Well not completely, in the sense that they seem to be exchanging USDT for USD at a 1:1 ratio if you show up with 100k or more. There have been no reports of people that tried to get that and didn't get it.
On the other hand maybe people holding a lot of USDT wouldn't not want to tell anyone else if they were unable to redeem it before they had sold it all on the exchanges...
That last part is key: you’d only publicly share bad news if you had unloaded – and if the news isn’t good they’d have an incentive to offer a major holder a better deal with an NDA.
Even that never really happened, did it? Madoff was never not able to make a payment.
His kids reported him to the police before they could be found out by anyone else. Of course, as part of the reporting, they also got immunity from the consequences of the company they worked for being an elaborate ponzi scheme.
I suspect it's highly likely that this was a scheme they came up with to ensure that no one in the family, other than Madoff himself, would have to suffer the consequences of their crime.
On the other hand maybe people holding a lot of USDT wouldn't not want to tell anyone else if they were unable to redeem it before they had sold it all on the exchanges...