4 ms·

A poor decision does not equal fraud.

dmitrygr 4y ago
Promising a guaranteed 15% return is fraud. There is no place in reality where you can * guarantee * that kind of return.
- devoutsalsa 4y ago
  They explain the risks on their website: https://stablegains.zendesk.com/hc/en-us/articles/4402687751569-Is-there-any-backing-security-on-my-deposit- https://stablegains.zendesk.com/hc/en-us/articles/4402687751...
  - ihalip 4y ago
    If there are risks, how can the 15% be guaranteed?
    - devoutsalsa 4y ago
      Where do they say it's guaranteed?
    - cinntaile 4y ago
      "You can now earn up to 15% APY interest on your cash with Stablegains. This is 30x higher than in your traditional bank*." Up to
  - bsamuels 4y ago
    They explain the risks, while excluding the risk of, you know, the stablecoin depegging. This is like the 10th algo stablecoin to eat shit. You would think by now, a risk person could adequately describe these existential risks. Stablegains was a rent collecting middleman. The risks are not characterized adequately on this page, and there ought to be some level of liability.
    - Majestic121 4y ago
      Where do they specifically exclude the risk of depegging? From their website : "As Stablegains is not a traditional US bank, the funds are not secured by the FDIC. While we aim to make every effort to understand and mitigate everything that can possibly go wrong, there is still a non-zero risk you can lose your deposit. Our advice is to diversify and never invest all of your savings in a single place." Of course they are selling themselves as pretty safe, and I'm sure they thought they were. But as you mention, it's like the 10th stablecoin to drop, so it's not exactly a surprise that crypto is a risky investment in any case.
    - smugma 4y ago
      “There is a non-zero risk that the peg does not recover to 100%.”
      - nrmitchi 4y ago
        If you’re taking this from their Twitter thread after this whole situation happened, that is definitely not the same thing as an upfront risk factor when collecting investments from people.
        smugma 4y ago
        https://stablegains.zendesk.com/hc/en-us/articles/4402680705553 https://stablegains.zendesk.com/hc/en-us/articles/4402680705... Article is from July 2021 (according to Google), updated 7 days ago
    - dmitrygr 4y ago
      They added a much more reasonable risk explanation after the event happened. Click the link that the submission is. Look at the before and after pictures
- irjustin 4y ago
  That's a good question. Are you liable for fraud in this case? What about another case? Say you promise 0.75% because the bank promised you 1% and you skim 0.25%. Is that scenario fraud? Probably not. At what point is it actually fraud? My guess is it's not the yield but the loss of deposits.
  - Ekaros 4y ago
    At the point you don't have capability to pay the 0.75% yourself.
  - nowherebeen 4y ago
    You are moving the goal post here. 15% is not 0.75%. The probability of returning 15% consistently is significantly lower than 0.75%. If you guaranteed 0.75% to your customers and do not deliver, then you are liable. What you are describing is arbitrage and not what this scenario is about.
- usrn 4y ago
  Most marketing is arguably fraudulent. I don't think these scams are good at all but part of me really wishes there were more just to force people to think twice when they see marketing from eg Apple or Tesla. EDIT: s/advertising/marketing/g I don't really think of them as separate but that's a good point.
  - mdemare 4y ago
    Tesla doesn't pay for ads.
- noway421 4y ago
  For the sake of being a pedant, your statement is incorrect: the U.S. federal fund rate was 15% in 1981, making CDs and T-bills yield 15% APY for the products bought that year. So that kind of return has a place in reality. Granted, those were different times, different economic climate and exceptional fed actions. What you probably mean is that promising anything that exceeds SOFR + say 2 percentage points has a risk premium that should be disclosed.
  - devoutsalsa 4y ago
    I remember back the 80s when my regular savings account paid 6%.
- Khelavaster 4y ago
  Credit cards issue debt on promised 15%-24.99% returns all the time..
  - throwaway2048 4y ago
    The fact those returns aren't guaranteed is a big part of why they are so high to begin with. Credit card debt is unsecured (no collateral put up to be seized in the event of a default), creditors can walk away from the debt and the issuer will never receive a cent.
- charcircuit 4y ago
  From what I can tell they weren't promising a guaranteed return. Although their landing page used to not say "up to 15%" they had a section in their knowledgebase saying 15% APY is just an upper bound.
Khoth 4y ago
It does when the poor decision is to run a ponzi scheme e: ah, only acting as the middlemen between the end user and a ponzi scheme. Probably that'll give them and their VC backers enough plausible deniability to avoid being arrested.
- devoutsalsa 4y ago
  This wasn’t a Ponzi scheme. A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. https://www.investor.gov/introduction-investing/investing-basics/glossary/ponzi-schemes https://www.investor.gov/introduction-investing/investing-ba...
  - charcircuit 4y ago
    If anything it was closer to a pump and dump with Luna. I don't get why calling it a Ponzi is so popular when there wasn't something paying returns using other people's money.
    - devoutsalsa 4y ago
      People like throwing the word scam around a lot, too. I don't think this was a scam. It was simply a shit financial product based on deluded fundamentals.
  - Khoth 4y ago
    It's obfuscated by splitting the components into multiple cryptocurrencies with multiple actors, but that's what's going on. People were staking UST for 19.5% returns, and if you cut through the fluff, those returns came from later people putting their money in hoping to get those returns themselves. (and because UST was a stablecoin those returns were (ostensibly) in dollars, not just inflation of the coin value)
    - devoutsalsa 4y ago
      You just described banks. Banks take deposits & lend the money out at a higher rate. This is what anchor protocol was all about. Pay high interest, and lend at even higher interest.
ramraj07 4y ago
You can say it was just a bad decision to pick up a feather from the ground. But that’s still illegal. The magic of statutory laws.

Promising a guaranteed 15% return is fraud. There is no place in reality where you can * guarantee * that kind of return.

devoutsalsa 4y ago
They explain the risks on their website: https://stablegains.zendesk.com/hc/en-us/articles/4402687751569-Is-there-any-backing-security-on-my-deposit- https://stablegains.zendesk.com/hc/en-us/articles/4402687751...
- ihalip 4y ago
  If there are risks, how can the 15% be guaranteed?
  - devoutsalsa 4y ago
    Where do they say it's guaranteed?
  - cinntaile 4y ago
    "You can now earn up to 15% APY interest on your cash with Stablegains. This is 30x higher than in your traditional bank*." Up to
- bsamuels 4y ago
  They explain the risks, while excluding the risk of, you know, the stablecoin depegging. This is like the 10th algo stablecoin to eat shit. You would think by now, a risk person could adequately describe these existential risks. Stablegains was a rent collecting middleman. The risks are not characterized adequately on this page, and there ought to be some level of liability.
  - Majestic121 4y ago
    Where do they specifically exclude the risk of depegging? From their website : "As Stablegains is not a traditional US bank, the funds are not secured by the FDIC. While we aim to make every effort to understand and mitigate everything that can possibly go wrong, there is still a non-zero risk you can lose your deposit. Our advice is to diversify and never invest all of your savings in a single place." Of course they are selling themselves as pretty safe, and I'm sure they thought they were. But as you mention, it's like the 10th stablecoin to drop, so it's not exactly a surprise that crypto is a risky investment in any case.
  - smugma 4y ago
    “There is a non-zero risk that the peg does not recover to 100%.”
    - nrmitchi 4y ago
      If you’re taking this from their Twitter thread after this whole situation happened, that is definitely not the same thing as an upfront risk factor when collecting investments from people.
      - smugma 4y ago
        https://stablegains.zendesk.com/hc/en-us/articles/4402680705553 https://stablegains.zendesk.com/hc/en-us/articles/4402680705... Article is from July 2021 (according to Google), updated 7 days ago
  - dmitrygr 4y ago
    They added a much more reasonable risk explanation after the event happened. Click the link that the submission is. Look at the before and after pictures
irjustin 4y ago
That's a good question. Are you liable for fraud in this case? What about another case? Say you promise 0.75% because the bank promised you 1% and you skim 0.25%. Is that scenario fraud? Probably not. At what point is it actually fraud? My guess is it's not the yield but the loss of deposits.
- Ekaros 4y ago
  At the point you don't have capability to pay the 0.75% yourself.
- nowherebeen 4y ago
  You are moving the goal post here. 15% is not 0.75%. The probability of returning 15% consistently is significantly lower than 0.75%. If you guaranteed 0.75% to your customers and do not deliver, then you are liable. What you are describing is arbitrage and not what this scenario is about.
usrn 4y ago
Most marketing is arguably fraudulent. I don't think these scams are good at all but part of me really wishes there were more just to force people to think twice when they see marketing from eg Apple or Tesla. EDIT: s/advertising/marketing/g I don't really think of them as separate but that's a good point.
- mdemare 4y ago
  Tesla doesn't pay for ads.
noway421 4y ago
For the sake of being a pedant, your statement is incorrect: the U.S. federal fund rate was 15% in 1981, making CDs and T-bills yield 15% APY for the products bought that year. So that kind of return has a place in reality. Granted, those were different times, different economic climate and exceptional fed actions. What you probably mean is that promising anything that exceeds SOFR + say 2 percentage points has a risk premium that should be disclosed.
- devoutsalsa 4y ago
  I remember back the 80s when my regular savings account paid 6%.
Khelavaster 4y ago
Credit cards issue debt on promised 15%-24.99% returns all the time..
- throwaway2048 4y ago
  The fact those returns aren't guaranteed is a big part of why they are so high to begin with. Credit card debt is unsecured (no collateral put up to be seized in the event of a default), creditors can walk away from the debt and the issuer will never receive a cent.
charcircuit 4y ago
From what I can tell they weren't promising a guaranteed return. Although their landing page used to not say "up to 15%" they had a section in their knowledgebase saying 15% APY is just an upper bound.

Khoth 4y ago

It does when the poor decision is to run a ponzi scheme e: ah, only acting as the middlemen between the end user and a ponzi scheme. Probably that'll give them and their VC backers enough plausible deniability to avoid being arrested.

devoutsalsa 4y ago
This wasn’t a Ponzi scheme. A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. https://www.investor.gov/introduction-investing/investing-basics/glossary/ponzi-schemes https://www.investor.gov/introduction-investing/investing-ba...
- charcircuit 4y ago
  If anything it was closer to a pump and dump with Luna. I don't get why calling it a Ponzi is so popular when there wasn't something paying returns using other people's money.
  - devoutsalsa 4y ago
    People like throwing the word scam around a lot, too. I don't think this was a scam. It was simply a shit financial product based on deluded fundamentals.
- Khoth 4y ago
  It's obfuscated by splitting the components into multiple cryptocurrencies with multiple actors, but that's what's going on. People were staking UST for 19.5% returns, and if you cut through the fluff, those returns came from later people putting their money in hoping to get those returns themselves. (and because UST was a stablecoin those returns were (ostensibly) in dollars, not just inflation of the coin value)
  - devoutsalsa 4y ago
    You just described banks. Banks take deposits & lend the money out at a higher rate. This is what anchor protocol was all about. Pay high interest, and lend at even higher interest.

ramraj07 4y ago

You can say it was just a bad decision to pick up a feather from the ground. But that’s still illegal. The magic of statutory laws.