4 ms·
The people's deposit money is effectively gone. A few people might be able to find their money in an underlying bank to recover. The hope is the deposit is froz
by irjustin 6y ago
The people's deposit money is effectively gone. A few people might be able to find their money in an underlying bank to recover. The hope is the deposit is frozen and in the unwinding it'll be there waiting.
Per the article, FDIC insurance doesn't cover this because it's a 'neo-bank' and the underlying bank didn't fail.
The problem is how the deposits were used. If they're simply stored, it's easy to unwind, but the real problem is if the deposits were lent out or even used to pay other account's interest rates (which would qualify for a pyramid scheme?).
I'm not familiar with the rules regarding a neo bank's access to an underlying deposit in compared to the bank itself, but I wouldn't put it past CEO Du to utilize deposits in the worst way possible.
- kijin 6y agoThat would be a Ponzi scheme. It would be a pyramid scheme if people were promised higher interest rates based on how many other people they recruit.
- irjustin 6y agoAh crap you're right got my p schemes mixed up. Leaving error for posterity.
- luckylion 6y agoThey kind of were, weren't? As far as I understand, you'd get 1.5% minimum and you can raise it to 4% or 7% by bringing new people on board.
- Tuna-Fish 6y ago... how did it take this long to shut them down?
- l-lousy 6y agoGenuine question — when does a referral bonus (pretty standard) turn into a pyramid scheme
- konschubert 6y agoWhen it becomes perpetual and when it becomes the dominant benefit that people get from the service?
- viro 6y ago> Per the article, FDIC insurance doesn't cover this because it's a 'neo-bank' and the underlying bank didn't fail. wait ... wat? how do you know something is a "Neo-bank"?
- PascLeRasc 6y agoThis makes me really concerned for the more established companies operating this way like Wealthfront and SoFi. Even Fidelity’s checking account does the same sweep stuff. Does this mean they actually aren’t safe at all?
- viro 6y agoI didn't realize banks like Simple or Chime could basically have "fake FDIC insurance". time to move my shit back to my local credit union.
- joshstrange 6y agoBoth Simple [0] (soon to be closing down) and Chime [1] are FDIC insured. I'm not sure how Beam structured it but I'm not sure if it's the same thing... [0] https://www.simple.com/help/articles/account-info/fdic-insurance https://www.simple.com/help/articles/account-info/fdic-insur... [1] https://help.chime.com/hc/en-us/articles/224459628-Are-Chime-Accounts-FDIC-insured- https://help.chime.com/hc/en-us/articles/224459628-Are-Chime...
- lifeplusplus 6y agoso any neo-bank's consumers can be told the underlying bank didn't fail so they get nothing?
- lifeplusplus 6y ago> FDIC insurance doesn't cover this because it's a 'neo-bank' and the underlying bank didn't fail. where does it say that