Imagine the New York Stock exchange decided to print counterfeit dollars (electronically) and use them to buy up shares of all the stocks on the exchange. There would be a huge rally, all the stock prices would go through the roof. But if enough shareholders started selling their shares and asking for real dollars back, the exchange would eventually collapse because they wouldn't have enough money to settle all the trades.

With Tether its basically the same situation, just more convoluted. Rather than counterfeiting dollars, they are rapidly printing USDT that the community, apparently on faith alone, believes are redeemable for $1 per Tether. Curiously Tethers have only been created, never destroyed, which would indicate that none have been redeemed back to USD. Many other (complicit) exchanges are also accepting these "tethered dollars" - the "USD" volume at exchanges like Bitfinex, Poloniex, Binance, Huobi, Bittrex, OkEX, etc is actually USDT based.

The endgame is the same as the simplified example with counterfeit dollars. The only thing keeping it going is the rising cryptocurrency price, which is keeping people hoarding coins instead of selling back to USD. This is also why the rate of tether issuance has been increasing - they need to keep the price high so people continue to hold. Eventually the selling pressure will increase (on the few exchanges that actually handle real USD), and as people attempt to convert their crypto holdings to real dollars the fraud will become readily apparent.

There will be huge distortions as the price of Bitcoin and Ethereum rockets on Bitfinex and other Tether exchanges as people try to get their money out, and simultaneously craters on GDAX & Gemeni as they try to get back in to fiat. In the end the massively decreased GDAX/Gemeni prices will be the only ones that matter since all faith will have been lost in the former tether-based exchanges.

If you're reading this, you have been warned.