Now-frozen crypto-lending biz Celsius accused of devolving into a Ponzi scheme An ex-employee of Celsius Network, the cryptocurrency lending platform that recently suspended all transactions, this week accused the company of operating as a Ponzi scheme in a lawsuit. Netizens were told they could earn interest on cryptocurrencies they put into Celsius. The biz generated that return by investing people's …
Not all fraud and foolishness is a Ponzi scheme. The alleged series of events describes precisely what happened. It started as a bad idea, then became a Ponzi scheme when the bad idea was no longer sustainable.
A Ponzi scheme requires paying investors from the contributions of other investors rather than the proceeds of the investment. That's the specific distinguishing feature of a Ponzi scheme. Calling every cryptocurrency fraud and bubble "a Ponzi scheme" is inaccurate and does no one any good.
Putting existing crypto investments into a pooled fund, which is then invested in more crypto? The whole point of crypto is that it's a gamble - the investors in this scheme are basically paying someone else to go to the casino on their behalf. I really don't understand this one.
That is not true depending on what people think cryptocurrencies are.
I use cryptocurrencies as a means of anonymous payment. I have a balance of about £100 (a bit more a while ago but I don't keep that as an investment - it's the crypto equivalent of a jar full of loose change.
If you want to pay anonymously, BTC does what it says on the tin. If you want to get rich through cryptocurrencies as an investment, you are indeed a sucker just like all get rich quick schemes.
"I'm sure you do understand it. OTOH the entire operation seems to have depended on a ready supply of people who didn't and were prepared to back their lack of understanding with cash."
Most people do not understand that cash is only worth what you can exchange it for.
Happily almost no-one says "no, I want a kilo of jam" when offered £3.
Most people do not understand that crypto is only worth what you can exchange it for.
Unfortunately some people want more a lot $crypto when offered £3.
Trustless was not supposed to be interpreted like that but that is humanity for you.
Re " I really don't understand this one."
Stable coins are the best scam. It works like this...
You give me that 100€ note and I give you a token that I try really hard to make sure is still worth 100€ in a few years. If all goes well your token is worth 100€, if not you lose all your money.
Its algorithmic. And AI. And crypto.
That's not a strange business model, it's called an investment fund.
The fact that the crypto bubble got so big that it enabled a huge ecosystem of investment funds, currency exchanges and "financial journalism" to flourish around it is going to make the terminal crash all the more painful. The only thing they really invested in was electricity, which they then proceeded to burn calculating meaningless numbers on expensive graphics cards.
Cross your fingers if you invested in a pension fund that was "high risk" and they were stupid enough to pour your savings into any of this.
It's an investment fund that invests exclusivly in tulips and takes payments exclusively in tulips and returns funds in dried out un watered tulips.
Real investment funds take money in and invest in real businessss that solve real problems for real people and pay back a share of the real benefits that actually happened in the real world.
"Real investment funds take money in and invest in real businessss that solve real problems for real people and pay back a share of the real benefits that actually happened in the real world."
Which depends on what you consider real benefits. If, for example, you don't like this concept (separate from the Ponzi scheme part which nobody likes), you might not like investment funds that invest in financial companies that themselves are trading. Yet those exist. Similarly, there are investment funds that invest in commodities of various types, and you make money if copper becomes more valuable. They're not investing in companies mining or processing the copper, just the copper. Do you object to those? Investors aren't limited to stocks and bonds and companies aren't limited to "solving real problems".
This fund sounds very dodgy, and possibly it always has been. Even if it started out without that plan, it doesn't seem to have taken long to go very badly. The concept is still that of an investment fund.
So if anyone remembers the big economic crisis of 2008 the guilty bit was the derivatives, an asset composed of prime and sub prime debt that nobody seems to understand the risk, but as long as had two digits returns everybody was happy, until it burst.
Pretty much Celsius created the same, you borrow backed by more estable coins and trade at a margin more risky crypto assets, except that opposite to the formal financial industry on which arbitration and regulations are in place nothing like that exist in the crypto world. Not to mention the risk of trading at a margin, specially when the lender starts doing margin calls because of the risk of default, you can by en debt in no time.
DeFI is criminally stupid plus the total lack of security made it a picnic for hackers, these people needs to end in jail.
On top of that is a cottage industry of “investment gurus”, special software to analyse the market and of course the wallet apps that happily takes a cut of commission when selling / buying.
And of course the brain washed drones repeating ad-Infinitum that is all lies because the governments are slaves of the financial institutions and they don’t want you to move the money away,
Yup. I started mining back in two thousand and “cough”.
It looked hopeful but became boring and was trashing my GPU.
So I stopped.
I still have my wallet lurking in an image somewhere that I suppose I could revive if I can remember which drive it is on.
In the meantime and in the case of Celsius I only have this to say:
“Hah, hah, hah, hah, haaaah!”
Bloody idiots.
Let me sum up some of Gen-Z idea's about wealth generation....
"So there's a great way I can invest my real money to make free currency that's worthless, in the hopes of never having to work after the age of 25? All I have to do is buy these "magic coins" that rooms full of GPUs have 'pulled out of their arses' by way of months spent scanning a stream of meaningless data? There's huge risk, huge cost and probably no liklihood of ever seeing my money again? Well sign me up!!"
You pretty much nailed the description, but there are two problems. It's not just young people doing this, and it's not new. Yeah, the term now is cryptocurrency, but people have been hoping to get rich quick and throwing away their money and time on schemes they thought would get them there for centuries. This will eventually die, those who invested will learn a painful lesson and go back to work, another generation will form, and a new thing will come along that's clearly going to change the world and make you rich in the process. Some of those things will change the world, but they won't make many people as rich as they thought it would.
Asked me what I thought about crypto last year.
I told him I thought it was basically a Ponziesque bubble with zero intrinsic value that was about to burst and that any people attempting to enter now (arse end of 2021) would likely be entering at the top.
He said a subdued “thank you” and that was the last I ever heard from him.
I found out from his Facebook page a few days later the reason why he’d asked was that he’d just pumped $20k into a mining rig which he was still waiting for.
Now you’ve made me wonder how that all turned out.
Oh damn I quit Facebook last year, too, so I guess I’ll never know.
I was asked the same thing during the last bubble a few years ago, but gave a borderline tactless explanation of greater fool theory that probably sounded like a personal insult. Whoops.
If you value someone's friendship, you have to be very careful how you give them even solicited financial advice. It's basically a lose/lose situation when it comes to volatile speculative gambling like cryptocurrencies.
The only advice on investments you should ever give to friends is that if you can't afford to lose all of it, you can't afford to invest it. If they can afford it, it's their responsibility to look for and choose good opportunities and make their own decisions, same as with everything else in life.
I spent £20 on BTC back in 2010 when they were emerging as research. That's the entire limit of my investment.
My advice at the time - and since - has been to forget about crypto as an investment vehicle, coz it ain't.
Meanwhile the development of the blockchain is far more interesting.
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