The problem is worse than that. They also use their BTC holdings as part of their assets they hold, which allows them to pump the BTC/USDT rate (print USDT, use it to buy BTC, see prices of BTC going up because of artificial demand, say "BTC is up, our holdings have increased in value and we can print more", rinse and repeat.
Once they do circular dependency with BTC and tether, they might even go one step further and back 1000 tethers with 1000 tethers they hold themselves.
No. "Pump[ing]" by buying something is entirely legal. And the price should come down just as much when you are trying to cash in, so the mechanism doesn't really work, or anyone with enough money could just do it repeatedly using whatever traded asset they want.
"Pump and dump" refers to promoting some investment by other means, usually spreading some false news.
> "Pump[ing]" by buying something is entirely legal.
I beg to differ. The Securities and Exchanges Act of 1934 criminalizes all sorts of things that are deemed market manipulation, and inflating the price of a security by false trading, i.e. selling it to yourself or a conspirator, is one of the very things it was created to prohibit.
