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.

I disagree with this previous premise: In finance, you should never assume incompetence over malice. It very rarely works out that way. Malicious incompetence maybe.

I suspect it's informed more by confirmation bias fed by the news cycle than actual facts. And Misty likely the rule of thumb featuring incompetence still holds.