> Yotta marketed itself as a "bank" where every time you deposited to savings you would get a free lotto ticket for the month based on how much you deposited.

The archive link shows something a little more nuanced than Yotta presenting as a bank.

The archive link in gp has a hero text that says “banking” and then a few lines down says: Yotta is a financial technology company, not a bank. Banking services provided by Evolve Bank & Trust and Thread Bank; Members FDIC.”

If I’m reading this as a consumer I’m thinking my money is protected but this Yotta thing is a lottery incentive to put deposits into those banks, maybe some loyalty incentive or marketing scheme on top of it?

Lesson learned, don't trust “not a bank” to deposit your money into the bank for you.

> but the FDIC has helpfully pointed out that no FDIC insured account has defaulted which is the necessary condition for FDIC insurance to pay out

This is what scares me. I use Betterment for everything, which strikes me as a much more legitimate company, but it follows the same model where accounts are "FDIC insured" by being distributed among various bank partners. I always thought that meant it was safe if the company had troubles, but it seems not.

> every time you deposited to savings you would get a free lotto ticket for the month based on how much you deposited

reminds me of a payment scheme someone in Poland described about getting a car on 'lottery', where every month one person 'won' the rest of their payments paid off as the prize, while the 'worst loser' paid twice the price of the car? i was pretty young so i'm sure i'm missing the details

Prize linked accounts is a thing. In the US, it started with banks in Michigan 15 years ago

https://en.m.wikipedia.org/wiki/Prize-linked_savings_account

I've had an account with them. It looks like in March they quit giving automatic tickets monthly based on funds. Now the app looks much more like a casino, with other games and a separate yottacash balance for playing games including the lottery that use to be automatic and based on cash in the account. Withdrawing isn't possible but it still shows I have a $400 balance. Evolve bank is sending me $0.06 based on my balance because of the synapse bankruptcy. I'm just glad I moved most of the money I had in it to a different bank a few months before the issues started, I had 10k in it at one point.

It looks like the drawings are still happening and it says someone won 33k this month. That's gotta be bitter sweet. They won big but probably won't actually collect the prize considering it's not possible to withdraw. I wonder if they are going to have to pay taxes on that prize despite it not being accessible.

Notably, they promoted this scheme to people with troubled finances and tried to morally justified it by talking about how they were encouraging people to save their money who otherwise wouldn't. In principle that sounds good, but the reality is they just funneled those people into a glorified casino.

tbf the UK government does the same thing: https://en.wikipedia.org/wiki/Premium_Bonds

> someone will go to jail for financial crimes,

I like where your thinking and you seem confident, but history has shown this to not always be true. However, even if it does happen, people sitting in jail does nothing to fix the loss of the victims.

The fact that one of the parties involved hasn't done an audit of their accounts because "they can't afford it" is the chef's kiss of the clown show this debacle is.

The core issue seems to be that a company named Synapse was a middleman to a lot of fintech startups and spread money around various banks but didn't actually keep very accurate records of balances. Evolve bank noticed this and hired a fancy consulting firm named Ankura to reconcile 100 million transactions. But most of the money is still lost in the various banks that Synapse used. The core issue is why is it so hard to use Synapse's records to find where the money is? And the various banks that Synapse used should be able to work together to reconcile the money. I wonder if most the missing money was just embezzled.

In finance, you should never assume incompetence over malice. It very rarely works out that way. Malicious incompetence maybe.

This is probably a rug pull in a system designed for money laundering. They can’t figure out where money came from or who it belonged to…. I don’t think that happened out of the blue using standard accounting practices.

By mixing non-bank money companies and traditional banking services, you can construct an effectively opaque and ultra efficient system to obfuscate the origins of funds, all without deviation in an obvious way from what looks like standard accounting. All of the best money laundering happens in plain sight within the banking industry through clever constructions. AML rules are just there to eliminate the competition.

My guess is that it was time to shut down and the fingerprints had to be burned. Maybe no customer money was stolen, but the data of who has what money and who it belonged to might be hopelessly obfuscated in the process of obfuscation of their primary activities.

This is not likely an example of sloppy accounting, but rather of very, very clever accounting and orchestrated fraud to make money disappear out of an otherwise well designed system of accounting. The real question is where did the fraud propagate out of? What was the exploit, what was the systemic vulnerability, and who exploited it?

There is a huge incentive in fintech to create “legitimate products“ where John Q. Public deposits funds that just happen to be very useful for money laundering when combined with some other, apparently unrelated activity or similar lever that only an insider knows how to pull. It works fundamentally like a cryptocurrency coin mixer, without the hassle or suspicious profile. Shifting burdens of documentation often have gaps where things can “get lost” and shell companies that act only as conduits and never hold funds can evaporate with little accountability. Often, “unknowing” accomplice banks are left holding the bag…but all you have to figure out is where to repatriate the money that people will come looking for, the flows you know no one is going to come asking about effectively never happened.

Meanwhile it’s very easy to take a margin of 10 percent or more of the flows. And they aren’t small flows. It’s a multibillion dollar market. The demand and the incentives are absolutely spectacular.

For the most part, these crimes are invisible to the public, very difficult to prosecute, and effectively impossible to garner the political support to even launch an investigation into, for reasons.

I hope the hapless victims at least get their money back some day.

> bad interest rate

That link shows 2.7% in Sept., 2023. It should have been more like 5%.

The yellow flag should have been the sketchy "win prizes" part of their offering that the article didn't really mention. What's this pseudo bank's innovation? A raffle?

I still agree that weren't actual signs of sloppy accounting customers should have seen, and as it really does look like customer funds were supposed to get deposited in an actual bank.

Looks exactly like Premium Bonds here in the UK. (Winnings on those are also tax free, not sure if yours are the same.)

You're getting downvoted, but I don't think it's fair. Sure, there are many places you can get a high interest rate, but it's also true that the baseline savings accounts for most major banks aren't paying high interest.

Proof:

https://www.bankofamerica.com/deposits/bank-account-interest...

https://www.chase.com/personal/savings/interest-savings/inte...

https://www.wellsfargo.com/savings-cds/rates/

https://www.navyfederal.org/checking-savings/savings/savings...

https://www.citi.com/banking/current-interest-rates/savings-...

Discover (high interest) even does a comparison on their site comparing their interest rates to other major banks

https://www.discover.com/online-banking/savings-account/

So the average person who goes to the Wells Fargo down the street and says "give me a savings account" is getting minuscule interest.

This was a high yield savings account. They allowed some withdrawals at any time. No minimum balance but I can’t remember for sure.

Marcus (Goldman Sachs) high yield savings was 4.50% until revenetly. EverBank is at 4.75% right now. These are normal savings accounts.