Twenty years ago or so, I attended a weekend seminar in Calgary hosted by Canada’s largest Ponzi scheme. The firm was called Capital Alternatives, and I paid $1200 to be there.
What does this have to do with agriculture? Consider the alternative investment opportunities that are promoted and often seem too good to be true. The Capital Alternatives investment scheme is a similar example that we can learn from.
The latest blow-up of several major players in the cryptocurrency space ignited memories of my Ponzi scheme experience, inspiring this column. I shared a portion of this story with my Klarenbach Research Telegram Group members this past week.
One of the largest and most high-profile cryptocurrency exchanges, FTX, experienced a high-profile solvency crisis before filing for bankruptcy this past week. You might be familiar with FTX as they obtained the naming rights to the Miami Heat basketball stadium and several other high-profile sporting partnerships. FTX is not alone in this strategy; as sports fans know, many other crypto firms have sponsorship deals. I have a thesis regarding stadium naming rights and sponsorship deals which I will discuss at another time.
The FTX marketing department was ambitious and effective, and their Super Bowl ad featuring Larry David is a stroke of genius. FTX effectively targeted and attracted investments from many recognized high-profile firms and personalities.
FTX, and most other crypto exchanges, offer the opportunity to stake your crypto tokens or coins to obtain rewards or earn interest. Crypto staking is similar to depositing cash in a savings account. The depositor earns interest while the bank uses the money for other purposes.
These interest rates are considerably higher than those offered through traditional banking. For example, interest rates of 14.5% per annum on crypto and up to 8.5% on stablecoins are available.
As a recovering pessimist and retired skeptic, I am not attracted to these promised high returns and have not spent any time investigating them. They seem too good to be true.
Have I missed an opportunity?
Perhaps.
However, I remember Capital Alternatives offering 1.5% per month returns guaranteed by the Syndicated Gold Depository investment. The Syndicated Gold Depository made loans to Merendon Mining Company, which operated a gold refinery in Honduras. This refinery would purchase gold and refine it into jewelry, realizing value through retail sales to tourists.
As ridiculous as this business model seems, I am not making this up. They even provided eyewitness testimony verifying the authenticity of the refinery operation photographs.
Along with the business model, another red flag caught my attention. The Syndicated Gold Depository offered 2.5% to early investors; however, by the time I attended the seminar, they had reduced it to 1.5%. This reduction in return is common practice with Ponzi schemes, raising another red flag.
A quick Google search will prove that it did not turn out well for the investors or promotors, hence my skepticism regarding crypto staking. There may be a healthy level of skepticism. It is worth noting that Capital Alternatives Inc. eventually changed its name to Institute for Financial Learning.
In the coming weeks, I will share more of this experience, including why I attended, what I learned and why it did not pass my BS detector.
In the meantime, trust your intuition