Tether (USDT) would lack transparency on Proof of Reserves (PoR). This is a position that favors a suspicion of Ponzi fraud. In any case, this is what some observers think, such as John Reed Stark, a former official of the SEC.
Tether (USDT), too discreet about its Proof of Reserves?
On December 2, Reeve Collins, co-founder of Tether (USDT), appeared on CNBC’s Squawk Box. Asked about the Proof of Reserves, he remains evasive. As a reminder, this proof is part of a verifiable audit procedure that helps improve the transparency of an exchange’s cryptocurrency reserves. John Reed Stark, a former SEC official, was highly critical of Collins’ attitude. The response to reporters, he says, makes him believe in a Ponzi scheme.
John Reed Stark served as an enforcement attorney with the SEC for fifteen years. He has led projects and investigations in addition to having developed measures relating to cybersecurity. In reaction to this interview on CNBC, he explains on Twitter : “In my humble opinion, as an 18-year-old former SEC enforcement officer, the evasion/diversion/lack of responsiveness makes me believe Tether is a house of cards.”
Build consumer confidence
The implosion of FTX sent a wave of panic through the cryptosphere. For some investors, this event altered their perception of the ecosystem. For crypto companies and exchanges, regaining consumer trust becomes urgent. Although this turns out to be insufficient, remaining transparent about its financial state would already give investors confidence. Circle (USDC) for example, one of the main competitors of Tether (USDT), has always been transparent about its reserve funds.
This strategy allows it to easily attract investors, unlike Tether which sows doubt in the minds of consumers. Tether has never shown its reserves to the public since its creation more than eight years ago. The company occasionally releases a few numbers, but its overall accounting remains a mystery.
The Proof of Reserves allows to certify that an exchange holds enough cryptocurrencies to cover the deposits and withdrawals of its customers. This method aims to establish a relationship of trust between investors and exchanges although it is not 100% reliable.
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