Topic: Recent events should make you withdraw all your coins to your own wallet: Part 2 - page 3. (Read 1659 times)

Or, in many cases, handing out uncollateralized loans worth hundreds of millions of dollars.

And a platform which has assets of over a billion dollars can afford to pay to have someone available to perform these checks 24/7. Holding withdrawals for 5 or more days is completely unjustified, and just a method to protect their fractional reserve system from a bank run.

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Looks like blockchain.com have also lost $270 million due to 3AC: https://www.reuters.com/technology/blockchaincom-faces-270-mln-hit-loans-bankrupt-three-arrows-coindesk-2022-07-08/

And it turns out that Tether had a loan with Celsius as well: https://tether.to/en/tether-discloses-celsius-loan-liquidation-process/. Of course Tether have said that this liquidation will have no affect on their reserves, but given that we know that Tether repeatedly lie about their reserves, and we've just seen a bunch of other platforms lie and say everything is fine shortly before they shut down and file for bankruptcy, then make of that statement what you will.

I suppose that this thread is being raised in a global way but I wanted to comment here that there is an exchange in Spain that has closed down leaving 100,000 people without access to their funds. If they had withdrawn their own wallets, as oeleo says, this would not have happened.

Spanish crypto platform 2gether closes unexpectedly: RTVE

First they announced in a strange way that they were going to charge 20 euros to certain accounts, but shortly after announcing it they disappeared from the social networks, the website is not working, and those who managed to request a withdrawal before the website stopped working are complaining that they have not received it, which looks like an exit scam.

My opinion is that Celcius (and other similar companies) was facing a 'run on the bank' after the collapse of TerraUSD that resulted from a mismatch of the maturities of their assets (loans) and liabilities (customer deposits), along with likely loan losses resulting from the value of the collateral being less than the repayment values of the various loans they made.

The first issue will eventually be solved by halting withdrawals, and waiting for customers to repay their loans. The second issue will lead to actual losses to their deposit holders, assuming there is insufficient equity to cover the losses. I have read reports that those who have repaid loans have been unable to withdraw their collateral, which may indicate they plan on socializing losses to borrowers who have excess collateral.

Obviously, it is nice to have the ability to ~instantly withdraw your coin, however, when you deposit your coin on a centralized exchange, you are giving them access to your money.

IMO, the reason for the security checks is not necessary to confirm that you are the rightful owner of your account, but also to confirm that your available balance is actually equal to or greater than the amount you are attempting to withdraw. I assume these exchanges use automated checks to prevent people from withdrawing amounts exceeding their available balance, but those exchanges that hold withdrawals for "security checks" also likely add a human component to add an actual person's judgment when deciding if a withdrawal should be allowed or not.

Obviously, these types of delays in withdrawals should be disclosed ahead of time, specifically prior to receiving deposits, and prior to implementing said policy for those who have already deposited. If a customer deposits money knowing they will have to wait for said security checks, it should not be a surprise when they are having to wait.

Wasn't expecting to be updating this thread almost every day, but here we are.

CoinLoan reduce their withdrawal limits by 99%, from $500,000 a day to just $5,000 a day: https://coinloan.io/blog/temporary-change-in-withdrawal-limits/

Voyager have filed for bankruptcy in NY: https://www.forbes.com/sites/ninabambysheva/2022/07/06/crypto-broker-voyager-digital-files-for-chapter-11-bankruptcy/

Meanwhile Crypto.com have slashed their rewards while hiking their fees. Obviously feeling the pinch as well.

Singapore's too hot now I think, been a lot of public outcry since even last year on various crypto companies (exchanges, crypto projects, you know the shitcoin type), then Terra, now this. Suspect the Monetary Authority is going to swoop in and do audits on all the exchanges and lenders there pretty soon, at least internally.

Wonder also if the Chinese bank runs from last month have anything to do with this. I know they're not directly into crypto and the problems have been tied to fraud in development projects but someone had to finance all those guys who flew the coop in the China crypto exodus -- many of whom landed in Singapore.

It is, eventually. And all the people who simply kept their bitcoin in their own wallet and didn't lose it by gambling on platforms with unsustainable promises will be the ones who come out on top.
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Oh yeah, that's for certain. I meant that they took surefire bets on 100k in 2021 and still thought it would happen despite all the writing on the wall, thinking the bull would extend its overstay.

Still can't really understand the allure of 4-10% APY with all that risk, when Bitcoin already provides gains that outstrip that (only, over multi-year) without an iota of that risk.

Well, that didn't take long: https://www.vauld.com/blog/corporate-statement/

Vauld are another centralized lending platform which is popular in Singapore and India. Their backers include Coinbase and Peter Thiel. From various news articles it seems that they had at least $1 billion in crypto assets under management, and they say that their freezing of all accounts was prompted by $200 million of withdrawals since June 12th. However, on June 16th, they made a blog post saying everything is fine: https://www.vauld.com/blog/vauld-continues-to-operate-as-usual/. Maybe that should be yet another warning to everyone who is ignoring the warning signs from other lenders because their CEO is posting on Twitter that everything is fine.

It is, eventually. And all the people who simply kept their bitcoin in their own wallet and didn't lose it by gambling on platforms with unsustainable promises will be the ones who come out on top.

In addition to the interest you also earn on the collateral actually (again, depending on the asset, long story short you've to buy a portion of their shitcoin). Again, just an experiment to gain some insight into the models they use but also because I was really curious about the compliance and banking license process they've been working on for the past few years.

Absolutely am not in an illusion that they're actually going to go on forever -- but to further explain my personal interest, which I didn't make part of the thread I update in: there's also a long back story to NEXO owners -- Romanian owners, CEO himself is directly linked to the mafia (as a politically exposed person/PEP) via his father, and a decades-long effort to legitimise their wealth.

How they managed to get their various licenses (including in several US states) is probably a story in itself.


Yeah, a big circle-jerk of people loaning each other money to squeeze out as much leverage as possible. They all thought BTC was going to 100k, huh.

So you are risking your funds to earn ~4% interest on ~10% of the amount you risk? That's a big risk for very little gain.

Sure, but your collateral is currently in the hands of an unknown third party which could go bankrupt at any time, meaning you lose everything, as just happened with 3AC.

100% collateral for the average user, yes. But not for institutions or other large entities. They will be getting loans which are under collateralized or not collateralized at all. This is the crux of the problem that hit Celsius and now Voyager - huge uncollateralized loans to 3AC.

I didn't put much in there, just enough to try and earn interest in their nexo shitcoins to get me up a level, and stablecoins (with max interest). It was meant to be an experiment, and still ongoing, I'd never put my main Bitcoin in there beyond what I can afford to lose.

It's been an interesting journey to say the least, as I know am a semi-expert in proof of source of funds, proof of ownership, etc. They have an intense KYC process I've never experienced with any platform before.

No idea how big their 3AC position is, they actually answer me quite promptly on a lot of questions, still vague but generally of a much higher level than any other service customer support I've ever come across.


NEXO can be quite attractive if you find out about their rates and don't mind adjusting capital around -- for example, you could actually put up collateral and borrow 10% of the value with near-zero interest... and still earn interest on that borrowed amount. I've been doing that, and paying the interest daily, there's a small bit of leftover interest actually so making profits from borrowed capital, just annoying to do it every day (as it compounds).

They do seem to be a bit more "advanced" than blockfi, celsius, etc, and as mentioned, they require minimum 100% collateralisation for all loans, so I'm not sure if they've found a way to ride this bear out safely -- wouldn't bet on it until they make their real time audit fully transparent.

[Just a note to anyone reading, totally not advising anyone to try any lender. Not your keys cannot be emphasised enough]

Greed and naivety. Every time in the past I've pointed out the risks involved in these platforms on this forum, there have been multiple other users saying how they are using these platforms and they've been working fine, they've never been scammed, yadda yadda. It all works great until it doesn't.

Give us your bitcoin and we'll give you a worthless shitcoin which we can print more of at will. You can then stake your shitcoin to earn more shitcoin, while we spend your bitcoin and then freeze everyone's account!

Looks like FTX have gone in for full bailout of BlockFi, so they will probably survive a bit longer than anticipated. Nexo just slashed all their interest rates, so they must be struggling too. Lots of rumors going around about KuCoin as well. Obviously we can't tell for sure who will be the next to collapse, but it will be someone. Only safe place for your coins is in your own wallet.

I never even heard about Voyager app until now, and I don't know why people use that for such a small earning percentage.
Taking a big risk, giving custody of your bitcoin to someone else, just to earn 12% annually is a terrible deal, but hey who am I to judge what other people are doing.
I just checked their website and sure enough, they have their own shitcoin token with revolutionary staking crap...
Let's make prediction for next crypto vompany going bust in this bear market, maybe something connected with Tether?

Hope you've since withdrawn all your coins back to your own wallets!

As you say, an audit proves nothing. We know these companies are all running fractional reserve systems and not keeping enough in reserve to cover their liabilities. All it takes is for one of their outstanding debts to default (as it just did with 3AC), and everything goes to shit.

Any idea how big Nexo's position with 3AC is/was?

I think it makes sense when you think about. There platforms which are offering 20% returns to their users must be making even more than that from the entities they are lending to in order to cover their own (substantial) profits. If I want a bitcoin loan, and I have 100% collateral to cover it, there are far more attractive rates that I can access than ~25% interest. I would only have to pay such high rates if my loan was partially or fully unsecured.

^ Nice update. Now it reminds me that I actually experimented with NEXO a while back, and provide semi-updates to this thread every now and then, probably due an update once they clarify and adjust rates (some time this month).

They refreshed their landing page and sent out a flurry of emails to users last month after Terra, 3 Arrows, Blockfi etc. And seem to almost be egging on their lending rivals by saying "This is why we do over-collateralisation for every loan" (referencing that they need minimum 100% collateral to lend out any money).

There isn't exact proof of this (I ask actually every now and then) -- even though they provide a real-time audit to all their customers of held assets, it's not proof that it's enough to cover all outstanding loans (an unknown number) if defaulted. Last month, though, they upped their insurance cover to $650M (still I believe hardly enough to cover anything in end-game scenario) so clearly they're digging in and expecting a lot of defaults.

My point -- sorry if I didn't look like I was getting there -- is that I'd assumed all lenders were doing at least 100% collateral on loans. How naive of me.

Bump.

Looks like I was wrong about BlockFi being the next to collapse, as despite a $485 million bailout from FTX just 10 days ago, Voyager are next to freeze all their customers' accounts, essentially holding their money hostage: https://www.investvoyager.com/blog/voyager-update-july-1-2022/.

According to their filed reports (https://www.newswire.ca/news-releases/voyager-digital-provides-market-update-851734302.html), out of $1.12 billion in assets they had loaned out to generate interest, $654 million of those were with Three Arrows Capital, who recently went bankrupt. That's almost 60%. You've got to wonder why they are handing out non-collateralized loans of 60% of their assets. And you've got to wonder why people believed that 10% returns was somehow sustainable. I suspect the answer is greed in both cases.

And looks like BlockFi have just increased their FTX funded bailout from $250 million to $400 million: https://blockfi.com/a-message-from-our-founders-july-2022. And with that comes an option for FTX to buy BlockFi at just $240 million or even less. BlockFi used to be valued at $4.5 billion, and is now potentially being sold at 5% of that. They are sinking fast.

https://www.forbes.com/sites/stevenehrlich/2022/06/28/bankman-fried-some-crypto-exchanges-already-secretly-insolvent/

Pretty concerning statement from the CEO of FTX here. I wonder if he is just speculating in the same way we all expect other exchanges are running fractional reserve systems and bordering on insolvency, or if other exchanges have already approached him looking for bailouts and he's turned them down.

After $485 million to Voyager and $250 million to BlockFi, wonder who he'll bail out next?

Who are the people dumb enough to still have their coins on these platforms?

How possible or how achievable is this advice to day traders? Is it possible that at the end of every day trade, they convert all the coins they traded to one coin and send to their non custodain wallet, the then next day they repeat the process. It is not something that is simple to do.

We know that exchanges are not safe, but the first step is to search for a more reputable exchange and then avoid giving out coins for high risky trades. By this only temporary funds for trade will be on exchanges.

FTX's bailout of blockfi is concerning, but what bothers me more are the withdrawal fees. It costs $25 to withdraw stablecoins, for example. If you have $1000 in blockfi, it will take 5 months of interest to pay for the withdrawal. Also, I think many people will be withdrawing all of their money before the fees start and that will create even more problems for blockfi.

o_e_l_e_o here is another recent event why people should only hold their coins in their own wallet and stay away from centralized or third party crypto services, though this is a slightly different case, but it remains the same outcome which is people losing their coins. A crypto firm called Harmony has been hit by attackers, and they have lost $100 million dollars in digital coins to the attackers. Harmony is a centralized blockchain bridge that helps people transfer their coins between different blockchains, but people that use it have to give up the ownership of their coins in the process, and that means: it is not your keys; it is not your coins!
https://www.washingtonpost.com/business/2022/06/24/crypto-hack-harmony-horizon/

Latest update to this story: https://www.coindesk.com/business/2022/06/25/morgan-creek-is-trying-to-counter-ftxs-blockfi-bailout-leaked-call-shows/

The $250 million bailout is set to wipe out all other BlockFi shareholders, as it gives FTX the ability to buy out BlockFi at close to no cost. One of these shareholders - Morgan Creek Digital - are now trying to come up with their own rescue package for BlockFi to stop this from happening. BlockFi apparently receive a number of other bailout offers, all of which would have used clients funds to secure the loan from the lender.

So, it doesn't really matter which way you look at this - BlockFi are in trouble and if you have any coins on their platform then you are at a significant risk of losing everything.

Indeed. My first direct experience with some of these shenanigans was a centralised wallet run by a mining company think it was called Eohash or Eobot? Small one, they sold mining rigs but also had a wallet, kinda like the antpool dashboard. I actually had quite a bit of coinage there as 2016 you could still do some shitcoin pow with reasonable results (okay Monero's not a shitcoin but nevermind). Had what I'd say was an impressive balance in the run up to 2017 but I left it sitting there, not realising they'd suddenly implemented a monthly % maintenance fee which wiped it all out by the time I DID go in to see a year or so later. They've closed down.


The only way to get the seed phrase was to use the older version (which I did) but if you were unlucky to upgrade and forget you ever had Doge, like I guess a lot of people did, too bad. You're right, it was outright theft and it actually caused some small furore from the Dogecoin "devs" at the time -- I didn't follow too much and had I better forum skills I would reference the thread I recall discussing it. This reddit thread seems to explain it in some detail (the comments) if you're interested.


100% sure. I used Exodus for most alts I had (at first I did QT on almost everything but that became a terrible hassle, doge was one of the worst IMO) and that event was actually pretty stealth mode, I only found out WHEN I downloaded new version then.

You can see the reddit thread I put in this post for more detail and context. The Doge code maintainers got into a row after that, as did some Exodus users (they or I didn't lose any coins but we know for sure n00bs caught unawares would of course never realise this theft).

I note Exodus today seems a very different wallet, I see it as an exchange actually now it has a trading function and integrated card/bank option to buy.