“Top 5 auditing firm” is a bit of a Tether psyop imho. There are the “big 4” (EY, PWC, Deloitte, KPMG), which have never been willing to engage Tether but any other grouping is somewhat manufactured. Nothing against BDO in particular but Tether’s marketing of this and other engagements is pretty suspect.
If they were already running at a deficit in prior periods, continuing to lie about their financial condition is the only way to buy enough time to “make it all back” rather than being forced into insolvency (and likely legal issues due to prior period misrepresentations). I find this line of reasoning to be unconvincing.
Even if their statements were more or less accurate, Tether still shows extremely poor and risky financial management.
Besides the widely discussed “commercial paper” balance sheet line item, there is also significant holdings in corporate bonds, “funds” (bonds? equity? VC?), precious metals (no clarity if this relates to XAUT issued or if they are backing USD liabilities against Gold/other metal assets), “secured loans” (which they’ve claimed in the past were not to related entities, but have also been shown to have lied about this in the past), and “other investments” (could be anything, Celsius investment could have been bucketed under this).
According to their financial statements, they hold ~$200MM in equity against $66.2 billion in liabilities (0.3% capital ratio). Even if one assumes that their cash and cash equivalent assets have zero risk (which is generous given CP holdings), this is only ~1.4% capitalization against their potentially volatile assets (bonds, funds, precious metals, secured loans, and other investments). If their portfolio had a decent amount of duration they could easily be underwater by more than this amount on their bond portfolio alone due to increasing rates and credit spreads.
My sense is that, if Tether didn’t have something to hide they would have provided much more satisfactory disclosures by now. And given how high of return can be earned currently on risk free US treasury bills, they would likely have shifted more of their assets into these investments if they weren’t trapped in low quality assets and wanting to avoid being forced to recognize losses.
Supporting USDT as collateral could provide a form of competitive advantage for Euler (only major lending protocol offering significant support) but I think it would be counterproductive in the long run, as all other assets on the platform would now bear significant Tether credit risk and users would tend to demand a higher rate of return to participate in lending pools.