this post was submitted on 22 Nov 2024
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The lie was WORSE than that.
A lot of the fintechs invovled actually told people their money was safe, because it was subject to "passthrough FDIC insurance", because their money was ultimately put in an insured bank, and thus was safe.
Problem is that's not how it actually worked, so basically everyone was straight up lied to.
Basically the whole thing is that the bank keeps track of who owns which account and how much money they have, so if they go bust, you just have the FDIC come in and use that data and write checks, basically.
Except since they're disrupting banking, they also decided to just fucking not bother, and so even if there was going to be a payout, nobody has any fucking clue who has how much and in which bank said money was.
Absolute clusterfuck, and about what you'd expect from silly-con valley types.
“Hand us your money and us MBAs promise it’ll eventually get somewhere safe” is not reassuring even before the lie.