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> I'm not saying it's a legitimate business Umm, once it's not a legitimate business, it's fraudulent. Exactly what type of fraudulent is a somewhat secondary

> I'm not saying it's a legitimate business Umm, once it's not a legitimate business, it's fraudulent. Exactly what type of fraudulent is a somewhat secondary issue. [of Boiler Room scams of old] "... often rely on high-pressure sales tactics, such as aggressive cold-calling, misinformation, and extravagant promises to assure buyers that they are buying "a sure thing." [..] The SEC requires brokers to adhere to strict standards when selling securities. Brokers may not misinform or omit material facts when selling securities; nor can they exaggerate their own track records. They are also required to have a “reasonable basis to believe that a recommended transaction or investment strategy is suitable for a customer.”"[0] Ring any bells? Do we think customers are really giving informed consent before putting their savings into these platforms? [0] https://www.investopedia.com/terms/b/boilerroom.asp https://www.investopedia.com/terms/b/boilerroom.asp

paulgb 4y ago
josu didn’t say it wasn’t fraudulent, just that it wasn’t a Ponzi scheme, which is a particular type of fraud. (I agree)
- josu 4y ago
  Bad grammar on my end, just edited the comment to clarify that I was indeed saying that I don't see it as a legitimate business.
- adrr 4y ago
  So how is the 20% interest created? Excuse my ignorance on crypto. I don’t understand how UST can drop 90% when I assume it required some sort payment of some other currency/coins to get mint them. I heard it was tens billions of UST was minted. So what happened to these coins? Were they used to pay out the interest?
  - josu 4y ago
    Read Matt Levine's columns on Luna, or listen to the most recent podcast from Odd Lots with Galois Capital. They answer all your question and are much more cohesive than anything I could type here.
    - logifail 4y ago
      > Matt Levine's columns on Luna Thanks, some great stuff. This[0] jumped out at me: "But there is no magic here. There is no algorithm to guarantee that Luna is always worth some amount of money. The algorithm just lets people exchange Terra for Luna. Luna is valuable if people think it’s valuable and believe in the long-term value of the system that you are building, and not if they don’t. The danger here is that Point 7 never goes away. Any morning, people could wake up and say “wait a minute, you just made up this all up, it’s worthless,” and decide to dump their Lunas and Terras." [0] https://archive.ph/HQAwY https://archive.ph/HQAwY
  - paulgb 4y ago
    To be clear, I was interpreting josu's “these platforms” as the layers on top of UST, not inclusive of UST itself. He also mentions that they might be ”front ends for a ponzi” which is basically where I fall on this. (So, to your question, the answer would be that the yields in fact do come from a ponzi mechanic) This is a pretty meaningless distinction if you invested in them, because you were exposed to the same mechanics, but it does have some implications for culpability because it's the difference between “should have known it was a ponzi” and “actually operated a ponzi”.
    - jsjohnst 4y ago
      > but it does have some implications for culpability In many jurisdictions around the world, there isn’t much of any difference between “directly handed the loaded gun to the killer” and “pulled the trigger and killed someone”.
    - shkkmo 4y ago
      A feeder fund for a Ponzi is a still a ponzi, even if it is a step removed from the core fund. Thus a "front-end for a ponzi" is a ponzi.
  - logifail 4y ago
    > So how is the 20% interest created? I'd treat the offer of earning 20% interest on a risk-free investment with the same scepticism I'd treat the offer of buying a perpetual motion machine. You can have abnormally high interest, or your capital can be risk-free. I simply don't believe it's possible to have both, at least not over the long term.
    - adrr 4y ago
      Interest has to come from somewhere. It is a zero sum game. There has to be some mechanism that is generating interest unless you're paying from the money invested which would qualify as a ponzi scheme

paulgb 4y ago

josu didn’t say it wasn’t fraudulent, just that it wasn’t a Ponzi scheme, which is a particular type of fraud. (I agree)

josu 4y ago
Bad grammar on my end, just edited the comment to clarify that I was indeed saying that I don't see it as a legitimate business.
adrr 4y ago
So how is the 20% interest created? Excuse my ignorance on crypto. I don’t understand how UST can drop 90% when I assume it required some sort payment of some other currency/coins to get mint them. I heard it was tens billions of UST was minted. So what happened to these coins? Were they used to pay out the interest?
- josu 4y ago
  Read Matt Levine's columns on Luna, or listen to the most recent podcast from Odd Lots with Galois Capital. They answer all your question and are much more cohesive than anything I could type here.
  - logifail 4y ago
    > Matt Levine's columns on Luna Thanks, some great stuff. This[0] jumped out at me: "But there is no magic here. There is no algorithm to guarantee that Luna is always worth some amount of money. The algorithm just lets people exchange Terra for Luna. Luna is valuable if people think it’s valuable and believe in the long-term value of the system that you are building, and not if they don’t. The danger here is that Point 7 never goes away. Any morning, people could wake up and say “wait a minute, you just made up this all up, it’s worthless,” and decide to dump their Lunas and Terras." [0] https://archive.ph/HQAwY https://archive.ph/HQAwY
- paulgb 4y ago
  To be clear, I was interpreting josu's “these platforms” as the layers on top of UST, not inclusive of UST itself. He also mentions that they might be ”front ends for a ponzi” which is basically where I fall on this. (So, to your question, the answer would be that the yields in fact do come from a ponzi mechanic) This is a pretty meaningless distinction if you invested in them, because you were exposed to the same mechanics, but it does have some implications for culpability because it's the difference between “should have known it was a ponzi” and “actually operated a ponzi”.
  - jsjohnst 4y ago
    > but it does have some implications for culpability In many jurisdictions around the world, there isn’t much of any difference between “directly handed the loaded gun to the killer” and “pulled the trigger and killed someone”.
  - shkkmo 4y ago
    A feeder fund for a Ponzi is a still a ponzi, even if it is a step removed from the core fund. Thus a "front-end for a ponzi" is a ponzi.
- logifail 4y ago
  > So how is the 20% interest created? I'd treat the offer of earning 20% interest on a risk-free investment with the same scepticism I'd treat the offer of buying a perpetual motion machine. You can have abnormally high interest, or your capital can be risk-free. I simply don't believe it's possible to have both, at least not over the long term.
  - adrr 4y ago
    Interest has to come from somewhere. It is a zero sum game. There has to be some mechanism that is generating interest unless you're paying from the money invested which would qualify as a ponzi scheme