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> 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.

> 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.

intelVISA 2y ago
Just seeing the phrase 'financial technology company' is a red flag.
- kevin_thibedeau 2y ago
  Plaid is a financial technology company and many HNers are happy to hand over their account passwords to them for storage in cleartext.
  - BenjiWiebe 2y ago
    I'd still consider Plaid a red flag. ;)
    - rubyfan 2y ago
      Could you elaborate? Red flag because of risk due to using Plaid, what it says about the fintech or something else?
      - tharkun__ 2y ago
        Not parent but, what about this does not scream red bloody flag to you? hand over their account passwords to them Give my banking password to some other company? That's a red bloody flag right there. Stop the presses. Nobody should ever do that. Not outside of very specific use cases like a password manager and in that case there better be seventeen million levels of encryption and such in place. for storage in cleartext. Did we mention the color red? On a flag? I think we did. Cleartext, eh? Who thought this was a good idea?
        BenjiWiebe 2y ago
        Yep, that's what I was meaning.
        tzs 2y ago
        Storage in cleartext would indeed be a huge red flag, but Plaid says they store it encrypted and I've seen no evidence that they are wrong about that. That still might be a red flag but not as big a red flag. Cleartext means a database leak would leaks passwords. Encrypted, if done right, would mean a database leak would not leak passwords.
        tharkun__ 2y ago
        Can you share a link that describes what exactly they do? What I would expect to be table stakes is that they only ever have an encrypted version of the data on their end (like a password manager) and that the encryption key is stored on my machine or if on their side that it by itself is protected by a passphrase that I have to enter each time plaid needs to do something. If we are talking storing the clear text password somehow coz they use screen scraping to implement their features for some banks. All I find on their site (casually looking) is marketing fluff. Also really I would expect that they never even need my password at all and that instead they have a proper API between them and the bank(s) where I authorize specific scopes only (preferably read only scoping being available) and my password stays with me and if something bad were to ever be done with a write scoped token from Plaid it would be traceable to their token authorizing it and they would be liable. When I give them my password they basically get full monetary power of attorney and the bank would always fault me ("we can see you logged in with your user and password. We tell you to keep your password/PIN secure and to never share it. Sorry, money gone".
  - bdcravens 2y ago
    Square, Stripe, Cash App, Venmo, Paypal, etc...
jellicle 2y ago
Over and over we've seen the same financial scam play out: a) company starts up that explicitly avoids being a bank b) company does something where some amount of money is placed in FDIC-insured banks, and it TRUMPETS on its website: "FDIC INSURED" over and over c) consumers are misled into thinking their money is safe d) regulators do not act e) consumers lose all their money f) profit (for a very specific set of individuals) The company can even fake up a bunch of social media accounts to tell people reassuring lies right up until the scam collapses. These scams will continue until regulators get serious about putting people in jail for them. https://www.reddit.com/r/yotta/comments/1ctf25r/is_our_money_actually_fdic_insured/ https://www.reddit.com/r/yotta/comments/1ctf25r/is_our_money...
- bithead 2y ago
  >These scams will continue until regulators get serious about putting people in jail for them. Which is so much more likely under turmp.
  - Terr_ 2y ago
    It used to be I could be sure this was sarcasm. I miss those days.
- evrydayhustling 2y ago
  Is this a job for regulators or just criminal prosecution? Sounds like step (b) is either fraud or not, depending on how the trumpeting gets done.
  - cyanydeez 2y ago
    Criminal prosecution only works on poor people. Crimes where the individual is elected president or just gets rich don't do anything of merit.
- cyanydeez 2y ago
  Unfortunately, the kleptomaniacs are in charge. Please try again in 4 years
Thorrez 2y ago
Should I be suspicious that Wealthfront Cash accounts will fail as well? What about Fidelity Cash Management Accounts? >Wealthfront isn’t a bank, but we work with partner banks to get you an industry-leading APY, the security of FDIC insurance, and a full array of fee-free, no-strings-attached checking features — all wrapped up into one label-defying package we call a Cash Account. https://www.wealthfront.com/cash https://www.wealthfront.com/cash >The Fidelity Cash Management Account is not a bank account. It is a brokerage account that allows you to spend, save, and invest. The account offers competitive rates as well as spending and money movement features including a free debit card, checkwriting, Bill Pay, and more. https://www.fidelity.com/spend-save/fidelity-cash-management-account/overview https://www.fidelity.com/spend-save/fidelity-cash-management...
- SmellTheGlove 2y ago
  Fidelity’s brokerage business would be covered by SIPC, which would include its cash management accounts. They also likely sweep cash out to FDIC-insured accounts. More importantly though, Fidelity is large enough that you’re unlikely to need that insurance, and that’s really how I’d prefer to approach this. Yeah we can look at 2008 and say no institution is safe, but if there’s risk everywhere, I’ve just got to try and minimize that as best I can. Fidelity didn’t give me any sort of scare that year fwiw. Disclosure: I’ve been using Fidelity for basically all of my money for most of my career now, including cash management.
- georgeecollins 2y ago
  Fidelity is very regulated, and large. If something happened it would be a systemic event that the government would definitely get involved. Wealthfront may be fine too, I just don't know.
  - aluminussoma 2y ago
    To put it differently, Yotta’s customer’s misfortunes are because they are poor and not politically connected. If Fidelity fails, their customers are rich and they vote: they must be made whole. Kind of like the SVB failure. SVB customers were made whole. Systematic risk and all that.
lxgr 2y ago
> Banking services provided by Evolve Bank & Trust and Thread Bank; Members FDIC.” I just don't understand why on Earth it's legal to use the term "FDIC" one sentence away from "not a bank" without there being a regulatory framework defining minimum record keeping and reporting requirements to avoid exactly this type of failure. The European "e-money" scheme seems to be exactly the opposite: Deposits are not insured (I believe there are requirements on the stability of the depository bank), but intermediaries, i.e. "financial technology companies", have to make detailed reports about their customers' balances available on a very short time frame to avoid exactly such problems. Ideally, there would be a combination of both (pass-through insurance against bank failure and reporting requirements to reduce the blast radius of non-bank failure).

intelVISA 2y ago

Just seeing the phrase 'financial technology company' is a red flag.

kevin_thibedeau 2y ago
Plaid is a financial technology company and many HNers are happy to hand over their account passwords to them for storage in cleartext.
- BenjiWiebe 2y ago
  I'd still consider Plaid a red flag. ;)
  - rubyfan 2y ago
    Could you elaborate? Red flag because of risk due to using Plaid, what it says about the fintech or something else?
    - tharkun__ 2y ago
      Not parent but, what about this does not scream red bloody flag to you? hand over their account passwords to them Give my banking password to some other company? That's a red bloody flag right there. Stop the presses. Nobody should ever do that. Not outside of very specific use cases like a password manager and in that case there better be seventeen million levels of encryption and such in place. for storage in cleartext. Did we mention the color red? On a flag? I think we did. Cleartext, eh? Who thought this was a good idea?
      - BenjiWiebe 2y ago
        Yep, that's what I was meaning.
      - tzs 2y ago
        Storage in cleartext would indeed be a huge red flag, but Plaid says they store it encrypted and I've seen no evidence that they are wrong about that. That still might be a red flag but not as big a red flag. Cleartext means a database leak would leaks passwords. Encrypted, if done right, would mean a database leak would not leak passwords.
        tharkun__ 2y ago
        Can you share a link that describes what exactly they do? What I would expect to be table stakes is that they only ever have an encrypted version of the data on their end (like a password manager) and that the encryption key is stored on my machine or if on their side that it by itself is protected by a passphrase that I have to enter each time plaid needs to do something. If we are talking storing the clear text password somehow coz they use screen scraping to implement their features for some banks. All I find on their site (casually looking) is marketing fluff. Also really I would expect that they never even need my password at all and that instead they have a proper API between them and the bank(s) where I authorize specific scopes only (preferably read only scoping being available) and my password stays with me and if something bad were to ever be done with a write scoped token from Plaid it would be traceable to their token authorizing it and they would be liable. When I give them my password they basically get full monetary power of attorney and the bank would always fault me ("we can see you logged in with your user and password. We tell you to keep your password/PIN secure and to never share it. Sorry, money gone".
- bdcravens 2y ago
  Square, Stripe, Cash App, Venmo, Paypal, etc...

jellicle 2y ago

Over and over we've seen the same financial scam play out: a) company starts up that explicitly avoids being a bank b) company does something where some amount of money is placed in FDIC-insured banks, and it TRUMPETS on its website: "FDIC INSURED" over and over c) consumers are misled into thinking their money is safe d) regulators do not act e) consumers lose all their money f) profit (for a very specific set of individuals) The company can even fake up a bunch of social media accounts to tell people reassuring lies right up until the scam collapses. These scams will continue until regulators get serious about putting people in jail for them. https://www.reddit.com/r/yotta/comments/1ctf25r/is_our_money_actually_fdic_insured/ https://www.reddit.com/r/yotta/comments/1ctf25r/is_our_money...

bithead 2y ago
>These scams will continue until regulators get serious about putting people in jail for them. Which is so much more likely under turmp.
- Terr_ 2y ago
  It used to be I could be sure this was sarcasm. I miss those days.
evrydayhustling 2y ago
Is this a job for regulators or just criminal prosecution? Sounds like step (b) is either fraud or not, depending on how the trumpeting gets done.
- cyanydeez 2y ago
  Criminal prosecution only works on poor people. Crimes where the individual is elected president or just gets rich don't do anything of merit.
cyanydeez 2y ago
Unfortunately, the kleptomaniacs are in charge. Please try again in 4 years

Thorrez 2y ago

Should I be suspicious that Wealthfront Cash accounts will fail as well? What about Fidelity Cash Management Accounts? >Wealthfront isn’t a bank, but we work with partner banks to get you an industry-leading APY, the security of FDIC insurance, and a full array of fee-free, no-strings-attached checking features — all wrapped up into one label-defying package we call a Cash Account. https://www.wealthfront.com/cash https://www.wealthfront.com/cash >The Fidelity Cash Management Account is not a bank account. It is a brokerage account that allows you to spend, save, and invest. The account offers competitive rates as well as spending and money movement features including a free debit card, checkwriting, Bill Pay, and more. https://www.fidelity.com/spend-save/fidelity-cash-management-account/overview https://www.fidelity.com/spend-save/fidelity-cash-management...

SmellTheGlove 2y ago
Fidelity’s brokerage business would be covered by SIPC, which would include its cash management accounts. They also likely sweep cash out to FDIC-insured accounts. More importantly though, Fidelity is large enough that you’re unlikely to need that insurance, and that’s really how I’d prefer to approach this. Yeah we can look at 2008 and say no institution is safe, but if there’s risk everywhere, I’ve just got to try and minimize that as best I can. Fidelity didn’t give me any sort of scare that year fwiw. Disclosure: I’ve been using Fidelity for basically all of my money for most of my career now, including cash management.
georgeecollins 2y ago
Fidelity is very regulated, and large. If something happened it would be a systemic event that the government would definitely get involved. Wealthfront may be fine too, I just don't know.
- aluminussoma 2y ago
  To put it differently, Yotta’s customer’s misfortunes are because they are poor and not politically connected. If Fidelity fails, their customers are rich and they vote: they must be made whole. Kind of like the SVB failure. SVB customers were made whole. Systematic risk and all that.

lxgr 2y ago

> Banking services provided by Evolve Bank & Trust and Thread Bank; Members FDIC.” I just don't understand why on Earth it's legal to use the term "FDIC" one sentence away from "not a bank" without there being a regulatory framework defining minimum record keeping and reporting requirements to avoid exactly this type of failure. The European "e-money" scheme seems to be exactly the opposite: Deposits are not insured (I believe there are requirements on the stability of the depository bank), but intermediaries, i.e. "financial technology companies", have to make detailed reports about their customers' balances available on a very short time frame to avoid exactly such problems. Ideally, there would be a combination of both (pass-through insurance against bank failure and reporting requirements to reduce the blast radius of non-bank failure).