As far as I can work out:
1. You gave your money to Yotta. They pooled it with money from others and deposited (most of) it in banks.
2. Yotta gave you an interest rate which was a bit less than you would have got by depositing directly in the banks, and a slightly bigger bit less than Yotta was getting for depositing the pooled funds.
3. They used the little bit they kept for themselves, plus the bits they hadn't deposited, to fund a system of prizes/bonuses/magic sparkly things which meant that there was a chance that from time to time you, yes you!, might get an additional sum credited to you. If you were one of the lucky winners you would end up earning a return signficantly more than you would have earned by depositing in a bank.
4. On top of that they also offered games of chance — digital poker, blackjack, roulette, that kind of thing — and you could use funds in your account to play these games and possibly win more. (Or possibly not, of course.)
5. They relied on third party software to track the accounts of their customers, and to match what they owed to customers with funds they had deposited in various banks.
6. The banks in which Yotta deposited funds have not failed. Those funds are still there. If the banks failed, the FDIC deposit insurance would kick in but that hasn't happened.
7. What has happened is that the third party software supplier has failed, and the software package is no longer maintained and no longer works. (Possibly that happened in the other order - the software crashed and as a result the supplier became insolvent. I don't know.)
8. The upshot of all this is that Yotta cannot match the funds it has in various banks with the amounts it owes to its customers.
9. It's not necessarily the case that there has been any dishonesty or that any of the money has been misapplied — without any accounting records, it's impossible to say whether something of the kind has happened or not. Equally it's not possible to say whether the Yotta business model was viable or not — if the software had not crashed, could they have financed the prizes and bonuses indefinitely out of the turn they were making or was the whole thing a slow-burning Ponzi scheme all along?
There'll now be the most unholy row about how the funds available should be divided up, given that there are insufficient records to establish who is owed what, and given that some of the funds will havbe to be spent on conducting the wind up. The thing will end up after a considerable time with a scheme of arrangement in which the funds are allocated to customers and creditors. Most people will get back more than the worst prognostications are currently saying, but less than they think they should.
www.independent.co.uk