Ask HN: Is Seashell legit? Startup offering 10% interest | Hacker News Reader

Ask HN: Is Seashell legit? Startup offering 10% interest

11 pointscausehealth10111 comments

Seashell (seashell.com) was founded in 2021 and raised its Series A last month.

The product: "Earn up to 10% interest on your cash. Compliance focused. No hidden fees. Get started in minutes."

The FAQ page explains how they earn such high yields: "We place your money into a diversified strategy, partially investing into safe haven assets like gold and partially investing into dollar-pegged digital assets that attract borrowers who are willing to pay higher interest fees. As a result, your money is generating reliably up to 10% interest, leaving you with more cash in your pocket."

This sounds like an investment product that is substantially downplaying the risks (placing money in non-digital assets like cyrpto) - a material misrepresentation of an interest-bearing account.

And does "compliance focused" mean they're actually compliant? Or are they following the Robinhood model of building up a treasure chest before regulators notice, in order to afford the legal costs and changes necessary to clean up their act (i.e. cost of doing business).

It doesn't pass my smell test, but I'd like to hear your thoughts.

I think literally the only thing that's innovative about this company is how close they are willing to come to claiming to be a savings account when actually being a crypto fund. What's going on here is you're going to give Seashell $100, they're going to go and buy $100 of USDT and lend it to any old idiot who is stupid enough to trade crypto on margin. Then, the next time BTC crashes the idiot defaults and Seashell turns around to you and says "Sorry, that savings account you had with us technically isn't a savings account, you aren't protected from losses in any way all your money is gone". And the kicker? You're not even getting the upside!

It's innovative in they've found a way of giving you the returns of a moderately risky stock market investment whilst offering you the risk profile of playing in traffic.

There’s a fairly broad disclaimer at the bottom of the page:

“Disclaimer: Custody and settlement services are offered through Prime Trust, a Nevada trust bank. Seashell Financial Inc. ("Seashell"), a Delaware corporation, does not provide legal, tax, or investment advice. Holdings of digital assets are speculative and involve a substantial degree of risk, including the risk of complete loss. There can be no assurance that any cryptocurrency, token, coin, or other digital asset will be viable, liquid, or solvent. No Seashell communication is intended to imply that any digital asset services are low-risk or risk-free. Seashell works hard to provide accurate information on this website, but cannot guarantee all content is correct, complete, or updated. Digital assets held in custody are not guaranteed by Seashell and are not FDIC-insured.”

Also, chances are you’ll have to sign something similar before signing up. I would think they probably get away with that.

> Prime Trust, a Nevada trust bank

From the little I can understand this is offering something like a "backbone" to new fintech companies via some API, definitely with some crypto-coin-related stuff, but also allowing "normal" money accounts:

https://www.primetrust.com/

The "about" page:

>What we do

>The one-stop shop for fintech innovation

>Prime Trust’s APIs and widgets power the world’s leading crypto exchanges, NFT creators, digital wallets, Alternative Trading Systems, RIA platforms, broker dealers, crowdfunding platforms, and neobanks.

though it is not clear (to me) how the actual custody works, from their help/FAQs:

https://support.primetrust.com/hc/en-us/articles/44102221908...

>Does Prime Trust offer $130m in FDIC insurance total or $250k in FDIC insurance per account?

>Prime Trust is not an FDIC-insured entity but does work with FDIC-insured banks only. To learn more about FDIC insurance, go to https://www.fdic.gov/resources/deposit-insurance/

"not FDIC-insured."

Here's the important part.

Yeah, frankly the latter clause is more of a red flag than a positive. It's "we're not FDIC insured, but we've thrown this basically irrelevant detail about our banks into the sentence (they're not storing your money in banks), because it might confuse some people into thinking there is some degree of protection, and those are the sort of people we want as customers"

Read the fine print. It's not a FDIC-insured account.

It's a crypto yield account that downplays the fact that it's crypto.

Do with that knowledge what you want.

For a legit investment broker, even with an Uber-like disregard for regulations, 10% is too good to be true. Either it is far less than 10%, normal returns minus what their greed demands, or they aren't legit.

Possibilities include a Ponzi scheme or the like (possibly on the VC funding side), brazenly lying or carefully almost-lying to customers, delusional leadership, investments in something illegal or ridiculously high risk. Most likely, they care for their stock and their exits rather than their customers.

The phrasing "up to 10%" is already sketchy. I mean literally 0% is also up to 10%.

In fact, they don’t even guarantee a positive return:

“As detailed in your account agreements, Seashell is not FDIC insured and like any investment product, there is a risk that your investment may lose value.”

https://www.seashell.com/frequently-asked-questions

And 0% isn't even the floor. It could be -100% (not FDIC insured) to +10%.

If anyone had found a way to make 10% interest consistently, they would create a hedge fund, not a b2c company.

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