My suspicions about Finder Earn

Are you bombarded with ads from Finder about their app Finder Earn? They promise 6.01% pa returns if you throw $10,000 or more into their cryptocurrency wallet - an enticing prospect when the best savings accounts hover around 1.5% to 2% pa.

I’m no financial guru, but I do know that if someone is promising you sweet returns on your hard earned cash, they have to be doing something with your money in order to earn enough of it to pay you and make money for themselves.

The classic scenario is a bank offering a 1.5% return on your savings. The bank loans that money out to someone at say 2.8% to buy a car or a house. When the borrower pays the money back to the bank, the bank keeps 1.3% for its troubles and gives you 1.5% as interest. Your money did something in order to generate more money.

With Finder Earn, I do not know what Finder is doing with your money/stablecoin once you give it to them. This is a huge red flag.

In the Finder Earn FAQ they state you’re giving them a loan - “members of the Finder App to convert their Australian dollars into stablecoins, and lend those stablecoins to Finder Wallet. In practice, you’re making loans directly to our business”. When I give someone a loan, it’s natural to want to know what they’re going to do with the money.

You’d think a basic question like that would be answered by the FAQ item, “why does Finder Wallet want to borrow my capital”, but it isn’t. All they say is “we intend to deploy the capital lent to us across the blockchain ecosystem in a long-term, sustainable and risk balanced way” and that “Finder Wallet has the full discretion of how it will use the capital it has borrowed from lenders”.

This is pretty common with many managed funds/ETFs. You give them money and they invest it for you. But they at least tell you what they’re investing in and their strategy for investment. Give me your money and I’ll give you more of it, but I won’t tell you how I do it, just shut up and enjoy the ride. Sounds like a ponzi scheme to me.

There is a real risk that whatever Finder is doing to earn these oversized returns will stop working one day. I can’t assess the chances of that happening as they won’t tell us what they do with the money, but still, it can happen.

If or when that happens to Finder, you’re fucked. From the FAQ, right at the bottom:

“You need to be aware of the risk that our business could default partially or wholly in our ability to pay a return interest on your loan or to repay the capital borrowed from you. Because you do not have legal title in the TAUD that you have loaned to us, if we default, you may lose some or all of the TAUD that you loaned to us. If Finder Wallet were to default, you will be an unsecured creditor in relation to your loan to us”.

Which honestly, isn’t that big of a deal. That’s a risk of most investments besides a term deposit at the bank. What I have a problem with is the lack of information Finder provides in order for me to “be aware of the risk that our business could default partially or wholly”.

The fundamental question of “what are you doing with my money” is not answered by Finder beyond “we will invest it”. If they are proud of what they do, they would at least mention it in a footnote somewhere on their site, but they don’t even do that and expect me to hold the bag should whatever schemes they’re running dry up.