23
The phrase "no loose lottery" should be a red flag right away.
Normally, yes, but Yotta looks like a form of "Prize-based savings"
https://en.m.wikipedia.org/wiki/Prize-linked_savings_account
They are "no lose lottery" in the sense that you don't put up money directly to enter, you just open a "savings account". But they pay far less than market rate to fund the payouts. So in a sense, you pay for the entry with reduced returns on your "savings".
So similar to premium bonds? Usually those are government backed though.
Yes, similar to government-backed premium bonds, in the countries where they do stuff like that. But they are not run by the government, so they need to be called something else.
Yeah it’s a big red flag but how did it work?
I can't say for sure but it sounds like a Ponzi scheme. You get some investors. You lie on paper that they're making lots of money. If anybody wants to withdraw, you give them the money from other investors to make it look like anybody can withdraw whenever they want. But there isn't enough to cover all of the withdrawals because you've lied about the profits. Then you get more investors. And more investors. You promise if they keep their money in your investment a long time they will make way more than the initial withdrawers. They were silly to sell when everyone is still making so much money. As long as investors continue to add money to the pool you can pay off the few people who want to withdraw. At some point it becomes untenable to pay everyone off and continue to look legitimate and so you just withdraw all the money and run.
It seems like the big problem with Yotta right now is that it is caught up in the Synapse fallout. These small financial firms advertised that their customers funds were insured, but didn't hold them directly, they held them through intermediaries like Synapse who did have the US FDIC insurance. When Synapse collapsed, all the funds held by Synapse's customers like Yotta got stuck in limbo.
https://www.cnbc.com/2024/07/02/synapse-fintech-fdic-false-promise.html
this post was submitted on 04 Aug 2024
23 points (100.0% liked)
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