You cannot offer 10% APY on a stablecoin like USDC that by definition does not increase in value or pay dividends without getting that 10% from somewhere else, namely other customers' funds.
Couldn’t you make the same argument about fiat currency? Both in regular finance and in defi there exist funds that do high stakes gambles with other people’s money.
Right but in “regular finance” you generally have a regulator who will slap you around if you advertise a product which promises 10% per year guaranteed. There are unregulated (or less regulated) things like hedge funds, but at that point you’re clearly in a fairly small market that most people cannot or do not participate in.
So what is niche, risky behaviour in traditional finance, seems to be the norm in the Wild West that is crypto.
To be clear none of this is defi, its all just traditional borrowing and lending. Aave pays 3% on USDT right now and lenders there are doing fine in defi
That's why i called it a "multi party ponzi". They had to know their largest borrowers were not above board. FTX promised large no risk returns for deposits in turn. Except FTX didn't even have the plausible excuse of lending money. One of the stablecoins promised an infinite money making circle of lending->profit. 3AC's trading model was to borrow at these high IRs and gamble it (i don't for a second believe they had a risk based trading strat) and hope it paid off and skim off the top. See my 3 possibilities above.
The company founders even had a flight plan to non extradition treaty countries. Where they now reside