One of the biggest mysteries in crypto revolves around token issuer Tether. Crypto enthusiasts—and crypto journalists— have long tried to figure out exactly what hard assets comprise the massive reserves that tether, as a “stablecoin,” is required to keep its dollar for dollar ratio in backing bitcoin with American dollars. The question is not academic. Tether has more than $78 billion worth of tokens in circulation and is by far the largest stablecoin issuer, accounting for about half of all transactions against bitcoin on centralized exchanges.
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If the market began to question the stability of those dollar reserves—or even their existence, as some have in the past — the reverberations would echo throughout the entire crypto world.
That’s the backdrop for a nasty little inside baseball spat that has emerged over the past few months between CoinDesk, the largest publisher of crypto news, and Tether. Technically, the fight is between CoinDesk and the New York Attorney General’s office, but in reality, the interested parties are CoinDesk and Tether.
That’s because Tether’s parent company iFinex settled a case brought by the New York Attorney General Letitia James last year against Tether and its sister company Bitfinex, an exchange that is also owned by iFinex. When the case was settled, the Attorney General said that “Bitfinex and Tether recklessly and unlawfully covered up massive financial losses to keep their scheme going and protect their bottom lines.”
The settlement required Bitfinex and Tether to submit quarterly statements detailing the assets backing the stablecoin. Tether is of the opinion that that backing includes closely guarded, non-public internal records that should not be subject to the freedom of information law request filed by CoinDesk.
Tether won the first round but CoinDesk appealed and seems to have won that appeal. Tether is now challenging that appeal. Today, it filed a document with the Attorney General’s office claiming that releasing the details of its balance sheet would “tilt the competing playing field against Tether.”
Tether claims in its filing that it is only required to disclose publicly the broad strokes “such as a breakdown of its reserves by category.” It maintains that “particular investment details” may be “disclosed privately to the New York Attorney General.”
Fascinatingly, Modern Consensus seems to have been dragged into this story through the back door. Our site’s founding editor Lawrence Lewitinn is now the Managing Editor for Global Capital Markets at CoinDesk, as well as one of the anchors of CoinDesk’s “First Mover” internet program.
In its filing, Tether notes how “CoinDesk complains that a Tether executive posted on Twitter a ‘meme mocking CoinDesk’s Request.’” But the company says “it is difficult to take CoinDesk’s umbrage seriously when one of its top ‘journalists,’ managing editor Lawrence Lewitinn has repeatedly used Twitter to baselessly disparage Tether. For example, in May 2019, Mr. Lewitinn called Tether “the slowest train wreck ever”—the market cap of USDT has since then exploded by nearly 40 times—and in July 2021 posted a Tweet suggesting that Tether’s backing, despite verification from independent accountants, “isn’t there.” This unprofessional behavior, combined with CoinDesk’s glaring conflict of interest, should make clear that CoinDesk’s professed claims to journalistic standards and neutrality are nonsense.”
Yes, they put the word journalists in scare quotes. Like, grow up. The charge of a “glaring conflict of interest” seems to be based on the notion that CoinDesk’s parent company, DCG, is an investor in Circle, a quasi competitor to Bitfinex.
The idea that a publication needs to meet some sort of objective “journalistic standards and neutrality” in order for its FOIL requests to be honored is novel at best and chilling at worst. As I’ve previously opined, “all media outlets have a point of view and as long as they’re written and edited by human beings, that will continue to be the case.” The FOIL laws exist so that all government activity can be more transparent, not just that activity that is being covered by a favored media outlet.
But Tether is taking this idea a step further. The company seems to want itself to be the arbiter. Even if Lewitinn and CoinDesk are hopelessly biased against Tether, the idea that Tether itself should decide which journalists are “professional” enough to view its dealings with a state official is ludicrous.
There is no doubt that Lewitinn has a longstanding fascination—some would call it an obsession—over the extreme value Tether places on secrecy. He wrote that first tweet when he worked at Modern Consensus and has surely written a dozen more like it. But he’s also a fair and careful journalist, so Tether’s reluctance here may add to the impression that it really does have something to hide. At the very least, these endless filings—this effort to shield Tether’s secret sauce now numbers 128 exhibits—reveals that the company has little idea how to deal with financial journalists, many of whom have a net worth 1/100th of the people they cover and thus find nothing more satisfying than bringing rich douchebags down a peg.
As someone who’s dished out crisis communications advice at the highest levels and also endured plenty of embarrassing personal scandals, let me offer Tether and its parent company some free advice: Surrender. Stop fighting and publish the docs on your own site with context and narrative. They’re going to come out eventually. And the longer Tether resists the radical transparency demanded in today’s business climate, the more sinister whatever’s in those documents will seem.