FTC to close down mobile banking app Beam
finledger.com
finledger.com
https://www.techinasia.com/tag/24quan
https://www.americanbanker.com/news/beam-financial-vanishing...
Du then goes to Harvard Business School to burnish his reputation and then starts Beam.
New New Pied Piper
Contrary to FTC statement and CNBC reports, the timeline is the following, and Beam had the paper trail to show that this is factual —
1) October 1, 2020 - Beam's ACH service provider's API service stopped working. Funds locked in banking service provider.
2) Early October - Beam began proactively working with its ACH service provider, banking service provider to unlock the funds help at bank. Service providers initially refused to unlock funds unless Beam indemnifies them. Months long disputes with ACH vendor who locked up the fund.
3) November 16 - All of $2.6 million except around 80 customers who Beam was not able to reach had been refunded in full by Beam and Beam's service providers. The remaining amount of these around 80 customers accounted for <$90K in aggregate dollar amount.
4) November 18 or about - FTC, knowing that Beam had returned vast majority of the $2.6 million, still filed a lawsuit against Beam. CNBC article came out around the same time misstating that Beam had not yet returned the funds and it was FTC who “made” the fund return happen or to be happened.
5) By January - Beam had since then contacted all remaining 80 customers and the return of funds had been complete for all where customers can be reached.
FTC admitted explicitly to Beam on an internal call that they have not reviewed all the evidence —and that they WILL NOT review the full evidence proving Beam's innocence—which is against the principle of due diligence and fair justice. Beam offered full review of the facts and full disclosure of all facts and evidence, but FTC refused to examine the facts to rectify false allegations by FTC. This is clear evidence that this case was NEVER about truth-seeking, but a PR chess piece for FTC.
About Settlement
1 - There is zero conclusive evidence of finding of wrongdoing. Nil. Only false allegations.
2 - There is $0 penalty. When was the last time you saw FTC taking on an scrappy SME for months, only to come to a $0 settlement? Shows there’s more to the story.
To be clear, Beam as a company is not shutting down. Stop the misleading headlines just like when people call Beam a Ponzi scheme. False “entertaining” frivolous news comes and goes, but the damage on good people and startups is a permanent injustice.
If the “System” can take down any small, defenseless SME with explicit refusal to review the FACTs, simply sensationalizing a false make-believe story to paint a picture of the “System” being glorious, fired up by fake news, is this the world we want to leave to our children?
Media are incentivized by maximizing eyeballs, not always standing for what really happened. Most news readers want to read what’s entertaining and confirms their cognitive biases, and care less about the dry facts behind which truth stands.
Beam was not able to speak openly before the Settlement about what really happened—FTC holding Beam at “gun point”, vendors requiring Beam to stay silent or else they will not release the customer funds. Beam now can finally speak openly, but does not have the PR budget to go against these fake news that has been in public domain in the last few months. That’s the price to pay for doing the right thing — making sure all customers are made whole and putting the preposterous “Ponzi scheme” stupidity to rest.
If you care about the truth more than the sensationalism and entertainment-at-the-expense-of-others, you’re probably the minority. Please stay well.
I can always be reached at aaron at meetbeam dot com.
Per the article, FDIC insurance doesn't cover this because it's a 'neo-bank' and the underlying bank didn't fail.
The problem is how the deposits were used. If they're simply stored, it's easy to unwind, but the real problem is if the deposits were lent out or even used to pay other account's interest rates (which would qualify for a pyramid scheme?).
I'm not familiar with the rules regarding a neo bank's access to an underlying deposit in compared to the bank itself, but I wouldn't put it past CEO Du to utilize deposits in the worst way possible.
Leaving error for posterity.
wait ... wat? how do you know something is a "Neo-bank"?
[0] https://www.simple.com/help/articles/account-info/fdic-insur...
[1] https://help.chime.com/hc/en-us/articles/224459628-Are-Chime...
where does it say that
"The FTC also alleged that Beam wasn’t able to give users the high interest rates it said it would give.
The FTC first announced in November 2020 a complaint alleging that Beam and its founder Du promised that customers of the free mobile banking app could make transfers out of accounts and users would obtain their requested funds within three to five business days. However, the FTC alleged that some customers waited weeks or months to get their money.
"
> In a complaint first announced in November 2020, the FTC alleged that Beam Financial Inc. and its founder and CEO, Yinan Du, also known as Aaron Du, promised users of Beam’s free mobile banking app that they could make transfers out of their accounts and would receive their requested funds within three to five business days. In fact, some users waited weeks or months to receive their money, which was particularly difficult for users who were struggling with lost income as a result of the COVID-19 pandemic, the FTC alleged.
> ...
> Beam also failed to give users the high interest rates the company promised, the FTC alleged. Beam repeatedly claimed that users would receive at least 0.2 percent or 1.0 percent, but many new users received a much lower interest rate of 0.04 percent and stopped earning any interest after requesting that Beam return their funds, according to the complaint.
(from the PDF)
> IT IS FURTHER ORDERED that Defendants must provide full refunds of the amounts held by or on behalf of Defendants for Covered Consumers (the “Full Refund Amount”), which consisted of at least $2.6 million on November 15, 2020, as follows
Then again, maybe this is just a slap on the wrist. This is equivalent to robbing a store, getting caught, and then the only punishment being "you aren't allowed in the store again, and you have to return the stuff that you stole." Which is pretty damn lenient by the standards of the rest of the US justice system.
Hopefully there will be a civil suit followup for additional damages. But even then, the company might just go into bankruptcy and the creditors are the one who get screwed. Meanwhile the executives who made the decisions in the first place just go home.
The FTC is a civil agency, not a criminal agency.
Just b/c Beam and Yu settled with the FTC out of court doesn't mean the FBI can't go after them for criminal charges.
If the only thing that happens is that the business disappears , with depositors fully recouped, id still say that's not good enough.
The holds are the same types of holds that you see at regular banks. Issue is that Beam explicitly made a claim that it only takes a few days to transfer out and falsely advertised an interest rate. Interest false statement is interesting because the underlying bank violated their bank charter if Beam put out false interest rate marketing materials and could be subject to fines.
We’re talking an $8b company about to go public with over 7 million users vs. some tiny scam app that had at most 30k users.
Now I know that this is bad, but I have seen worse behavior from banks like Wells Fargo. Why is it that those banks just get monetary fines, but this new startup is forced to shut down ?
That's just a pragmatic explanation though: I'm not claiming there was any equivalency of fairness between the two. It seems to me that Beam should be dismantled, and also that Wells Fargo should have suffered some equivalent fate. But again, consider the pragmatics involved: Forcing Wells Fargo to be sold off piecemeal would just mean there were even fewer massive banks controlling that market.
Counterpoint: security of holdings/nonreversability has been a clear tradeoff with cryptocurrency from the start. It’s frustrating to see public resources diverted to reinventing the wheel without a balancing revenue line.
Put another way, there is arguing that cryptocurrency is stupid in general. And there is arguing that those who lose their money through it shouldn’t be entitled to the same level of public support as those who lose money in other investments.
> In other recent banktech and wealthtech news, SoFi will offer its users the ability to invest in IPOs for companies going public, the digital lender announced on Friday. Typically, these opportunities are reserved for institutional investors. SoFi expects to offer a couple of IPO securities in the months ahead that will be available for its "SoFi Invest members through the SoFi app."
Well played SoFi.
[0] https://www.ftc.gov/news-events/press-releases/2021/03/mobil...
Contrary to FTC statement and CNBC reports, the timeline is the following, and Beam had the paper trail to show that this is factual —
1) October 1, 2020 - Beam's ACH service provider's API service stopped working. Funds locked in banking service provider.
2) Early October - Beam began proactively working with its ACH service provider, banking service provider to unlock the funds help at bank. Service providers initially refused to unlock funds unless Beam indemnifies them. Months long disputes with ACH vendor who locked up the fund.
3) November 16 - All of $2.6 million except around 80 customers who Beam was not able to reach had been refunded in full by Beam and Beam's service providers. The remaining amount of these around 80 customers accounted for <$90K in aggregate dollar amount.
4) November 18 or about - FTC, knowing that Beam had returned vast majority of the $2.6 million, still filed a lawsuit against Beam. CNBC article came out around the same time misstating that Beam had not yet returned the funds and it was FTC who “made” the fund return happen or to be happened.
5) By January - Beam had since then contacted all remaining 80 customers and the return of funds had been complete for all where customers can be reached.
FTC admitted explicitly to Beam on an internal call that they have not reviewed all the evidence —and that they WILL NOT review the full evidence proving Beam's innocence—which is against the principle of due diligence and fair justice.
Beam offered full review of the facts and full disclosure of all facts and evidence, but FTC refused to examine the facts to rectify false allegations by FTC. This is clear evidence that this case was NEVER about truth-seeking, but a PR chess piece for FTC.
About Settlement 1 - There is zero conclusive evidence of finding of wrongdoing. Nil. Only false allegations. 2 - There is $0 penalty. When was the last time you saw FTC taking on an scrappy SME for months, only to come to a $0 settlement? Shows there’s more to the story.
To be clear, Beam as a company is not shutting down. Stop the misleading headlines just like when people call Beam a Ponzi scheme. False “entertaining” frivolous news comes and goes, but the damage on good people and startups is a permanent injustice.
If the “System” can take down any small, defenseless SME with explicit refusal to review the FACTs, simply sensationalizing a false make-believe story to paint a picture of the “System” being glorious, fired up by fake news, is this the world we want to leave to our children?