Former SEC official calls Tether a house of cards and a Ponzi scheme
John Reed, a former Securities and Exchange Commission (SEC) enforcement employee, has questioned the significance of Tether’s claimed lack of openness.
Reed, who worked with the SEC for almost two decades, tweeted that Tether’s inability to disclose essential information about its balance sheet may indicate the company is functioning as a “house of cards.”
In response to a December 2 CNBC interview in which Tether co-founder Reeve Collins was asked to explain the company’s lack of complete transparency, particularly in light of the collapse of the FTX cryptocurrency exchange, the former SEC official made the statements. Reed concluded, based on Collins’ statement, that the business was operating a Ponzi scheme.
Collins refuted the suggestion that the business is concealing information about its reserves, stating that Tether’s stablecoin has withstood the test of time by maintaining its $1 peg.
In the last eight years of Tether’s existence, they have always redeemed each token for precisely $1. Moreover, Collins admitted that the sector needs greater openness in light of recent occurrences with FTX and BlockFi’s bankruptcy case.
Notably, the attention initially shifted to Tether after the Terra (LUNA) ecosystem breakdown, which led to considerable consumer cash being lost.
Following the demise of the FTX, Reed has been critical of the exchange’s administration, with founder Sam Bankman-Fried being accused of mismanaging user funds. Reed said lately that the situation at FTX is worse than the famed Bernie Madoff Ponzi scam.
Reed has described non-fungible tokens (NFTs) as a “huge Ponzi scam.” The former enforcement attorney characterized NFTs as “more crypto nonsense.”