The issue is that it's true that for every 1USD you give to Tether, there's 1USDT, but it's not true that for every 1USDT Tether mints, there's 1USD in some bank. Estimates are in the low 10%, but it's probably less. They have essentially a money printer.

(Some) people really believe that USDT is pegged to the dollar, so they really believe that if they have some ETH for instance, and they sell that ETH for USDT, that the translation ETH -> USDT -> USD is maintained, but that's the whole problem, nothing stops them from minting USDT without the real USD existing. So nothing stops them from "buying" your "hard earned" ETH/Bitcoin/whatevercoin with USDT pulled out of thin air.

That's why New York said essentially "these people are liers and nothing they say is true". It's just that people continue to play this game. And why is that? Because no financial institution would give you Bitcoin/ETH/whatever for dollars, because if they do, they are essentially banks and all the KyC rules / regulations apply.

So they came up with this charade, these "stable coins" are nothing more than a workaround for on and off ramps, because people have FIAT money (real money if you ask me). This is why Bitcoin doesn't go lower than 30.000, because there's huge amount of Tether being used to buy Bitcoin and keep the price up. Once this money printer charade goes bust we will see the actual price of Bitcoin, Ether, NFTs and so on.

If they give you 1 USDT for 1 dollar that's fine as long as they can return that dollar when you return the USDT. The problem is when the number of coins in circulation not held by Tether is not backed with 1:1 cash or currency equivalents.