When a savings account is very risky
By Felix Salmon
Compound Banc pays an eye-popping 7% on deposits — or at least things that look and feel a lot like deposits. But it’s not a bank, and the deposits — technically, they’re risky bonds — are not insured by the FDIC or anybody else…Compound Banc’s website “raises a number of significant questions that I suspect will quickly doom this scheme,” says banking policy analyst Karen Petrou of Federal Financial Analytics. Petrou was one of two experts who used the word “Ponzi” in conversations with Axios. That’s not necessarily because they think Compound Banc is a Ponzi, and more because they are concerned that its business model is prone to Ponzi-like death spirals like the one we saw at the now-bankrupt crypto exchange, FTX…
https://www.axios.com/2023/02/18/compound-banc-high-yield-savings-7-apy