page. By the way, we've been pointing 447 00:23:28,300 --> 00:23:30,900 out for years and one of our auditor friends also pointed 448 00:23:30,900 --> 00:23:34,300 this out for years. That the number of quarantine 449 00:23:34,300 --> 00:23:39,000 tethers described on the tether transparency, page does not 450 00:23:39,000 --> 00:23:42,900 match the number on the Block. I've added up the ones on the 451 00:23:42,900 --> 00:23:46,600 Omni blockchain before and it is millions more than they list on 452 00:23:46,600 --> 00:23:49,900 their transparency page, which gets at something we discussed 453 00:23:49,900 --> 00:23:51,300 back when we talked about the tether. 454 00:23:51,300 --> 00:23:54,100 Cftc settlement, right? Which revealed that tethers, 455 00:23:54,100 --> 00:23:58,300 record-keeping was inadequate, they were not keeping good track 456 00:23:58,300 --> 00:24:00,300 of their reserves. They were not keeping careful. 457 00:24:00,300 --> 00:24:04,300 Track of the tethers issued and redeemed against those reserves. 458 00:24:04,500 --> 00:24:09,700 And so tether has a long history of inadequate bookkeeping. 459 00:24:10,300 --> 00:24:12,800 Of suspicious numbers on these statements. 460 00:24:13,000 --> 00:24:16,600 And I think that kind of takes us back to why they've had so 461 00:24:16,600 --> 00:24:20,200 much trouble finding an auditor and like, they had hired an 462 00:24:20,200 --> 00:24:23,300 auditor who supposedly had agreed to do a full Financial 463 00:24:23,300 --> 00:24:27,600 audit way back in 2017, right? They had announced to the world, 464 00:24:27,600 --> 00:24:31,000 the name of the auditor, then when they separated from the 465 00:24:31,000 --> 00:24:34,200 auditor their excuse was, not that people were calling this 466 00:24:34,200 --> 00:24:37,700 auditor and annoying them, their excuse, was this auditor wanted 467 00:24:37,700 --> 00:24:40,200 to do excruciating. Lee detailed procedures. 468 00:24:40,700 --> 00:24:43,300 And because of that, we weren't going to go forward with it. 469 00:24:43,400 --> 00:24:45,000 That's how an audit works by the way. 470 00:24:45,300 --> 00:24:47,700 Yeah, that's how a fucking audit Works, guys. 471 00:24:47,700 --> 00:24:50,900 I don't know what to tell you. When you get audited, they go 472 00:24:50,900 --> 00:24:53,200 through your financials and like, excruciating lie. 473 00:24:53,200 --> 00:24:55,800 Especially if you're, you know, you're a bank with a dollar 474 00:24:55,800 --> 00:24:58,500 derivative essentially. Like, if that's your, if that is 475 00:24:58,500 --> 00:25:02,800 your company. Yeah, expect a rough audit to 476 00:25:02,800 --> 00:25:04,800 see what you're doing with your dollar derivative? 477 00:25:05,100 --> 00:25:09,200 Yeah, and we'll just double down in that last year when they went 478 00:25:09,200 --> 00:25:12,200 and Deirdre show. Promise, the audit stew ended up 479 00:25:12,200 --> 00:25:15,000 tweeting out something that was very strange, which said the 480 00:25:15,008 --> 00:25:21,200 audit would be coming soon that the 2018 fiscal year audit would 481 00:25:21,200 --> 00:25:25,000 be coming first and that there would be no pineapple pizza, 482 00:25:25,500 --> 00:25:30,300 their statements, which is a really weird statement for 483 00:25:30,300 --> 00:25:32,800 several reasons. One, the first auditor they 484 00:25:32,800 --> 00:25:36,600 engaged was for the 2017 Financial year, not 20 18, 485 00:25:36,900 --> 00:25:39,300 during 2018. They were engaging in a series 486 00:25:39,300 --> 00:25:41,800 of conflicted. Actions with B FedEx, involving 487 00:25:41,800 --> 00:25:44,900 hundreds of millions of dollars, moving between the two companies 488 00:25:44,900 --> 00:25:50,000 without documentation or contracts and like why in 2021 489 00:25:50,000 --> 00:25:53,000 where they promising that the first thing they were going to 490 00:25:53,000 --> 00:25:57,200 provide was the audit for 2018 and then finally, why was that 491 00:25:57,200 --> 00:25:59,100 promised a year ago? And now they're going on TV and 492 00:25:59,100 --> 00:26:01,300 saying there's no timeline and they can't even tell us who the 493 00:26:01,300 --> 00:26:03,500 auditor is. What happened to whoever was 494 00:26:03,500 --> 00:26:06,000 supposedly doing the 2018 audit a year ago? 495 00:26:06,600 --> 00:26:12,700 Why is that a question that they can't answer why 2018 I'm going 496 00:26:12,700 --> 00:26:14,800 mad. Yeah, well, for all this 497 00:26:14,800 --> 00:26:18,200 posturing that they consistently do, this is not new to us. 498 00:26:18,200 --> 00:26:20,400 We've been following the space long enough. 499 00:26:20,400 --> 00:26:24,900 That we've seen them do this a million times before, but I do 500 00:26:24,900 --> 00:26:28,900 want to say this that I think they have the same cocky, 501 00:26:28,900 --> 00:26:36,600 bullshit attitude as suzu at 3. AC Kyle Davies, at 3, AC Alex 502 00:26:36,600 --> 00:26:40,200 machine ski at Celsius. These people are broke now. 503 00:26:40,400 --> 00:26:42,600 Now and no one knows where they are. 504 00:26:43,500 --> 00:26:45,100 No one knows what's going on with them. 505 00:26:45,200 --> 00:26:49,100 Nobody's heard from these people in weeks, because as cocky and 506 00:26:49,100 --> 00:26:53,300 annoying as they were, they lost it all real fast. 507 00:26:53,400 --> 00:26:56,200 And that cocky attitude has gone, they're gone. 508 00:26:56,500 --> 00:27:01,000 And who knows? Maybe tether is being cocky 509 00:27:01,000 --> 00:27:05,000 because they're totally up to Snuff and they are going to 510 00:27:05,000 --> 00:27:07,900 prove us so wrong, with all these beautiful audits from a 511 00:27:07,908 --> 00:27:13,000 big 12 auditor, I don't think so. 512 00:27:13,400 --> 00:27:14,900 I just don't believe them anymore. 513 00:27:14,900 --> 00:27:18,600 They have lied to us about 10 times too many times for me to 514 00:27:19,000 --> 00:27:24,800 take a single word, they say as honest, they've, they have if 515 00:27:24,800 --> 00:27:27,200 nothing else proven that they won't be honest. 516 00:27:27,200 --> 00:27:31,800 Unless a government agency forces them to be slightly 517 00:27:31,900 --> 00:27:34,700 transparent, they're not going to tell you the truth. 518 00:27:34,900 --> 00:27:40,900 Don't believe their lies as my boy, in Memento would say, so I 519 00:27:41,800 --> 00:27:44,400 think that's, I wanted to do an update simply because they're 520 00:27:44,400 --> 00:27:47,100 posturing a lot lately. They're they're doing press 521 00:27:47,100 --> 00:27:49,900 releases. They're going on TV, they're 522 00:27:49,900 --> 00:27:53,600 doing the same old song and dance but it works sometimes. 523 00:27:53,600 --> 00:27:56,800 And I just want to make sure people are holding the same 524 00:27:56,900 --> 00:28:00,600 space of skepticism that they were holding before they started 525 00:28:00,600 --> 00:28:03,800 their song and dance. Again, Heather is a corporation 526 00:28:04,100 --> 00:28:06,800 full of liars and is a corporation that itself. 527 00:28:06,800 --> 00:28:09,000 Lies simple. I mean if corporations are 528 00:28:09,008 --> 00:28:13,000 people than there, you go. I guess we should take down our 529 00:28:13,000 --> 00:28:15,400 tether donation page. We've been accepting this 530 00:28:15,400 --> 00:28:18,600 donations and tether for truant either a theory. 531 00:28:18,600 --> 00:28:23,000 I'm debtors Alana Heather on on bitcoin cash. 532 00:28:23,000 --> 00:28:26,900 We only do those ones though, we don't do it on any of the other 533 00:28:26,900 --> 00:28:28,900 chains. Instead of donating, I guess you 534 00:28:28,900 --> 00:28:33,000 can hit the like or subscribe button and thanks for joining 535 00:28:33,000 --> 00:28:33,400 us.