Mark Cuban, Mavericks In Hot Water Over Voyager 'Ponzi Scheme' (techcrunch.com) 28
An anonymous reader quotes a report from TechCrunch: Lawsuits from disgruntled investors are beginning to stack up after crypto prices plummeted over the past few months, leaving them with steep losses. Billionaire Mark Cuban is the latest celebrity on the receiving end of investor ire. A group of Voyager Digital customers filed a class-action suit in Florida federal court against Cuban, as well as the basketball team he owns, the Dallas Mavericks, alleging their promotion of the crypto platform resulted in more than 3.5 million investors losing $5 billion collectively. Voyager Digital's CEO, Stephen Ehrlich, was also named as a defendant in the suit. Voyager, a New Jersey-based crypto firm, filed for Chapter 11 bankruptcy in July following a crash in crypto prices that instigated a liquidity crunch on the platform. The firm is one of many that got burned after loaning money, in Voyager's case worth ~$600 million, to hedge fund Three Arrows Capital (3AC). 3AC declared bankruptcy in the wake of the Terra collapse, triggering a domino effect throughout the crypto markets when the hedge fund defaulted on more than $3.5 billion worth of obligations to its lenders.
The plaintiffs in the suit against Cuban described Voyager as "an unregulated and unsustainable fraud, similar to other Ponzi schemes." They claim in the complaint that Cuban and Ehrlich personally reached out to investors both individually and through a partnership with the Dallas Mavericks, to encourage them to invest with the platform. The lawsuit also specifically calls out Voyager's Earn Program Accounts (EPAs), claiming they are unregistered securities. The Mavericks launched their exclusive, five-year partnership with Voyager in October 2021, giving fans cash rewards for making trades on the platform. The announcement said the cryptocurrencies were "an attractive investment for novice investors who might only have $100 to start." According to the lawsuit filed today, Cuban also promoted the company "as a Voyager customer himself, in a ploy to dupe investors into believing that Voyager was a safe platform." Although the partnership with the Mavericks was disclosed, the lawsuit alleges that Cuban did not disclose the compensation he personally received to promote Voyager. "During the runup in crypto prices, many web3 companies, apparently including Voyager, pretended that existing laws and regulations did not apply to crypto," said Shane Seppinni, founder of law firm Seppinni LLP, who was worked on various crypto and "meme stock" lawsuits. "Even smart people like Mark Cuban got caught up in the hype. But now that crypto prices have crashed it's plain to see that centuries-old legal theories like fraud, breach of fiduciary duty, and civil conspiracy are as applicable to crypto as they are elsewhere."
The plaintiffs in the suit against Cuban described Voyager as "an unregulated and unsustainable fraud, similar to other Ponzi schemes." They claim in the complaint that Cuban and Ehrlich personally reached out to investors both individually and through a partnership with the Dallas Mavericks, to encourage them to invest with the platform. The lawsuit also specifically calls out Voyager's Earn Program Accounts (EPAs), claiming they are unregistered securities. The Mavericks launched their exclusive, five-year partnership with Voyager in October 2021, giving fans cash rewards for making trades on the platform. The announcement said the cryptocurrencies were "an attractive investment for novice investors who might only have $100 to start." According to the lawsuit filed today, Cuban also promoted the company "as a Voyager customer himself, in a ploy to dupe investors into believing that Voyager was a safe platform." Although the partnership with the Mavericks was disclosed, the lawsuit alleges that Cuban did not disclose the compensation he personally received to promote Voyager. "During the runup in crypto prices, many web3 companies, apparently including Voyager, pretended that existing laws and regulations did not apply to crypto," said Shane Seppinni, founder of law firm Seppinni LLP, who was worked on various crypto and "meme stock" lawsuits. "Even smart people like Mark Cuban got caught up in the hype. But now that crypto prices have crashed it's plain to see that centuries-old legal theories like fraud, breach of fiduciary duty, and civil conspiracy are as applicable to crypto as they are elsewhere."
Voyager? (Score:2)
Is this the one that went to the Delta Quadrant?
Comment removed (Score:5, Funny)
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If the money was assimilated in the delta quadrant, perhaps Mark Cuban should be tested to see if he is a borg?
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Life imitating art imitating life. (Score:2)
Gilfoyle: "Does it mean lighting a pile of cash on fire?"
Federal PMITA Prison Awaits (Score:2)
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The plaintiffs in the suit against Cuban described Voyager as "an unregulated and unsustainable fraud, similar to other Ponzi schemes."
So, a standard cryptocurrency then?
Not a Ponzi scheme (Score:5, Insightful)
They didn't pay old investors with new investments. They didn't lie about what the investment was.
Speculators getting burned is a very different thing from good-faith investors getting defrauded.
Re:Not a Ponzi scheme (Score:4, Insightful)
Yes, that's exactly what they did.
The firm is one of many that got burned after loaning money, in Voyager’s case worth ~$600 million, to hedge fund Three Arrows Capital (3AC).
To see the scheme, remove "crypto" from the equation and think of it in terms of dollars. People paid dollars to Voyager in return for, essentially, tokens. Voyager took those dollars and gave them to 3AC. 3AC didn't repay, so when people tried to get their dollars out of their accounts with Venture, there was no money to cover it. That's exactly how a Ponzi scheme collapses.
Crypto is simply a new buzzword that is used to obscure fraud schemes that are otherwise very ordinary.
Well, crypto is involved (Score:1)
I'd argue that the crypto part is still relevant.
Part of the deal with a Ponzi scheme is using the money of people who come later to pay the people who came early. Since you need an ever expanding number of people in order to keep paying out, it does eventually collapse.
While with things like physical goods, you expect people to eventually pay a higher price (wholesale vs resale, for example) because of the utility of the piece, even a company share is supposed to be in a company producing a profit that ca
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I agree with you, you did a good job of describing how crypto is the definition of a Ponzi scheme.
The only difference between our viewpoints is this: the crypto piece doesn't distinguish this Ponzi scheme from others in the past, in any meaningful way. Other Ponzi schemes sold "shares" in an imaginary investment. With crypto, a "share" is now a "crypto token." This is merely an electronic mechanism for keeping track of the Ponzi shares.
Re:Not a Ponzi scheme (Score:5, Insightful)
To see the scheme, remove "crypto" from the equation and think of it in terms of dollars. People paid dollars to Voyager in return for, essentially, tokens. Voyager took those dollars and gave them to 3AC. 3AC didn't repay, so when people tried to get their dollars out of their accounts with Venture, there was no money to cover it. That's exactly how a Ponzi scheme collapses.
That is not how a Ponzi scheme collapses. A Ponzi scheme collapses when you can’t bring in enough new suckers to fund the “returns” of the earlier “investors”, because a Ponzi scheme is, fundamentally, just looping later funds back to earlier people.
Crypto as a whole is, in my view, a Ponzi scheme, but this specific thing here is not. There may be some other type of fraud going on, but at least at a glance based on the summary and your own description, this sounds more like a bad loan that came back to bite them. They had every expectation that—or so they’ll claim—they’d get their money back with interest. Instead, they got nothing back and everyone loses. That’s not a Ponzi scheme, that’s a high-risk loan.
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It sounds like you're arguing both sides. We have one Ponzi schemer loaning money to another Ponzi schemer. That doesn't make either Ponzi scheme less of a Ponzi scheme. The bad loan simply brought down the house of cards more quickly than it otherwise would have.
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Crypto is simply a new buzzword that is used to obscure fraud schemes that are otherwise very ordinary.
I can't remember where I read this, but I liked the line "cryptocurrency is a speedrun of how we got the last 300 years of financial regulations."
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Okay, we'll call it a "Fonzi Scheme": everyone does it because everyone else is doing it; it's "the cool thing".
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Naw, cryptocurrency has already Jumped the Shark.
Re: Not a Ponzi scheme (Score:2)
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Yes, but when the price was going up, you could pretend you were the scammer not the scammee.
Tell us, Mark, which is the "dumbest shit ever"... (Score:5, Funny)
Re: A reminder about Mark Cuban: (Score:1)
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Don't feed the troll...
Where's the success story? (Score:2)
Re: Where's the success story? (Score:2)
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I would like to know why the price of gold oscillates so much? When everything was priced in gold, its price wasn't oscillating,
Yes it was oscillating when compared to the price of silver, which also oscillated, both mainly based on supply. Here's one chart, https://www.longtermtrends.net... [longtermtrends.net] which misses things like what happened when the Spanish acquired a lot of new world gold and silver and regional differences like in areas of gold rushes.
Here's an article talking about historical benchmarks that is interesting, https://lenpenzo.com/blog/id47... [lenpenzo.com] which concludes that currently silver is about 40 times cheaper then historical.
I th
Re: Where's the success story? (Score:1)
Never bought his crypto, but his pharmacy has (Score:3)
Never bought his crypto, but his pharmacy has great prices... I pay less then what I paid when I had insurance: https://costplusdrugs.com/ [costplusdrugs.com]
Mark Cuban not actually smart (Score:4, Insightful)
He is, however, susceptible to his own incorrect forecasts of technology trends. Around 2004, he predicted video rental stores would persist after HD adoption with people bringing portable hard drives into the stores to have time-boxed copies of the movies directly copied over to their storage device. He failed to recognize that HD optical disc technology could be developed or that last-mile bandwidth and compression would support HD-quality video streaming. Check out some of his loudmouth predictions for streaming video in 2006 [blogmaverick.com]:
Here he is poo-poo'ing streaming video vs. his cable TV service in 2006- the same year Apple released the AppleTV set top box as a small black hockey puck video streamer.
He thought HD video was so bottlenecked that Cuban created HDnet cable channel in 2001 [wikipedia.org]. The idea was to get ahead of the other cable channels and provide HD content before the rest of the market caught up. He failed to find a useful idiot for that idea before the concept was overcome by the rest of the market adopting HDTV as a format. oh, well. He has done ok with the Dallas Mavericks, winning an NBA championship and so forth. Too bad nobody in our lifetime will ever see his team play live streamed in HD over the internet....