Tether Falsified Bank Records – Crypto Critics' Corner
Bennett Tomlin and Cas Piancey discuss the recent Wall Street Journal report that reveals that Tether and Bitfinex falsified bank records in order to try to maintain access to banking.
WSJ article discussed on the show.
This video was recorded on March 3rd, 2023.
Cas Piancey and Bennett Tomlin discuss the recent Wall Street Journal reporting that reveals that Tether and Bitfinex falsified bank records in order to try to maintain access to banking.
This episode was recorded on March 3rd, 2022.
Other episodes mentioned in this episode:
- Episode 1 – Tether: A Stable Discussion
- Episode 2 – Tether: A Stable Discussion Continued
- Episode 6 – Crypto Capital Corp: the quiet billion dollar cryptocurrency scam
- Episode 4 – Zhao Dong: A Summary
- Episode 34 – The Tether Papers (featuring David Canellis of Protos Media)
- Episode 70 – The Rise and Fall of Reggie Fowler
Other resources mentioned in this episode:
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English Transcript:
00:00:05:00 - 00:00:12:06 Cas Piancey Welcome back, everyone. I am Cas Piancey and I'm joined, as usual by my partner in crime, Mr. Bennett Tomlin. How are you today? 00:00:12:06 - 00:00:14:15 Bennett Tomlin I'm feeling vindicated, Cas. How are you? 00:00:14:17 - 00:00:32:01 Cas Piancey I'm doing good. Let's talk about vindication, then. Let's talk about tether. It's a big, big day for us. It's a tether update. There was a story out of the Wall Street Journal talking specifically about some tactics used by tether to ensure that they had banking. Do you want to get into the details? 00:00:32:02 - 00:00:59:02 Bennett Tomlin Well, it was a summary of a lot of things we knew before, along with some additional color and their specific techniques. So as we've discussed on this show previously, go back way to the beginning, like episodes one and two for this March of 2017, Wells Fargo Cuts Off Bitfinex and tether from their correspondent banking services and from then until they bank at Deltec tether and Bitfinex both struggled to find consistent banking partners. 00:00:59:10 - 00:01:22:13 Bennett Tomlin This is the period where episode six they relied on Crypto Capital Corp alleged money launderers for the Colombian cartels for much of their money movement. The first when they detail is a conversation between Stephen Moore, an alleged tether shareholder for Tether Holdings Ltd, who was communicating with and it's described in the Wall Street Journal report as an important Chinese tether, trader and intermediary. 00:01:22:23 - 00:01:47:21 Bennett Tomlin And they were having this conversation about how they could create fake invoices and contracts for the shell company that had the account at the bank in order to make the exchange deposits and withdrawals look like business transactions of another type. Eventually in this conversation, Stephen Moore apparently said that he would not want to argue any of the above in a potential fraud or money laundering case. 00:01:47:22 - 00:02:21:18 Bennett Tomlin Now, the reason I'm pausing here is because of episode four of our podcast. There was one specific, very important Chinese tether trader, tether shareholder and tether partner for their offshore yuan tether Zhao Dong Zhao Dong pled guilty to money laundering in China sometime after this conversation between an unknown trader and Stephen Moore occurred. But if I had to guess if I was making guesses, I would say that that was probably Zhao Dong, your friend Renrenbit, 00:02:21:18 - 00:02:25:04 Bennett Tomlin who is that trader having this conversation with Stephen Moore. 00:02:25:04 - 00:02:35:02 Cas Piancey I'm not sure if this is being reported now or not, but I know that before Stephen Moore was involved with a stablecoin called FRAX. 00:02:35:02 - 00:02:36:06 Bennett Tomlin Different Stephen Moore. 00:02:36:06 - 00:02:40:09 Cas Piancey Yeah. So that's what I was trying to get to the bottom of. So this is a different Stephen Moore, right? 00:02:40:20 - 00:02:57:17 Bennett Tomlin Yeah. Yeah. So there is another Stephen Moore who is an economist, one of Trump's nominees to the Federal Reserve, who ended up not making it and then ended up connected to this other stablecoin I've talked about before called FRAX that, as far as I can tell, is a different Stephen Moore than the Stephen Moore who is a shareholder in tether. 00:02:58:01 - 00:03:01:11 Bennett Tomlin There's at least two. Stephen Moore is in the cryptocurrency ecosystem now. 00:03:01:12 - 00:03:09:09 Cas Piancey Do we know? Yeah. Do we know who this Stephen Moore is like what he is involved with outside of Tether Holdings like this is a very anonymous character then. 00:03:09:16 - 00:03:14:09 Bennett Tomlin Yeah, this was a new name for me. I know nothing besides what the Wall Street Journal had today. 00:03:14:09 - 00:03:42:07 Cas Piancey Let's get into the weeds, a bit of what they were doing to obfuscate their cash and ensure that they weren't losing banking partners. Because basically and you and I have been aware of this for a while, that there's a lot of there's a lot of silly, silly ways to avoid having regulators notice you. It can be something as simple as like changing the name of the company by one letter, which famously I think HSBC got in trouble for. 00:03:42:08 - 00:03:49:09 Cas Piancey There's far more sophisticated ways and ways that these guys ensure that they're not being seen, at least for a little bit. 00:03:49:09 - 00:04:27:04 Bennett Tomlin We discussed already the fake contracts and invoices to make. What is this basically money services, business, this account servicing this exchange look like something else often they will rely on like import export businesses for this because then they can make the transactions fit the weird amounts they need for the exchange deposits and withdrawals. Right. Previous context we talked about this back in like episodes went into the New York attorney general investigation, revealed that bitfinex and tether during this period had relied on with the New York attorney general, referred to as friends of Bitfinex, which were literally human friends of Bitfinex, who were willing to let their accounts be used by Bitfinex for withdrawals, especially. 00:04:27:04 - 00:04:55:12 Bennett Tomlin One of those seems to be described in here, and that was by Chrise Lee C H R I S E Lee, who is an executive who runs Hylab Technology, which is a company that makes set top TV boxes. The documents The Wall Street Journal reviewed seemed to indicate that this person had set up another company called Hylab Holdings, changing the name slightly, as you noted, and then was holding these funds in trust for tether. 00:04:55:17 - 00:05:20:11 Bennett Tomlin Now, what's especially interesting here, and I want to draw attention to a couple of things, Jean Louis van Velde, also known as Jean Ludovidicus van der Velde, the chief executive officer of both Bitfinex and Tether, describes in his Bitfinex biography that he previously was at the center in the early development of a number of key technologies, including embedded systems, video streaming, IPTV and digital TV. 00:05:20:17 - 00:05:33:03 Bennett Tomlin Giancarlo Devasini in his previous import export businesses, which again jail was part of the Asian side of, was importing set top TV boxes. Isn't that a fun little coincidence? 00:05:33:03 - 00:05:52:00 Cas Piancey This is something that you and I have discussed in regard to a few different things, whether it's small retail sales of things like televisions or cables. Alternatively, it could be like, you know, aviation jet fuel, for instance. I don't know. These are all very big hypotheticals. These are great money laundering vehicles because you can really obfuscate these things. 00:05:52:00 - 00:06:00:00 Cas Piancey You can send an order and then send it back. And you can do all sorts of wacky stuff that on its surface level isn't illegal at all. 00:06:00:00 - 00:06:20:06 Bennett Tomlin Yeah, that does make some of those reports surrounding Giancarlos business specifically seem a little weird, like the reviews online where customers said instead of getting what they ordered, they got just like a brick or a couple of pieces of wood or like the strange warehouse fire that ended his business, where the insurance valuation in the valuation reported to regulators were very different. 00:06:20:11 - 00:06:45:18 Bennett Tomlin It gives those a bit of a different context. But hey, that's not related to Bitfinex and tether, of course. Yeah. And as you started to allude to their aviation fuel, this Wall Street Journal report suggests that Bitfinex and Tether had previously had accounts at Signature Bank in New York, which we had also known from other reporting that ended up getting closed by Signature Bank, seemingly because they realized they were bitfinex and tether, which is troubling. 00:06:45:18 - 00:07:20:05 Bennett Tomlin And so shortly after that, shortly after Signature rejected Bitfinex and Tether Signature was apparently approached by a company called AML Global AML Global is run by someone else we've talked about on this show before. Episode 14, I think was the tether papers where we talked about Christopher Harborne. Christopher Harborne is the largest contributor to Brexit, recently gave a $1.2 million donation to Boris Johnson and runs AML Global, an aviation fuel brokering business which approached signature and convinced it to give it an account. 00:07:20:11 - 00:07:35:23 Bennett Tomlin The supposed reason they were going that Christopher was going to be using the account was so that he could trade cryptocurrencies on Kraken. Apparently Signature Bank shut the account down when they realized it was actually being used to service bitfinex deposits and withdrawals. 00:07:36:01 - 00:07:59:11 Cas Piancey Yeah, I want to actually I'm going to just go ahead and quote from the Wall Street Journal article here. It says, Mr. Stephen Moore said it was too risky to continue using the fake sales invoices and contracts which he had signed and recommended. They abandoned the efforts to open the accounts. The emails show I would not want to argue any of the above in a potential fraud slash money laundering case, he wrote. 00:07:59:11 - 00:08:17:17 Cas Piancey This is another topic we've discussed. Pretty stupid to write about your fraud and money laundering stuff in emails and in writing. Uh, yeah. Just typical at this point. I am never, ever surprised when these guys write down their crimes on. On paper. 00:08:18:06 - 00:08:26:11 Bennett Tomlin Yeah. No, it's. And it's still always a bad idea to stop taking notes on a fucking criminal conspiracy. 00:08:26:19 - 00:08:29:11 Stringer Bell Is you taking notes on a criminal fucking 00:08:29:11 - 00:08:30:07 Stringer Bell Conspiracy? 00:08:30:20 - 00:08:31:15 Stringer Bell What the fuck is you thinking, man? 00:08:33:15 - 00:08:59:12 Bennett Tomlin Signature briefly gave an account to Christopher Harborne for those who don't know. Christopher Harborne is also the father of Will Harborne, who is the chief executive officer of DeversiFi a Decentralized Exchange, which used to be called Ethfinex and was a Bitfinex sister company. Just to help you keep kind of this whole picture in your head, we knew they were doing all of this stuff right back, right after they got cut off from Wells Fargo. 00:08:59:12 - 00:09:14:02 Bennett Tomlin Phil Potter, the chief strategy officer of both Bitfinex and tether was in WhalePool Teamspeaks trying to calm people down and he was telling them openly into this large group of people like we played cat and mouse games in order to maintain access to banking. 00:09:14:02 - 00:09:19:23 Phil Potter There have been lots of cat and mouse tricks that everybody in Bitcoin industry has to avail themselves of. 00:09:20:09 - 00:09:26:05 Bennett Tomlin And that correspondent banks cut us off when they find out where we are doing things with Bitcoin. 00:09:26:11 - 00:09:33:21 Phil Potter Sometimes those those accounts get shut down because, you know, the correspondent banks figure out, oh, this is Bitcoin related. 00:09:34:00 - 00:10:00:17 Bennett Tomlin It was no big secret that Bitfinex and tether were bending the rules. Wall Street Journal also highlighted a thing we've talked about before, which is that Bitfinex at one point talked about their decentralized banking system and warned people that sharing the banking information could not just threaten them, but the entire digital token ecosystem. Right. And like we've known for the last several years now, that tether has been under investigation for bank fraud. 00:10:00:17 - 00:10:18:11 Bennett Tomlin And I think a lot of the frustration people have had looking at regulators and law enforcement when it comes to tether, is it seems like there is this almost overwhelming amount of very public evidence that they were engaged in activities that at least from where I'm sitting, which, again, I'm not a lawyer, look like bank fraud. 00:10:18:18 - 00:10:38:21 Cas Piancey I also want to point out that it's not just bitfinex executives that are suggesting that tether is a systemic risk to the system and that if it were to get screwed over that that could very well be like a serious cataclysmic event. CZ seems to suggest as much to the SBF when they were having their talks over the collapse of FTX. 00:10:38:21 - 00:11:00:17 Cas Piancey And then we also had back in the day when Leo got started and when they did all these tokens to try to alleviate their hacks and their pains and sufferings, their frozen accounts, etc. We had Arthur Hayes and we had other individuals supporting Bitfinex because I assume they were worried about the systemic risk if it were to fail. 00:11:00:18 - 00:11:29:08 Bennett Tomlin Well, or even besides that, if we want to go back to like what Bitfinex executives themselves said, we had the conversation between Giancarlos Devasini and Oz Yosef of Crypto Capital Corp, where Giancarlos said we need to get these withdrawals out. We need this money because otherwise we otherwise bitcoin could crash too. He said, What, like 3000, 1000, some crazy low number because like if tether and Bitfinex were cut off from that liquidity from the banking system, that would be the end effect. 00:11:29:08 - 00:11:53:14 Bennett Tomlin And we should probably just pause briefly and remind people that during this period is also when they relied on things like Crypto Capital Corp. We did an episode on that. And but for those who don't know, Crypto Capital Corp was a shadow bank for much of cryptocurrency, crack and used it. Quadriga used it, Bitfinex used it. BitMEX was listed on their website, which is strange because BitMEX didn't have Fiat, but they may have used Crypto Capital Corp. 00:11:53:14 - 00:11:58:07 Cas Piancey I think Gemini also used them as well. From what I've heard, like every exchange used them. 00:11:58:12 - 00:12:29:07 Bennett Tomlin They were run by Reginald Fowler, former part owner of the Minnesota Vikings, Oz and Ravid Yosef and Ivan Manuel Molina Lee. Bitfinex and Tether ended up commingling a bunch of their money together and commingling a bunch of corporate and client funds together, eventually giving over $1 billion to this entity without a contract. These funds got seized as part of a global money laundering investigation, which eventually led to the arrest of principal Ivan Manuel Molina Lee in Greece and extradited to Poland and suspicion of money laundering for the Colombian cartels. 00:12:29:19 - 00:12:58:05 Bennett Tomlin So during this period we have tether putting money in the bank account of Stuart Hoegner. We have them using Hylab Holdings, we have them using Crypto Capital Corp. They're using AML Global's account at Signature. They were supposedly using this one account set up for Denix Royal Dis Ticaret Limited Sirketi, which would seem to be part of a money laundering scheme connected to the Hamas Izz ad-Din al-Qassam Brigades and the reason and they called us. 00:12:58:06 - 00:13:02:21 Cas Piancey They called us jihadist by the way I'm just it's okay. 00:13:03:04 - 00:13:27:02 Bennett Tomlin Yes. Yes, they did. And like, it's not even it's not even necessarily that Bitfinex and Tether were trying to partner with money launderers. They may have been I'm not going to exclude that from the list of possibilities. But the truth is they had been cut off from legitimate access to the banking system and were relying on anything they could find friends, shell companies, weird payment processors, anything. 00:13:27:02 - 00:13:38:15 Bennett Tomlin And so you end up with bitfinex and tether engaged in all these activities where they end up talking about should we submit these fake invoices and fake contracts we made in an attempt to maintain these accounts? 00:13:38:15 - 00:13:46:17 Cas Piancey Right. And here's I want to actually, while we're here, I think it's worth reviewing Tether's statements there. 00:13:46:18 - 00:13:48:19 Bennett Tomlin Their response looking good is. 00:13:48:19 - 00:14:15:03 Cas Piancey It more tether FUD from the Wall Street Journal that so that is the beginning of this if you want to think about how their public relations team thinks it's appropriate to respond to very serious allegations about money laundering and no proper KYC and obfuscation of who you're moving money for, their response is to immediately call it FUD, so clearly they're not taking it very seriously. 00:14:15:11 - 00:14:19:21 Bennett Tomlin They say in their defense, the Wall Street Journal is clearly waging a jihad. 00:14:20:02 - 00:14:41:23 Cas Piancey Well, they would know all about it, right? Takes one to know one. Bitfinex and tether have world class compliance programs and adhere to applicable anti-money laundering. Know your customer and counter-terrorist financing legal requirements. Bitfinex and tether. Are proud partners of global law enforcement routinely and voluntarily assist the US Department of Justice and other elite organizations across the world. 00:14:42:18 - 00:14:51:03 Cas Piancey These unfair attacks will not distract us from continuing with those efforts and offering the most liquid and reliable stablecoin experience. 00:14:51:04 - 00:15:03:19 Bennett Tomlin You missed the first sentence of that, which I think is the best. I think you need to read the first sentence again. The Wall Street Journal's report about stale allegations from long ago is wholly inaccurate and misleading. 00:15:03:21 - 00:15:13:04 Cas Piancey Yeah, I feel like they have a copy and paste design for how they respond to allegations, serious allegations that come up every two or three months. 00:15:13:04 - 00:15:38:04 Bennett Tomlin I just love that they're both stale, which means they can't be valid. It doesn't matter if tether committed fraud. Five years ago, four years ago, two years ago. It doesn't matter. That was then. This is now. You can't blame us for what we did then. We're now. And also that it's wholly inaccurate and misleading. Like because it's a it's not wholly inaccurate because much of this has been reported before. 00:15:38:10 - 00:15:50:12 Bennett Tomlin Right. We know it's not wholly inaccurate. The CFTC settlement and the New York attorney general settlement both detailed a lot of the same behaviors that The Wall Street Journal detailed today. So it can't be wholly inaccurate. 00:15:50:12 - 00:16:16:02 Cas Piancey Their responses don't actually go into any detail ever, ever. Like the idea that there were all these discussions about a Stephen Moore, who you and I both have never heard of this guy. We've been on top of the tether story for five or six years now. Like this is obscene and I've never heard of this guy. So it's news to me that this guy is an owner, part owner of tether, but they don't even they don't even bring it up. 00:16:16:02 - 00:16:44:05 Cas Piancey They're just like, yeah, it's all FUD and inaccurate and fake. And like, Who's Stephen Moore? I'm just getting down to bare basics here where I'm saying hello. Even on this small level, they haven't addressed the concerns that are being leveled against them here. Whatever. You know, we'll see what plays out. I think the counter argument always is, well, tether's been around since whenever and they're going to continue going on forever. 00:16:44:13 - 00:16:47:06 Cas Piancey And until that proves to not be true. 00:16:47:12 - 00:16:52:14 Bennett Tomlin So I guess that's right. Up till then fuck us. 00:16:53:07 - 00:16:55:13 Cas Piancey Yeah. 00:16:55:13 - 00:16:56:16 Bennett Tomlin The jihad must continue. 00:16:57:15 - 00:17:07:17 Cas Piancey Yeah. Yeah. Jihad. Jihad must continue. On that note, all the CasCoin is now going to the Stablecoin Jihad Fund. Oh, no, we shouldn't say that right?
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