A stablecoin is a crypto asset that is designed to trade in line with another asset, usually the US dollar or a commodity price. They are either backed by other assets or an algorithm that mints and burns coins in line with how many are in circulation.
Mr Schebesta had previously touted Terra as a “beast to be reckoned with” and among his top investment picks, so when Terra/Luna collapsed, Mr Schebesta was asked by the Financial Review how much money had been exposed.
Mr Schebesta said he had sold his Terra/Luna holdings some time between announcing his support for the coin and the big sell-off, but that he couldn’t remember when.
Asked by The Financial Review on Monday about his Terra/Luna losses, Mr Schebesta confirmed he had lost $20,000 of his personal money at the time, but denied any Finder products were exposed.
Through a Finder Earn product, Mr Schebesta invests clients’ money into various crypto assets, and his Instagram post to his nearly 8,000-strong following indicated he was keen to re-assure them that he could be trusted with funds.
Finder Earn is crypto investment product that ‘guarantees’ retail investors a 4 per cent yield on their money, and has been marketed across morning television shows and in slick digital campaigns targeting young ‘savers’.
“That was a lesson I needed to learn to be able to handle those situations in the future, to be able to handle even more money in the future,” Mr Schebesta said.
“The reason why I took the losses is because I hadn’t paid the price of those lessons….that’s the way I kind of handle these situations, if you can see it as a cost and a price you pay to be able to handle the wins next time.”
Finder does not say how it generates the returns for retail investors on its Earn product, other than to say it buys TrueAUD, another stablecoin, which is loaned back to the Finder Earn’s parent company Finder Wallet.
Finder has previously declined to answer questions on whether it had invested retail investor money in Terra/Luna or any other collapsed or insolvent crypto project like Celsius, Three Arrow Capital or Babel Finance.
But on Monday, Mr Schebesta said Finder Earn is not exposed to any of these projects at all.
The characteristics of Finder Earn are similar to Zip Up+, a yield generating product sold by Zipmex, an Australian-founded crypto exchange with customers in Australia, Thailand, Singapore and Indonesia.
In marketing copy that has since been removed from Zipmex’s website, the ZipUp+ product is described as a “savings program” that is a “100 per cent secure way to earn guaranteed interest on your cryptocurrencies”. Investors were promised a 10 per cent yield.
Zipmex has since admitted the ZipUp+ product had invested $69 million of investor money in Babel Finance, another crypto business is under a bankruptcy cloud after losing $US225 million.
There has been explosion of interest in DeFi, or decentralised finance, where investors are often paid high-interest rates to “lock up” their capital in various systems that mimic banking functions.
On the back of this DeFi explosion, a raft of user-friendly products targeting retail investors have emerged, claiming to be “fintech in the front, DeFi in the back” and boasting access to yields as high as 20 per cent.
However, there is little regulation regarding the advertisement for these crypto services, nor much insight into how and where money is invested, relying instead on the honesty of founders and company insiders.