To be clear, I am 100% on board with the possibility that Tether is a massive fraud. But there's a broader context of shenanigans here that is underreported. For example, consider the way Chinese stocks are listed on US exchanges.https://twitter.com/mathewi/status/1446468360745652226 …
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When you buy a Chinese stock on a US exchange, you're not buying shares of that company, but a Variable Interest Entity incorporated in the Cayman Islands. This VIE is a smoke-and-mirrors entity that has no enforceable relationship with the Chinese giant, and is illegal in China.
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Replying to @Pinboard @BeijingPalmer
This is not how VIEs work. For a start the VIE is the entity in CN that operates in the restricted industry. The Cayman entity is just a regular hold co set up for listing purposes. Further some companies that use VIE have most, or indeed all, of their assets and rev in the WFOE
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This means that while in some cases the Cayman company might not own any of the operating company in China (the VIE), in other cases the Cayman company owns ALL of the operations in China
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Replying to @fuheping @BeijingPalmer
Isn't this ownership unenforceable under Chinese law? That is my understanding of it.
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Replying to @Pinboard @BeijingPalmer
The ownership of the WFOE is enforceable, it's just a company owned by a foreign entity so it works the same as everywhere else (mostly anyway). The legally questionable part are the VIE contracts, between the WFOE and the VIE entity
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This is why it's important to look at what's in the VIE and what the listed company has direct ownership over. For instance
$NIO has a VIE, but it has no material assets or business in it, so in this case you actually own the entire business when you buy shares in the Cayman co1 reply 0 retweets 0 likes
Thank you! I'll try to word this more precisely next time I talk about it.
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Replying to @Pinboard @BeijingPalmer
With some luck it might come in useful when we finally get a look at what Chinese bonds tether has been putting money into lol
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