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How do you accidentally make false statements about customer funds being FDIC- and SIPC-insured? It's just not plausible to me that this wasn't an intentional

How do you accidentally make false statements about customer funds being FDIC- and SIPC-insured? It's just not plausible to me that this wasn't an intentional attempt to mislead about some pretty darn fundamental properties of the investment scheme.

_jal 4y ago
Strikes me as similar to small shops that have nothing to do with health care claiming to be "HIPAA-compliant". Doing things like this certainly conveys useful information, although not the information they intended to convey.
- marshray 4y ago
  How would it be similar, when FTX has everything to do with FDIC/SIPC protections?
  - _jal 4y ago
    Companies cluelessly claiming important-sounding capabilities they do not have. Is that really difficult?
    - JumpCrisscross 4y ago
      > Companies cluelessly claiming important-sounding capabilities they do not have Fraudulently. Not just cluelessly. The “government can’t crypto” meme led a lot of people to lawlessness.
- jfengel 4y ago
  Or better, "HIPPA compliant", which tells you even more.
vkou 4y ago
You don't, but it's easier to ask for forgiveness, than for permission, when your wildcat bank loses all of its customers' money.
nodesocket 4y ago
This has popped up before with other crypto exchanges. The core piece is that the bank that the crypto exchange uses is FDIC insured but not the direct crypto exchange. So, if the bank that the exchange uses goes under, then yes that money should be insured. However, if the exchange itself goes under you SOL. So technically this is accurate but very misleading. This is a complete nothing burger. They want Brett to remove a tweet (posted on his personal account by the way) and text on 3rd party sites FTX US does not control. Government regulation at its best.
- LiquidSky 4y ago
  >Government regulation at its best. Yes? Your own comment says this was a deliberate attempt to mislead people. This is exactly what regulation is meant to stop.
- marshray 4y ago
  > However, if the exchange itself goes under you SOL. Either your deposits are federally protected from failure of the institution, or not. It's as ridiculous as me telling my credit card issuers that their loans to me are federally protected because I have an FDIC bank account. Nobody's worried about some bank going under, we're worried about the risk of trusting our money with a crypto exchange when so many have been Ponzi schemes. Waving around the terms FDIC- and SIPC-insured in a way that implies that it means something to the end consumer is, IMHO, the sign of a scammer.
toolz 4y ago
They didn't - read the tweet, the statement they made is factual and boring. The tweet says they hold funds in FDIC insured banks and stocked in insured brokerages...how on earth is this misleading or controversial is beyond me.
dpifke 4y ago
This is about their direct deposit product, which is offered through an FDIC-insured bank, Evolve Bank & Trust. (Same bank that holds accounts for other fintech startups, such as Mercury.) It works as follows: When you sign up to enable direct deposit, FTX opens an account for you at Evolve. You can use that account number to have some or all of your paycheck direct-deposited. When you buy cryptocurrencies on FTX, that account is automatically debited. (This avoids the ACH transfer step if you were to purchase using your "regular" bank account.) I may be missing something, but I'm pretty sure the deposited funds are FDIC insured, up until you use them for a purchase. But FTX isn't allowed to say that without mentioning the name of the actual bank (Evolve), and the FDIC thinks the "until you use them for a purchase" part of the preceding sentence is confusing. I agree with the FDIC here, but I don't think FTX's statements were particularly nefarious. There's more nuance here than could fit into the tweet this C&D is about. Edit to add: this is how FTX explains it when you enable this feature on their site (no mention of FDIC insurance, but if it's a regular checking account, the unspent funds in that account would be protected if either FTX or Evolve went bust): https://pifke.org/ftxdd.png https://pifke.org/ftxdd.png
- computing 4y ago
  Yep, that's how I interpreted it to. The following things are still unclear to me: - if you ACH push/pull funds from your other banks accounts into FTXus, are those funds held in that Evolve Bank checking account (therefore being FDIC insured)? - if you deposit some crypto/stables and sell to USD, are those funds deposited into the Evolve Bank account? - if you wire in USD (domestic and international) are those stored in the Evolve Bank?

_jal 4y ago

Strikes me as similar to small shops that have nothing to do with health care claiming to be "HIPAA-compliant". Doing things like this certainly conveys useful information, although not the information they intended to convey.

marshray 4y ago
How would it be similar, when FTX has everything to do with FDIC/SIPC protections?
- _jal 4y ago
  Companies cluelessly claiming important-sounding capabilities they do not have. Is that really difficult?
  - JumpCrisscross 4y ago
    > Companies cluelessly claiming important-sounding capabilities they do not have Fraudulently. Not just cluelessly. The “government can’t crypto” meme led a lot of people to lawlessness.
jfengel 4y ago
Or better, "HIPPA compliant", which tells you even more.

vkou 4y ago

You don't, but it's easier to ask for forgiveness, than for permission, when your wildcat bank loses all of its customers' money.

nodesocket 4y ago

This has popped up before with other crypto exchanges. The core piece is that the bank that the crypto exchange uses is FDIC insured but not the direct crypto exchange. So, if the bank that the exchange uses goes under, then yes that money should be insured. However, if the exchange itself goes under you SOL. So technically this is accurate but very misleading. This is a complete nothing burger. They want Brett to remove a tweet (posted on his personal account by the way) and text on 3rd party sites FTX US does not control. Government regulation at its best.

LiquidSky 4y ago
>Government regulation at its best. Yes? Your own comment says this was a deliberate attempt to mislead people. This is exactly what regulation is meant to stop.
marshray 4y ago
> However, if the exchange itself goes under you SOL. Either your deposits are federally protected from failure of the institution, or not. It's as ridiculous as me telling my credit card issuers that their loans to me are federally protected because I have an FDIC bank account. Nobody's worried about some bank going under, we're worried about the risk of trusting our money with a crypto exchange when so many have been Ponzi schemes. Waving around the terms FDIC- and SIPC-insured in a way that implies that it means something to the end consumer is, IMHO, the sign of a scammer.

toolz 4y ago

They didn't - read the tweet, the statement they made is factual and boring. The tweet says they hold funds in FDIC insured banks and stocked in insured brokerages...how on earth is this misleading or controversial is beyond me.

dpifke 4y ago

This is about their direct deposit product, which is offered through an FDIC-insured bank, Evolve Bank & Trust. (Same bank that holds accounts for other fintech startups, such as Mercury.) It works as follows: When you sign up to enable direct deposit, FTX opens an account for you at Evolve. You can use that account number to have some or all of your paycheck direct-deposited. When you buy cryptocurrencies on FTX, that account is automatically debited. (This avoids the ACH transfer step if you were to purchase using your "regular" bank account.) I may be missing something, but I'm pretty sure the deposited funds are FDIC insured, up until you use them for a purchase. But FTX isn't allowed to say that without mentioning the name of the actual bank (Evolve), and the FDIC thinks the "until you use them for a purchase" part of the preceding sentence is confusing. I agree with the FDIC here, but I don't think FTX's statements were particularly nefarious. There's more nuance here than could fit into the tweet this C&D is about. Edit to add: this is how FTX explains it when you enable this feature on their site (no mention of FDIC insurance, but if it's a regular checking account, the unspent funds in that account would be protected if either FTX or Evolve went bust): https://pifke.org/ftxdd.png https://pifke.org/ftxdd.png

computing 4y ago
Yep, that's how I interpreted it to. The following things are still unclear to me: - if you ACH push/pull funds from your other banks accounts into FTXus, are those funds held in that Evolve Bank checking account (therefore being FDIC insured)? - if you deposit some crypto/stables and sell to USD, are those funds deposited into the Evolve Bank account? - if you wire in USD (domestic and international) are those stored in the Evolve Bank?