Blockfi agrees to pay $100M in penalties and pursue registration
sec.gov
sec.gov
https://www.sec.gov/news/press-release/2021-211
If crypto prices go down, it might become more lucrative for crypto employees to start talking to SEC rather than trying to sell their tokens.
If you work at one of these places, why not start collecting documentation now.
Disclosure: used BlockFi’s lending program and had pulled out most of my holdings for unrelated reasons by last week.
Cryptocurrency companies seem too often play fast and loose with laws and regulations, and the SEC can and will fine them. In addition, whistleblowers can get handsomely rewarded. Ergo, it might soon start to look more and more attractive for a lot of employees to tell on their employers.
Even if this particular case didn't go down like that, I still think it's an interesting point that's relevant to the discussion.
> Even if this particular case didn't go down like that, I still think it's an interesting point that's relevant to the discussion.
There are lots of things I’m sure you and I might find interesting. But HN doesn’t benefit from the practice of “ooh, let me use this topic as a pretense to post something I wanted to share regardless, and without reading the article”.
I disagree. The comment is related to the discussion (about SEC action) and the comment was pretty interesting and added value to the comment section
On the other hand, posting shallow dismissals and implying that they haven't read the article is not adding value to the comment section.
As regards the other comment re:lobbying, my answer to the above would be: it may exist, but it doesn't do much work.
https://www.nycbar.org/get-legal-help/article/employment-and...
The whistleblower can get 15-30% of the penalty/settlement amount.
1. You have to file a prospectus (an S-1) before collecting money.
2. You have to disclose a lot of stuff, like who's really behind this, where the money goes, what the risks are, what's happened so far, and what the business plan is.
3. Lying in an S-1 is a crime.
Crypto schemes tend to violate 1), because 2) would show that their scheme is a scam, and if they tried to cover that up, 3) would put them in jail.
There's grumbling about "paperwork", but that's just an excuse. It's the part about having to disclose all that stuff under penalty of perjury that scammers hate.
A guaranteed 9.25% APY on crypto deposits when US dollar savings accounts at FDIC banks do 0.50% is odd. Where is the extra money coming from?
> The order also finds that BlockFi made a false and misleading statement for more than two years on its website concerning the level of risk in its loan portfolio and lending activity.
The point is there's no free lunch. If you're making 9+% on your deposit don't be surprised if your account is wiped out when BlockFi's debtors fail to pay.
In effect, this is a junk bond they're selling - high interest, with a high chance of losing the principal. Those are semi-legitimate financial products (but see Michael Milliken). However, if you invest in junk bonds, you have to evaluate them, and you don't own just one. You own a broad portfolio of them, collateralized by different things, expecting some of them to fail and some to succeed. This is why there are junk bond funds. Some of which fail, because too many of the risks were correlated.
If someone in the DeFi sector is selling this, the funds are probably being used to finance some other crypto-related scheme. Not building a factory or an apartment building, which you could probably finance at 3-4% right now. So you're probably buying into a speculation that some crypto product goes up. You're buying with a capped upside, an uncapped downside, and no visibility into the risks.
Not crypto related, but one of the things that made the financial collapse of 2008 so much worse were the number of institutions that were over leveraged at the time and couldn't make the margin calls when assets started tanking. The fund I worked for at the time was leveraged as high as 40:1 at one point around that period. We exited the crisis leveraged closer to 10:1.
The problem with firms being overleveraged is when the margin call comes, it starts a snowball effect. To make the margin call, you have to liquidate assets, most likely at a loss, which further drives asset prices in the market down, increasing margin requirements in a vicious feedback loop. It's not uncommon for a firm hit with a big margin call like this to end up having to sell everything for pennies on the dollar.
I won't name names, but I worked a few high profile blowups during my tenure in finance, one of which was the very high profile bankruptcy of one of the banks that was allowed to fail in the US another was a boutique hedge fund that doubled down on a bad energy bet. Neither was pretty. But, in both cases, the root cause was the same: failure to properly understand the risk of the investments they were making either in part or in whole. Data quality in the risk system at the large bank was especially atrocious, BTW.
If you buy gold, the price will fluctuate, but it won't be lost. If you bought the Dow at the peak in 1929 and held it all the way to the bottom then you lost 89% of your money, but it didn't actually go to zero. When Ponzi schemes evaporate, the money disappears. You can sign on to whatever class action lawsuit comes out of it, but the lawyers are going to eat most of the proceeds.
It's more options trading than "investing", and Robinhood's profits demonstrate that most people lose money on options.
Blockfi's yields remind me of money market funds in 2008. They looked like bank accounts, and paid out mostly sane yields, but the fine print said "not a bank account, may evaporate". Well, when it threatened to evaporate, everyone freaked out: https://www.investopedia.com/articles/economics/09/money-mar...
When the NFT staking people are advertising yields of 132%, https://twitter.com/Route2FI/status/1492940519965605890 that's a huge blinking red sign that says SCAM SCAM SCAM, but 9.25% isn't as big of a warning as it should be. The moral hazard of every market bubble is sophisticated actors chasing yield on the way up, then claiming you were swindled, bamboozled, and had no idea what you were getting into, and urgently need a bailout when the bubble pops.
Obviously the devil is in the details, it's not clear if/how these loans are secured.
It’s far from certain but it’s certainly plausible that the value of nearly all cryptocurrency’s will collapse to nothing at all.
As the order linked above indicates, BlockFi knowingly deceived investors. In the financial/investing context of this discussion, “to scheme” is to plan and execute deception, with intent of personal gain. Thus, my attempt to reword using your provided language rather than the order’s:
> BlockFi’s scheming led investors to believe that BlockFi was a lower-risk investment than it was in reality.
Note that any errors in translation from SEC wording to your provided terminology are my own, and that I’m making a good-faith effort to help build a verbal bridge from your confusion to an example of specific language in the order that addresses it. If my verbal bridge is insufficient, then please accept my apologies and I hope you’re able to find the answers you seek from others, or in the order itself.
(I am not your lawyer, this is not legal advice.)
> The order also finds that BlockFi made a false and misleading statement for more than two years on its website concerning the level of risk in its loan portfolio and lending activity.
Just because a scam hasn't imploded yet, doesn't mean it's not a scam.
I'm somewhat pro-crypto for it's anti-establishment roots (which are barely visible these days) and so I find it interesting that the standard it's held to is much higher than that for existing 'finance' - for which the bar is incredibly low, seemingly for the only reason that society has developed a callous against all that (g)rubbing.
It isn't though. It's has all the worst aspects of Wall Street, more wolves and a few unique problems, without the redeeming feature of it facilitating massive amounts of real world activity, and you'll still find more people on here defending even crypto's most blatant scams than you'll find arguing that securitising subprime mortgages is the future of homebuying but just had a few teething problems.
How is it unfounded? The carbon and ewaste problems are well documented. Any fixes for that (eg Proof of Stake) have either compromised Bitcoin's original focus on decentralization, continually delayed release, or both. Over a decade after Bitcoin's launch few use cases have emerged and none of them have proven durable. The ICO craze came and went. DeFi is still muddling along with ever more convoluted cryptoshadows of regulated fiat finance. NFTs are all the rage but currently about as intellectually stimulating as baseball cards. Hacks and scams abound far beyond any other industry.
Both "sides" of the crypto debate are welcome to share their opinions on HN. The constant stream of blockchain links on HN makes me think there are plenty of at least crypto-curious folks around. I'm not sure why the pro side feels so attacked. Share your thoughts. Share your use cases. Advance the field. Prove us on the other side wrong.
Without a benchmark this means nothing. Just because a new technology contributes to ewaste we should just ignore it and bury it? No use in trying to fix it right? Just kill the technology because it contributes to ewaste. That doesn't make any sense. Not to mention the majority of the uproar around Crypto being a danger to the environment is completely overblown https://www.cnbc.com/2021/07/20/bitcoin-mining-environmental...
> Over a decade after Bitcoin's launch few use cases have emerged and none of them have proven durable
Durable in what sense? I can take some Bitcoin right now and purchase almost anything I want. Seems like that money use case is pretty durable to me.
> The ICO craze came and went. DeFi is still muddling along with ever more convoluted cryptoshadows of regulated fiat finance. NFTs are all the rage but currently about as intellectually stimulating as baseball cards. Hacks and scams abound far beyond any other industry.
You're just conflating scams with crypto as a technology. If you can't find merit in cryptocurrency while at the same time thinking NFTs are mostly a scam you lack imagination.
I'll be the first one to admit I think the following are all mostly scams, useless, or only serve to create bag holders:
- NFTs
- DAOs
- ICOs (not really a thing anymore)
That doesn't deter me one bit from thinking that Bitcoin, ETH, and a handful of layer 1s are genuinely useful in creating technology to digitize money and decentralize finance. How long is it going to take? Idk. 10 years seems like not enough time. Idk why people are complaining about the lack of use cases. Something as ground breaking as disrupting the banking system is going to be a multi-decade long endeavour. Scams will come and go. That seems like a natural progression.
Global BTC energy consumption is now double[1] what it was in July, meaning the claim that it's somehow getting better spurious. The article also acknowledges that the energy consumption criticism is a valid issue (even despite the stats being out of date).
But! Bitcoin does have one completely novel trick! It can operate without State backing. No authorities. No trust between parties (whether miner<->miner, node<->miner, or node<->node). Centralization seems somewhat questionable these days, but I think "decentralized enough" is a fair assessment.
None of this is something I look for in a currency, but I can appreciate how cryptocurrencies fill that niche for those who do.
Right. This is why.[1] That's the SEC's list of "cyber enforcement actions". They have been bringing the hammer down on about two ICOs a month since 2018. Last August, they started in on DeFi.[2] “The federal securities laws apply with equal force to age-old frauds wrapped in today’s latest technology,” said Daniel Michael, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. “Here, the labeling of the offering as decentralized and the securities as governance tokens did not hinder us from ensuring that DeFi Money Market was immediately shut down and that investors were paid back."
[1] https://www.sec.gov/spotlight/cybersecurity-enforcement-acti...
Why do you assume that the replacement will be net-positive?
Likewise, you reference "decentralizing finance" as a positive thing that's occuring. However, to-date, this has been nothing but a mirage--as illusory as fractional-penny transaction fees and other promises.
We're not even on a path to decentralization, and it's not a temporary aberation to be sorted out. It's actually the design, despite the ruse that tries to focus us on the idea that anyone could operate a node. Crypto is at least as centralized as traditional currency/finance. It only seeks to displace the incumbent financial class with a new one.
What's the use case here?
It's marketing to a specific niche of tech bro, which is probably a large enough segment of Newegg's customers to justify it.
That's a long time to hold up the line at the grocery check out.
https://ycharts.com/indicators/bitcoin_average_transaction_f... - and current $1.76 is considered low compared to $50 per transaction craziness. So you have to go offchain
Again, I paid BTC for a laptop 9 years ago and it made sense for me then since it was mined BTC from 11 years ago.
In order to use BTC you need to obtain BTC and transaction fees kill any normal day to day use case.
This leaves BTC for less than legal uses where you do not care about fees.
So BTC itself might not qualify as a scam but as a mega enabler of scams and illegal activity.
EDIT: that $1.76 is just a on-chain fee for the network, most stores will charge you extra to use BTC since they do not care about BTC they want to cash out immediately so they use a 3rd party.
So unless you get paid in BTC you have very little reason to use BTC for payments.
It was exciting when I first looked at it and then I realized that this was actually not "democratizing" anything so much as ensuring a new class of folks would be able to create new centralized "everythings" in a new environment outside of the current system - without the benefit of the years of testing, regulation, and (sure) cruft that our current systems have because they're subject to political forces (which is actually a feature).
Maybe starting the wild west over again is a good thing? My money's on "not really" at the moment.
Not saying this justifies BlockFi’s behavior but the incentives for any bank is there!
Especially not typically fraudulent are the APY yield savings accounts whose deposits are insured.
Also I doubt you could find countless violations outside of (maybe?) insider trading based on MNPI at these institutions, but if you know of them you should report them - whistleblowers can make a lot of money!!
A rant over two hours long about the endless grift and unfettered scamming that is crypto.
Two hours, and it doesn’t even cover all of it.
No mention of the fine at all, and instead framed as "first SEC registered crypto interest-bearing security" (from BlockFi's page) rather than "[BlockFi] failing to register the offers and sales of its retail crypto lending product" and "the SEC also charged BlockFi with violating the registration provisions of the Investment Company Act of 1940" (both quotes from the SEC statement).
BlockFi also doesn't mention the "false and misleading statement for more than two years on its website" part that the SEC highlights, and instead says "Both the SEC and state-level agreements contain no admission or denial of wrongdoing or liability."
Going to be interesting to see how the space develops moving forward. Hopefully companies that continue to mislead people will eventually disappear, or at least not be this popular among the masses.
Unless regulators shut them down or expose them quite clearly as mlm/ frauds I suspect this isn’t going to stop.
It seems, based on this action that the SEC just went through with, that things like BlockFi are not "clearly MLM / fraud" as you say, as otherwise they would indeed try to get them shutdown, not just slap a tiny fine on them.
It does if they are selling securities (either as their main business or securities for their business).
The FTC does regular MLMs.
> Herbalife and Lularoe operate in broad daylight.
Herbalife was restructured to settle a pyramid-scheme lawsuit by the FTC. [0] And subsequently also settled a lawsuit from the SEC. [1]
LulaRoe has managed not to be sued by the FTC, but that seems mostly to be because that process is complaint driven and the complaints have instead either gone to state regulators or directly into private lawsuits; LulaRoe has a pile of direct- and class-action lawsuits from distributors, settled a State of Washington lawsuit for $4.75 million, has been sued by it's main supplier, etc.
[0] https://www.consumer.ftc.gov/blog/2016/07/restructured-herba...
[1] https://www.forbes.com/sites/lisettevoytko/2019/09/27/herbal...
I'm sure the 100M fine didn't feel great but unless it bankrupts the company I doubt that BlockFi would want to go backwards now. For the low price of 100M they now have a map of how to legally do business in the space, in a way that is now much scarier to any would be new entrants.
At its most optimistic I think crypto is trying to avoid some of these regulatory rube goldberg value extraction machines. Maybe it will in some spots, but you can see too where it may also just reinvent them.
If you focus on the centralized institituions like cryptocurrency<>centralized currencies exchanges, or centralized lending platforms, then yeah, they sure get closer and closer to classical finance (except being based around decentralized platforms).
But if you look at actual cryptocurrencies, without focusing on the exchanges or any other centralized parties, they actually get further and further away from classical finance. But it requires you to read GitHub/IRC/Matrix/Forum discussions between developers, rather than following reported news.
“They now have a map”
Regulators won’t generally tell you how to comply with a rule, often because they don’t know.
So you force them to make a ruling and then have a proprietary roadmap.
What was learned in those meetings by both parties is a huge moat.
In the end, the SEC just got a hefty pay day for doing their job.
A whole bunch of these startups have sprung up; which take up real money (USDT or even USD, INR etc.,) promising very attractive guaranteed returns without locking up customers' fund. Look at these[1] for examples. Anyone who knows anything about banking in the traditional world knows how ridiculous it is. And indeed some of these are beginning to unravel[2]. In Anchor's case there are way more lenders than borrowers so Anchor is resorting to pay those high yields from their reserves. It's cutting close to being a Ponzi scheme at the moment.
In a traditional banking world businesses take a loan either to cover for a short-term cashflow crunch (example an invoice that's delayed by their client) or for longer term investment. That money usually goes into economic activities which are expected (hoped?) to bear fruit to repay the loan.
In the crypto world however such loans are taken only to be put back into the crypto world; to be swapped into some hot new coin to be staked and what not. The music has got to stop at some point.
I'm really glad SEC has been proactive. I hope regulators in other countries do so. Because 99% of the money flowing into these are totally guidable and clueless people; they need to be protected for their own sake.
[1] https://www.pillow.fund [1] https://www.flint.money
[2] https://au.finance.yahoo.com/news/anchor-protocol-reserves-s...
Is your startup going after the consumers? If most prospective customers are clueless, and many of the remaining customers are sharks or early investors looking for suckers, that doesn't bode well for new companies in this space, even the ones that are trying to do things right.
Me and my co-founders are committing ourselves into this for the long haul (think ~10 years) so are taking it slow. We hope our deliberate, slow and steady approach will help us tide over the current short term bubble and the imminent burst.
A related problem is not even depositing but simply granting token approval to a scam app, and similar techniques may be used to warn users before they give these approvals.
The agencies played a large role enabling the mortgage bubble that popped in 2008. They were essentially selling ratings to bond issuers without any real attention to the quality of the loans underlying the bonds.
Zac Prince, CEO and Founder of BlockFi, said: “From the day we started BlockFi, we have always known that strong engagement with regulators would be critical for the adoption of financial services powered by cryptocurrencies. Today’s milestone is yet another example of our pioneering efforts in securing regulatory clarity for the broader industry and our clients, just as we did for our first product – the crypto-backed loan. We intend for BlockFi Yield to be a new, SEC-registered crypto interest-bearing security, which will allow clients to earn interest on their crypto assets.”
Nothing new here, definitely nothing unique to cryptocurrency companies.
I know companies spin, but this is next level.
This was in relation to a $100m fine for Merrill Lynch.
https://products.kitsapsun.com/archive/2002/05-22/0054_merri...
This took a whole minute to Google, comment and attribute/source. So it's pretty disingenuous of you to act like this is cryptocurrency specific behaviour when in fact it is standard behaviour for all companies who are fines. I'm not saying it is right but it is hardly a novel approach to dealing with an SEC fine.
On that topic, where does BlockFi's profit come from? They're offering 9% (previously 12%) interest on deposits. Are they really re-loaning that money to other people at the 20-30% interest rate required to produce those returns (high interest rates come with high default rates, so you need to overshoot your target by a lot to make up for defaults).
They're not really "capital efficient".
[0] https://prohashing.com/guides/earning-interest-on-crypto
Notice also that these loans are undercollateralized. DeFi lending requires overcollateralization which often is not appealing to HFT's executing low-risk arbitrage trades that make a few bps of profit. They need big leverage to make decent money. In our normal financial system banks are willing to lend them money, but in DeFi nobody does undercollateralized loans.
For example anchor protocol offers 20% APY on UST deposited in it, and has done consistently for 6+months. As long as the peg holds and the protocol is solvent it's "free" money
The whole thing sounds incredibly scammy.
https://au.finance.yahoo.com/news/anchor-protocol-reserves-s...
https://agora.terra.money/t/capitalising-anchors-reserve-wit...
They must be reinvesting elsewhere similar to other bank models just a lot riskier, more opaque, and less regulation (for now).
They’ve meaningfully cut interest rates over time as well often in response to market volatility.
BTC is 0.1% above 0.35 BTC. ETH is 0.25% above 5 ETH. I think we can agree these are not high rates.
On the flip side, the rates for stablecoins (GUSD, USDC, USDT) are quite high still, at 7.75%. But it's not impossible to imagine institutions borrowing stablecoins at higher rates than that.
As far as I can tell it mostly works by token inflation. Celsius, Nexo tokens, Compound and Aave tokens for example.
But these tokens are given as a reward to yield farmers so there is a huge sell pressure and yet I don't understand who is on the buy side. Why would you buy these reward tokens. It seems strange to me.
Like, are they investing in real estate that pays rent? Companies that pay dividends?
To start with, they lend out at interest, which is paid by users, for the same reason anyone would take a collateral-backed loan, knowing they'll have to pay interest. It could be speculation on sh-tcoins, investment in stocks, whatever. The Compound contract doesn't care because they're more-than-fully backed and have a mechanism for liquidation at a profit if the loan/collateral value ratio gets too high.
A fraction of that is then paid to depositors (whether or not they're borrowing against said deposits).
In some cases there are tax advantages in that you can avoid selling crypto while converting it into a different asset you'd prefer to invest in.[1]
They also allocate Compound tokens (COMP) to depositors and borrowers (that's the distribution yield figure you see). While COMP's value is highly speculative, its grounding (for whatever that's worth) comes from the fact that the tokens entitle you to vote on changes to the Compound contract[2], which some people apparently value and are willing to pay for. You also need a minimum number of tokens (100,000 IIRC) to submit proposals.
I don't know their process for deciding the distribution yield, but it sometimes leads to weird situations where it's higher than the interest rates for borrowing, meaning that (modulo fluctuations in the rates and value of COMP) you're being paid to borrow it. See, for example, the yields on Basic Attention Token (BAT) [3] -- 10.23% dist yield vs 3.84% borrow rate.
As things stand now the interest on borrowing ETH is about the same as its borrowing distribution yield, meaning you can effectively borrow for free (again, modulo those fluctuations). I starting doing that to convert BTC to ETH that I use in Uniswap liquidity pools, which make money as automated market makers, taking a cut of conversions between cryptocurrencies.
[1] Though, until the IRS clarifies, it's an open question whether putting up your crypto on Compound etc for these loans is a taxable event, as it's booked on the blockchain as conversion of e.g. Ethereum (ETH) to Compound Ethereum (cETH). I think that it should (obviously) have the same tax consequences as taking a loan at a pawn shop with your gold chains as collateral (i.e. there's no sale unless/until you default on the loan, in which case you have sold it for whatever amount they lent you that hasn't been paid back).
https://www.sec.gov/news/statement/peirce-blockfi-20220214
Essentially she says that while they did misrepresent the over collateralization, a 100m fine is too much since they did fulfill their end of the loans.
Additionally, she says that the categorization this stuff as securities is not effective. US consumers want interest on their crypto-assets now, but with companies having to jump through complicated SEC hoops this type of product will not be available in the near future (or maybe never available); not because of "customer protection" issues but because of sec over-regulation issues.
And it doesn't matter whether BlockFi has paid its loans so far. If misrepresentation of collateralization is penalized only when loans aren't paid, then it can never be penalized at all.
I can easily believe that US accounting practices have problems with crypto; do we even have GAAP for this stuff? And it's easy to complain that SEC filings are complex and time-consuming. But at the end of the day there must be some sort of accounting of how these companies and products work.
I suspect that a lot of crypto products won't meet SEC disclosure requirements because they can't meet any real disclosure requirement. And if that's right, then no, they shouldn't be available.
Eg: https://peckford42.wordpress.com/2021/10/05/pfizer-covering-...
The prospect of the SEC crashing every rando company with fines isn't great. Lotta people hurt who had nothing to do with it.
I worked at a company that pulled some illegal stuff with backdating stock awards and so on. CEO actually went to jail. I'm glad I still had a job and the company rolled on, our customers were probably happy too.
Which stock?
There are a lot of cult-ish communities around certain stocks that "know just enough to be dangerous" and end up misinterpreting a lot of signals as naked shorting and such. The narratives sound good to people who are holding the stock, but they're almost always completely flawed.
If the complaints are basically coming in bulk with the same reports that can be traced back to a Reddit post or something, they're probably going straight to the trash.
What evidence do you have of wash trading? How would you tell if something is a wash trade? How would you determine if someone is naked shorting? What evidence would you provide for something like this?
Notice I am not 100% sure myself. I am a computer scientist who got caught in this and question my sanity sometimes (as someone else posted a while back, there are many groups who obsess and conspire over this).
So any advice, help or insight might be useful.
It's generally pretty hard to short OTC stocks, so the idea that someone is out there short 10s of millions of shares is pretty far-fetched. And to what end? If the stock has gone down they're probably covering, not adding.
Roughly half of OTC stocks are themselves scams, run by crooks. Is the company funding itself by continuously selling shares? Check their SEC filings for ATM offerings.
If you genuinely think the fundamental value (not the share price!) of the company will be substantially higher than its current trading value, then go ahead and take advantage of the artificially low price, buy some, and be very patient and ignore the day-to-day stock price movements.
If you're in this stock because you've convinced yourself some short seller has overextended themselves and will get squeezed, well... Prepare to be disappointed.
There will be no reckoning. What they're doing is scummy but legal. The selling will only stop when no outsiders will buy any shares at any price.
Well, legal as long as they don't short ahead of time. But either way, it's a terrible investment for you.
Appreciate the advice.
1 and 2 have nothing to do with any of your claims
3 is the only way to sell stock in a thinly traded market.
4 i'e been in the industry for more than 10 years and have never come across anyone who has actually performed these fabled short ladder attacks.
This isn't something that happens, its a creation of the hive mind of /r/superstonk.
If they want to say its a real thing then the onus is on them to put forward some evidence that it happens. I so far havent' seen anything that looks compelling.
Point 5 makes no sense at all, why would people cover all at the same time?
6. this is what happens with shitty stocks that has someone trying to offload their long position, it by definition, has to close down as the selling pressure overwhelms the buying pressure.
7. again no sequitor and has nothing to do with shorting or wash trading.
Do you have any actual data to back up the wash trade or short claims?
And as a side note, shorting to zero isn't something that happens as you need to close out your position by buying to make any money. And as stock prices drop they run the risk of being delisted before the shorter can buy back their position. Which is a terrible position to be in.
A typical shorter will short at $100 and buy back at $50 or $25 and doesn't mess with anything under a $1.
If you want definitive proof, you need to see sell tickets. That is what our whistleblower reports to the SEC have been requesting. I do not have sell tickets.
I wrote this as a response before: my biggest proof was that over the past year, if I tally up the number of uncovered short sales it is more than 2M. How do I know that these sales are uncovered? If there is any day with more than 50% shorting, I know that the short cannot have covered. If I tally up the differences, I get at least 2M uncovered over the past year. This model assumes that the short covers the same day (which we can see from tape they do not). Even if they did cover the same day, they are still short 2M shares uncovered.
I was mistaken with "short ladder attack" - I should have said short attack. The price action is strange. A bunch of selling say happens at one price point, and then the seller reduces the price by 10c and offers a huge lot. When we try to take the wall, the offer is withdrawn. We have definitive proof of spoofs that were withdrawn like this.
1 and 2 are very relevant to the current discussion. Since the toxic lender has done exactly this to other companies. As soon as a loan is given, they short the company to shit. Except here the company returned the loan. They have been fined by the SEC for similar behavior before and this playbook is seemingly related. The closest is (Badian and Sedona, https://www.sec.gov/news/press/2003-26.htm). So it is not inconceivable that this is happening here.
I have screenshots that I have submitted to the SEC. I can share them with you.
Like I said, I understand the OTC is ridden with fraud. And this may well be the case here and I fully admit I may be wrong.
2. This is a win for Blockfi. Like other mentions, they gave their business a legal veneer for the sum for $100m. If you are of the opinion that all Cryptos and related companies are scams. Guess what? The SEC disagrees.
3. The same product (even better actually) is done via DeFi. That's where the real battle will be with major implications on the Ethereum ecosystem (or whatever Dapp blockchain you prefer).
"To settle the SEC’s charges, BlockFi agreed to pay a $50 million penalty, cease its unregistered offers and sales of the lending product, BlockFi Interest Accounts (BIAs), and attempt to bring its business within the provisions of the Investment Company Act within 60 days."
Have they though?
From Blockfi:
"As part of the resolution, existing U.S. BlockFi Interest Account (BIA) clients will maintain their accounts and receive interest as they always have, but cannot add new assets to their accounts as of today, February 14, 2022. Further, U.S. persons will not be able to open new BIAs. Following completion of the SEC registration process for BlockFi Yield, BIAs of U.S. clients will be exchanged for BlockFi Yield, unless a client instructs BlockFi otherwise. BIAs of BlockFi clients outside of the U.S. are not subject to today’s resolution."
Sounds like existing accounts can continue to function and accrue interest but no addition new users or assets can be deposited until they get SEC approval.
The US gov could require teams based in the US to require KYC in their apps for US citizens. And they can require US citizens to only use apps with KYC. But can they really do much beyond that?
Per this case, the SEC stand is interest bearing crypto -> a security
The result is that we now have no idea how much insider trading actually went on in that premine sale. For example, it could be the case that most Ethereum is secretly controlled by a tiny, tightly knit cabal of people who collude to pump up the price to a false valuation. If this were true, it would be incredibly problematic with their planned transition to proof of stake, because a tiny number of people would effectively have full control over the fate of the protocol and all the money outsiders hold in ETH.
I should not have conflated my personal feelings with it with the facts of its suspicious and unverifiable initial distribution.
https://www.bloomberg.com/news/articles/2022-01-26/crypto-le...
https://www.gemini.com/legal/gemini-earn-program-terms-and-a...
https://blockfi.com/regulatory-developments/
BlockFi is first participant in new regulatory framework for crypto sector
They're the first participant. They won't be the last. Police can't pull over every car at the same time and neither can the SEC go after every actor simultaneously. What the SEC has now though is a precedent of cooperation.
https://www.bloomberg.com/news/articles/2022-01-26/crypto-le...
Disclosure: have significant holdings in Gemini’s lending program and used to in BlockFi’s.
True, that dyanmic may not be happening here, but (see previous comment) it is also a courtesy to err on the side of over-disclosing rather than under-disclosing.
Your comments are a slightly-obfuscated version of "wh... why would you erase the chalkboard after your class is over? That spends time that doesn't personally benefit you. Since we have janitors for that, you don't really need to." My immediate reaction would be, "just accept the courtesy, dude".
And here -- just accept the transparency. Don't make me have to justify it.
P2: That's an apple.
P1: No, it's a banana.
P2: Dude, that's clearly an apple.
P1: Okay, it's an apple, but by pretending it's yellow and long, we're bypassing the rules for selling apples.
P2: That's not.... that's now how any of this works
I found it somewhat alarming that people proclaimed that 9% APY interest could be made, in such a way that it implied no risk, in much the same way cash in an FDIC-insured bank account is well-protected.
I think much of this is moving so fast that it's going to take some time before the offerings really come close to offering the same level of safety one finds with an FDIC-insured bank account.
If you're putting your money in your bank, and they're loaning it out, is that now a security?
https://www.complianceweek.com/regulatory-enforcement/hsbc-h...
The US regulator made them pay $1.9 Billion.
https://www.reuters.com/article/us-hsbc-probe/hsbc-to-pay-1-...
We honestly need to return to a time when we had a bit more financial regulation.
Mostly true if your main financial transactions are receiving bank deposits from your work & paying bills, and if you, your family and your friends all live in first-world countries.
I also own (and occasionally trade) securities, have loans (mortgage and auto), use credit cards, and own equity in private companies.
The only financial thing that I don't do is sell financial services, which is the industry that regulations were designed to reign in because they tend to be filled with grifters.
But you're correct, I am in the US.
$100m fines, chargebacks, compliance, transaction fees and the labor behind these are all fat that could be trimmed with DeFi.
> $100m fines, chargebacks, compliance, transaction fees and the labor behind these are all fat that could be trimmed with DeFi.
Yes, I know. These are the things I like about regular finance and don't want to give up. All of those things are pro-consumer except the transaction fees.
DeFi has not demonstrated an ability to eliminate transaction fees or even to make them predictable or consistently low! It's the worst of both worlds.
All consumer banks have identical products, preventing you from starting things like a tontine/friends cash pool without a business behind it. KYC means you have to send in recordings of your face. Accredited investor rules often mean only rich people can get richer. There's definitely some harmful ones.
This is untrue in the US. Nothing is stopping you from contracting a tontine among friends. You just can't sell it to strangers.
> KYC means you have to send in recordings of your face.
This is untrue in the US too. Where do you have to do this?
> Accredited investor rules often mean only rich people can get richer.
I don't buy this. Most things that require accreditation are extremely risky.
The best asset classes (passive index funds) are available to everyone.
People of moderate net worth should avoid assets like venture equity like the plague.
What I mean is there isn't a feature where you can easily open a separate account and share it with them, or let them deposit to it, that doesn't involve separate money transmitter apps/doing your own accounting/being married to them or knowing their SSN.
Hmm, you could sell something like one under Reg CF as long as it's not an "investment company", I think? I've seen some weirdly structured unaccredited crowdfunds, there was one that sent me $200 of products for $250 equity investment, seemed like a good deal to me.
> This is untrue in the US too. Where do you have to do this?
That's how id.me works. Just using a picture of your passport doesn't provide a liveness check, though other places will just ask you more questions off your credit report instead.
> People of moderate net worth should avoid assets like venture equity like the plague.
Hopefully that lets rich people do it then, since they can easily have negative net worth (via loans against illiquid assets.) But accreditation has more than one way in, and not all of them are about assets - income or a stockbroker license are enough.
The math behind "risk" in MPT/Sharpe ratio based advice like you get from robo advisors is not that good though. It treats it like it's symmetric but downside risk of your early assets isn't that important (your income will replace them), its diversification doesn't help as much as it says (correlations go up in a down market), and once you have moderate savings you should be taking a lot more upside risk than it recommends.
Target date funds are the right answer for retirement funds but not for everything. Even if they were, the more uncorrelated alpha the better even in the MPT model.