Is anything other than 100% cash backing a scam to you because that seems like a stretch? Oh lawdy did they defraud people by claiming to be 100% cash backed when they weren't but I don't think fractional reserve is a scam in general.
At any given moment you just need the ability to pay out the people who come to you and ask which is already teeny tiny (as evident by banks needing less than 5% cash reserves of deposits) and made even smaller since people don't typically cash Tether out directly and do it at exchanges.
I think you are looking at this through rose-colored glasses. Not everything you read on the Internet is true, and Tether is likely to not even pay a small fraction of what they have made. It is almost certain they have stolen an incredible amount of money, using a song and a dance, and made people shill for them - because hey tbey have all the bad parts of banks and none of the good parts - so what's the problem?
> as evident by banks needing less than 5% cash reserves of deposits
You may not be aware, but when you deposit money into a bank, deposits are insured, so it doesn't matter if they have 1% on hand. You will eventually get your deposit back. That is not even close to what Tether is.
> They are absolutely running afoul of banking regulations
> the only thing Tether actually needs to do is keep the trading value of their coin near $1.
How do you propose Tether do that if they don't have financial backing to create a watermark below which the value won't fall? Increase the scam?