Tether is alleged to have been far more deeply and willingly involved than just "collateral damage." Per the AG's statement: "Those transactions – which also have not been disclosed to investors – treat Tether’s cash reserves as Bitfinex’s corporate slush fund, and are being used to hide Bitfinex’s massive, undisclosed losses and inability to handle customer withdrawals."

https://ag.ny.gov/press-release/attorney-general-james-annou...

The only reason to swap funds between those accounts would be if the parties knew that there was more risk than normal cash reserves for the money that Tether would end up having - and this was deemed by Tether operators to be an acceptable risk not worth disclosing. Not a shining beacon of cleanliness here.

That source does not reliably support the claim "Bitfinex money was on an account of a small Polish bank. It was confiscated by a US government when they chased Colombian drug cartels earlier in 2018."

That's just some dude's crypto blog. There is no citation or first or second-hand info.

Citation, the equivalent of the AOG over there proudly said they have taken it and will return the money to the state after fees and bribes: https://www.rmf24.pl/fakty/polska/news-lodzkie-w-malym-banku...

What would happen if the US Government stepped in and took over Tether? Would it be feasible for a different foreign government to do so?

They would almost certainly not have the jurisdiction. They’re a BVI Corp (a jurisdiction that tends to look the other way at corporate fraud) and I believe operate out of Hong Kong. Lately it seems the Chinese government practically encourages companies to commit securities fraud in the US so I can’t imagine they’d be much help either.

I suspect the likely outcome (eventually.. and if Bitfinex doesnt fold first) is the US government seizing their domain to prevent them from continuing to commit fraud.

Edit: missed a word

> Lately it seems the Chinese government practically encourages companies to commit securities fraud in the US so I can’t imagine they’d be much help either.

The China Hustle is a good movie if anyone wants to see how these schemes work.

What would they take over? Massive liabilities?

Just business as usual.

Every government in the world has dissuaded its citizens to get involved with crypto. If there is a bankrun on ING or WellsFargo the government will act. With Tether you're on your own. Cryptocurrency places you outside the financial system- the system r/bitcoin professed to hate.

Wouldn't the US government taking over Tether give them a toehold to monitor or control Cryptocurrency? They couldn't control all of crypto, but they could possibly control the favored way of getting the value out.