In mid-2018, NIA published a 39 minute documentary called Decentralized Deception (click here to watch). NIA recently reposted a 9 minute clip featuring only the parts exposing the stablecoin Tether (USDT) and its relation to the original Mt Gox Willy Bot Ponzi Scheme from 2013 (click here to watch). Three weeks ago, a popular YouTube channel called Coffeezilla published their own 35 minute documentary exposing Tether (USDT) and we thought they did a very good job although they were three years behind NIA (click here to watch Coffeezilla's Tether documentary).
When NIA's Decentralized Deception was released three years ago, Tether (USDT) claimed on its homepage, "Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD." A few months after NIA's release of Decentralized Deception, Tether (USDT) changed its homepage to read, "Every Tether token is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, “reserves”). Every Tether token is also 1-to-1 pegged to the dollar, so 1 USD₮ Token is always valued by Tether at 1 USD."
On May 13, 2021, Tether (USDT) published a pair of pie charts showing the composition of its reserves. Tether (USDT) now admits that less than 3% of its $62.2 billion in reserves are held as "cash" with nearly 50% of its reserves being unsecured "commercial paper". However, if Tether (USDT) truly owned $30 billion in commercial paper, it would rank as one of the largest owners of commercial paper in the world alongside Vanguard and BlackRock. In addition, if Tether (USDT) truly held $1.8 billion in U.S. dollar cash at their Deltec Bank in the Bahamas they would have more U.S. dollars than the Central Bank of The Bahamas!
On May 25th, NIA sent out an alert entitled, 'Tether Competitor USDC Prints $6.2 BILLION in One Day'. NIA predicted in its alert, "If USDT is backed by anything it is most likely backed by Bitcoin, which is backed by USDT, which is backed by Bitcoin." NIA warned on May 25th that Circle's stablecoin USDC was beginning to look a lot like Tether (USDT) when we first became concerned about it in 2017. NIA explained, "We previously viewed USDC as a safer alternative to Tether (USDT) but it is beginning to look very suspicious and we are not sure that we can trust it".
In the summer of 2018, when 8,500 people paid $2,000-$3,000 to attend the much hyped Consensus conference in NYC, the biggest Crypto innovation announced at the event was that Circle Internet Financial, LLC would soon be launching a new U.S. dollar backed stablecoin called USD Coin (USDC). Circle was copying Tether (USDT) but promising greater transparency.
When USDC first launched in October 2018 it was fully backed by U.S. dollars held in FDIC insured custody accounts. Shortly after the end of each month, Circle's independent accounting firm Grant Thornton LLP issued a USDC attestation report that was subsequently released by Circle. For example, on April 17, 2019, Circle released its March 2019 USDC attestation report including the summary: "The report states that as of March 31, 2019 at 11:59 PM Pacific Time: USD Coin (“USDC”) tokens issued and outstanding = 246,586,876 USDC. US Dollars held in custody accounts = $246,590,714. As of the Report Date and Time, the issued and outstanding USDC tokens do not exceed the balance of the US Dollars held in custody accounts."
For the month of March 2019, when USDC had 246,586,876 tokens outstanding, Circle needed only 17 days to release its attestation report. Since then, Circle's attestation reports have taken progressively longer to release. For the month of March 2020, when USDC had 692,955,272 tokens outstanding, Circle needed 22 days to release its attestation report. For the month of March 2021, when USDC suddenly had 11,141,404,000 tokens outstanding, Circle needed 55 days to release its attestation report or 3.24X longer than two years earlier.
Circle still has not released its attestation report for May 2021, which is the month that saw a suspicious $6.2 billion USDC get printed in a single day! We will be surprised if Circle manages to release its May 2021 attestation report by the end of this month. Keep in mind, attestations are not audits... if USDC was still a fully backed stablecoin all Grant Thornton LLP would need to do is check Circle's custody account balances and confirm the amount of cash held by Circle.
When Circle finally released its March 2021 attestation report on May 25, 2021, the report had suspiciously changed from all previous USDC attestation reports! Circle removed the line from all previous reports that stated the exact amount of U.S. dollars held. The March 2021 USDC attestation report included the summary: "The report states that as of March 31, 2021 at 11:59 PM Pacific Time: USD Coin (“USDC”) tokens issued and outstanding = 11,141,404,000 USDC. US Dollars held in custody accounts are at least equal or greater than the USDC tokens outstanding at the Report Date and Time."
In addition, the criteria for what constitutes 'US Dollars held in custody accounts' had also changed! Circle's original USDC attestation reports said: "US Dollars held in custody accounts are the total balances in accounts held by the Company at federally insured US depository institutions on behalf of the USDC holders at the Report Date and Time."
Circle has now changed the criteria to: "US Dollars held in custody accounts are the total balances in accounts held by the Company at federally insured US depository institutions and in approved investments on behalf of the USDC holders at the Report Date." Circle added the phrase "and in approved investments" while removing "and Time". By making these small changes that have largely gone unnoticed, Circle has betrayed the Crypto community by turning USDC into another USDT! Their "approved investments" could be literally anything including unsecured IOUs, volatile Bitcoin, or worthless altcoins.
Yesterday, it was announced that Circle is going public through a reverse merger into a SPAC called Concord Acquisition Corp in a transaction that will value the company at $4.5 billion. For Circle to obtain this $4.5 billion valuation they somehow managed to grow their USDC stablecoin supply from $1 billion up to $26 billion over the last twelve months. How did Circle achieve this growth? There are many DeFi programs that have been offering outrageously high yields to Crypto investors willing to buy and hold USDC. Some of these firms are offering yields on USDC of up to 12% to 20% that they market as being risk free. We suspect that Circle must be offering some kind of incentive to cause these firms to pay outrageously high USDC yields. How can Circle afford to do this? Circle appears to have been secretly lending out their U.S. dollar reserves backing USDC to holders of Bitcoin who put up some of their Bitcoin as collateral. These borrowers then used the money to buy more Bitcoin or other altcoins creating a circle of leverage that fueled artificial demand for Cryptocurrencies and in the process created more demand for USDC.
In Concord Acquisition Corp's SEC filing yesterday for their proposed merger with Circle, one of the risk factors is, "Our yield product is collateralized predominantly by Bitcoin and the value of that collateral is directly exposed to the high volatility of Bitcoin."
Unfortunately, Concord only provided Circle financials for up to December 31, 2020. Most of Circle's growth has occurred in 2021 yet there is no information about the current state of Circle's balance sheet!
Past performance is not an indicator of future returns. NIA is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This message is not a solicitation or recommendation to buy, sell, or hold securities. This message is meant for informational and educational purposes only and does not provide investment advice.
Preparing Americans for Hyperinflation
