There is an assumption behind your question to the effect of saying "If we assume Tether is not, ultimately, a fraud, it seems like the only way..."
That is, IMHO, a questionable assumption.
Now, "fraud" in this case too strong a term. The intent to defraud may not be explicit in Tether's internal conversations and practices.
All business ventures by definition involve risk, and corporate structures and venues and liability shields and so forth exist precisely to create a space for risky ventures to be undertaken without failure leading to death or personal poverty for the principals. In those cases, the customers, investors, and other participants are also partaking in the risk, based on information that is deliberately- sometimes responsibly, sometimes incidentally, and sometimes maliciously- incomplete.
At the end of the day, when the full accounting is known, a post facto judgement of fraud vs speculation may be rendered.
But the assumption that Tether is behaving as one might want one's bank to be behaving, in terms of customer/user risk exposure, should be strongly, strongly questioned.
Have just seen it many times, specifically in finance, the risk complexity of which is really hard to understand, and which has an equilibrium of stasis punctuated with earthquake-level surprises that make even careful bets into speculations into existential threats more quickly than most people are able to respond. Fraud is a catchall for a really wide range of often unintentional outcomes. Incompetence rather than malice, though the common behaviors both of information hiding and cutting customer hair rather than one's own shades awfully close to malice, even if they are in compliance with terms and disclosures.
Very early on in my MBA, I ran a pretty simple simulation of different investment strategies with different expected returns and different tail distributions. Each round, new money entered the market and was distributed based on previous empirical returns.
The result was the same “slow up fast down” sawtooth we see in the real market, and investments that had real alpha were crowded out by investments that simply pushed risk into the tails. It took like an hour to assemble that agent-based simulation and it scared me out of finance. Most financial engineering seems to just be Martingale betting schemes that guarantee small to modest returns 99% of the time.
That is, IMHO, a questionable assumption.
Now, "fraud" in this case too strong a term. The intent to defraud may not be explicit in Tether's internal conversations and practices.
All business ventures by definition involve risk, and corporate structures and venues and liability shields and so forth exist precisely to create a space for risky ventures to be undertaken without failure leading to death or personal poverty for the principals. In those cases, the customers, investors, and other participants are also partaking in the risk, based on information that is deliberately- sometimes responsibly, sometimes incidentally, and sometimes maliciously- incomplete.
At the end of the day, when the full accounting is known, a post facto judgement of fraud vs speculation may be rendered.
But the assumption that Tether is behaving as one might want one's bank to be behaving, in terms of customer/user risk exposure, should be strongly, strongly questioned.