Long story short, they not only were probably printing Tethers that weren’t backed by anything, they also banked with a money launderer and embezzler. All of their bank’s assets were seized by the Feds and it will never be returned to them. They cannot back their deposits.
So they shifted to backing Tether partially with their Bitcoin holdings. That is however very circular. Bitcoin is worth more because of Tether and Tether is worth something because of Bitcoin. There isn’t a foundation underneath.