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Comment by dmix | Hacker News Reader

[sploiler] For those who want a TLDR of this story, here it is from his Wikipedia: https://www.wikiwand.com/en/Chris_Sacca

> During law school, Sacca used his student loans to start a company which was unsuccessful and used what was left to start trading on the stock market. By leveraging trades for significant amounts (discovering a flaw in the software of online trading brokers)[15] he managed to turn 10–20 thousand dollars into 12 million dollars.[15] Eventually, when the market crashed, Sacca found himself in debt with a four million dollar negative balance. He negotiated to have it reduced to just under 3 Million and by February 2005 it was completely repaid. [15]

[15] http://www.financemagnates.com/forex/brokers/chris-saccathe-...

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What was the flaw? Also, isn't starting a company with your student loans illegal?

> He says he managed to graduate without attending class. In order to obtain class notes, he threw an annual keg party where entry required classmates to dump their notes in a bin.

I sure wouldn't want that guy as my lawyer.

The flaw was that the early online trading systems didn't include provisions for reg-T, which stopped leverage at I think 50 percent of your balance. So, you could borrow hundreds of thousands of dollars worth of stock with a thousand dollar account balance. He goes into detail on it here: https://www.youtube.com/watch?v=iqUG2_cmZ6I

> Also, isn't starting a company with your student loans illegal?

I don't think he meant using the money he was loaned to pay for classes but using the money the loan provides for living expenses. That money is completely up to you to figure out what to spend it on.

I could be wrong about that though...

I'm not sure that federal or private loans could be used to start a company, even if you listed that one of your "living expenses" was "starting a company."

There isn't a lot of policing of what students use their student loan living expenses for, but I don't think that means you're free to do whatever you want with it legally.

Also, it's amazing how the child a doctor and a professor would be praised for cheating the government at a grand scale while our society is busy watching what poor people buy with EBT (food stamps) at the grocery store.

I don't find these details of Sacca's story admirable.

> would be praised for cheating the government at a grand scale while our society is busy watching what poor people buy with EBT

The former happens so rarely it doesn't get much attention at all.

If he had flamed out, we'd probably hear a sob story about the oppression of student loans.

He could have taken the easy way out of his problems and declared bankruptcy. I think most would have, but he paid back all his debts, the hard way; that seems admirable to me.

Well there definitely is no criminal law against starting a company with student loans. It would be up to the actual contract he signed which might not say anything about how you spend the money as long as you you aren't lying about anything in the application(ie. amount of income you make, actually being registered for classes etc).

Wow. I'm not sure it's possible for me to imagine what it would be like to have 12 million dollars and then lose it all plus three million more. I guess.. maybe not a huge deal if you have unwavering confidence that you'll just make it back again?

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