IANAL. When an entity takes customer deposits it gets hyper regulated, a notch or two below commercial bank. These apps circumvent those regulations by accepting deposits in crypto.

Regulators are are also in bit of a spot because it's an entirely new beast. For most of the current use case crypto acts like unregistered security but in in some minor way it's also a currency. So regulators are biding their time because coming down with a heavy hand will attract a bad rep as big hedge funds are also getting into crypto.

Also, IMO current legal codes aren't good enough to tackle crypto at the moment, see this[1] for example. It's an active area of legal research so will take time to crystallise.

So these apps are slipping through this regulatory crack. Do they deserve to go to jail? I'm not so sure. But they do know what they are doing.

[1] https://www.imf.org/en/Publications/WP/Issues/2020/11/20/Leg...

In the U.S. at least, anyone dealing in things financial has to be very careful not to violate any number of laws involving money handling, banking, insurance, securities etc. It's not enough to say 'we don't do that' or 'we're not a registered X and therefore not required to do Y'. If a relevant government agency decides you are an unregistered X, or otherwise violating the law, be prepared for an expensive multi-year legal fight and most likely to lose unless you are really doing something completely new that actually isn't like the old thing[1] they are tasked with regulating/enforcing.

I'm actually quite surprised that some of these scams (stablecoins being one example[2]) have been allowed to go on as long as they have.

[1] i.e. buying you at least a temporary reprieve as all you're winning is the argument that that particular law doesn't apply to you, not that they won't pass a new law and come after you using it.

[2] It sure looks to me like they're pretending to be defacto banks issuing their own defacto dollars and not so subtly assuring 'investors' a rate of return. The combination of these factors have historically been all but guaranteed to get damn near every agency of the govt on your ass.

While part of me agrees, part of me also thinks we have all these security laws for a reason, and allowing people to claim they don't have to follow them because of what is effective just a fancy ledger doesn't sit right. I am not a securities law expert by any means but some of the tactics used in the crypto world seemed directly contrary to the intent, if not the letter, to me. I would not be surprised if we see a couple lawsuits filed sometime later this year by the state.

If there isn't criminal enforcement these scams will continue to grow and amplify.

Risk of private action can be mitigated by making sure the victim's best recovery comes from selling their position along to a greater fool. At the end of this process the last bag holders individual losses are enough to not justify the cost of litigation. Costs which are all the greater for private individuals because they lack the governments power to investigate.

(and if fools run out a bit too soon, a bit of the initial income can be used to vacuum up the remainder)