Spoiler Alert: The ‘Institution’ buying Tethers, is Bitfinex themselves.
Bitfinex’ed
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There is certainly a lot that is fishy with bitfinex and their opacity, your claims might even be true, but your article just uses too much hyperbole, errors and exaggeration to be taken seriously.

For example: 
“This means that Bitfinex is converting users US Dollar balances (which IS money), into Tethers, which as we all know by now… is not money.”

Bitfinex does not accept deposits in US Dollars, so there are no US Dollars at bitfinex, all the USD is always Tether.

If someone transfers 100 BTC to Bitfinex, and sells them for USD(T) and requests a withdrawal of USDT, they need to buy them. I can understand that as long as its at bitfinex, they dont request the issuance of the USDT until there is a withdrawal request, since the user could still buy BTC again and transfer it out or some other crypto.