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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

#251

Post by matthewdgreen »

josu wrote: post #94
Asparagirl wrote: post #34

They’re just one of several shiny fintech apps/websites running the same scam, a modern two-and-twenty on a ponzi — but with really nice UI. Alice (alice.co / @alice_finance) is another prominent one that may have lost customer funds, which was also using the Anchor protocol. It’s unclear how much they lost, but it’s interesting that Do Kwon’s name is still an actual logo listed on their home page. And Vertex Protoco…

I publicly called out LUNA/UST on Twitter a few times a few months before the collapse [0] [1]. Just stating this so it's clear that I don't have any interest defending them. That being said, calling these platforms "ponzis" isn't correct, the most you can say is that they were front ends for a ponzi. It would be like setting up a front-end to receive investments, and then depositing the money with Madoff. I'm not sa…

The front-end is the ponzi. The whole point of the ponzi is that there is no investment activity happening beyond tricking customers into depositing funds. So being the front-end for a ponzi (even unwittingly) means you’re an integral part of the scheme.

Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers

#252

Post by dropnerd »

nivertech wrote: post #87

1. HYIP (High Yield Investment Programs) is an old scam. Rebranding it as DeFi doesn't change this. https://www.investor.gov/protect-your-investments/fraud/type... 2. Algorithmic "stablecoins" don't work, in the same way as perpetuum mobile doesn't work. You think you're inventing a perpetuum mobile, but you're building a Rube Goldberg's machine instead ;) 3. Every algorithmic "stablecoin" can be traced to 2 papers p…

algo stablecoins work fine when they're overcollateralized, like dai.

the industry keeps chasing undercollateralized algo stablecoins because of capital efficiency. jon wu explains to laura shin, worth a watch: https://twitter.com/laurashin/status/1525505300219961344

Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers

#253

Post by bhouston »

gzer0 wrote: post #200

Quick comparison between archive.org March 27th snapshot 27 March 2022 > There are no lock-up periods. Withdraw your funds any time and keep the interest you earned. 18 May 2022 > There are no long-term lock-up periods. These guys are going under. [1] https://web.archive.org/web/20220308041252/https://www.stabl...

They didn't plan for a black swam. I think that they only kept so much money around to do redemptions (fractional reserve) assuming that there wouldn't be a run on the bank. But then when a run on the bank happened, they were screwed as they had been locking up the funds.

Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers

#254

Post by CPLX »

saalweachter wrote: post #206
josu wrote: post #94

Earlier quoted context omitted.

I publicly called out LUNA/UST on Twitter a few times a few months before the collapse [0] [1]. Just stating this so it's clear that I don't have any interest defending them. That being said, calling these platforms "ponzis" isn't correct, the most you can say is that they were front ends for a ponzi. It would be like setting up a front-end to receive investments, and then depositing the money with Madoff. I'm not sa…

> That being said, calling these platforms "ponzis" isn't correct I feel like "ponzi" has become the "magazine/clip" derailer of crypto discussions.

A ponzi is when an investment that supposedly produces a return actually pays the funds needed to deliver that return from new entrants to the scheme rather than productive enterprise.

Given that there’s literally no productive return-producing enterprise underpinning any of this it’s totally fine to consider the word ponzi at least loosely applicable to the entire concept of cryptocurrency as practiced.

Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers

#256

Post by wolongong942 »

charcircuit wrote: post #166
Asparagirl wrote: post #34

They’re just one of several shiny fintech apps/websites running the same scam, a modern two-and-twenty on a ponzi — but with really nice UI. Alice (alice.co / @alice_finance) is another prominent one that may have lost customer funds, which was also using the Anchor protocol. It’s unclear how much they lost, but it’s interesting that Do Kwon’s name is still an actual logo listed on their home page. And Vertex Protoco…

Insurace is another site who offered insurance for the UST depeg. They had a very poor estimation for the risk and had the price at only 2% annually for the amount insured. They were covering 22.2 million worth of UST and as of a few days ago they had claims submitted totalling 7.3 million worth.

No post body was provided.

Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers

#257

Post by MacsHeadroom »

vkou wrote: post #128
negzero wrote: post #78

Earlier quoted context omitted.

Given you could get ~20% on anchor, why would you invest in something with lower return with no a priori reason to believe the returns are safer?

If a 20% better ponzi is better than a 15% one, again, I ask, why not a 1,500% one? There's new shitcoins born every day, promising these kinds of returns.

The part you're missing is that StableGains was simply parking their investors' money on Anchor, collecting the 20% APY, shaving off a quarter of it, and passing the remaining 15% to their investors.

Skipping the middleman is necessarily better because it is inherently lower risk for an absolute guarantee of 33% more upside.*

Investing in something else with even 16% promised returns, let alone 1500%, is not necessarily better because it is almost certainly higher risk.

* When Anchor (Luna/UST) crashed both StableGains and direct users of Anchor suffered the same percentage losses. But direct investors in Anchor had balances which were necessarily 33% ahead of StableGains investors due to not having StableGains shave off their interest earnings.

Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers

#258

Post by dropnerd »

bhouston wrote: post #253
gzer0 wrote: post #200

Quick comparison between archive.org March 27th snapshot 27 March 2022 > There are no lock-up periods. Withdraw your funds any time and keep the interest you earned. 18 May 2022 > There are no long-term lock-up periods. These guys are going under. [1] https://web.archive.org/web/20220308041252/https://www.stabl...

They didn't plan for a black swam. I think that they only kept so much money around to do redemptions (fractional reserve) assuming that there wouldn't be a run on the bank. But then when a run on the bank happened, they were screwed as they had been locking up the funds.

startups usually dont have enough resources for a black swan.

but this collapse was entirely predictable- many analysts pointed it out and were mocked by kwon and the self-described LUNAtics.

founders either didn't do enough diligence, or didn't care.

Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers

#259

Post by junofan »

sumeno wrote: post #247
Ambolia wrote: post #179

Earlier quoted context omitted.

The problem with web3 and crypto in general is that most people and energy get attracted by the potential to get rich, and being useful is an afterthought. I would be more attracted if I saw more products that tried to be useful first, and then try to make money for it afterwards. But it's harder to direct so much energy into projects like that.

Products that are trying to be useful first do their due diligence and realize that blockchain is wholly unsuitable for anything other than creating speculative assets and just use a normal database instead.

Well, they also have to pick a payment processor. And find somewhere to host it all. And pay for all of the above.

Re: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers

#260

Post by logifail »

josu wrote: post #222
adrr wrote: post #212

Earlier quoted context omitted.

So how is the 20% interest created? Excuse my ignorance on crypto. I don’t understand how UST can drop 90% when I assume it required some sort payment of some other currency/coins to get mint them. I heard it was tens billions of UST was minted. So what happened to these coins? Were they used to pay out the interest?

Read Matt Levine's columns on Luna, or listen to the most recent podcast from Odd Lots with Galois Capital. They answer all your question and are much more cohesive than anything I could type here.

> Matt Levine's columns on Luna

Thanks, some great stuff. This[0] jumped out at me:

"But there is no magic here. There is no algorithm to guarantee that Luna is always worth some amount of money. The algorithm just lets people exchange Terra for Luna. Luna is valuable if people think it’s valuable and believe in the long-term value of the system that you are building, and not if they don’t.

The danger here is that Point 7 never goes away. Any morning, people could wake up and say “wait a minute, you just made up this all up, it’s worthless,” and decide to dump their Lunas and Terras."

[0] https://archive.ph/HQAwY

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