John Reed, a former employee in the enforcement division of the Securities and Exchange Commission (SEC), has slammed Tether for its lack of transparency.
Reed, who worked for the SEC for nearly two decades, suggested (1) in a tweet that the fact that Tether has not disclosed essential balance sheet information may indicate that the company is functioning like a "house of cards." Reed is a former employee of the SEC.
The comments were made by the former official of the Securities and Exchange Commission in response to a CNBC interview that took place on December 2, during which Tether co-founder Reeve Collins was asked to explain the company's lack of full disclosure, particularly in light of the collapse of the FTX cryptocurrency exchange. Based on Collins' response, Reed deduced that the business in question was operating as a Ponzi scheme.
“Wow, tell us Tether is running a Ponzi scheme without telling us that Tether is running a Ponzi scheme. Just listen to his answers. IMHO, as a former SEC enforcement official of 18 yrs, the evasion/deflection/lack of responsiveness makes me believe Tether is a house of cards, said the Ex-SEC."
Collins refuted that the corporation is concealing something about its reserves, claiming that the Tether's stablecoin has withstood the test of time by keeping the $1 peg. This came about in the midst of worries over the trust.
"Well, what I can say is that in the previous eight years of Tether's working history, they have always repaid every token for exactly $1. I can say that with absolute certainty". He stated, "I sold the firm at the end of 2015, and the principles have continued to operate, in my opinion, to the utmost best of their capacity, and with the finest risk mitigation strategies in the industry, it has weathered the test of time. I sold the company at the end of 2015."
In addition, Collins noted that the sector required more openness in light of the recent events surrounding FTX and BlockFi's application for bankruptcy protection.
"It's fine to ask these questions, and due to the recent failures of FTX and BlockFi and these other companies, the sector as a whole is going to become more and more transparent over the next several years. Therefore, this bodes really well for the sector as a whole going forward," he went on to say.
Notably, the attention first shifted to Tether in the aftermath of the crash that occurred in the Terra (LUNA) ecosystem, which caused a considerable amount of user assets to be lost.
Reed's Thoughts on FTX
Reed has grown critical of the management of the FTX exchange as a result of its failure, with creator Sam Bankman-Fried coming under pressure for alleged improper management of customer cash.
Reed's criticism comes as a result of the FTX collapse. Reed recently pointed (2) out that the current situation with FTX is even direr than the classic Ponzi scheme run by Bernie Madoff.
While this was going on, Reed referred (3) to non-fungible tokens, often known as NFTs, as a "huge Ponzi scheme." The former enforcement attorney referred to NFTs as "more crypto gibberish" in his assessment of them.