The problem is the fintech industry - both crypto and mainstream - exists to swindle.

The biggest rewards come from crossing the line and avoiding regulation/enforcement, either by legitimate or illegitimate means (including bribing enforcement officials).

Next biggest are rewards for crossing the line and delaying enforcement until you can launder your rewards to a safe haven.

If you're arrested and jailed - only likely in cases where you inconvenience certain very rich and powerful people, not ordinary folk - it isn't usually for long. And you can afford the best representation to minimise the risk.

So the risk profile is very much slanted towards rewarding the unscrupulous.

Example: Even after all the confusion around the $400m or so "missing" from Mt Gox, Mark Karpelès only received suspended sentences and spent no time in jail. Even after the recent crash, that's still more $1.5bn at 2022 values.

> Mark Karpelès only received suspended sentences and spent no time in jail

He was in jail from August 2015 to July 2016, if his wikipedia article is correct. The suspended sentence came after that.

I would argue that the risk:reward is still very heavily weighted toward reward.

I would happily spend a year in jail for $1bn+

This seems like an unnecessarily harsh take.

For example, some fintech companies aren't groundbreaking from a tech perspective, but they make big strides on efficiencies from legacy systems. As long as you deliver value and are capturing some of that value, a business can be made.

A rule of thumb I've used in both career and investment decisions is that to make money, at a minimum, one has to be in the vicinity of where money moves.

Fintech - in any of its forms, as you note - takes the maxim to its conclusions and seeks rent over transactions themselves, which gradually inclines it towards zero-sum "find a mark to dump my toxic assets on" shenanigans. So the industry perpetually leverages itself into fragility on the backs of "rip to them but i'm different" leadership and whomever they can convince to come along. At the nation-state level this creates nasty entanglements of regulatory capture and debt that let market leaders who play the game well make rules for themselves and pay off enforcing bodies, which contributes to macro-scale misalignments in who is getting funded or regulated for what, and therefore many "ills of the market".

The tech of crypto assets themselves, on the other hand, is antifragile in construction: Winning at the trading game does not result in regulatory capture or bailouts, since the settlement ultimately takes place on-chain, and on-chain is an automated consensus, one relatively hostile to political machination. Rent-seeking doesn't scale up well with this kind of asset. You can pull a small-time scam, but it doesn't lead to an empire lasting for generations. And if your asset becomes too hard to trade in because you've come up with some crafty way of polluting it or gatekeeping it, it's substitutable in a way that state-backed instruments are not. Price survival over a crypto bear market is a pretty strong signal for a project, and as the market gets bigger it attracts bigger players trying to remake the rules with a slant so that they can win. It's escalated every cycle, and really is a phenomenon beyond retail now.

What this past cycle entailed was an attempt by larger fintech players to muscle in on the crypto game and apply various strategies to capture it by adding obfuscating instruments in the name of liquidity and yield. The ones who survived made an early exit or successfully derisked, but many of them committed to their strategy in a way that ensured they would lose. And from here on, the only remaining escalations of that game involve some of the largest amounts of capital on the planet - the biggest banks, or actual governments.

There are many fintech companies that I see as hugely important in disrupting finance, which is desperately in need of disrupting. The various new banks and companies like Wise are dragging the industry into the 21st century, though the incumbents are still failing disastrously.

The problem with fintech is it is about integrity, and cashing out on integrity is generally counterfactual. Like cashing out on Idealism. Well if it's strictly cash, it can be done, like if there's no interest in prostitution of the resources, merely a form of liquidity and cooperation, yes.

But to buy a Lamborghini? Only with an excellent, satisfying reason.[1] Like anything. Are you a man who wants to have sex with a girl who is underage? You can, if you marry her. But she's not an adult, so there's no possibility of a prenuptial agreement, you can marry her if you can accept that.

"Half."

--Eddie Murphy

[1] And not in the way people imagine it, like the hedonism of the noughts, showing off like that horrible show "MTV Cribs." Yeah they're literally cribs, not masochists like a real man ie fasting and running track and field. That's exactly what they are, cribs for babies. And then, on a recurring reddit post, they tell you all those cribs you saw were fake, when really many of them were real--telling you on blogs that "only Red Man's crib was his true living conditions"--just pulling the rug under you. They filmed actual places, they were all different, they didn't have the tech to fuck with that back then. Yeah they rented some houses for a week, but those houses were still meant to be cribs for babies. And it's a demonic show--a demonic channel--yeah it looks like MTV is beautiful but...no yeah suppose they're beautiful, that's the fastest way to learn what's up.

Could you expand a bit? It sort of sounds like you're describing a small town or a social circle / social scene where everyone got involved in some particular altcoin or something and invested a ton of their personal savings into it while encouraging others to do so as well, is that essentially it? Crazy if so.

That’s essentially it, a small town where everyone knew each other and all hung out in the same bars. I didn’t pay attention to which one it was, I do remember hearing crazy interest, like >40%. I think you also got a cut from new entrants as well, so it reeked of pyramid + ponzi.

I'm fascinated that some kind of place like this existed. I've only lived in large cities and the picture I've gotten of small towns from trips and media hasn't prepared me for the idea of a whole community that collectively buys into a get rich quick scheme.

It happens all the time but often the community and the physical community don't overlap, but check out /r/MLM or other similar subreddits and there's whole groups of scammers who target particular groups (church, social, retired, veterans, etc) with particular pitches designed for that group.

Because if some rando tells you to join Amway or invest in AmCOIN™ you will tell them to get bent, but if it's a trusted friend, you're much more likely to be open.

It's disgusting, but it happens. And in a small town, likely everyone goes to the same church or two, hangs out at the same bar, etc. It can spread like wildfire, though usually after the first few scams it becomes known and starts to die out a bit.

Sometimes you recognize the situation and decide to "participate" (read: lose some small amount of money in the scam) to stay in the community.

In the smallest version of this... My weekly poker group talks about stocks and crypto often. It's a mix of guys who work in tech and engineering and a handful who just want to get rich quick. We've all bought a few yolo stocks and coins together and 100% of the time the investments have gone to zero or close to it.

Thankfully no one in the group is dumb enough to go all in on this hyper risky investments but I can see how it would be easy to be talked into something if you're in an echo chamber.

Before anyone gets too worried I'm talking about spending a few hundred dollars each on stupid investsments over the course of a few years.

The danger is when they don't go to zero, and you suddenly thing you're stock picking geniuses - or you then decide to put it all in on the next one.

https://en.wikipedia.org/wiki/Beardstown_Ladies

Amusing quote from that page: “This revelation led to a class action lawsuit against publisher Hyperion, a division of The Walt Disney Company, which settled the case by offering to swap the Beardstown Ladies books for other Hyperion books.”

Considering I'd estimate something like 99% of investment book purchases are "for entertainment purposes" (i.e., the buyer either doesn't read it, or never bothers trying to implement any of it) this may be a decent option.

A common strategy for binary auction scams is to rig the market in your favor so that you think your a genius and then you go all in. Then they rig the market against you or simply block withdrawals.

You can also check out behindmlm.com which exposes most of the more popular scams.

The town is mostly retirees and it was mostly the retirees that got suckered into it. Inflation eating away at fixed incomes and low interest rates undermining their investments.

It happens a lot, and isolation can help keep scams going.

In case anyone has any illusions about how bad financial scamming can get, pyramid schemes famously led to civil war in Albania not that long ago.

https://en.wikipedia.org/wiki/Pyramid_schemes_in_Albania

In Utah "Network Marketing" or more plainly MLM schemes are literally the second biggest industry in the state. Strongly influenced by the Mormon culture you have stay at home moms do direct sales and multilingual missionaries using their skills for that kind of stuff. There's entire software companies that just build tools for MLM companies.

Oh boy, have I got a story for you.

Around 1999, my hometown (pop. ~600) fell for a conman. Like, the actual Town government, and almost everyone in it.

Pudgy, balding, middle-aged white dude breezed into town and seduced the owner of one of the motels. She kicks her husband out and starts taking Conman to town board meetings, etc. Eventually divorced husband.

Guy claims to be Hollywood connected, a wealthy promoter or agent, scouting locations for future filming, etc.

This goes on all summer, and the town manager and county administrator, and the whole board and chamber of commerce totally buy it, lock, stock, and barrel. Conman claims he can bring in some big country music star he knows. I don't remember who. I can't stand country, so why would I remember? Big star. Not Dolly big, but Boot Scooting Boogie big.

He convinced the town to foot the bill, that he would pay for everything once they had the final bill... and this podunk nowheresville town 60 miles from the nearest traffic light pays to fly this star in on a private jet, sets up a huge stage for her, and all like 50 of us that show up get a private concert. It sucked.

This whole time... Everyone in town is talking about this guy, right? And nobody is asking if he's legit. I mean, I did, but I had long hair and was a nobody, so...

Spoiler: he wasn't. Not even a month after the big concert, he disappeared with motel lady's (and her husband's) life savings, and obviously skipped on the million-odd bill for Peggy Rae or whoever TF it was.

Everyone looked like a moron. Motel lady declared bankruptcy and left town. I gloated mercilessly.

Idiots. They all voted Trump, too. Some people never learn.

Wild.

> pays to fly this star in on a private jet, sets up a huge stage for her, and all like 50 of us that show up get a private concert. It sucked.

The concert actually happened? That's the craziest part of all of it.

Should have just bought a monorail.

This should be a movie.

There is out of town huckster in the Simpson monorail episode…

Written by Conan OBrien. Had a Catchy song and had Leonard Nimoy cameo.

https://en.m.wikipedia.org/wiki/Marge_vs._the_Monorail

This is amazing. Do you remember the con man’s name?

This is especially common in churches because in addition to having an existing trust relationship, in many more conservative denominations you also have a large population of women who are expected to be mothers first and working second but are also expected to be the frugal wife running the household like a small business (there are several scriptures like Proverbs 31 which mention this in contexts which make more sense if your household is a small farm & you're selling your surplus). Those pitches explicitly borrow from that tradition and they always refer to it as being a small business owner, which sounds a lot better than working part-time at Starbucks even if the latter tends to pay considerably better, and that's also appealing to the people who see working outside the home as being out in the world exposed to all kinds of dangers and temptations since you can tell yourself that you'll mostly sell to people you already know.

What tends to happen is that the first person who picks up some new scam does fairly well because there's no exact competition for whatever they're selling. They tell their friends, who are likely to join because they made an enviable amount of money, but returns drop off rapidly because most of the people who want whatever that company is selling already bought it from the first person (whose social network overlaps considerably) and at some point most of the money is coming from the people buying the initial inventory which will mostly sit in their garage.

The social dynamic also means that _nobody_ will ever admit that they lost money or made the equivalent of $2/hour even as they're giving away that unsold merchandise at baby showers for the next 5 years.

Cryptocurrencies have largely been the brilliant idea of capturing this dynamic for a different demographic (libertarian men).

There is a recent movie called Dream Horse based on true story: "Twenty years ago, one woman convinced her neighbours to buy, rear and train a thoroughbred racehorse, Dream Alliance. Now their unlikely story is relived in a feelgood film"

https://www.theguardian.com/film/2021/may/30/against-all-odd...

I had similar at work: neverending stories about how crypto will reach Mars and then some. When asked the very basics on certain claims, the answers were always how don't get,how innovative it is and etc. I haven't heard a single word about crypto since it all gone down substantially. Everyone's smart when the rocket is going up, but at some point the fuel ends.

> The real problem is that swindlers have made a huge amount of money and can use that money to corrupt politicians

Yes! It's not just crypto, either, this problem seems to be endemic in our political and economic power structures.

Yea who do you think benefits most from the Fed's printing press?

People in tech

Wat? The fed bought mortgage backed securities, so property owners, bankers, and real estate agents were the primary beneficiaries. Look at who was in charge.

> The real problem is that swindlers have made a huge amount of money and can use that money to corrupt politicians so it affects the rest of us.

Exactly this. Can you imagine what regulatory capture by the NFT crowd would look like?

We're already closer to idiocracy than I thought possible before the last decade, so I'm good without an OwMyBallsCoin

The threat is always systemic risk. That's why we need such a massive and seemingly unfair bailout of financial firms in 2007-8. Or the S&L crisis in the 80s. At some point, other's peoples bad decisions affect everyone else. I don't think the crypto market is big enough to have the same affect yet but it could. And it really shouldn't be allowed to get to that point until the market submits to regulation.

The savings and loan scandal is a great example of this, not that there's a shortage.

I think even larger problem is how we don't correlate the other thread on here right now about how America can't build anything anymore with the over financialization of the society.

The amount of human capital spent on the thousands of hedge funds and financial products the last 30 years is staggering and we basically have nothing to show for it other than unproductive pooling of capital. Given the incentives though it is borderline individually foolish to build anything in the physical world.

I don't even think political corruption is near the worst part. It is the complete distortion of risk preferences and the distortion of what is even meant by "investing".

At least the financial swindlers of old actually laid down thousands of miles of rail in their process of swindling. Now in the name of market efficiency we have a systemic process of trading options on options on options on options in an endless chain to the point the underlie has practically vanished.

At least crypto is honest and doesn't even pretend there is an underlie, just a call option on nothing straight up. Everyone knows that is most of the financial system outside crypto too but with an accompanied financial theatrical performance by the participants. Even complete with Shakespearean bullshit language to make it sound more real.

"I am not trading options on thin air. This is an arbitrage opportunity on a derivatives price that will help to facilitate market efficiency. It is almost like the way a physical bridge facilitates people getting across a river but we don't have to waste years actually building a bridge, take a fraction of the risk of bridge building and the return is 100X better."

I am sure some future Edward Gibbon will come up with a name for this process while writing their historical masterpiece on why the West imploded.

Reminds me of an interview I watched with some hedge fund asshole talking about how they were "creating value" by raising the rent of old people in trailer parks. As if raising the rent of old people in trailer parks is basically like building a bridge across a river.

UK is talking about backstopping the stable coins is an example of influence. I assume they are referring to Tether which hasn't completed an audit.

https://www.cnbc.com/2022/05/31/uk-plans-new-safeguards-for-...

> UK is talking about backstopping the stable coins

London’s talking about regulating and ringfencing them. Not backstopping.

Yes exactly. Having a regulatory regime to resolve a failure and minimise contagion (which is one of the things they're talking about) makes sense and cases like this 3AC one show why. It's not about protecting crypto participants, it's about reducing the damage to the system overall and impact to non-crypto participants caught in the blast radius when something central fails.