4 ms·

Stablegains (YC W22) customers were defrauded out of $40M

65 points by akanet 4y ago

camdat 4y ago
The irony of a company called "Stablegains" providing investments for a possibly incredibly volatile resource is astounding. Hope YC puts out a statement on this.
- prattcmp 4y ago
  Yeah, its quite disturbing that YC declined to comment - especially knowing how many similar crypto companies they are funding. I don’t want to see YC get targeted and brought down by the Feds.
  - verdverm 4y ago
    Wouldn't YC be one of the defrauded investors?
    - camdat 4y ago
      Sure, I'm expecting a statement more along the lines of "Here's how we attempted to do due diligence and failed (and thus failed in our responsibility to fund investors)" rather than accepting fiduciary responsibility for Stablecoin.
      - clpm4j 4y ago
        I think the due diligence at the point of acceptance into YC is fairly minimal. It might not even go beyond the application answers and the 10min interview... not sure though. I'd be curious to learn more about it. *edit: Seems YC participated in the follow-on round after the batch ended, so I imagine some extra due diligence goes into that.
        verdverm 4y ago
        The point is that they are an investor and do not run the company. Would they have known about allocation strategy, how to evaluate that? Even if they did know, are they in a position to control or dictate anything within the company? This applies to investors at any company. At some point you have decided to believe in the founders and executive team, rather than deal with daily operations and micromanaging your portfolio
        nytesky 4y ago
        Isn’t this one of cited reasons for a lack of diversity in VC funded founders — they invest in a founder as a person and their team, thus biased by personal relations, rather than the merits and details of the actual business plan?
        verdverm 4y ago
        Yes, VCs care more about the people behind the company than what the company does. Projects , products, and ideas evolve and the founders need to be adaptable. VCs don't always know the founders well, but they see a ton of founders and have learned to discern. The personal network is often more used by founders, who provide introductions to investors. You have to be social to be a founder, which is really why networks are more noticeable therein.
        davidgerard 4y ago
        there have been issues around this, insofar as how much the VC investors - who are part-owners, remember - are involved in the running of the company. When Telegram did its failed ICO, a pile of the VCs who bought tokens behaved with sufficient involvement that the SEC deemed them underwriters, i.e. partially responsible for the offering. So how much business help did Y Combinator offer this particular blatant Ponzi? Looking forward to YC and PG's comments on this.
    - davidgerard 4y ago
      yes, that's the way the scam works. * all the laws are to protect investors from issuers * splash around money to incentivise securities fraud * buy a pile of tokens * if the SEC doesn't bust the issuer, the VC wins big * if the SEC does bust the issuer, the VC gets their money back and doesn't lose it also realises liquidity much quicker than the long and tedious process of backing a tech company that does things So did YC buy the tokens, or buy equity in the company? If the latter, then they're part-owners and may claim to have been completely hands-off, but might need to show it.
  - jjulius 4y ago
    They've already had ~21 days[1] to make a statement, too... [1]https://news.ycombinator.com/item?id=31431224 https://news.ycombinator.com/item?id=31431224
mrpadie 4y ago
Previous discussion: https://news.ycombinator.com/item?id=31431224 https://news.ycombinator.com/item?id=31431224
parkerhiggins 4y ago
A few months ago I found Stablegains. I asked myself, “how is this possible?”, “why is this backed by YC?”. Started digging around. Read their TOS and Privacy Policy. Analyzed their relationship with the Anchor protocol. Then I found screenshots of the founder’s notebooks and code. Showing deposit amounts… At that point I knew this wasn’t about actually delivering value to customers if they were so sloppy with their security.
eatonphil 4y ago
I thought the company was shut down. If the company was shut down how can it be sued?
- akanet 4y ago
  The lawyers contemplating the suit have decided not to sue, but you can sue companies that plan to shut down.
- jjulius 4y ago
  The company is not shut down. Today is June 9th, and Stablegains says[1]: >Finally, as a result of recent events, we have decided to discontinue the Stablegains service beyond the end of June 2022. >On July 1, 2022, we will stop supporting the Stablegains service. The mobile app will be delisted from App Stores, the web interface will be taken offline, and it is very likely we will not be able to support withdrawals after that time. [1]https://blog.stablegains.com/were-discontinuing-the-stablegains-service-please-withdraw-your-remaining-funds-405e6bfb89c4 https://blog.stablegains.com/were-discontinuing-the-stablega... Edit: Also, closing a business doesn't mean that you can no longer be held accountable for what happened while your business was opened. Statute of limitations and whatnot (IANAL) may differ from state-to-state, but allowing a business to be immune from prosecution simply because they closed would be one hell of a gaping legal loophole. It'd be like not prosecuting someone for theft or murder because they had stopped stealing or murdering lol.
perryh2 4y ago
Previously discussed [0] Seashell.com is another VC-funded startup that seems shady and is building an investment app advertising high yields sourced from DeFi. Took investment from Do Kwon and had a tweet from Terra [1]. [0] https://news.ycombinator.com/item?id=30375309 https://news.ycombinator.com/item?id=30375309 [1] https://twitter.com/terra_money/status/1481701273070047232 https://twitter.com/terra_money/status/1481701273070047232

65 points by akanet 4y ago

The irony of a company called "Stablegains" providing investments for a possibly incredibly volatile resource is astounding. Hope YC puts out a statement on this.

prattcmp 4y ago
Yeah, its quite disturbing that YC declined to comment - especially knowing how many similar crypto companies they are funding. I don’t want to see YC get targeted and brought down by the Feds.
- verdverm 4y ago
  Wouldn't YC be one of the defrauded investors?
  - camdat 4y ago
    Sure, I'm expecting a statement more along the lines of "Here's how we attempted to do due diligence and failed (and thus failed in our responsibility to fund investors)" rather than accepting fiduciary responsibility for Stablecoin.
    - clpm4j 4y ago
      I think the due diligence at the point of acceptance into YC is fairly minimal. It might not even go beyond the application answers and the 10min interview... not sure though. I'd be curious to learn more about it. *edit: Seems YC participated in the follow-on round after the batch ended, so I imagine some extra due diligence goes into that.
      - verdverm 4y ago
        The point is that they are an investor and do not run the company. Would they have known about allocation strategy, how to evaluate that? Even if they did know, are they in a position to control or dictate anything within the company? This applies to investors at any company. At some point you have decided to believe in the founders and executive team, rather than deal with daily operations and micromanaging your portfolio
        nytesky 4y ago
        Isn’t this one of cited reasons for a lack of diversity in VC funded founders — they invest in a founder as a person and their team, thus biased by personal relations, rather than the merits and details of the actual business plan?
        verdverm 4y ago
        Yes, VCs care more about the people behind the company than what the company does. Projects , products, and ideas evolve and the founders need to be adaptable. VCs don't always know the founders well, but they see a ton of founders and have learned to discern. The personal network is often more used by founders, who provide introductions to investors. You have to be social to be a founder, which is really why networks are more noticeable therein.
        davidgerard 4y ago
        there have been issues around this, insofar as how much the VC investors - who are part-owners, remember - are involved in the running of the company. When Telegram did its failed ICO, a pile of the VCs who bought tokens behaved with sufficient involvement that the SEC deemed them underwriters, i.e. partially responsible for the offering. So how much business help did Y Combinator offer this particular blatant Ponzi? Looking forward to YC and PG's comments on this.
  - davidgerard 4y ago
    yes, that's the way the scam works. * all the laws are to protect investors from issuers * splash around money to incentivise securities fraud * buy a pile of tokens * if the SEC doesn't bust the issuer, the VC wins big * if the SEC does bust the issuer, the VC gets their money back and doesn't lose it also realises liquidity much quicker than the long and tedious process of backing a tech company that does things So did YC buy the tokens, or buy equity in the company? If the latter, then they're part-owners and may claim to have been completely hands-off, but might need to show it.
- jjulius 4y ago
  They've already had ~21 days[1] to make a statement, too... [1]https://news.ycombinator.com/item?id=31431224 https://news.ycombinator.com/item?id=31431224

mrpadie 4y ago

Previous discussion: https://news.ycombinator.com/item?id=31431224 https://news.ycombinator.com/item?id=31431224

parkerhiggins 4y ago

A few months ago I found Stablegains. I asked myself, “how is this possible?”, “why is this backed by YC?”. Started digging around. Read their TOS and Privacy Policy. Analyzed their relationship with the Anchor protocol. Then I found screenshots of the founder’s notebooks and code. Showing deposit amounts… At that point I knew this wasn’t about actually delivering value to customers if they were so sloppy with their security.

eatonphil 4y ago

I thought the company was shut down. If the company was shut down how can it be sued?

akanet 4y ago
The lawyers contemplating the suit have decided not to sue, but you can sue companies that plan to shut down.
jjulius 4y ago
The company is not shut down. Today is June 9th, and Stablegains says[1]: >Finally, as a result of recent events, we have decided to discontinue the Stablegains service beyond the end of June 2022. >On July 1, 2022, we will stop supporting the Stablegains service. The mobile app will be delisted from App Stores, the web interface will be taken offline, and it is very likely we will not be able to support withdrawals after that time. [1]https://blog.stablegains.com/were-discontinuing-the-stablegains-service-please-withdraw-your-remaining-funds-405e6bfb89c4 https://blog.stablegains.com/were-discontinuing-the-stablega... Edit: Also, closing a business doesn't mean that you can no longer be held accountable for what happened while your business was opened. Statute of limitations and whatnot (IANAL) may differ from state-to-state, but allowing a business to be immune from prosecution simply because they closed would be one hell of a gaping legal loophole. It'd be like not prosecuting someone for theft or murder because they had stopped stealing or murdering lol.

perryh2 4y ago

Previously discussed [0] Seashell.com is another VC-funded startup that seems shady and is building an investment app advertising high yields sourced from DeFi. Took investment from Do Kwon and had a tweet from Terra [1]. [0] https://news.ycombinator.com/item?id=30375309 https://news.ycombinator.com/item?id=30375309 [1] https://twitter.com/terra_money/status/1481701273070047232 https://twitter.com/terra_money/status/1481701273070047232