Why do we keep using that number in a thread about a guy offering 67.65% APR? That interest rate is still ridiculous so there's no need to overstate it.
Yeah. 1%/week is around 67% APR. 1.5%/week is around 117% APR.
I think it's pretty easy to generate plenty of funds to cover this rate. Considering bitcoin fell ~30% in the last few weeks I also don't think it's unreasonable to offer a little over twice that per year for protection. The thing I totally agree with you about is the "guarantee" It's more likely the issuer thinks it's low risk and willing to risk reputation on that fact. As the holdings get higher, reputation means less and less.
The main problem is that investors have no way to assess risk. Funds compete based on the reward, which creates a huge incentive to increase risk.
Fundamentally, it's this simple: If the fund operator is not making decent money, there's no good explanation for why they'd go to all this trouble and risk other than that it's a scam. If the fund operator is making decent money and not exposing their investors to extreme risk, the first thing they'd do with the money they're making, if they're not an idiot, is pay down all their ultra-high-interest debt.