4 ms·

The prize stuff was front and center, the whole point of it. It functioned mostly like the interest from a savings account, but with a small chance of doing muc

The prize stuff was front and center, the whole point of it. It functioned mostly like the interest from a savings account, but with a small chance of doing much better. The effective interest rate was quite good even without winning big. It was quite clear that Yotta was not itself a bank. It was also quite clear that it used real banks to store your funds and your funds were as safe as they would be in a normal account. That last part just turned out to be a lie. What “shame” would there be to lessen here?

snypher 2y ago
The shame is the consumer putting savings into a space bank lottery scheme instead of t-bills or whatever. If Yotta passed the sniff test of being a real bank, people are less likely to shame the people who lost their savings.
- wat10000 2y ago
  Yotta claimed to be functionally equivalent to having a normal interest-bearing account with an excellent interest rate, and using a small portion of the interest to buy some lottery tickets. Buying lottery tickets might be dumb, perhaps even shameful (although I disagree as long as it’s not to excess), but it by no means implies that you deserve to lose your savings.
  - kgwgk 2y ago
    For what it's worth, some countries also offer "lottery bonds": https://en.wikipedia.org/wiki/Lottery_bond https://en.wikipedia.org/wiki/Lottery_bond
    - multjoy 2y ago
      In the UK, those are Premium Bonds backed by HM Government. The day that they can't be redeemed is the day you have significantly bigger problems.
      - wat10000 2y ago
        Yotta’s funds were backed by the US government. The trouble is that the link between Yotta’s funds and Yotta’s customers’ funds was somewhat more tenuous than they implied.
- lesuorac 2y ago
  Is a space bank lottery really worse than t-bills? Like is the average utility gained from a depositor from their $1000 turning into $1001 for 1000 depositors greater than the utility gained from a single depositor turning $1000 into $2000 while the other 999 depositors utility remains flat?
sdwr 2y ago
Saving is disciplined, forward-thinking, and virtuous, in a sober, Puritanical way. Gambling is degenerate, chaotic and immoral. Yotta is a savings account for gamblers. The moral argument is "Gambling is bad, these people tried to bet their cake and eat it too, on some level they got what was coming to them".
- foxglacier 2y ago
  It's a wrong argument. "what was coming to them" was not winning but still keeping their money. Gambling is different because you risk losing what you put in.
- multjoy 2y ago
  >Gambling is degenerate, chaotic and immoral. The Mayflower called, they've lost a puritan again.
  - matwood 2y ago
    Hahaha. They irony in the gamble the puritans took to come to the US to start.
    - salawat 2y ago
      ...First, when there is somewhere to go to get away from religious persecution, that is a more or less a rational gamble. Second, are you really condescendingly equating compulsive gambling with escaping societal scale persecution or strife resulting from incompatibilities of religious belief with the State religion? That's a bit of a stretch.
- tzs 2y ago
  The general idea of Yotta at the time appears to be sound [1]. Research has shown that prize-linked savings accounts tend to result in people getting and using savings accounts who otherwise would not have done so. Just make sure to get it from an actual bank or credit union where your account will be directly FDIC or whatever the equivalent for credit unions is insured, instead of going through some fintech company where you account is with the fintech company where they store your money (commingled with other people's money) in a (hopefully insured!) bank but as far as the bank is concerned its all the fintech's money and you have no relationship with the bank. https://en.wikipedia.org/wiki/Prize-linked_savings_account https://en.wikipedia.org/wiki/Prize-linked_savings_account
TuringNYC 2y ago
>> It was also quite clear that it used real banks to store your funds and your funds were as safe as they would be in a normal account. That last part just turned out to be a lie. I dont understand how this would happen, how could a bank claim to be FDIC insured but not actually be FDIC insured? If false claims like this can happen, wouldnt that be fraud...in which case why arent the well capitalized backers and Directors of Yotta in legal trouble? Also, what prevents any bank from claiming to be FDIC insured and not be FDIC insured? I went on the FDIC site and it isnt even clear how someone would verify they are FDIC insured. It seems customers would run from tiny banks if this were the case, because then nothing could be trusted. Finally, the entire affair needs to be handled incredibly seriously by the regulators (though it doesnt seem to be the case). Because it makes me question the entire system -- and makes me wonder about any fintech. For example, i'm wondering now -- is Wealthfront actually SIPC insured as they claim (https://support.wealthfront.com/hc/en-us/articles/211004063-What-is-SIPC-Insurance https://support.wealthfront.com/hc/en-us/articles/211004063-...)
- wat10000 2y ago
  My wording was ambiguous. They didn’t lie about storing your funds in real banks. That part was true. The lie was the implication that this made your funds safe. It’s a subtle thing. It sounds like the money is safe. And it really is safe in the way that the FDIC handles: the depositor is protected in the event of a bank failure. It’s just that the depositor in this case is Yotta, not their customers, and there are potential problems beyond failures of the banks holding the money. Note that this general scheme of “we’re not a bank but we’re as safe as a bank because we put your money in real banks” is not completely crazy and is sometimes used by serious financial institutions. For example, Fidelity offers a cash management account that works this way. So it’s not an immediate red flag on its own.
  - cloudsec9 2y ago
    More to the point, FDIC insurance covers a BANK failure; but in this instance it wasn't the bank that failed. It doesn't even seem it was Yotta that had the issue, but rather their transaction company, Synapse. Now if Synapse had created individual accounts for the Yotta depositors, we wouldn't be talking now. But what happened was Synapse had a few account(s) for Yotta and a bit of a records gap, which it seems is making it hard to tie Yotta depositors to their money. What's unclear is if this is a Synapse issue, a Yotta issue or something else. But the fact that there is this accounting issue shows that there is a gap in how FinTechs are actually managing cash flows, to the risk and detriment of their customers/depositors.

snypher 2y ago

The shame is the consumer putting savings into a space bank lottery scheme instead of t-bills or whatever. If Yotta passed the sniff test of being a real bank, people are less likely to shame the people who lost their savings.

wat10000 2y ago
Yotta claimed to be functionally equivalent to having a normal interest-bearing account with an excellent interest rate, and using a small portion of the interest to buy some lottery tickets. Buying lottery tickets might be dumb, perhaps even shameful (although I disagree as long as it’s not to excess), but it by no means implies that you deserve to lose your savings.
- kgwgk 2y ago
  For what it's worth, some countries also offer "lottery bonds": https://en.wikipedia.org/wiki/Lottery_bond https://en.wikipedia.org/wiki/Lottery_bond
  - multjoy 2y ago
    In the UK, those are Premium Bonds backed by HM Government. The day that they can't be redeemed is the day you have significantly bigger problems.
    - wat10000 2y ago
      Yotta’s funds were backed by the US government. The trouble is that the link between Yotta’s funds and Yotta’s customers’ funds was somewhat more tenuous than they implied.
lesuorac 2y ago
Is a space bank lottery really worse than t-bills? Like is the average utility gained from a depositor from their $1000 turning into $1001 for 1000 depositors greater than the utility gained from a single depositor turning $1000 into $2000 while the other 999 depositors utility remains flat?

sdwr 2y ago

Saving is disciplined, forward-thinking, and virtuous, in a sober, Puritanical way. Gambling is degenerate, chaotic and immoral. Yotta is a savings account for gamblers. The moral argument is "Gambling is bad, these people tried to bet their cake and eat it too, on some level they got what was coming to them".

foxglacier 2y ago
It's a wrong argument. "what was coming to them" was not winning but still keeping their money. Gambling is different because you risk losing what you put in.
multjoy 2y ago
>Gambling is degenerate, chaotic and immoral. The Mayflower called, they've lost a puritan again.
- matwood 2y ago
  Hahaha. They irony in the gamble the puritans took to come to the US to start.
  - salawat 2y ago
    ...First, when there is somewhere to go to get away from religious persecution, that is a more or less a rational gamble. Second, are you really condescendingly equating compulsive gambling with escaping societal scale persecution or strife resulting from incompatibilities of religious belief with the State religion? That's a bit of a stretch.
tzs 2y ago
The general idea of Yotta at the time appears to be sound [1]. Research has shown that prize-linked savings accounts tend to result in people getting and using savings accounts who otherwise would not have done so. Just make sure to get it from an actual bank or credit union where your account will be directly FDIC or whatever the equivalent for credit unions is insured, instead of going through some fintech company where you account is with the fintech company where they store your money (commingled with other people's money) in a (hopefully insured!) bank but as far as the bank is concerned its all the fintech's money and you have no relationship with the bank. https://en.wikipedia.org/wiki/Prize-linked_savings_account https://en.wikipedia.org/wiki/Prize-linked_savings_account

TuringNYC 2y ago

>> It was also quite clear that it used real banks to store your funds and your funds were as safe as they would be in a normal account. That last part just turned out to be a lie. I dont understand how this would happen, how could a bank claim to be FDIC insured but not actually be FDIC insured? If false claims like this can happen, wouldnt that be fraud...in which case why arent the well capitalized backers and Directors of Yotta in legal trouble? Also, what prevents any bank from claiming to be FDIC insured and not be FDIC insured? I went on the FDIC site and it isnt even clear how someone would verify they are FDIC insured. It seems customers would run from tiny banks if this were the case, because then nothing could be trusted. Finally, the entire affair needs to be handled incredibly seriously by the regulators (though it doesnt seem to be the case). Because it makes me question the entire system -- and makes me wonder about any fintech. For example, i'm wondering now -- is Wealthfront actually SIPC insured as they claim (https://support.wealthfront.com/hc/en-us/articles/211004063-What-is-SIPC-Insurance https://support.wealthfront.com/hc/en-us/articles/211004063-...)

wat10000 2y ago
My wording was ambiguous. They didn’t lie about storing your funds in real banks. That part was true. The lie was the implication that this made your funds safe. It’s a subtle thing. It sounds like the money is safe. And it really is safe in the way that the FDIC handles: the depositor is protected in the event of a bank failure. It’s just that the depositor in this case is Yotta, not their customers, and there are potential problems beyond failures of the banks holding the money. Note that this general scheme of “we’re not a bank but we’re as safe as a bank because we put your money in real banks” is not completely crazy and is sometimes used by serious financial institutions. For example, Fidelity offers a cash management account that works this way. So it’s not an immediate red flag on its own.
- cloudsec9 2y ago
  More to the point, FDIC insurance covers a BANK failure; but in this instance it wasn't the bank that failed. It doesn't even seem it was Yotta that had the issue, but rather their transaction company, Synapse. Now if Synapse had created individual accounts for the Yotta depositors, we wouldn't be talking now. But what happened was Synapse had a few account(s) for Yotta and a bit of a records gap, which it seems is making it hard to tie Yotta depositors to their money. What's unclear is if this is a Synapse issue, a Yotta issue or something else. But the fact that there is this accounting issue shows that there is a gap in how FinTechs are actually managing cash flows, to the risk and detriment of their customers/depositors.