> Smart money and retail both hit. Jump, 3AC, VCs, and small investors alike wiped out all the same from the same flawed idea.
I beg to differ, there was no ‘smart money’ invested in Luna. A 15% yield is an enormous red flag and anyone who put money into it is stupid as hell in my book.
To recap: if someone is offering a yield that is 1300 basis points above the risk-free rate, it’s a scam.
Also, if your entire clientbase is in a single groupchat, you should be much more prepared for a bank run. This is like common-sense stuff. The fact that this is a bad business model isn't really my concern.
> The bank managers and investors are not being bailed out -- they have already lost everything.
The bank managers will walk away having earned millions of dollars in salary and bonuses, funded by risky bets, and the investors will walk away without bearing the consequences of the risks SVB took. Their investments in SVB went to zero, but there's still money that's been lost.
>Also, the idea that the mispricing was intentional is silly. The issuing banks mostly held onto the equity tranches and suffered as a result - not the actions one would take if you knew things would tank.
We've been over this before. Banks are not people. The people in the banks were trying to sell these things so that they could collect commissions. They didn't give a shit if the bank suffered.
>It's simply how much money you can generate for the business
I find your excessive faith in businesses disturbing.
Markets aren't rational [1] and the wage-labour market isn't either. Sometimes there's no good reason for something, only a bunch of chain of consequences that don't necessarily have to make logical sense from an utility perspective.
> Turns out I was too smart for my own good. Almost every ponzi scheme can be exploited ...
You're misusing the term "Ponzi scheme". A speculative system that relies on volatility and wishful thinking isn't necessarily a Ponzi scheme (might be but not necessarily).
A classic Ponzi scheme has layers or levels that are treated differently. Ordinary speculation about a volatile entity doesn't have this property.
Quote: "Typically, extraordinary returns are promised on the original investment[5] and vague verbal constructions such as "hedge futures trading", "high-yield investment programs", or "offshore investment" might be used. The promoter sells shares to investors by taking advantage of a lack of investor knowledge or competence, or using claims of a proprietary investment strategy which must be kept secret to ensure a competitive edge."
> Even if they explicitly conducted a pump-and-dump, nobody was cheated here.
A pump-and-dump is a scheme designed to cheat people. The cheat is to deliver misleading statements to convince others to purchase something, while quietly doing the opposite of what you're promoting.
A better comparison would be a stock brokerage that took your money to buy specific stocks on your behalf but then did something totally different, including “investing” in illiquid assets.
If they had just bought the stock you requested, then they could just liquidate your stock at market price when you said you want to sell.
This was not the situation that FTX was/is in.
Instead, the way FTX allocated money/assets was suspicious (at best) if not flat out irresponsible and deceptive.
Also, FTX was not and is not a bank, and the idea that this is levering in the same way regulated banks lever is laughable.
> I actually hate people disavowing themselves of responsibility here.
I believe that everyone should do their own research etc but there's a reason there are laws against fraud. There are a lot of people who would get taken advantage of by the unscrupulous if we just decided that it's all about personal responsibility. Yes people should not have the expectation that they will get rich quick but there is also no reason to allow them to be blatantly ripped off either.
If tether haven't maintained the level of reserves they need to maintain the peg (and honestly I can't see how the possibly could have adequate reserves) then it seems a pretty straightforward case of fraud.
This seems like a pretty clear example of why looking at revenue and margin like this is not a good way to manage this. Our goal here is clearly to eliminate the market for this product, and everyone ought to chip in to make that happen, not just the people who currently are at risk. The whole funding model is fundamentally broken.
It's a nearly guaranteed loss, and and pretty much the only people who will invest in it are those that are too incompetent to realize that. It smells like a legal con to separate those people from their money.
There is enough information in a ten or 20% yield to come to a conclusion. That doesn't stop unsophisticated investors from getting screwed.
When they do so because they bought magic beans, I have no sympathy. When are lied to and sold deposit-like products [1], it's infuriating.
[1] https://stablegains.zendesk.com/hc/en-us/articles/4402680375...
reply