If someone is promising a high yield above the market rates, just ask where this yield comes from
YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers
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Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers
#22Earlier quoted context omitted.
Promising a guaranteed 15% return is fraud. There is no place in reality where you can * guarantee * that kind of return.
That's a good question. Are you liable for fraud in this case? What about another case? Say you promise 0.75% because the bank promised you 1% and you skim 0.25%. Is that scenario fraud? Probably not. At what point is it actually fraud? My guess is it's not the yield but the loss of deposits.
You are moving the goal post here. 15% is not 0.75%. The probability of returning 15% consistently is significantly lower than 0.75%.
If you guaranteed 0.75% to your customers and do not deliver, then you are liable. What you are describing is arbitrage and not what this scenario is about.
Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers
#23I also think we should let Luna die.
Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers
#24YC invested in what was clearly an outright fraud? Or did they pivot do hard that nobody noticed?
They were skimming yield(in return of a nice UI) on a risky yield asset with poor disclaimers and extremely reckless risk management systems
The fact that they promised to redeem some UST deposits 1:1 with the dollar after the peg had failed, presumably using other customers funds tells me they were not just a custodian.
I wouldn't be surprised if friends of the founders got a half hour heads up before that 08:55 tweet... So that they could withdraw their money at full value.
Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers
#25They just raised $3 million last month too.
I assume they might need some more.
https://blog.stablegains.com/we-raised-3-million-and-are-hir...
Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers
#26Earlier quoted context omitted.
They explain the risks on their website: https://stablegains.zendesk.com/hc/en-us/articles/4402687751...
They explain the risks, while excluding the risk of, you know, the stablecoin depegging. This is like the 10th algo stablecoin to eat shit. You would think by now, a risk person could adequately describe these existential risks. Stablegains was a rent collecting middleman. The risks are not characterized adequately on this page, and there ought to be some level of liability.
Where do they specifically exclude the risk of depegging?
From their website : "As Stablegains is not a traditional US bank, the funds are not secured by the FDIC. While we aim to make every effort to understand and mitigate everything that can possibly go wrong, there is still a non-zero risk you can lose your deposit. Our advice is to diversify and never invest all of your savings in a single place."
Of course they are selling themselves as pretty safe, and I'm sure they thought they were. But as you mention, it's like the 10th stablecoin to drop, so it's not exactly a surprise that crypto is a risky investment in any case.
Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers
#27If someone is promising a high yield above the market rates, just ask where this yield comes from
This is the Economy 101 lesson that many don't know (or pretend they don't)
The only ones that can "promise" a yield are sellers of titles for a fixed period. Anything else is an estimate at best
Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers
#28I imagine (and hope) those 5k where mostly crypto bros who knew what they were getting into. Who else expects 15% returns from a "safe" investment?
YCombinator's board? https://www.ycombinator.com/companies/stablegains
What is YCombinator’s “board”? Re their directory profile: every public YC company has one, even my defunct 11 year old startup —- it’s definitely not an active endorsement.
Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers
#29Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers
#30The last few weeks (months, really) has highlighted an incredible lack of discernment in the VC-verse wrt the thing we call web3. Now. I have no experience doing what YC does and don’t claim to, but the jig here was so transparent that the smallest drop of “street smart” should’ve been enough to set off some alarms.
We’re approaching a point where being passed over for “culture fit” is a compliment. Hopefully the embarrassment is enough to expand the founder vetting checkboxes.