4 ms·

The FDIC covers $250k per depositor, not per account, and specifically does not cover bond investments. Either your startup created 200+ entities to pull this o

• tedivm 4y ago
  > Either they created 200+ entities to pull this off That's literally what they told me they did, and what I was trying to say happened here. It's possible he was misled, but he seemed pretty knowledgeable about this. The money initially came from Softbank, who helped with the process. Also, $250k per depository per bank. You can also distribute the money across multiple banks to get higher insurance levels.
  • costco 4y ago
    Why didn’t they just use https://en.m.wikipedia.org/wiki/Certificate_of_Deposit_Account_Registry_Service https://en.m.wikipedia.org/wiki/Certificate_of_Deposit_Accou...? I haven’t used it I just read about it in a Taleb book but it seems like it would be much easier than creating all the accounts yourself and you can interact with just one bank account instead.
    • tedivm 4y ago
      I'll be honest, there's a chance that this is exactly what they did but that they didn't understand it or describe it properly. My main point was that there are ways to get protection beyond the FDIC limit, and your link shows a pretty reasonable way to do that.
  • e1g 4y ago
    Assuming legitimate operations, this strategy is highly atypical in corporate finance. There is no scenario where this setup has less cumulative risk than keeping cash reserves spread evenly across the top 2-3 banks. For a startup, this is a red flag about the founders' priorities, risk management, and ability to find professional advice. As an intuitive measure, extrapolate this idea to Apple or Microsoft, which keep ~$10B in cash on hand and also need to protect it.
    • tome 4y ago
      > extrapolate this idea to Apple or Microsoft, which keep ~$10B in cash on hand Literally cash, as in deposits? Or highly liquid assets such as T-Bills?
    • tedivm 4y ago
      To be fair the founder was really incompetent, and the money was pretty much wasted. When the company finally sold it was well worth what my strike price was.
  • postexitus 4y ago
    They either made the story up based on what they read on reddit or you are making it up now based on what you have read on reddit. There is a third possibility that that person being incredibly dumb and they actually believed what they read - but I give that a slim chance.
    • from 4y ago
      Why would someone lie about that? Having 30 bank accounts does not confer any prestige upon you. There are companies that do this for people (https://en.wikipedia.org/wiki/Certificate_of_Deposit_Account_Registry_Service https://en.wikipedia.org/wiki/Certificate_of_Deposit_Account...) and if you Google "FDIC sweep" or "insured cash sweep" there are a bunch of banks talking about how they support automatically moving money out when an account gets more than $250000 in it.
      • zamnos 4y ago
        What's more likely being lost in translation is that they have an insured cash sweep account and explained how that works, and who exactly is creating the 30 bank accounts is what's being misunderstood in this game of telephone.
• bombcar 4y ago
  At the $100m amount people may confuse FDIC with SIPC - https://www.sipc.org https://www.sipc.org What SIPC does is similar to FDIC but it basically comes down to "If you buy stocks via Vanguard, Vanguard guarantees that those stocks actually exist and that if they fail you get them, and SIPC helps with that".
• a-r-t 4y ago
  Just a clarification: it's per depositor per bank.
• notyourday 4y ago
  This is literally the primary job of the CFO: Making sure that if there's X in cash or cash equivalent at noon on March 9th, 2023 PST there's still X in cash or cash equivalents at noon on March 10th, 2023
• squeaky-clean 4y ago
  Per bank. You can use something like IntraFi to distribute your deposits across multiple banks automatically.