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Comment by tombert | Hacker News Reader

I sincerely hope that I never meet Sam Bankman Fried, because if I did I do not know what I would do but it certainly wouldn't be legal.

I was stupid and thought that the 7+% interest I was getting from Gemini+GUSD+Genesis Holdings was a good idea, I put a good chunk of money in there, and as of right now the status for that appears to be in "limbo at best". It's particularly upsetting, because this all unfolded right after I got fired from my last job, when I really needed my liquid money to pay for things like "my mortgage" and "food".

I'm fine now fiscally, and even wasn't in too much trouble back in November [1], but it make me lose multiple nights of sleep worrying about stuff, and also made me feel like an idiot for ever thinking that cryptocurrency was a good idea.

[1] I have a good chunk of money stashed in stocks/ETFs, which I could have liquidated for money, but the market was pretty far down so I would have had to take a big haircut.

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I’m sorry for your loss but I’m really amazed you thought that 7% yield from savings at a time of 0% interest rates was anything other than a fabrication.

I looked at these and they were so absurd there was no way I would invest. No fundamentals. No audit. No insurance. No stable company or bank.

What was your thought process in putting funds here? Did you think it would just take longer to explode and you would be able to withdraw before? Did you genuinely believe?

Being a true passive investor is much harder than most people think. We are flooded with stories of "amazing opportunities" and "systemic risks".

> I’m really amazed you thought that 7% yield from savings at a time of 0% interest rates was anything other than a fabrication

Necessarily risky. Not necessarily fabrication. Between those two there is room for both productive gains and delusional optimism.

Risk to return is non-linear, and at a system with a floor of 0%, 7% is an insane claim. Granted, this requires a reasonable amount of financial literacy, and plenty of people think they have that but don't.

> at a system with a floor of 0%,

There's not a floor of 0%. Negative returns exist.

But are rarely promoted as an investor benefit.

>> I’m sorry for your loss but I’m really amazed you thought that 7% yield from savings at a time of 0% interest rates was anything other than a fabrication.

The guy (SBF) was hanging out with and appeared to be anointed by Gensler and crew https://www.sec.gov/about/commissioners/gary-gensler. How much due diligence does one expect common citizens to perform?

Why do you think that made the financials viable?

>> Why do you think that made the financials viable?

Even a person with a finance background such as myself cannot realistically state what yield is "viable", especially without history.

Commercial Real Estate is paying 8.5% preferred these days...is that viable? Not sure, but I can look at history across rate environments.

Crypto has no history so I think a lot of people were going on trust of the players. Many investments are about trusting the managers.

These investments were comparable to money market funds. There’s no way passive cash is viable at those returns.

If Commercial Real Estate is paying 8.5% and someone starts offering “Crypto Commercial Real Estate” as a competing product for those same fundamentals but offers 400% return, would you still be unable to assess its viability?

>> These investments were comparable to money market funds. There’s no way passive cash is viable at those returns.

Totally agree. But why would you compare crypto high yield accounts to MM funds, rather than, say, CLOs or CLO funds, or structured notes (https://pprcapitalmgmt.com/invest-in-a-real-estate-fund/) or factored receiveables funds

Not sure how strong the commercial real estate argument is rn lol

Well, there was some hand-waviness claiming that GUSD was FDIC insured [1], and they kept comparing it to bank accounts. I will admit that I should have done more research before putting it in, but I just assumed that since Gemini was ostensibly working with regulators and they were plastering the safety of GUSD everywhere, I guess I just didn't do my due diligence. I'll accept my share of the blame.

[1] https://www.gemini.com/dollar It still mentioned "FDIC" stuff in small print, but it was much more prominent in earlier stuff.

> there was some hand-waviness claiming that GUSD was FDIC insured

This should be piercing-the-veil fraud if true.

They're actually being sued by the SEC over this, claiming it's an unregistered security.

> being sued by the SEC over this, claiming it's an unregistered security

Good, but insufficient. Misleadingly using the FDIC’s brand should open a criminal investigation.

But that’s so simple to validate. I mean, I have funds in a few accounts and every one of them shows up in FDIC’s bankfind tool and “member fdic” is advertised by the banks.

The link you posted does mention fdic but it says Gemini’s deposits are fdic insured (probably true as what kind of a crazy company keeps cash in uninsured accounts). Definitely shady of them to word it like that as it’s likely meant to confuse and mislead. But again, pretty easy to validate and disprove before sending any funds.

I hope you get something back and I guess the good news is that you only make this mistake once in life and teach everyone in your family how to avoid.

> But that’s so simple to validate.

Simple to who? Simple to you? I didn't invest in Gemini and also thought these returns were obviously bunk, but I've never heard of "FDIC's bankfind tool" before your comment.

The guy already said he accepts his share of the blame for not doing DD, but I'm not sure why you're so insistent that it's entirely his fault when SBF was clearly committing fraud.

Simple to anyone with significant sums of money to invest.

Either someone is competent enough to earn thousands to hold with FTX or competent enough to inherit win and not have it wasted away.

Either way, if I have $10-100k or whatever and this isn’t simple for me then the issue isn’t FTX, it’s me and I’m going to eventually lose it.

I’m saying it is OP’s fault because he invested in magical thinking. Of course it’s also SBF’s fault for committing fraud. But this is an entirely avoidable fraud as it’s not a complicated con.

If I buy magic beans from a traveler whose fault is it? It’s certainly the traveler’s fault for claiming they will grow into a beanstalk to heaven, but it’s also my fault for believing such a tale.

> Simple to anyone with significant sums of money to invest.

Remember Bernie Madhoff?

Hedge funds are quite different than cash accounts. And Madoff at least had a story with fake statements and whatnot.

FTX was patently impossible.

Genesis was claiming that the Earn program was effectively using cryptocurrency as collateral on high interest loans. I knew how high the interest was on credit cards and auto-loans and payday loans, so it didn’t seem ponzi-like to me.

To be clear, I didn’t ever directly do anything with FTX, at least not knowingly. I was unaware of the cross-mingly that was happening with SBF, Genesis, and Alameda, so no matter how “impossible” FTX seemed, it wouldn’t have saved me if I didn’t know FTX was involved.

That said, 7% when banks and bonds are are offering 0.1% should have more directly set off my bullshit alarm.

Yep, no argument that I should have checked the FDIC's bankfind tool, which I do make liberal use of now. I guess I just made the mistake of thinking that Gemini wouldn't have been able to do this for so long if it were a scam, especially since they repeatedly claimed they were working with regulators.

I'm also reasonably sure that the FDIC insurance stuff was more prominently displayed on their site, though I'm having trouble confirming that so maybe I'm just misremembering.

And indeed, I have helped a few people avoid these scams now. When friends of mine ask me about investing in crypto now, I tell them "I think you should buy Treasury Bills directly from the government for safe short term stuff, and probably just find a good low cost index fund from a registered broker for longer term stuff".

You're not crazy that it used to[1] be less clear what exactly FDIC insurance applied to.

Originally:

> Gemini is a U.S. company regulated by the New York Department of Financial Services. GUSD reserves are eligible for FDIC insurance up to $250,000 per user while custodied with State Street Bank and Trust.¹

Later:

> Gemini is a U.S. company regulated as a limited purpose trust company by the New York State Department of Financial Services. Each GUSD corresponds to a U.S. dollar held by Gemini in accounts at U.S. FDIC-insured bank accounts and money market funds holding short-term U.S. treasury bonds and maintained at a custodian. The cash portion of these GUSD reserves may be eligible for FDIC “pass through” insurance for Gemini customers, in the event of the failure of a bank holding the U.S. dollar deposit portion of the GUSD reserves.

[1] https://web.archive.org/web/20211201224824/https://www.gemin...

It's really unfortunate so many VC's and people in the tech industry lent credibility to such naked fraud. It made (and continues to make) regulation politically untenable. One of our political parties _continues_ to insist the crypto industry is "innovation!" and it'd be a mistake to stifle such incredible innovation. It's all bs.

I'm sorry you fell victim to this. It's a shame the regulators, meant to protect consumers from this exact thing, weren't able to do their jobs. Don't take it as a personal failure. This was systemic, and you were served up by lots of deeply monied interests.

I mean the VCs literally make their money from pump and dump schemes. There are a ton of startups in the valley that have ludicrous valuations. VC can do the initial investments then recoup their capital even before companies are profitable as we see with examples like Uber.

Or you could take personal responsibility for having ignored everybody who said for years that it's all BS. This was not a secret, unforeseen, some higher natural power. It was delusion, and if you choose not to listen then it's up to you. Don't blame it on regulators.

Hey, I was one screaming at everyone about how silly it all was. I’ve got a nice decade of HN comments to demonstrate. BUT I also have a decent interest in personal finance and understand that world better than your average bear. It sucks that predators are just allowed to scam less informed people, and this is the response they have to deal with.

We’re all getting older, and there’s a good chance we’ll lose some of our faculties along the way. I’d prefer to live in a place that does something to help protect me from outright scams, and not have to take “personal responsibility”, and constantly be on guard against every potential bad actor.

But it's precisely that handwaviness that should make you not have to do research at all and smell a rat, as ultimately rate of interest and risk come hand in hand. It doesn't matter whether the instrument is based on crypto, real estate or pokemon cards.

If someone is offering a high interest, very liquid investment with returns so high that you are better off taking a larger mortgage, and putting the extra money into the investment, there has to be a hidden risk component: Otherwise, why would anyone issue mortgages, instead of investing in this very liquid instrument? It's too good to be true.

It's not unlike the people that spent money ordering cryptominers from butterfly labs: The expected return from buying them (pay the whole thing off in two months, and afterwards it's all profit!") just doesn't line up, regardless of the justification. Extraordinary returns exist, but they either require that you discover them yourself, or have to carry significant risks. So when someone is selling the opportunity to you, and you are told there's no risk, you have to know you are being lied to, no due diligence necessary.

I mean, I know. I lost my money. I wrote the post explaining that I feel stupid about it.

Sorry, we all make mistakes. Some people do dumb things with money, others with relationships, some with their health, and others with their time.

It's hard to be successful at everything. Ask the friends of anyone here, they'll point at the things someone did right and the things they messed up to get their.

Glad you're doing better.

Just wanted to chime in and say thank you for sharing. If everyone was too ashamed of sharing past stupidness we would have no guideposts at all for gauging our own inevitable stupidness.

Yeah, honestly I don't particularly care what the people on HN think of me [1], but I think it's important to come out to say that even relatively educated people like me can be duped. I might very well be an idiot, but at least nominally I'm in the "educated" demographic: I have a yuppie job, a college degree, some graduate education, and until Gemini Earn was generally considered somewhat financially responsible. I don't gamble, I don't drink, I don't go out to eat very often, any large purchases are planned out for weeks (if not months), and I try and put at least 30% of my paycheck into some form long-term savings (either something low risk/long-term like an index fund or something super-low-risk like a treasury bill). I feel like if something like this can happen to me, it can happen to nearly anyone else.

If anyone was thinking about "investing" in cryptocurrencies, just try and remember that it's largely-unregulated funny money, and you're probably not going to save the world while simultaneously getting rich from it.

I'm hoping that other people can learn from my mistake the age-old adage: if it looks too good to true, it probably is.

[1] (well, most of the time, admittedly I'm subject to vanity like anyone else)

> if it looks too good to true, it probably is.

And everybody told you, all the time, and you chose not to listen. That's your choice, no worries.

But threatening physical harm to the con man you fell for is just not ok.

Sorry, “everybody” told me? “All the time”? That’s news to me; lots of people seem to get suckered by Gemini Earn. Yes there were a few comments we can look back at in hindsight, but its not like anyone in my friend group told me anything.

Also, it’s hardly a “threat”; it was a bit of hyperbole, which nearly everyone here seems to understand (including you, I think), but let’s just pretend my statement was 100% sincere; what danger am I causing exactly? I very clearly say that I do not want to meet him. What kind of cartoon-like circumstances are going to lead to me meeting this guy if I am not seeking him out?

Actually, threatening physical harm to a con man has a long and storied tradition in this country; but more than that if SBF had mugged this guy I don't think anyone would call a physical response a bad thing, but because he mugged him with words you're going to posture about this is "just not ok"? Come on.

Don’t sweat it. I’ve invested multiple hundreds of thousands in venture-backed startups over the past two decades, and lost all of it. None of the startups was successful. These were all audited venture-backed with experienced founders many of whom I’ve known personally in the Austin tech scene. Losing money is the rule in any kind of investing beyond the prevailing real interest rate. It’s all speculation. By the sound of it your diversification is paying off. Actually you’re quite smart in that regard, you didn’t put it all into startups like me.

It's ok. Don't worry. I lost $250k during Covid because of similar lack of due diligence.

I made most of them back YOLO-ing TQQQ, but like you, I was having cold sweats for several nights.

Thankfully, there is so much money in tech industry that you can still recover from mistakes like this.

Thanks for sharing. You've paid a significant price for a very tough life lesson. It takes guts to be so open about it. Kudos.

OK, now you're moving from the realm of genuine curiosity and into the realm of victim blaming.

Before the collapse, FTX and crypto had a veneer of respectability. They had ads everywhere and the mainstream press treated them like legitimate financial investments.

The failure here isn't of the individuals who get suckered with crypto bullshit, it's a failure in our ability to regulate and tamp down that kind of crap. Shame on the press, government institutions, and of course tech sector VCs, for either shilling for, investing in, or looking the other way while these frauds were taking people to the cleaners.

I talked to a lot of people at the time. You could say things like:

* There is no free money. Why would there be free money?

* It isn't FDIC insured. Look, it is a lie

* It has ponzi economics, etc

And it would get hand waved away. Agree that authorities dropped the ball, but the way a good con works is the mark wants to get conned, they want to believe there is something too good to be true.

This is not aimed at OP, who opened up, admonished themself, etc.

Yes, it often boils down to recognizing that "this person is telling me what I want to hear" because we're very vulnerable to that.

The world is full of liars, something one learns as one gets older.

> Yes, it often boils down to recognizing that "this person is telling me what I want to hear" because we're very vulnerable to that.

This also explains all the hype and starry eyes for LLMs.

And yet the top comment here starts with:

> I sincerely hope that I never meet Sam Bankman Fried, because if I did I do not know what I would do but it certainly wouldn't be legal.

Why is this statement not condemned? Of course it's terrible that SBF was a fraud. But insinuating that physical harm is justified is just not ok. They were the naïve ones who bought into the BS, waived away all the warning voices, and now they are threating violence? Not ok.

I was engaging in a bit of hyperbole because I very much dislike SBF. I wouldn’t actually hurt him if I met him in person, but even if I would, I find it exceedingly unlikely that I will meet him in person, so it’s really a non-issue regardless. It would be kind of cool if he stubbed his toe or something on my behalf those though.

I feel like you know this, and you’re pretending to not understand this to take some moral high-ground.

> There is no free money. Why would there be free money?

When interest rate is below inflation, we do have free money, it's just not for everyone.

When the "victim" was planning to grab free money at the expanse of the next guy in the ponzi scheme, I think it's fair enough to blame them.

I didn’t know it was a Ponzi scheme. I thought they were using GUSD as collateral for high-interest loans.

> The failure here isn't of the individuals

Nope, the failure is of the individuals. Sure, regulators deserve some of the blame but nobody forced the individuals to put their money into such ridiculous schemes.

They know this. Why are you trying to make them feel worse? I really don’t like the culture around finance issues where everyone is treated like an irredeemable fool.

It’s better to treat people like the redeemable fools we are.

Sure, but fraud is illegal lol. They're the victim of criminal activity at their expense.

That’s the redeemable fool part. I was a fool to fall for this obvious fraud. I am redeemed by now being less of a fool.

But it doesn’t change the fact that I was once a fool.

There were people in the comments here 11 months ago who thought the same thing: https://news.ycombinator.com/item?id=31434052

You know, it's very possible that I read this exact thread when it was fresh. I should have listened to you!

10 months ago when Voyager blew up, I've pleaded with people not to believe the FDIC status these crypto firms were claiming [1]. The misrepresentation by these firms was straight fraud.

[1] https://news.ycombinator.com/item?id=31954115

GUSD holders never lost a cent. Only people who deposited their GUSD in Gemini Earn, where they made it clear it was a loan to Genesis, have their money encumbered.

Yeah, if it hadn't imploded or he managed to exit before it did, I'm sure he would have enjoyed the money. Well it didn't go so well, tough luck for what was essentially a gamble.

I still feel bad but only in the measure that poor economic literacy contributes to people falling for these scams. That and old-fashioned greed :)

7% risk-free savings with negative interest rates... Come on.

I mentioned this in a sister comment, but in a bit of fairness to me, Gemini was claiming some degree of FDIC insurance on GUSD coins. I definitely should have read the fine print more thoroughly.

Clearly I'm not the only one who was suckered by some of this verbiage though: https://www.sec.gov/news/press-release/2023-7

I’m not sure what the terms of the deal were. but I am sure if the payment for the 7% interest was to be made in the same coin and loans were to also be made at the same rate if not higher, then all of those coins would appreciate in value. what causes inflation and therefore depreciation is printing too much money. What causes appreciation for a coin is scarcity that can be created by interest rates, especially super high ones. When not enough coins are being minted And interest is accumulating Then it creates a deficiency in supply.

It's sort of bizarre to talk about "inflation" for an asset where the actual value was always zero.

Anecdotal, but btcJam was one of the first to the market of paying interest, and could offer 8% with significant reputation recourse.

Btcjam were making the market between miners buying more equipment and capital much earlier.

Eth staking was also in the plan this same time as FTX

Yup, i remember, I gave 3 loans of a few BTC there to three "AAA+++" borrowers, only one repaid the loan, partially :) Their "arbitration" decided in my favor, the catch was I needed to go find the debtors (with a fake Brazilian identity) myself :)

I did an number with the same borrower that paid every time

He was in "reputation accumulation" phase.

   I’m really amazed you thought that 7% yield from savings at a time of 0% interest rates was anything other than a fabrication

On the one hand, I agree with this: where was the 7% coming from?! There's a basic level of skepticism that should have raised alarm bells for the "average" person.

On the other hand, this was an epic level of fraud. As an example, I was making ~8-10% off of peer-to-peer lending when rates were very low, done via very (seemingly) reputable lending platforms. Imagining if a SBF-level scammer was running one of these, and I very much feel for those that put trust in an overall system that generally doesn't have this scale of fraud.

There doesn't even have to be a scammer involved. (Although is also clearly true that the entire ecosystem is a magnet for scammers)

Any of these schemes had to involve a much higher risk than conventional investing. You can wave your hands as much as you want, but that doesn't hide the fact that there was (and still is) systemic risk that was by a) nature incredibly difficult to quantify and b) probably pretty high, given the returns. There is no free lunch.

It was possible in a market neutral way in crypto and without much risk for a while.

You could provide liquidity for stablecoin swaps, collect the shitcoin rewards and regularly dump them. Withdraw at anytime.

Of course, in that scenario you had good control and the counterparty can't rug you because you could verify what was going on. There was some technical risk, but it never actually occurred.

It was because interest rates were zero, largely, that this was possible.

The mistake here was giving the assets to another party who can do whatever they like and where you can't see directly what they were doing.

Just because people got lucky for a while doesn't mean that risk was actually ever low. The reality is that risk on those trades was always extremely high, but it wasn't apparent through traditional risk metrics such as volatility or credit ratings. And there are more risks to worry about than just market risk and counterparty risk.

>without much risk for a while.

> There was some technical risk, but

These statements are a bit at odds. "But it never actually occurred" is a statement of chance, not risk. I also suspect you are downplaying significant systemic risk. "Withdraw at anytime" could go away quite easily in several scenarios.

Wait, I have a few CDs that are "FDIC insured", according to Fidelity, offered by banks I absolutely don't know. In fact, that's the reason I choose them over Treasuries, which are not FDIC insured. Is my money safe or could it be a fraud like FTX? I learned to trust Fidelity over the years, maybe now is the time to be less complacent.

FTX is really no separate phenomenon than the underlying crypto industry itself.

The entire space rests on the metrics generated at the whim of perhaps a hundred or two extremely (crypto-)influential individuals who are all affiliated with one another and whose incentives and behaviors are highly correlated even when that affiliation is weak or antagonistic. I'm referring here to the large established miners, both public and dark (i.e. bot farm based, corrupting gov. officials, etc.) As well as the pools that they pretend not to control, and to a lesser extent the operators of the larger exchanges - although they are not nearly as free to move in recent years as the miners still are. It's no accident in miners are extremely publicity shy.

This group, which behaves like a cartel so it's reasonable to think about it as one, self-generates nearly every metric used to determine the size and depth of the entire industry. The fees and other costs to create fraudulent statistics would be impossible for anyone who is not a miner to swallow, but if you're mining at scale there is an enormous discount - because an inverse scale fraction of those fees are paid to yourselves.

Transaction volume, price, number of nodes, number of accounts, velocity of funds, everything that is used to construct a picture of the real human interest in this market via the lens of virtual numbers that describe it is completely under the control of a few people. Although some of them are more regulated today than they were in the past, for a good part of a decade there was effectively no oversight into how any of these operations worked, and they were free to openly front run the market, buy electricity at substantially corruption-reduced cost or just outright steal it- and again in the early days this paid off extraordinarily well because early large block rewards could be sat on and held until they bubble-appreciate several thousand of percent above acquisition cost.

when you're paying reduced (or nearly zero) cost for your production infrastructure you don't need to sell all of your product right away, and you thereby accumulate a future war chest to create a market 'bottom' anytime liquidity gets a little bit too loose for your liking: simply slow-roll selling new block rewards and voila, price stabilizes. Your carefully managed low public profile lets the media and public fill in their own self-serving explanation, which is that the public must be crazy about this stuff it cant stop buying it.

You can check those banks to confirm they are fdic insured.

Although it’s a lot easier to trust a boring and stable company like Fidelity that’s not offering snake oil.

You mean like this? https://www.fidelity.com/crypto/trading

Treasuries aren't FDIC insured, but they're considered the safest asset on earth because they're backed by the government. At least historically. Who knows if that will continue to be the case next month.

>> next month

Exactly)

> What was your thought process in putting funds here? hope. desperation.

What’s crazy is if this was so blatantly obvious too good to be true… why didn’t the SEC stop it ?

There isn't any prima facie problem with paying an extremely high interest rate.

I'm sure you can find double digit interest rates for say bonds that represent payday loans, but you should expect the bondholders to default at a correspondingly high rate.

But investors should be aware that higher rates imply higher risks.

Some of the smartest SV people fell for his con. Big names we all know. Anyone can be conned.

(Replying in the context of Genesis/Gemini since that's what the parent comment was about, not FTX.)

>I’m sorry for your loss but I’m really amazed you thought that 7% yield from savings at a time of 0% interest rates was anything other than a fabrication.

I'm amazed that this is itself amazing. The 7% was over a time when US inflation peaked at ~9%. It doesn't seem right to say, of a yield that doesn't compensate for inflation, that it's is so ridiculously high that only the most self-deluded investor thought it was achievable.

Furthermore, the collapse didn't happen while those sky-high rates were being promised. As of November 1st 2022, rates had been cut to 5.6%, and then, that was only for the Gemini dollar (which Gemini issued and was willing to use as a loss leader). By then, other stablecoins were lower, like DAI at 4.9% [1], similar to the rate that overcollateralized platforms like Compound were charging to borrow it.

(Disclaimer: I used Gemini Earn, but was able to remove all assets before suspension of withdrawals and hat not put anything in that I would need urgently.)

[1] https://web.archive.org/web/20221027002940/https://www.gemin... -- note, that's from Oct 27, before the final GUSD drop.

> I’m really amazed you thought that 7% yield from savings at a time of 0% interest rates was anything other than a fabrication.

Did something substantial changed on the market recently? Because right now I can literally get a risk-free 7% time-limited savings deposit from my bank (Santander), which HN tells me is completely legit, all while banks in most other countries in the EU are stuck at offering 0.01% or even negative interest rates. What gives?

I've long given up on trying to make any sense out of it.

EDIT: to be clear, I'm in EU too (Poland). I don't follow what FED is doing (outside of what I occasionally hear about it on HN). I imagine it has some impact on EU markets (US having most nuclear carriers, etc.), but I don't know how big. From my perspective, we're still "at a time of 0% interest rates", and Santander suddenly offering 7% rates is some kind of anomaly, compared to other banks - both locally and EU-wide.

> Did something substantial changed on the market recently?

Yes. The FED has increased to interest rates. So the marked can support that now.

The FEDs rate was close to 0% early 2022 and is now above 5%.

Yes, something very substantial has changed.

It's quite easy really. The FED has done stuff which doesn't impact you directly, really.

However what the ECB(European Central Bank, steward of the euro) and the NBP (Narodowy Bank Polski) have done, impacts you much more directly.

https://www.ecb.europa.eu/stats/policy_and_exchange_rates/ke...

https://www.ecb.europa.eu/press/pr/date/2023/html/ecb.mp2305....

And of course, most relevant, Polish Central Bank: https://nbp.pl/en/monetary-policy/mpc-decisions/interest-rat...

The 7% interest rate you get in Poland is based on the one set by the central bank. Note that it is only like this since end of 2022, before that the rate was probably hovering around zero, like the ECB.

wit 0% rates at the time, you can consider 7% as a risk asset, and not a big issue if the portfolio is diversified.

FTX failure isnt a cryptocurrency problem, its a plain old boring case of financial mismanagement and fraud.

Good reminder to all here that if you don't hold they private keys to your crypto, all you have is an IOU from a risky new business.

How would holding keys to a crypto wallet full of FTT prevent large-scale fraud via currency manipulation and subsequent devaluation of your holdings?

This is indeed a failure of crypto, because FTX was the one primarily in control of the coin supply.

Bitcoiners ask the same thing about holding a bank account full of dollars, or in many other countries (like Lebanon, etc.) even worse currency, or they can just freeze your account, etc.

Anyway, it should be clear to people that the 7% in an outside currency has to come from somewhere. And most of this stuff has been a zero-sum game so the money comes from:

1) Investors who bought the top

2) Traders who got liquidated

3) IPO investors who bought shares in a money-losing business model like WeWork

4) Advertisers whose ads didn’t pay off (yes, advertising is a zero-sum game too)

Sadly, most people do not realize it’s a zero sum game and the bagholder class only grows and grows until the speculative bubble pops.

If you have enough money, you will not be immune to rubber hose decryption attacks or other shows of force.

Either you live in a country where you can trust your money system, or you don't.

It's always been my take that the reason ideological Bitcoin ghouls are so enthusiastic about directly contradicting their entire argument against government control over money, by lobbying countries like El Salvador to adopt Bitcoin as a national currency, is because they recognize (cf. lead pipe attack) that there is ultimately no replacing men with guns when it comes to defending the value of money. Quote back by math quote doesn't cut it when someone has a mortar aimed at the middle of your mining farm. Or even someone with a couple Jerry cans of gasoline, matches, and nothing to lose after some anon creep chilling in a Thai brothel pulled their life savings to fund his 'tech nomad' lifestyle.

And since they are too fragmented and comically self-serving to organize anything like their own soveriegn state, they need to piggyback off an existing one.

It’s a crypto issue. You can figure that out by restating their advertising/business model using ‘cash’ instead of crypto, and asking yourself how long they could go before getting shut down.

Hint: they likely could never have even gotten to the point of taking customer deposits, or would have been shut down within weeks or months at most by regulators.

Then the issue isn't with crypto itself, but with the regulation of crypto.

Which is a philosophical issue with crypto - the first cryptocurrencies were designed specifically to avoid government regulation.

But here we're talking about exchanges. Resistance to government censorship/control only applies to on-chain activity, not centralized custodians.

Most of the custodians work very hard to side step regulation and enable scams, albeit not necessarily openly on the second part, and are enabled by the on-chain primitives.

Pretty hard to avoid gov’t oversight/regulation when a USD Wire and ACH goes through the fed, for instance.

Easier when it goes through a blockchain which they can’t control.

Which is why a lot of exchanges (and all the sketchy ones) use things like Tether and stablecoins, and avoid US banks.

It's wild to me that crypto bros will screech about decentralization and how the government shouldn't be able to tell you what to do with your money, then turn around and screech for goverment oversight and regulation. Absolutely nonsensical group of people.

It does kind of feel like cryptocurrency is sort of a collective Dunning-Kruger syndrome of programmers and finance.

Programmers see all this bureaucratic regulatory red tape and decide to try and make something more efficient by removing it and claim that they've saved finance by reinventing it.

Then one by one, they start seeing why each of these regulations exist; the regulations didn't exist to keep the little person down, it was to protect against scams. And then they suddenly want regulation on their funny money, at which point cryptocurrency just kind of becomes a worse version of real currency.

Let’s, uh, not bring up the same thing about social media heh.

It's almost as if "crypto bros" are not a hive mind, but are ordinary people who hold unique and conflicting sets of beliefs.

Forums make it worse, IMO. Frankly, it’s nearly impossible on many to even keep track of who is being responded to half the time, let alone personalize them.

It’s like taking to some floating Janus head sometimes.

In person interaction doesn’t work that way.

I wasn't expressing any opinion on how crypto should or shouldn't be regulated. I was only pointing out that if someone is concerned that banking regulations don't apply to crypto exchanges, then their concern is about regulations, not about crypto itself.

If the largest value prop of the industry (and historically crypto primitives) is that it is un-regulatable (and unregulated/get rich quick) the industry doesn’t get a free pass.

> It’s a crypto issue. You can figure that out by restating their advertising/business model using ‘cash’ instead of crypto

Yeah, I think it falls down pretty quickly; if nowhere sooner, then at the point where “We issue our own cryptocurrency” turns into “We issue our own cash”.

It’s called counterfeiting or ‘chuck-e-cheese tokens’ or ‘issue our own stock’.

All point out the same issue, as both have various regulatory precedents and/or obvious real life issues.

And if you do hold the private keys to your crypto, all you hold is an IOU from a risky market full of fraud and rug pulls.

Many coins have failed, many more will fail, and many if not all will drop to zero as the mania subsides. When that happens it doesn’t matter where your keys are if the market turns illiquid in seconds during a crash.

You hold "an IOU from a market"? I'm not sure that's how that works.

Markets have varying levels of risk.

I mean it still kind of matters where your keys are if the market turns illiquid. Its the difference between losing an asset and not.

I can definitely see a lot of cryptocurrencies losing a ton of a value but they do have a legitimate use for remittances. If you're transferring $1000 it doesn't matter if you convert it into 1 bitcoin or 100 bitcoins since your wife is cashing it out the next day for 20,000 pesos.

Your argument applies equally to fiat finance too: in case of a catastrophe it all goes to zero or turns illiquid.

The fact is that billions in locked value have accrued securely over the years in battle tested protocols like curve, aave and yearn.

Well that level of risk certainly applies to some risky instruments (say CDOs), but I'd say there is far less risk in VWRL say than speculating on the value of a plethora of currencies which are almost purely vehicles for speculation rather than used for everyday transactions.

Doesn't matter if you own your keys if nobody wants to buy your Crypto/NFT etc.

Re your numbers, I'm afraid I don't trust any of the numbers in this market as none of them are audited.

> I'm afraid I don't trust any of the numbers

You don’t have to. That’s the point. It’s a trustless infrastructure, with public data that anybody can audit. There are countless independent services that are reporting the same numbers, from querying the blockchain data.

Uhm, no, the pricing is mostly provided by exchanges which have been found guilty of wash trades, money printing, front running and every crime in the financial playbook, and most definitely are not audited.

So while the blockchains provide public records of transactions, the prices are not set by the blockchains and participants are anonymous enough to be difficult to track.

The smart-contract exchanges agree on the same prices too, though. They can't lie, because the entire exchange is public record on the blockchain.

Uniswap, Cowswap, Kyber, Balancer, they all agree.

In FTX’s case it’s impossible to hold your keys, right. The condition to get interest payments is to allow them to manage your funds and invest/loan/etc.

Is there any crypto “bank” that promises to pay interest while you hold your own keys?

There are decentralized staking mechanisms, but you do take risk in exchange for the interest rewards.

If interest rates are any indication, depositing DAI on Aave for example is seen by the market as lower risk than US Govt treasuries.

This makes some sense, as with treasuries you run the risk of not having access to your cash when you need it because of trade and settlement windows. Funds in Aave are 100% liquid.

This reminds me of an old finance joke my professor told me (this was when rates were 0): if somebody offers you 20% interest p.a. on an FDIC insured account, and you put in $1,000,000 today, how much money will you have in 5 years?

The correct answer is 0, because you're being scammed.

Wouldn't the correct answer be $250k due to the FDIC insurance?

Why would they be honest on FDIC insurance if they lie on rate ?

Today’s FDIC would reimburse the full amount and honor the investment terms.

Late reply, but basically:

I pinky swear that my NotAScamBank is FDIC insured, and that it has 20% interest p.a., would you like to deposit money with me?

Obviously the FDIC is gonna take a look and say "hah no, go away", NotAScamBank knows this, and won't even bother applying. It's a scam, why would they be honest about FDIC status?

Interestingly, even today you can still get much better than 7% in DeFi. No need to give your money to a curly haired dude living in a condo on an island. Who, at the time, was making a lot more than that on your funds.

In DeFi, you give your money to a "smart" contract, which can of course still get hacked or what not. Always assess your risk/reward ratio.

Where does the yield come from? Collateralized lending/borrowing markets. People are still gambling with crypto and they can do it better, if they can borrow funds. It got a lot smaller after the collapse of FTX, but hasn't stopped at all.

Aave still has $7.5b locked up.

Aave rates are sub-3%

Aave isn't the only site out there. That was just an example.

feels weird to provide an example that is less than half of the rates we were talking about, any others?

DeFi is a fascinating (to me) set of money lego's to effectively become your own bank. Like writing code, it takes a bit of time and effort to really dig in and understand the mechanics of providing liquidity. There is a lot of risk and a lot of reward. It is a bit of a minefield, but you do it long enough, you learn ways to navigate safely.

If you have any experience in currency conversion, this is the equivalent to that. If you've travelled you've probably bought and sold currency at the airports. If you're in Saigon, you get the best USD->VND rates not at the airport, but by going to the gold dealers who have shops on the streets. You have to shop around to different stores to find the best rates. DeFi enables you to effectively be that conversion service (gold dealer). But instead of USD->VND, it is ETH->BTC (or whatever cryptos you want to provide liquidity for, or lend/borrow).

I personally find this a fascinating aspect of crypto that few understand or even care to look into. It goes far beyond just the gambling aspect of buy/hold and number go up (or down). It turns into real finance and an actual valid use case for crypto. Sure, crypto is re-inventing the same old stuff that people have been doing for ages, but at least now people globally have the ability to try out these mechanics, instead of just leaving it up to the bankers (or gold dealers) to get rich on your money. I love the concept of power to the people.

That said, I'm not here to give financial advice about how to get the best rates. There is nothing weird about that. I'm just saying they are out there if you want to look for them and learn more about it all. Aave is just an example of the fact that a single site has a $7.5b market. Of course, if there is a market that large, there is going to be many other sites than that, and it is all quite competitive.

If you're interested in this, please do your own research.

to claim "you can get much better than 7%" and then refuse to provide a single example is a fascinating approach to the conversation

Don't feel too bad about it. Wealth wise, what doesn't kill you makes you stronger. Once you made it thru the tough time, you can always rebuild (unlike say, health).

It takes a big person to admit it and I think this is the first.

Forget the math, the tech, the error you made-- that lots of people made-- is we must evaluate the trustworthiness of the people running the show, and run like heck from any whiff of lack of integrity. My impression of the FTX folks was they exhibited catastrophic lack of maturity, at minimum. Now, the cynic says that perhaps folks were desensitized by shortcomings of crypto culture in general... which to my mind is a cautionary sign for anyone speculating in that area who has not yet been separated from their stake.

I didn’t actually do anything with FTX, at least not directly; I did not realize that the Gemini Earn program had anything to do with FTX or SBF until after everything collapsed.

I didn’t feel like the Gemini people were terribly unprofessional; at least not outwardly.

I think it shows some professionalism that the Winklevoss twins have committed $100M of their own capital to pay back Earn users. They are trying to do the right thing.

> the market was pretty far down

If you're an efficient-market believer, there's no such thing as a "down" market, because the price is always correct.

I think it's reasonable to believe in efficient markets, but also understand that pricing in markets is a) made up of imperfect information, and b) subject to outside influences like emotion, propaganda, etc.

Those are inconsistent beliefs, if we're talking about Eugene Fama's hypothesis.

Just like the rest of economics, the efficient market hypothesis is a nice model without any basis in reality. The fact that speculative bubbles exist should be enouh to disprove it.

I guess that's the big question. Market behavior certainly can look like there are speculative bubbles, but Fama hypothesizes a different interpretation of the evidence.

I'm not a believer, but there is some value in the thought.

If you believe the efficient market hypothesis can actually apply to an existing stock market, I would like to offer you an incredible price to buy the Eiffel Tower! Hurry up! This offer is only valid for a few hours! People are lining up to get this offer

I'm sorry for your loss but I hope you take this as a lesson that crypto is just snake oil. Some in these comments try and paint this as just an FTX problem but it's not.

For cryptoskeptics such as myself it's been fascinating to watch as the crypto world speedruns the lessons of debt, finance and the banking system that led them to work the way they do. A lot of otherwise smart people in other areas discovered those smarts don't automatically transfer to disrupting the financial system.

What ultimately underlies the financial system--including crypto--is trust and, beyond that, the military might of governments.

To your specific case, I saw a quote (that I can't find) that basically said that any investment consistently offering above-market returns is eitehr a scam or has risks that you cannot see.

Bear Stearns returned above market returns every month until it didn't, and that was that.

Yep, I replied in a sister comment [1], I am wholly turned off by cryptocurrency at this point.

I was kind of enamored with the tech behind blockchains (and to some extent I suppose I still kind of am), and saw the insane growth it was going through, and drank the stupid kool-ade.

Seeing it all go pear-shaped has really highlighted why we regulate banks in the way that we do. It's not perfect, but I sleep better knowing that an actually-insured bank won't really run away with my money.

[1] https://news.ycombinator.com/item?id=35907377

> made me feel like an idiot for ever thinking that cryptocurrency was a good idea

The very broad notion of digital currency involving cryptography is as good, bad or ugly as any number of other everyday concepts and mechanisms. There's no special inherent evil in that broad notion.

Your investment choice, on the other hand, was average. Not terrible. Average. That is, you diversified, you lost some, but you're still around to play the game, and still ranking very highly in the overall human race affluence stakes.

Snake Oil, or even simpler, mundanely-poor investments, from all walks of life, are the true basis of idiot bait. Digital currency involving cryptography simply is what it is. It's quite likely that the near-to-medium future of humanity will involve quite a lot of it, in some form or another (not at all like most of the current forms, of course).

The term “cryptocurrency” is WAY more inclusive than the thing you invested in.

I have a friend in a similar boat who lost hist entire life savings in Gemini

My heart goes out to him...he's in a way worse situation than I was/am.

I was in a position that gave me more headaches than I'd like; unpleasant but fundamentally I'll get over it (most of my savings are in ETFs and treasury bills). I was able to sell some stock at a bit of a loss, pay for my mortgage and food until I found another decent job. It sucks, I don't like losing money on my investments when I know I could have waited them out had I been employed, but fundamentally not earth-shattering.

But I did read stories about people who really bought into cryptocurrencies, and were really taken for everything they were worth by the Gemini Earn program, which it sounds like your friend was.

I can only hope that the SEC lawsuit against Gemini is successful, and all the investors are made whole; I cannot speak for your friend, but I'd be happy enough to forfeit my interest if I could get my principal back.

He can sell claims on the secondary market for ~50-70% of what he's owed, BTW

where

https://www.cherokeeacq.com/

> I could have liquidated for money, but the market was pretty far down so I would have had to take a big haircut.

Humans in general cannot 'time the market'. To think that you can is a fool's errand. Therefore, the fact your stocks are down isn't a good reason not to sell them.

I actually did end up selling some to pay the mortgage. It's not fun to realize a loss in my portfolio no matter what though!

Blaming SBF is almost pointless because you obviously needed the lesson - you did not learn previously by seeing the mistakes of others. You would have been taught the lesson eventually by some other random, and fortunately your lesson didn’t take you to zero in your retirement.

That said, you clearly also get a lot of other things right: admitting your error, long term savings in a home, a good job, understanding what a portfolio is, plus other obviously smart decisions.

Hopefully we all learn from your mistake - it is so easy to screw up or be beguiled into screwing up.

I mean, whether or not I needed to learn the lesson, I'm going to be upset with any human that outright steals money from me. I don't think that's weird.

But yeah, fundamentally I suppose it's better for me to have been conned like this while I'm still relatively young, and where I didn't have all my net worth tied up in it.

Honestly at this point, if anyone were to ask me for investing advice, I would tell them to stay the hell away from cryptocurrency.

> Humans in general cannot 'time the market'. To think that you can is a fool's errand.

OP wasn't trying to time the market. They had a liquidity issue and needed cash.

> Therefore, the fact your stocks are down isn't a good reason not to sell them.

Realizing a loss is the perfect reason not to sell. This is why smart people recommend having an emergency fund, so you don't have to take a hit and damage your long term goals when you find yourself in a short term pinch. Not selling is actually the most important part of owning stocks.

> I sincerely hope that I never meet Sam Bankman Fried, because if I did I do not know what I would do but it certainly wouldn't be legal.

You are insinuating physical violence (I will assume) which is never acceptable.

And in your case you made a mistake ie

'I put a chunk of money in there'

and further SBF had no control over this: 'because this all unfolded right after I got fired from my last job, when I really needed my liquid money to pay for things like "my mortgage" and "food".'

The takeaway for others is events happen in life. Could be someone's fault could be nobody's fault.

Having all your eggs (or no eggs) in one basket can and does lead often to disaster.

Sorry for the harsh way of putting this. What you are indicating is that you had no cushion and made the mistake of being lured by a high return and ignored potentially any downsides. (Gemini is not and did not claim to be an FDIC insured bank. Also crypto can and does lose value unlike money in a bank. Even if you had been able to get 7% return if crypto loses value you lose money. Same as or similar to a dividend paying stock).

It's easy to say it's never acceptable when it's not your life savings that have been stolen.

> You are insinuating physical violence (I will assume) which is never acceptable.

I mean, the guy stole about more than ten thousand dollars from me. I wouldn't actually hurt him, I was engaging in a bit of hyperbole (which I feel you're deliberately refusing to understand), but fundamentally I am not going to lose a ton of sleep if something bad happens to SBF.

> and further SBF had no control over this: 'because this all unfolded right after I got fired from my last job, when I really needed my liquid money to pay for things like "my mortgage" and "food".'

No, but it is why I am especially upset over this stuff. If it had happened when I was gainfully employed at the time I would obviously be upset to have thirteen grand stolen from me, but it especially hurt because I was a victim of all the layoffs that happened last year. I didn't claim there was some divine rationality, which I also think you are deliberately not understanding.

> Having all your eggs (or no eggs) in one basket can and does lead often to disaster. > Sorry for the harsh way of putting this. What you are indicating is that you had no cushion

In the post that you are responding to, I mention that I did have a cushion, and I didn't put all my eggs in one basket. I had a fair bit of stock and ETFs. I had to sell in a down market, so that wasn't fun, but I feel like you didn't finish reading the post.

> Also crypto can and does lose value unlike money in a bank. Even if you had been able to get 7% return if crypto loses value you lose money

This was GUSD, which was ostensibly pegged 1-to-1 to the US dollar, so it wasn't supposed to be able to "lose value" in any substantial way.

> Gemini is not and did not claim to be an FDIC insured bank.

No, but the verbiage on this was less clear on this in the past: https://web.archive.org/web/20211201224824/https://www.gemin.... Thanks johnmaguire in this post: https://news.ycombinator.com/item?id=35907642

I looked at that archive.org page. That is the marketing page for the GUSD. (And separate the actual signup page my guess is it goes into a bit more detail.) Also that is not the page for geminiearn - that is where the issue was with losing money.

This page: https://web.archive.org/web/20211201212024/https://www.gemin...

Now I will note that on that page it does say this:

"Gemini is partnering with accredited third party borrowers including Genesis, who are vetted through a risk management framework which reviews our partners’ collateralization management process. Additionally, on a periodic basis we will conduct an analysis of our partners’ cash flow, balance sheet, and financial statements to ensure the appropriate risk ratios and healthy financial condition of our partners."

But the thing is this. There is literally no way to prevent against outright fraud of a counter party. (See the Crazy Eddie story where they were shifting inventory from store to store when they were being audited).

Look one thing I will tell you here let's call it 'the bottom line'. I am an old timer. And I right off saw crypto involved risk and as such I did not either make or lose any money on crypto. As an again 'old timer' it just didn't make sense to me. I would have never gone down this road because being around for so many years right off it had the potential for issues. Plus again there is always counterparty risk.

Sure, I don't think I ever disputed the fact that I should have done more due diligence, and I feel like I've mentioned that fact multiple times now.

However, I do think Gemini/Genesis and SBF were deliberately obfuscating the risk to make these investments seem less risky, and obviously I have the right to be mad at SBF for outright stealing my money.

Was 7% in 2021 too good to be true? Yes, obviously, in hindsight it was, but that pays no bearing on whether or not I was robbed.

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