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ansible
NovemberWhiskey
I invite you to look at the list of failed banks provided by the FDIC:
https://www.fdic.gov/resources/resolutions/bank-failures/fai...
Notice that the vast majority of these are smaller, local or regional banks.
woodruffw
Pointing to the list of failed banks from the website of the government agency that insures them and makes customers whole doesn't convey as strong of a point as you might have intended.
NovemberWhiskey
I think it perfectly well makes the point that regional banks are much more likely to practice poor risk management and fail than larger banks. If your goal is "boring banking", having to have the FDIC come in and arrange a sale of your bank is ... not it?
AmericanChopper
> makes customers whole
*As long as whole is less than $250k.
mensetmanusman
Dodd Frank destroyed a lot of small banks and helped the big get bigger.
concinds
This is a complete misunderstanding of the problem.
I invite you to read Taleb (I'm not trying to sound like a fanboy; but his ideas are literally the utterly common-sense conclusions you'll reach if you study complexity science as applied to the financial system; i.e. they are objectively and necessarily true).
I'll try to present a very simplified but rigorous case:
1. There's commercial banks (that take consumer/corporate deposit & give out loans), and investment banks that arbitrage the markets. If you allow banks to fulfill both commercial and investment roles, consumer deposits are at risk from bad investment decisions. Note that Glass–Steagall is still repealed, and banks are still allowed today to put your money at risk.
2. Many investment banks used mathematically-flawed risk models, that underestimate fat-tail risk, and therefore lead to inevitable collapse. Read Jim Rickards's testimony to the House of Representatives on this; he was LTCM's general counsel, and LTCM (a who's who of finance PhD's and Nobel Prize winners) blew up due to overconfidence in these flawed models (https://moam.info/house-testimony-rickards-committee-on-scie...).
3. The problem here is systemic risk: banks only get rescued because they're systemically important. "Systemic-ness" is mainly a function of interconnectedness of markets, i.e. systemic banks cannot fail without destroying the markets and economies. Hence banks have an incentive to become systemically important, so they'll get bailed out if they make mistakes. Risk of catastrophic system failure is incentivized.
4. Small banks failing is normal. FDIC insures deposits to a certain amount; no Average Joe gets wiped out, bank investors do. The key point (covered in Taleb's Antifragile book) is that individual survival (agent) and ecosystem survival (system) are often at odds. Animal evolution requires death, since that's the filtering process; if everyone survived, no natural selection occurs, no evolution, and pathological mutations would eventually accumulate and wipe the species out. A healthy banking industry is one in which banks fail regularly, without impacting consumers (thanks to FDIC), and where bankers who worked at those banks get wiped out financially too, and don't just walk away with bonuses. Then, they'd have an incentives to stop using known-defective quant risk models. Contrary to popular opinion skin in the game isn't about incentives but about filtering (if you fail at the game, you personally suffer the consequences and cannot continue playing).
Many problems in the world stem from misunderstandings of either complex systems theory (an actual scientific discipline that should be taught in high school), math (mostly dimensionality and fat-tailedness) and probability theory. Without a basic understanding of these, people simply don't have the tools to understand or discuss much of the modern world.
The consequences can be seen in systemic financial failures; in ineffective pandemic responses; and in much of social science. See for example:
concinds
Note: that Jim Rickards testimony link is the only good one I've found. He was given little time in committee, and had to essentially rush through his points (reducing entire paragraphs or sometimes entire pages to a sentence); so if you look at the 'official' House transcript you'll miss out most of his supporting arguments. Despite the "moam.info" site looking strange, I can confirm the submitted testimony is the original, authentic version.
This is the link to his verbal testimony, and you can see how shortened it is:
https://www.youtube.com/watch?v=40Gkp0wJplU at 1:39:51
Taleb also testifies earlier in the same hearing.
himinlomax
> Notice that the vast majority of these are smaller, local or regional banks.
Well, there's a lot more of them than there are big ones, so I'm not sure that says a lot.
unclebucknasty
Many larger banks are deemed "too big to fail" so they won't land on that list by definition.
darkerside
Aren't there just more of them? When Bear and Lehman failed, each was a huge percentage of large banks, all at once.
NovemberWhiskey
Neither Bear Stearns nor Lehman Brothers were deposit-taking banks.
alexjplant
Aren't retail and investment banking separate spaces? Aren't depository accounts insured to the tune of a quarter of a million dollars by the FDIC? Isn't Voyager a crypto exchange?
I tend to keep my money in local credit unions as well, but I'm struggling to understand how this discussion is germane to Voyager's actions here.
EDIT: See https://www.investvoyager.com/blog/voyager-is-now-fdic-insur...
thr0wawayf00
Because Voyager has tried to position itself as a crypto-based alternative to banking. From the front page:
> Build your wealth
> Earn up to 12% annual rewards. Beat your bank by earning top rewards each month on 39 digital assets with no lockups.
They explicitly touted their benefits over using a traditional bank before they issued this notice. They also issued debit cards that they are now deactivating.
Fundamentally, crypto has staked its future on replacing the banking system, citing various issues with the Fed, etc. But the regulatory environment in banking (the FDIC) creates a much more stable environment in which to transact than these platforms do.
teraflop
In particular, the Voyager home page says that "USD" and "cash" deposits are FDIC-insured, while the debit card landing page talks about how you can earn rewards while "spend[ing] USD Coin like cash".
I can easily imagine a naive consumer coming away from this with the incorrect impression that USD Coin deposits, being equivalent to USD, are insured to the same extent.
adrr
They can be the same. Voyager looks like they have their sweep account as a brokered deposit with an FDIC insured bank. This similar to other investment firms. I think Etrade lets you have up to $1M for FDIC insurance spread across 4 banks but you have to set it otherwise it sits in a money market or equiv.
Good thing is that voyager shouldn't be able to touch money in the sweep accounts.
iskander
https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bl...
>the Financial Services Modernization Act of 1999...repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies, and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company
FDIC insurance ends up being the main guarantee of safety, especially in the modern era of 0% reserve requirements.
JumpCrisscross
> especially in the modern era of 0% reserve requirements
They’ve been replaced with capital requirements, which make a lot more sense in modern finance than reserve requirements.
NovemberWhiskey
>especially in the modern era of 0% reserve requirements.
Total red herring; reserve requirements went away but they were irrelevant because banks were holding massively in excess of the required reserves in any case.
captainkrtek
Couldn’t agree more. Been banking with a not-for-profit credit union for over 15 years. Never been charged unreasonable fees, great customer service, solid and simple app/website. I don’t want banking to be “exciting”
ansible
> I don’t want banking to be “exciting”
Yes, exactly.
My bank makes money off of me every month, even though I have the "free" checking account. They offer an historically low interest rate on the savings account, and I know they're making money off that too.
But I'm OK with all that.
throw34
I get your point but was Voyager a bank?
https://www.investvoyager.com/investorrelations/overview
“ Voyager Digital Ltd. is a fast-growing, publicly traded cryptocurrency platform in the United States founded in 2018 to bring choice, transparency, and cost efficiency to the marketplace. ”
jrumbut
Never heard of them before but they talked about direct deposits and a debit card on the page linked above so if they aren't a bank they are acting a lot like one.
KronisLV
> Bank local! If you want to speculatively invest, that's fine. But keep some money in a local bank so that you can pay your bills next month.
Hmm, shouldn't you also consider having accounts in multiple banks, even if they're relatively local ones? For example, in my country there's two banks that I guess are the most popular ones: SEB and Swedbank.
While they both have a history of being reliable, it's not unheard of that people's bank details might be compromised, breaches happen, or outages/cyber attacks that might disrupt/slow down service in whatever capacity.
While a part of these factors might not be applicable to people who practice good information security, it's not like you cannot write them off entirely. Furthermore, I do think that there was a bank that actually went bankrupt a number of years ago, people couldn't access all of their funds etc.
So treating banks like any other system - where avoiding a single point of failure might just be worth it in the face of significant consequences should anything bad happen, seems like the right thing to do.
Then again, one might also just buy gold and bury it in their back yard (provided that they own the land), depending on what their risk tolerance is towards certain events. Not even kidding about this. If you can diversify your investments, doing the same for where/how you store your money or other assets just seems smart, even if a bit cumbersome.
logicalmonster
> I sometimes wonder if I'm the only one who just wants a bank to be a bank.
1) One big issue is that there's a case of bad incentives that are growing even worse. As I see it, the big problem emerges when you really start to understand what inflation does to your savings and how inflation operates like a stealth tax, particularly on the poor/middle class who have less avenues to shield their wealth through property or other assets that might retain or expand their value in the long term. The paltry ~0.05% (not 5%, but a fraction of a percent) interest rate you might get from your savings account feels like somebody is pissing on your face when inflation is reportedly in high single digits, but probably higher. You end up being robbed of more purchasing power the more responsible you try and be and the more of a saver you are in a high inflation environment. Fix this systemic problem with inflation first. This is why a lot of people are searching out higher and higher returns, even with some risk. You're being robbed no matter what happens unless you beat out inflation.
2) I'm taking a guess here, but as you state you're a bit of an older man, you might be speaking from an advantageous perspective of growing up in an era where buying a home and relative economic success was comparatively easier to achieve. It's a little easier to play it extremely low risk, even if you're losing some money, if you've already achieved a satisfactory outcome in life with home ownership. For many complex reasons, the younger generations here who are taking bigger risks have a far harder time achieving the same level of relative success as the older generations have achieved.
lottin
I don't think people put money in these crypto high-yield investments because they love risk. The majority of people I have talked to were unsophisticated investors who didn't know what they were doing, and were under the impression that the investment was safe.
Pasorrijer
This is a very American thing. As much as our Canadian banks gouge us, and lead to a lack of choice and almost monopolistic conditions... Our banking system is so ridiculously stable compared to the US it's not even funny. I look down south in confusion because I just don't understand how you manage in your system
umanwizard
Not sure what you mean. I’ve had the same account with Chase roughly since I became an adult (I’m 32 now). It seems to be perfectly stable and work fine.
sytelus
I hate to break it to you but vast majority of small regional banks are scams. I learned this hard way trying to support local bank instead of big ones. It turns out these banks are run by bunch of private equity firms for the sole purpose of lone manipulation. After they serve their purpose, they “almost” go out of business until another equity firm picks it up for cheap for another rinse repeat cycle. My local bank changes hands about every 2-3 years. As a bonus you get crappiest website with giant security issues. Your money is safe there only below federal limit. As long as banks are concerned, always chose too big to fail ones.
ww520
There's a myth that Voyager is FDIC insured. It's pure marketing.
Voyager has an omnibus account with the Metropolitan Commercial Bank where Voyager's customers deposit their money. Voyager acts as the money manager of the omnibus account and has absolute control over the money.
Metropolitan is a member of FDIC and is FDIC insured. In the case of the Metropolitan bank failing, the FDIC insurance kicks in to cover any loss of the omnibus account upto 250K. However, Voyager is NOT a member of FDIC and is not FDIC insured. In the case of Voyager failing, the money is gone. FDIC won't be involved as Metropolitan is still fine.
Voyager customers hoping FDIC coming in to cover their loss are going to have a rude awakening.
Edit: A simple analogy is that your parents and you open a shared account with a bank. Your parents lose all the money from the account. FDIC is not going to cover any of the loss since the bank is fine.
spyder
Hm.. interesting. In their medium article linked below they say the funds are safe even in case of the failure of the company not just their bank partner, but on their website in the same text the "company failure" is not there. (and even just saying "company" in the article is a little vague because they don't say which company):
"Through our strategic relationships with our banking partners, all customers’ USD held with Voyager is now FDIC insured. That means that in the rare event your USD funds are compromised due to the _company_ or our banking partner’s failure, you are guaranteed a full reimbursement (up to $250,000)."
https://invest-voyager.medium.com/usd-held-with-voyager-is-n...
https://www.investvoyager.com/blog/voyager-is-now-fdic-insur...
ww520
They were misrepresenting their FDIC status if they were claiming FDIC covering their company's failure. They might be cleaning their language to avoid legal problems.
tim333
This article (https://amycastor.com/2022/07/02/who-had-voyager-digital-nex...) says they'd convert any USD you sent them to USDC which are not insured.
iends
Just two weeks ago they had the following in a blog post:
> This is also a good time to remind everyone that USD is held by our banking partner, Metropolitan Commercial Bank, which is FDIC insured. The cash you hold with Voyager is protected up to $250,000–which means it’s as safe with us as at a bank.
They also said:
> Through our strategic relationships with our banking partners, all customers’ USD held with Voyager is now FDIC insured. That means that in the rare event your USD funds are compromised due to the company or our banking partner’s failure, you are guaranteed a full reimbursement (up to $250,000).
The "That means that in the rare event your USD funds are compromised due to the company" is what is confusing people.
oldgradstudent
That's misleading marketing, and might even be a federal crime.
Their terms of service say clearly:
>FDIC insurance does not protect against the failure of Voyager
ww520
They are misrepresenting their FDIC status if they claim FDIC covers their company's failure.
notch656a
What the hell? Is there no penalty for advertising as being FDIC insured when client deposits are not? Plain as day I checked their tweets and they made a statement about FDIC insurance and the next sentence was telling you to start your crypto investment.
hn_throwaway_99
I'd be interested if someone can comment with more information. Here are the details from Voyager's legal docs:
> Customer understands and acknowledges that Customer may arrange to deposit United States Dollars (“USD” or “Cash”) into the Account. Cash deposited into the Customer’s Account is maintained in an omnibus account at Metropolitan Commercial Bank (the “Bank”), which is a member of the Federal Deposit Insurance Corporation (“FDIC”). Voyager maintains an agreement with the Bank whereby the Bank provides all services associated with the movement of and holding of USD in connection with the provision of each Account. Therefore, each Customer is a customer of the Bank. All U.S. regulatory obligations associated with the movement of, and holding of, USD in connection with each Account are the responsibility of the Bank. For purposes of clarity, any services pertaining to the movement of, and holding of, USD are not provided by Voyager or its Affiliates. Cash in the Account is insured up to $250,000 per depositor by the FDIC in the event the Bank fails if specific insurance deposit requirements are met. FDIC insurance does not protect against the failure of Voyager or any Custodian (as defined below) or malfeasance by any Voyager or Custodian employee.
My reading of that, then, is that if you have USD cash in that account, then Voyager can NOT restrict your withdrawal of that cash, due to this line "All U.S. regulatory obligations associated with the movement of, and holding of, USD in connection with each Account are the responsibility of the Bank." They are clearly saying here that, basically "For purposes of your cash, you are an individual customer of the Bank (which is FDIC insured), and the Bank is responsible for following Banking regulations". AFAIK banks are not allowed to just restrict withdrawals as Voyager has done.
So it seems like your crypto could all be tits up, but your cash should be FDIC insured.
ww520
Your cash is FDIC insured in regarding to Metropolitan failure. Your cash is not FDIC insured in regarding to Voyager failure.
Omnibus account is a shared account which Voyager has absolute control. See their language below where Metropolitan grants them the right on "movement of and holding of USD," i.e. they can move the money as they see fit.
"Voyager maintains an agreement with the Bank whereby the Bank provides all services associated with the movement of and holding of USD in connection with the provision of each Account."
As for Voyager customers withdrawing the money from Metropolitan, they can try. Curious to see how far they get.
UkrainianJew
IANAL, but I think what they are trying to say here is "We are not a bank. Dear SEC, please don't treat us like one - go ask Metropolitan for all your regulatory cravings".
"Therefore, each Customer is a customer of the Bank", ehm, does the bank know about it? Each bank account must have a legal owner (or multiple ones for a joint account) and I somehow doubt Voyager would put their entire customer base as the joint owners of their bank account.
The "Cash in the Account is insured up to $250,000 per depositor" part is deliberately misleading. As far as the bank is concerned, there is only one depositor - Voyager.
In general, you need to look at specific scenarios:
1. Voyager goes belly up and you still had $1000 on your account. You could:
1.1. Sue Voyager. The court will likely rule you as a creditor granting you a claim against some fraction of their residual assets. You will get anywhere between $0 and $1000 depending on other creditors, their claims and the amount of remaining assets. Quite likely, not much.
1.2. Sue the bank. The bank will show that the omnibus account still holds some USD (that might be less than the end users' deposits) and will tell you to go sue Voyager as a creditor.
1.3. File a claim with FDIC. They will tell you to bite dust because they cover the business between the bank and Voyager. You are neither of those and have no business with them.
2. The bank goes belly up. Voyager will file a claim with FDIC and get $250K for ALL users. This will make them default on the users' claims, hence go to 1.1.
stefan_
Maybe that myth got started when they wrote a blog post to that effect:
https://invest-voyager.medium.com/usd-held-with-voyager-is-n...
sytelus
I am pretty certain people there will end up in prison for making these kind of false claims.
undefined
Barrera
> We are in discussions with various parties regarding additional liquidity and the go-forward strategy for the company. While we don’t have anything else to share today, we are working diligently and hope to have more information to share soon.
Translation: we are insolvent. The action we have taken prevents a run that will wipe out our working capital. We have been running a fractional reserve all along.
This is getting tedious.
Also: Voyager's alleged debtor, 3AC, just filed for Chapter 15 Bankruptcy:
https://www.bloomberg.com/news/articles/2022-07-01/crypto-he...
tootie
Celsius made a similar statement nearly 3 weeks ago and there hasn't been any movement since then.
sbierwagen
Well, there's been one really alarming movement: https://www.coindesk.com/business/2022/06/30/ftx-passed-on-d...
ww520
Didn't they also put in a big chunk of money into Celsius? 3AC + Celsius = 0 is going to hurt.
TedDoesntTalk
> We have been running a fractional reserve all along
How do you know that? It’s possible 3 Arrows missed their loan payments and that was enough to prevent them from meeting liquidity demands, no?
sbierwagen
>How do you know that?
The very first line on https://www.investvoyager.com:
>Build your wealth. Earn up to 12% annual rewards. Beat your bank by earning top rewards each month on 39 digital assets with no lockups.
Doing 12% APY when the fed funds rate was 0.5% meant they were loaning those deposits out at more than 13%. That's a pretty bad rate for a commercial loan. The only companies taking out those loans are doing so because they were rejected from regular banks. Why? Well now we know: it was all crypto hedge funds who were levered up and instantly imploded the minute crypto started to go down.
jcranmer
If loans were a component of Voyager's reserves, then by definition, Voyager was employing fractional reserve banking.
It's even more amusing that you think this crisis being caused by failed loan payments doesn't mean that fractional reserves are in play, because backing deposits with loans in lieu of cash is literally the textbook example used to illustrate fractional reserve banking.
TedDoesntTalk
Perhaps I just don’t understand fractional reserves.
Animats
Another one?
Tether is looking stressed. In the last three months, a lot of Tether has been cashed out. Look at the chart for Market Cap -> Last 3 months.[1] From US$82 billion to US$66 billion. Today, US$200 million was cashed out. Every few days, their market cap drops suddenly. At this rate, in a few months we'll find out how much backing Tether really has, because it is being paid out.
Stablecoins have two stable values: 1 and 0.
marcell
Tether's market cap dropping without a price drop is indication that they are liquid and able to handle (to date) almost $20 billion in withdrawal over a 1 month period. That is impressive and a sign of their robustness. They are passing a stress test so far.
Their blog counters much of the FUD out there: https://tether.to/en/news/
roywiggins
It seems like it would be pretty binary. That is, withdrawals would be orderly... until they are suddenly not. It's not very good evidence for the state of their backing now. Maybe they've chewed through all their liquid assets and will explode tomorrow, maybe not.
That is, withdrawals wouldn't shake the Tether price at all until someone is told "no you can't withdraw today" and decides to sell their Tethers on the market at a discount instead of withdrawing at par.
atwood22
Yes, it’s possible that Tether is suddenly unable to be exchanged for dollars, but it’s pretty impressive they’ve been able to handle a sudden outflow of 20B. They’ve certainly proven their most harsh critics wrong, but there is still risk of course.
marcell
That’s an often stated truism that is false.
You could have a situation where Tether is 80% capitalized, in which case one USDT is worth $0.80.
Or a situation where they have money locked in Treasury bonds for 1 year. In that case, the value of USDT depends on your discount rate and is around $0.95.
oldgradstudent
Madoff was able to handle withdrawals until one day he wasn't. Only then the Ponzi collapsed.
This is not a very good way to distinguish a fraud from an honest business, especially if you're not the one who already withdrew.
Animats
"The valuation of the assets of the Group have been based upon normal trading conditions and do not reflect an unexpected large-scale sale of assets, or the case of any key custodians or counterparties defaulting or experiencing substantial illiquidity, which may result in materially different or delayed realisable values. No provision for expected credit losses was identified by management at the financial reporting date."
Yesterday, Voyager could have said that.
kranke155
“FUD” is what all the coiners say it all is until the blog post happens and it’s all over. It was the same with LUNA.
Any intelligent and comprehensive assessment of the information on tether will tell you that it’s likely to be outright fraud.
EwanToo
I think this FT article suggests the blog isn't entirely comprehensive
Tether’s mystery commercial paper exposure - https://on.ft.com/3yzXTua via @FT
adrr
Whats the limit on withdraws before they have liquidity issues? Easiest way to make investors confident is due a full audit with a top 4 auditing firm.
marcell
https://tether.to/en/transparency/#reports
They claim 85% cash/cash equivalents, 15% less liquid assets. Cash equivalents is broken down also, 55% is Treasury bonds.
qeternity
You do understand that Charles Ponzi’s ability to meet early redemptions is exactly what gave him credibility?
driverdan
Nonsense. All they'd have to do is have $20 billion in cash to satisfy $20 billion withdrawals. It doesn't mean anything about the rest of the money. The next $1 withdrawn could bankrupt them for all we know.
uncletammy
> At this rate, in a few months we'll find out how much backing Tether really has, because it is being paid out.
As someone who's been watching Tether since it's inception, I say don't count on it. They've managed to continuously escape the consequences of running a dangerous fractional reserve system.
The main beneficiaries of this system are now companies with incredibly deep pockets who aren't afraid of deploying that capital to keep the system afloat.
I used to think Tether would fall apart with a long enough bear market. Now I think it will stay afloat until it's captured by the US government. Or until it's acquired by a U.S. company that's willing to turn over customer trade data to a "5 eyes" nation in exchange for their help and leniency in restructuring it so it can continue to operate with the government's blessing.
323
Have you ever considered for a nano-second the alternative that they actually might have the reserves to back it all up?
bastawhiz
Based on what evidence besides their word? There's been innumerable investigations and analyses which, while not 100% conclusive, raise mountains of evidence to the contrary. And they've already been caught lying with Bitfinex.
kranke155
Like the OP said, there is no evidence that’s true and enormous indications that it’s not true. You’re essentially saying this on faith
chaostheory
Tether is an inadvertent pump and dump scheme similar to Mt Gox that is surprisingly still working.
https://www.theverge.com/22620464/tether-backing-cryptocurre...
2OEH8eoCRo0
They just keep launching coins in a desperate attempt to raise capital. They are launching a new coin pegged to the British pound.
ploppyploppy
This isn't "launching coins in a desperate attempt", it's providing stablecoins in the FIAT currency that the market would want - in this case one of the world's most popular currencies.
2OEH8eoCRo0
Do they make money from this? Yes or no.
armchairhacker
I saw this on their site:
> FDIC INSURED ON USD $250,000
> You USD is held by our banking partner, Metropolitan Commercial Bank, which is FDIC insured, so the cash you hold with Voyager is protected.
So does that mean anyone with less than $250k is guaranteed their money? Is there any legal backing?
smoe
Seems like a marketing spin to lure customers into a false sense of security. From the fine print in the user agreement:
"Cash in the Account is insured up to $250,000 per depositor by the FDIC in the event the Bank fails if specific insurance deposit requirements are met. FDIC insurance does not protect against the failure of Voyager or any Custodian (as defined below) or malfeasance by any Voyager or Custodian employee."
iancarroll
If FDIC insurance is applicable, though, that should mean your cash is being held in your name with the underlying bank. It is unlikely that Voyager would have any right to those assets upon bankruptcy or insolvency -- if they do (I am no expert), that would destroy the neobank model to some extent.
> Voyager maintains an agreement with the Bank whereby the Bank provides all services associated with the movement of and holding of USD in connection with the provision of each Account. Therefore, each Customer is a customer of the Bank.
The "omnibus account" phrasing is a little vague though, but if FDIC insurance is applicable, funds have to be separated to some extent.
smoe
Statement from Metropolitan Commercial Bank
"Metropolitan Commercial Bank maintains an omnibus account specifically designated for the benefit of Voyager customers. [...] Voyager is responsible for maintaining records to determine the ownership and amount of each of its customer’s funds on deposit in the omnibus account."
https://www.mcbankny.com/fdic-coverage-available-to-voyager-...
Unless I misunderstand, there seems to be no account separation whatsoever on the side of the bank and no "each Customer is a customer of the Bank"
smoe
I'm not an expert at all either, just mildly interested how this will play out. I don't have any money in it.
There is an ongoing discussion about it on the Voyager subreddit
https://www.reddit.com/r/Invest_Voyager/comments/vp8kdq/prep...
Some people there say they have called the FDIC, but the response they have gotten is that the insurance only kicks in if the Metropolitan Commercial Bank fails.
I have no idea what happens to the customer accounts at the bank in case of a Voyager bankruptcy. E.g. if they can be used to cover voyagers debt or have to be handed over to the customers.
323
But how could then Voyager generate yield on funds locked into an underlying bank, more than what that bank offers on deposits?
stusmall
That's wild. That seems like something someone should go to jail for ignoring everything else. At a glance that wouldn't be my interpretation of the statement on their site.
JumpCrisscross
> does that mean anyone with less than $250k is guaranteed their money?
I’ve noticed a lot of crypto companies being sneaky with this. What that means is if Metropolitan Commercial Bank goes under, Voyager’s cash is protected. It does nothing to protect cash you’ve entrusted to Voyager if Voyager goes under.
jcranmer
What this means for anyone who is a customer is that Voyager is having an uproarious laughing session in their private conference rooms at how gullible their customers are.
The FDIC insurance means that Voyager is guaranteed at minimum $250k of its bank account should Metropolitan Commercial Bank. That's $250k for the entire company, not per customer of Voyager [1]--if Voyager held $25m in cash in that account, that's only 1% of its cash accounts that are insured. Of course, how much of an impact that has depends on how much of its assets Voyager actually holds in cash which is likely very little.
But as a customer? You have no protection whatsoever. This reassurance is basically saying "we're protected in case of emergency; you're not."
[1] It's possible that Voyager is actually the custodian of an account in your name at Metropolitan Commercial Bank, but I think that would require your explicit signature to set up, so I doubt that it's actually in play here.
UkrainianJew
>So does that mean anyone with less than $250k is guaranteed their money? Is there any legal backing?
No, it means that up to $250K of Voyager's USD is protected by FDIC in case their bank flops. That is the combined limit shared between ALL of Voyager's customers.
It doesn't protect from Voyager telling you that they sold your 1 BTC for $20K USD as you requested, while actually still sitting on 1 BTC, hoping to sell it tomorrow for $30K and pocket the $10K difference.
Similar to "not your keys - not your bitcoins", no written agreement with a regulated bank - not your dollars.
xur17
If a user has $250k or less in USD assets on the platform I believe it does.
For most of these sites, users convert deposits into stablecoins (USDC, etc) since they can typically earn interest on this, and this is not covered under FDIC.
ValentineC
I think the keyword here is "cash".
Other forms of assets, namely crypto, aren't protected by FDIC insurance.
InefficientRed
I have a hard time imagining a jury coming to the conclusion that this phrasing (still on their site) isn't intentionally misleading.
notch656a
USDC is supposedly USD backed, so a reasonable person would presume someone who advertises FDIC insurance of cash would assume the USDC underlying USD is backed by FDIC. Seems like pretty clear fraud to me if the USDC isn't actually FDIC insured. If they meant only some of the cash (non USDC backed) was insured they should have said that.
lmm
Sure, but by that time there will be 0 assets to pay out and winning a judgement against them won't help you.
koolba
I wonder if this is at all related to the recent move by Coinbase to merge USDC / USD balances.
ourmandave
Voyager Wallet You can transfer assets from an external wallet to your Voyager account/wallet. Like Coinbase, the account wallet is not yours (i.e., not your keys, not your coin). If Voyager wants to freeze your account, along with any assets in it, they can. And there isn’t much you can do about it.
No, you're fucked. It used to take up to 2 days to transfer it out of Voyager, before everyone (not a whale) was completely fucked.
ww520
It's a myth. See https://news.ycombinator.com/item?id=31954115
allenrb
It’s almost as if unregulated financial institutions don’t operate on the same standards as regulated ones. That would be crazy, though, so it must not be true.
If you’ve never read about what markets were like 100+ years ago (at least in the United States), it’s enlightening. Turns out that people lost money left and right due to fraud and mismanagement. Why would we expect anything different now?
Ancalagon
I interviewed with Voyager just before the drop in stocks. It was a pretty arduous process iirc, glad I didn't make it through.
wly_cdgr
How can a bank get off the ground without using fractional reserves or relying on the founders putting their own money at risk to start the business? No giving out loans until you've created enough of a buffer? But how to build that buffer in the first place, high fees? But how to successfully enter a competitive market as an unknown newcomer charging high fees?
captn3m0
The regulator usually demands the former (a war chest).
radicaldreamer
Were they gambling with customer funds? I don't understand how they lost crypto they were simply holding as a custodian...
impulser_
They were a lender to 3 Arrows Capital, who was liquidated.
These crypto exchanges are over leveraged. They make banks look like saints in risk managements.
floydnoel
Of course they weren’t just being custodians! Gotta chase those returns…
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Simon_O_Rourke
> We are in discussions with various parties regarding additional liquidity and the go-forward strategy for the company.
I actually smiled at that rather eloquent retelling of the old classic "dude, we're totally f*ked and don't know what to do".
As other posters have sagely advised, keep some of your money in a small regional bank!
ezekiel11
Just curious, how many of you hold crypto? I've always stayed away from it but what is a % of HN who support crypto roughly?
chx
Reminder: all crypto"currencies" are a scam. It never was and for the foreseeable future it can not be anything else. https://news.ycombinator.com/item?id=31462469
knowaveragejoe
By this description, any speculative investing is a "scam". Kind of devalues the term "scam" IMO.
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I sometimes wonder if I'm the only one who just wants a bank to be a bank.
I've been with the same relatively small regional bank for 30 years. I have a checking account, savings account and that's it. They've been stable this entire time, and I've never worried my money was going to disappear.
As another sign of being an old man, I'm old enough to remember the phrase "as safe as money in the bank". You see, when I was a kid, the banks had been operating under decades of strong regulation by the FDIC and other agencies, and were widely considered to be a safe place to put your money.
Not that the banking sector hasn't seen its share of problems in that time. From the S&L crisis, to the home mortgage lending fraud that lead to the big crash. But in all that time, with just a little effort, you could put at least some of your money in a regular local bank, and expect it to be there tomorrow.
Bank local! If you want to speculatively invest, that's fine. But keep some money in a local bank so that you can pay your bills next month.