Stuart Hoegner Fails to Convince Tether Doubters

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  • Stuart Hoegner, Bitfinex General Counsel, has largely failed in an attempt to convince the crypto community that Tether is 100% backed
  • Hoegner appeared on the What Bitcoin Did podcast to answer the long running claims made against the company
  • The responses didn’t seem to convince the community, whose again questioned why the company was not being audited

The general counsel of Bitfinex, Stuart Hoegner, has denied that Tether manipulates the cryptocurrency market by buying up bitcoin with unbacked USDT tokens but refused to acknowledge the need for a full independent audit. Hoegner appeared on the What Bitcoin Did podcast this week alongside Bitfinex CTO Paolo Ardoino to discuss with host Peter McCormack how Tether operates and to answer questions that have been plaguing the cryptocurrency market since 2017, but it seems his answers did not satisfy the community.

Hoegner Clarifies “The 74% Number”

Hoegner began by explaining how the minting of USDT tokens works, which was followed naturally by a discussion on how they are backed.

The short answer is yes – every tether is one hundred percent backed by our reserves, and those reserves include traditional currency and cash equivalents and may include other assets and receivables from loans made by Tether to third parties.

Hoegner then addressed “the 74% number”, which refers to a line in an affidavit he filed as part of the Bitfinex case against the New York Attorney General in 2019. In the affidavit Hoegner said that Tether “has cash and cash equivalents (short term securities) on hand totaling approximately $2.1 billion, representing approximately 74 percent of the current outstanding tethers.”

While some took this to mean that each USDT token was only backed 74%, Hoegner clarified that he meant only 74% of the minted USDT tokens were backed by the company’s assets. This is because Tether mints its tokens in batches on a regular basis and leaves them “on the shelf” until someone buys them, at which point they are then said to be backed.

Audit Issue Still Not Addressed

McCormack also sought clarification on the lacklustre proof that Tether has offered to back up its minting and asked about the lack of an audit. Hoegner was evasive on the subject and merely referred to the “good faith efforts” that Tether has made to reassure the wider world that it is a legitimate company, including a letter from a banking partner and a report from 2018 of Bloomberg looking over their bank statements.

The question of why Tether couldn’t pursue a full, independent audit of the sort undertaken by other stablecoins was not addressed.

PR Disaster?

Hoegner’s appearance may have done more harm than good however, with the overwhelming majority of the responses to the podcast being negative:

Hoegner may feel that he can do nothing right and that every attempt at placating doubters backfires, but the fact remains that until Tether is audited by an independent, trustworthy auditor there is nothing he can say that will assuage the doubters.