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Comment by dubcanada | Hacker News Reader

1. Tesla Inc. buys some Bitcoin.

2. Tesla announces that Bitcoin is good now and that it bought some.

3. The price of Bitcoin goes up, because institutional adoption of Bitcoin is good for its price, but also because, by the Elon Markets Hypothesis, anything that Musk buys goes up.

4. Tesla sells some Bitcoin, making a profit.

5. Musk tweets that the price of Bitcoin is too high.

6. Bitcoin prices go down due to the Elon Markets Hypothesis.

7. Go to Step 1.

How is that not illegal?

If we look at it from stocks, if Tesla bought a million shares of random X penny stock, and then Elon Musk tweeted that this random penny stock is now amazing. And then once it reached $10 they sold 10% at 1000% percent profit.

That's illegal, so why is crypto not?

Edit: It's actually legal... so nevermind.

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I'm not a lawyer.

> If we look at it from stocks, if Tesla bought a million shares of random X penny stock, and then Elon Musk tweeted that this random penny stock is now amazing. And then once it reached $10 they sold 10% at 1000% percent profit. That's illegal, so why is crypto not?

I'm pretty sure that is legal as long as you disclose that you own it. I think you're allowed to:

1. say: "I own a stock." 2. say: "It's a great stock." 3. (stock price goes up) 4. (sell stock)

And intuitively, this should be legal. If you disclose your position, you should be able to talk about how great it is, as long as you don't lie.

Huh, you're right I went and double checked the law.

What I said above is completely legal you just need to disclose you own X penny stock.

So random person with a bunch of followers can legit buy a million dollars of a stock, go on twitter spouting about it (even though just the increase of mentions are likely to make it become more noticed and thus gain value) and make a bunch of money.

That's fantastic...

It's buyer beware. Yeah if you own a thing and people will buy it off you at a high price when you tweet buy then you can make money.

You can also legally do the inverse of this, short a stock, say you are short the stock, and then tell people how much the business sucks so it goes down and you make money.

See: Hindenburg Research, Muddy Waters Research

Not just "can", this happens on Twitter, Instagram, Stocktwits etc daily.

Isn't this literally just what happened with wallstreetbets

There is a massive grey area where trading, advising, hyping and fraud all intersect. The SEC exists for the purpose of making these distinctions, but they don't cover Bitcoin (as far as I know).

Hrm, I'm pretty sure that area is pretty small. If "advising" here means a fiduciary agreement, the laws are pretty cut and dry as far as I know: you have a duty to act in the interest of your client.

Im also not a lawyer..

But I have a huge problem with thinking that Elons tweets about BTC is the primary mover of BTC vs USD.. The dollar value of BTC is basicly a random number generator..

The simple answer is that Congress has not yet passed laws that truly define what Cryptocurrencies are in the eyes of the government. To the IRS, it is merely property and is taxed as such. The SEC would like to regulate Bitcoin and Altcoins as securities, but securities law was never designed with these things in mind. That's why the penny-stock pumping example would be regulated, but doing the same thing with an Altcoin is permissible. Eventually, I expect Congress will pass some sort of law on the subject. I hope it's not too restrictive on ordinary citizens who own crypto.

What we're seeing is a wild west and I don't think it will last much longer.

It's illegal to purchase a stock and announce you purchased said stock?

Yes, there is endless case law and legislation around this type of trick. It's usually considered securities fraud. https://en.wikipedia.org/wiki/Pump_and_dump

Obviously it's not strictly illegal to purchase stock and then say you did, but it doesn't make sense that you would need that clarified.

If your statements about your holdings are true, it's not a pump and dump. To be fraud there needs to be deception: either you need to lie about what you bought or the price you paid, hide the fact that you sold it or the existence of other instruments you hold related to the security, etc...

Financial transparency isn't illegal by itself.

Or making statements that imply you plan to hold to the moon when you have a sell order set at 1.7x current price.

Per your own link, isn't "false or misleading statements" a core component? And if it is, how does this apply to what Tesla did here?

Also, if what Tesla did was illegal then aren't many authors on Bloomberg/SeekingAlpha/ CNBC/etc also just as liable? Seems like what we're discussing is a common occurrence and securities cases are often about people misleading about their own stock/company rather than third party/other tickers (even if they hold shares, or in this case coin).

I don't think this is correct. I believe it's only illegal if you make stock recommendations (pump) to others with false or misleading statements.

I believe any public statement made with the intention of moving the price, as opposed to, say, expressing your genuine commitment to a stock's value, is illegal.

Of course, good luck proving it, or telling the difference, in many cases. But if you cyclically go from “Bitcoin is the future” to “nah”, that might just tip it.

> That's illegal, so why is crypto not?

Crypto-fans want a libertarian free-for-all without government regulation or interference. That's what they're getting.

Good luck, guys!

It's Soros's tutorial on market manipulation, old news.

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