[1] https://www.gemini.com/dollar It still mentioned "FDIC" stuff in small print, but it was much more prominent in earlier stuff.
This should be piercing-the-veil fraud if true.
Good, but insufficient. Misleadingly using the FDIC’s brand should open a criminal investigation.
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.
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".
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...
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.
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.
Remember Bernie Madhoff?
FTX was patently impossible.
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.
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.
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.
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.
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.
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)
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.
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?
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.
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 bullshit. 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.
* 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.
The world is full of liars, something one learns as one gets older.
This also explains all the hype and starry eyes for LLMs.
> 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 feel like you know this, and you’re pretending to not understand this to take some moral high-ground.
When interest rate is below inflation, we do have free money, it's just not for everyone.
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.
But it doesn’t change the fact that I was once a fool.
Necessarily risky. Not necessarily fabrication. Between those two there is room for both productive gains and delusional optimism.
There's not a floor of 0%. Negative returns exist.
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?
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.
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?
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
Side note: I didn’t believe those efforts.
[1] https://old.reddit.com/r/personalfinance/wiki/commontopics
[2] https://i.imgur.com/lSoUQr2.png
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.
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
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
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 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.
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.
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.
> 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.
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 reason 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.
Although it’s a lot easier to trust a boring and stable company like Fidelity that’s not offering snake oil.
Exactly)
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.
>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 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.
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.
Yes. The FED has increased to interest rates. So the marked can support that now.
Yes, something very substantial has changed.
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.
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?