I can almost guarantee that they’re not doing that.

This would be explicitly against their own T&Cs, even the new ones. If they’re going to lie, why bother backing it with anything?

As second guessing Bitfinex is now a popular sport, my totally unsubstantiated guess is that they do have fiat to cover external, primary purchasers. Specifically, if you go to the site and buy tether with real money, they may well keep the reserve.

Their T&Cs don’t actually say they’ll honour the secondary market, just account holders. So, as long as they can meet that demand, they can print as much as they like themselves because they’ll never try to redeem it.

Dodgy as fuck but quite clever. No idea if it’s correct of course.