The Reddit effect is a very powerful and well documented one that can bring change and influence thousands of people. Essentially, once anything goes trending on Reddit, in this case crypto related, it’s pretty much game over.

A user on r/cryptocurrency, u/Toyake, recently posted about Tether sneakily updating their website claiming Tether (USDT) is no longer backed by 1 USDT for every 1 USD in cash reserves.

Tether’s website now says the following about USDT:

In the past, Tether stated that 1 USDT was backed by 1 USD in reserves. Now they are openly admitting that they send funds to Bitfinex. Furthermore, USDT is no longer officially backed 100% by USD.

Tether has been an ongoing problem for a while and many people are personally waiting for its implosion before investing any sizeable capital back into this space. The risks severely outweigh the costs.

With that in mind,u/Toyake, has noticed after saying the link to Tether’s “proof of funds leads to a dead page”, has now silently been brought back up. This is a perfect example of damage control and what a community can bring by voicing their concerns.

Tether Has Never Provided an Official Audit

Despite advertising for years that Tether has had regular third party audits, Tether has never once provided an official audit.

On June 20, 2018, Tether posted a “Tether Transparency Update”.

The FFS report addressed several allegations and stated that the release of financials was intended to directly address large criticisms of the platform that have surfaced.

FSS is not an accounting firm and did not perform the above review and confirmations using Generally Accepted Accounting Principles. Law firms do not give audits and the fact Tether is using this report to add legitimacy shows they are just trying to do that, look legitimate. However, nothing is actually being proven here.

Furthermore, FFS which is co-founded by ex FBI Director Louis Freeh, merely published data gathered from Tether’s accounts at two different banks, which the firm had access to.

In another tweet following Tether’s “Transparency Update” on June 20, 2018, Tether had to say this.

“Earlier this year Tether engaged Freeh, Sporkin & Sullivan LLP (FSS) to review bank account documentation and to perform a randomized inspection of the numbers of Tethers in circulation and the corresponding currency reserves.”

The report which can be viewed here, merely just showed a snapshot of 3 pages and provided bank account balances of $2.54 billion.

Tether Says an Official Audit “Cannot be Obtained”

Stuart Hoegner, Tether’s general counsel, said in a phone interview on June 18, 2018 the following statement.

“The bottom line is an audit cannot be obtained”.

The actual bank accounts that were examined by FFS, were not disclosed either “due to privacy concerns”.

Contrary to popular opinion from large news outlets, Tether has never actually been officially audited, nor has it even been deemed possible by Tether’s general counsel.

Furthermore, the FFS report is not an official audit, rather an examination of bank account balances over a two week period. Law firms do not give audits and the FSS is not an accounting firm and did not perform the review and confirmations using Generally Accepted Accounting Principles.