Tether is more like a means of making a crypto that people can transact like it's crypto, but has a very defined value that likely won't change. It makes it easier to move, let's say, $500 of fiat between exchanges without worrying whether the crypto of choice is going to be higher or lower in value. It allows for a very easy benchmark to be followed across every exchange with little chance of difference in value.

The issue is that, in order for Tether to be backed by USD, it's required that a central authority maintains the USD reserves. This means that, without audits, anything can happen and Tether might not be completely backed. This is where all the issues start, and where the issues that OP is describing really come into play. It's unfortunate, but that's how it is. Backed currencies across the board have to deal with this kind of issue, although it's easier to be confident in a government retaining the required backing assets then it is a company.