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. They did this by offering below average interest rates on savings then parking people's money in accounts at banks with higher interest rates than they paid out and pulling some of the difference into a prize pool. Over time (very quickly actually) to increase revenue they pivoted into more traditional gambling.

Notably, Yotta is neither a bank nor a payment processor. They are just an "app" front end. Yotta's processor went bankrupt and the fintech bank they were working with to hold the accounts now disputes the amount of money they actually are holding to the tune of ~$96M being missing. This will probably be in courts for several years while things are unwound, someone will go to jail for financial crimes, and a lot of people will never be made whole. Some people have called for the FDIC to step in, 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.

> 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.