00:28:05 · John Coogan, Jordi Hays
[00:28:05] S0: Yeah. So it's very, very odd. But there's actually something very interesting going on because when you see that, you think casino style gambling, you think that somebody took their capital if they have their nest egg, their kid's college fund. Like, when I was a kid, like, the the don't gamble meme was he gambled away his kid's college fund. Like, that was the most degenerate thing you could do as a father. Would be gambling away money that was in your retirement, money that was saved, your nest egg, your rainy day fund was gambled away usually at a physical casino because you couldn't resist the temptation of blackjack or poker or slots or something. Then we came to the era of the phone, and all of a sudden, it became sports betting, offshore betting casinos, crypto casinos. People were losing money on crypto. But, again, crypto is a moment where you have to put capital at risk. Like, you have to have the nest egg. This is different. This is people that are... So there are people that are getting fleeced and losing money, but what's interesting is that it's not that they're taking a nest egg and putting it in a stock that then goes down and they pick the wrong stock. That's not exactly what's happening. Oftentimes, what they're doing is they're signing up for subscriptions to trade fake stocks. It's a simulated market that gives them the the feeling of, okay, maybe one day they will be able to get good enough at day trading that they will have access to capital. [00:29:37] S2: Well, and these platforms pitch it as do your simulated trading with us.
00:29:37 · Jordi Hays, John Coogan
[00:29:37] S2: Well, and these platforms pitch it as do your simulated trading with us. [00:29:42] S0: Yes. [00:29:42] S2: And if you're good, then we will give you then we will stake you and we'll give you capital that you can trade. We'll basically turn you into a mini hedge fund. [00:29:51] S0: Yes, exactly. Exactly. [00:29:53] S2: And we did a little research on these companies and they're shockingly large. [00:29:59] S0: And there's lot of them.
00:29:59 · John Coogan, Jordi Hays
[00:29:59] S0: And there's lot of them. [00:30:00] S2: And there's a lot of them. Yeah. We found one that has done hundreds of millions of fees Yeah. Which for them is like clearly, like, better than software margins, right? Because they just have... They basically have like a fake trading app. Yeah. And they're like, yeah, place your trades. It's tied to real data. Yeah. But then they just promise this, pay the $100 a month, prove that you're good at trading, and if you're good, we'll give you capital. Yes. Because it'll be a win win. But, of course, over time, a lot of these companies have been exposed as Ponzi schemes where they take other customers' money and basically, like, you're doing the simulated trading and they're like, you get an attaboy, like, you did a good job, and then we're giving you like a reward. And so they'll pay them, which I think is part of what makes this process addicting, which has driven some of these people to go and get a bunch of subscriptions. Yeah. Which is just like very very strange because every subscription could be a $100 a month. Yep. Multiplying that out, it's like you could just be investing. But when you're investing, nobody nobody says good job. Yeah. If you do a little bit better.
00:31:29 · John Coogan, Jordi Hays
[00:31:29] S0: Jarring to me because I saw multiple reels from people who were like, I I have a prop trading account or I'm working with a prop firm or I blew my account or I blew an account or several accounts. And I was just like, you are not working with Citadel or Jane Street. Like, this is just... This does not compute. Like, you're not on the phone. Like, your counterparty is not a a a a hedge fund. Like, something else is going on. And it turns out that the counterparty is basically a SaaS it's not They're not. It's actually not the hedge fund that's making money off of this. It's the independent... [00:32:19] S2: The hedge funds would love to be trading. They would love to be trading against these people. [00:32:23] S0: Yeah. They're like, get in the real market. Go on a real... On... [00:32:27] S2: Don't be scared. Yeah. Don't be scared. [00:32:29] S0: Come on. And and we'll make a penny every time you make a trade. Like, we're happy with with doing market making, you know, but instead, it's it's these firms that are that are actually just taking a $100 a month from people. They'll do it on credit cards. And so that's where you get people. Again, we don't know if this one's real or not, but there are actual people who who will put multiple $100 a month subscriptions for these simulated trading challenges on their credit cards, and they're not even putting any capital in the market. So there's actually no chance of like, oh, you actually did get into a good stock and it did well. Like, it's it's purely fake. It's crazy. Crazy. Crazy. Yeah.
00:32:29 · John Coogan, Jordi Hays
[00:32:29] S0: Come on. And and we'll make a penny every time you make a trade. Like, we're happy with with doing market making, you know, but instead, it's it's these firms that are that are actually just taking a $100 a month from people. They'll do it on credit cards. And so that's where you get people. Again, we don't know if this one's real or not, but there are actual people who who will put multiple $100 a month subscriptions for these simulated trading challenges on their credit cards, and they're not even putting any capital in the market. So there's actually no chance of like, oh, you actually did get into a good stock and it did well. Like, it's it's purely fake. It's crazy. Crazy. Crazy. Yeah. [00:33:08] S2: And what's interesting is these these prop trading firms [00:33:11] S0: Yeah. [00:33:13] S2: They would end up having to classify like a bunch of people as independent contractors because they're not actually putting capital at risk. So if they're gonna get a payout, they're getting paid as like a freelancer. [00:33:23] S0: Mhmm. [00:33:24] S2: And I know at one point there was some, there was coverage around deal supporting some of these companies. They ultimately, I think pretty quickly exited the market Sure. Because they realized and there was basically the, I I think I don't know if it's the I think it's the SEC that's come after some of these [00:33:46] S0: I'm sure. [00:33:46] S2: Companies because they're they're again like simulating simulating trading but there's real money on the line and then of course the the Ponzi dynamic. So Yeah.
00:33:56 · John Coogan
[00:33:56] S0: So Bloomberg had a breakdown of this back in December fifteenth of last year, and it's fascinating. Somehow somehow we missed it at the time. I'm I'm so glad it exists because they did some they did some great journalism here To kind of show you the full picture of what's going on, we can read through a little bit of this. First, let me tell you about CrowdStrike. Your business is AI. Their business is securing it. CrowdStrike secures AI and stops breaches. So Bloomberg says the pitch is enticing. Learn to trade like a Wall Street master of the universe. Pay a fee, typically starting below a $100, just $99 maybe, and manage thousands in fictional funds in simulated markets for stocks, currencies, or commodities. If you stick to the strict rules and meet your profit target, you can become a funded trader for the firm. That means you could receive payouts as of of... As as much of 90% of the ersatz profits you make. If you fail, you can keep trying by paying the fee again. More than 400 companies offer forms of these challenges up from about 10 just five years ago, according to FPFX Technologies, a Florida based software provider for the industry. So there's actually a SaaS company that's powering all of these different, like, prop firms that do the simulated trading because, of course, you need to take real market data and then create a a front end for the end customer, and they are effectively reselling a skinned version of that software, which is fascinating. Three of the biggest are FTMO Group, Funding Funding Pips Corp, and Alpha Capital Group. That's a great name. Alpha. You wanna go with Alpha Capital. That sounds serious. They have about 6,000,000 customers collectively. Personally,