KAST, an $80 million Series A stablecoin-powered neobank, spent last week fending off claims on social media after EtherFi co-founder Mike Silagadze posted a public attack. Silagadze called the company a scam operation, triggering a wider conversation about how KAST's terms of service allocate risk to customers.
The core friction sits in deposit custody. KAST operates a card and banking interface pegged to stablecoins, meaning users hold balances denominated in crypto assets like USDC. The company's terms specify how those holdings are segregated, insured, or exposed if KAST itself fails, the issuer of the stablecoin depeg, or a custodian goes under. Silagadze's criticism centered on language in those terms that, he argued, left users without clear recourse in failure scenarios.
The specifics matter. If KAST uses a shared custodial account rather than segregated wallet holdings for each user, a single point of failure can wipe all balances at once. If insurance coverage is capped below user balances, the gap becomes customer liability. If the stablecoin issuer faces a bank run, KAST customers face the same depeg risk as anyone else holding that token. Standard neobanks typically offer FDIC insurance on fiat deposits, but KAST's model replaces fiat with crypto assets, eliminating that federal backstop.
KAST has not publicly released a detailed breakdown of its custody arrangement, insurance partner, or cap amounts. Without those specifics, customers cannot independently verify whether their deposits sit in genuinely segregated accounts, what happens if the custodian fails, or what portion of their balance is covered in case of issuer insolvency.
The dispute underscores a familiar tension in DeFi-adjacent fintech. Companies marketing simplicity and yield often bury risk allocation in terms no customer reads before signing up. Silagadze's public challenge forced KAST into a defensive posture rather than allowing those terms to operate in obscurity. Whether KAST's actual arrangements are sound or problematic remains unclear from public statements alone. The company did not respond to requests for comment on specific custody or insurance details.