FaceCash Files Formal Complaints Against Stanford, USC, Pomona, and AAU
aarongreenspan.com
aarongreenspan.com
Jacob Appelsmith
jacob.appelsmith@abc.ca.gov
EDIT: Mr. Greenspan, your exhibit at the end made me laugh out loud:
http://www.aarongreenspan.com/writing/20111019.aaupacket.pdf
Awesome and very funny. You might want to make these pdfs bigger, or just make the webpage one long html file.
The same bureaucrats perpetuate the falsehood that high net worth requirements somehow protect consumers. They do not. The extremely expensive surety bonds put in place as insurance (since FDIC protection does not cover money transmitters) only go a very short distance, and beyond that, they only cover licensed money transmitters. This means that the whole system is pointless, because consumers are never protected from the highest-risk money transmitters: those who never bothered to apply for a license (maybe because the requirements are so high). So despite the facade of regulation and consumer protection, the system actually increases risk while protecting incumbent interests.
http://www.aarongreenspan.com/writing/durbin.html
So I agree--more people need to know.
Perhaps they serve to protect that vulnerable segment of our population, the mega-corporation?
Once yours reaches sufficient size/influence [never to be explicitly specified] it may be able to claim such rights for itself before the U.S. Supreme Court, the supremely sympathetic arbitrator of such matters in this country. [/sarcasm]
I'm assuming as a startup he can't afford to have a lobbying firm on retainer, so the best outcome would be that the Times or the Journal picks up this story and shames them into action.
But man, I admire the chutzpah and the brass balls it takes to pick this fight. Good luck!
Sorry, but I can't read anything by Aaron without thinking how much of an unlikable character he is. Get the chip off your shoulder! Stop complaining. Stop boasting you "Invented" facebook. No one invents websites.
Reminds me of Mugatu "Do you not know who I am? I invented the piano key necktie!"
"finance" "gambling" "porn" - These will always be "high risk" sectors where government wants to do a lot of regulation and interfering.
How much of this decision should I put in your hands?
As for your second point: what or who are you quoting? My bio doesn't say that. I take great care not to say that.
For better or worse, people care about this stuff. That's why they made a movie. That's why Mark is speaking at Startup School. It's the sad truth that a politician will pay more attention to someone who demonstrates that they were involved in the creation of a widely-known enterprise. If you look around, you'll see that it's just not the politicians, either.
I was reading your "About" page. You seem to want to paint yourself as a martyr who has had to fight people every step of the way to get the success which you apparently deserve - That everyone else is wrong, and that you have succeeded despite all these people standing in your way. I don't think that's a likable picture.
Also from http://www.thinkpress.com/authoritas/index.html
"While at Harvard, he invented The Facebook." - I mean wtf that's cringeworthy surely.
Hope you take this critique in a good natured way... If I were you I'd remove every reference to facebook, startup something new in an UNREGULATED sector, (eg not finance), and prove people you can be successful.
I don't know where you get the notion that one should only be successful in "an UNREGULATED sector," but if reading my critiques of a system that is so broken people are literally in the streets as I write this--it it's really that painful for you, you probably won't want to read Hacker News, or open a newspaper, for the next few months. Because as I said in the letter, I am not done, and I don't think Occupy Wall Street is, either.
Sheesh.
If you want to spend your energy complaining how unfair life is, go ahead. I prefer to spend mine doing more useful things.
Particularly in a highly-regulated industry, that is the state's responsibility.
He's not complaining that it's highly regulated. Actually, he almost seems to be glorying in the fact that it's highly regulated.
I also understand his frustration with government regulation (my first attempt at a startup was stillborn due to regulation).
Some of his complaints aren't on the same level as his main points (complaining about having to make it to a meeting in person won't win any sympathy from me).
Have you considered that maybe if you were more willing to break stupid bureaucratic rules you wouldn't run into these roadblocks?
It's not even clear the law applies to you and very unlikely anyone is going to care unless you're successful (at which point it would be worth fighting over).
PayPal was arguably breaking all kinds of esoteric banking laws when they started. They were getting constant threats from state attorneys. In the end they worked it all out.
PayPal started before the USA PATRIOT Act made it a federal crime to violate state money transmission statutes. Max and Peter weren't looking at jailtime in 1999. Entrepreneurs (and investors, and directors) today in this space who break the rules are. Besides which the California law only went into effect this July, twelve years after PayPal started.
Also, it's extremely clear that the law does apply to us; that's why we were able to get an exemption order.
2. Change your idea.
3. Spend the next year trading letters with bureaucrats.
What Would Zuck Do?
Every day you spend on this is a day lost to making your startup successful.
The will to enforce is most certainly there today, and the moment you get a little bit of press (not even necessarily bad press) everyone, including your competitors, will check to see if you have the necessary certificates on file. If not, they will just narc on you to the regulatory authorities...who they are on a first name basis with, as they have known them for years. And if you get bad press, you can't just ride it out. Reporters will strip away all context and ask: "why is an unlicensed payment processor allowed to do business in the State of California"?
Especially when prompted by the press or their friends, regulators can spring into action out of nowhere and levy a host of civil and criminal penalties, up to but not limited to pulling your product from the market and freezing your assets so you can't meet payroll.
So, in short, you don't want to screw around with regulators under this administration. They treat businesses a LOT more harshly than college students. Indeed, no less an authority than Peter Thiel himself has commented that it might be impossible to clone Paypal today as the bridge seems to have been pulled up behind them:
http://news.cnet.com/8301-31921_3-20114584-281/talking-tech-...
CNET: I wrote a retrospective piece for CNET recently
about how significant the post-9/11 regulatory shift was,
especially when it comes to privacy.
Thiel: It's not exactly clear to me whether Paypal could
be built as a business today. That may be too strong....
As a startup, these kinds of regulations are much more
onerous. Paypal was able to be built at a time that was
pre-9/11 on a regulatory basis. Post-9/11 it would be much
more difficult to build. It makes the franchise more
valuable. I think no competitors will ever be built.You have my undying respect for not quietly giving up, even after being dumped on for so very long. Cheers to you, and I hope your next business doesn't randomly combust, or something.
It can be intensely frustrating dealing with some of the people I've dealt with, but all in all I enjoy roughly the same quality of life that many Valley billionaires do, even if I don't have the paper billions. In that regard I'm quite lucky.
I'm all in favor of regulations to prevent outright theft and fraud of a great deal of the public's money with no accountability. Gift card companies are repeatedly defrauding the public. Money transfer companies are repeatedly defrauding the public. Bitcoin gateways are repeatedly defrauding the public. I don't give a shit if you think the Man is keeping you down; you're trying to put your business risk (and perhaps your actual intent to defraud, but ABSOLUTELY your business risk) onto the public, and for some reason you think you're entitled to do so.
Your business risk ought to be borne by you, which means requiring you to get a big fat surety bond before you start handling large amounts of public money, so that when you fuck up your company (or intentionally bail with all their cash), the public isn't left holding the bag for you. Too damn bad.
Surety bonds only cover the licensed companies. Consumers are still at considerable risk as long as not everyone has a license. And usually the fraudsters aren't the first in line at the DFI with all of the required forms and audits.
Does FaceCash have a legal team or are you doing this all on your own? I imagine you've researched every possible legal angle regarding the situation and you certainly don't need a law degree for that, but professionals could provide some additional insights, just from work experience (e.g. what happens in situations with other similar regulations and stupidity). Having practiced tax law in the past (three years in NY), I know that how certain things work in that field that you can't pick up from reading statutes or cases.
Given that you've gotten the exemption for doing business in other states, are you back to building out your business with the exception of in California? At some point, you've got to move on and do what's best for FaceCash even if that means not completely righting the wrong - unfortunately, incompetence and bureaucracy may be able to stand much longer than you can afford to fight.
Since I only got the go-ahead to continue operating outside of CA as of October 13th, I'm starting to think about building things up again.
The guy displays shockingly poor decision-making. Why would I (as a prospective customer) want to do business with a company that didn't do basic research into the regulatory environment of its target market?
The point of the capitalization requirement is not to inhibit startups -- rather, the point is to make sure that someone who wants to launch a business handling other people's money puts at least some thought into it. In this case, the Aaron guy appears not to have put any thought into it at all, and is now blaming everyone else for his mistakes.
In this particular case, the point of the capitalization requirement actually is to inhibit new businesses. There are much better ways to assess risk, such as taking into account the actual involvement of credit, investments, and anti-fraud measures.
Here, and at the intended recipients as well. "I invented Facebook" being thrown in to a formal letter is likely to drop it into the crank file (as will the "this guy also filed a bunch of complaints against colleges for having meal plans").
Worst case, you might have to say "Sorry, we can't accept customers from California, because those customers might be breaking the law in their own state", and you only need to do that if the law penalizes customers and not just the businesses serving those customers.
Now, if you do business within a state with no such laws and another state claims regulatory authority over your business, or if some federal regulation attempts to enforce this ridiculosity, then by all means I'd suggest fighting that tooth and nail. A business should only have to deal with one vertical tower of authorities above them, not all the ones sideways of them too.
I'm suggesting that you could go somewhere that doesn't have their own crazy laws about this, and only bother fighting it if some other state tries to claim jurisdiction over you.
Looks like the head capo is Jacob Appelsmith:
jacob.appelsmith@abc.ca.gov [be polite!]
This is because American regulators intimidate the businesses they are regulating into silence. They have complete power over whether or not your products are approved, and criticizing them will piss them off and ensure that they sit on your application (at a minimum) or start finding various kinds of violations that they can cite you for.
That is, unless Mr. Appelsmith feels that the public and/or the press can (a) identify him by name and (b) do not support his actions. This is one of the vanishingly few scenarios in which a civil servant can actually lose their job, so they really hop to it[1].
During the whole process while you are waiting for approval you have zero revenue, and so it looks to all the world like you are just a loser and a whiner. In the biotech space this is why a lot of companies nowadays debut in Europe, so that they can say with some justification "well, we have a legit product but the FDA is holding it up". And because the threat of zero revenue for an arbitrarily long period of time means you might not make payroll, it's very unusual for someone to fight the power like Mr. Greenspan is doing. And he really could only do it as a one man software company without any employees that he needs to feed.
In a less sympathetic sector like oil or pharmaceuticals, or even just a slightly larger company of 100 employees, he loses the sympathy associated with a one man operation. At that point the regulators just go to the press and get them to write a story on what a terrible company this is for practicing without a license. Thereby justifying further regulation.
Basically, someone needs to stand up for what is right rather than just retreating. Mr. Greenspan is a pain in the ass in the same way the Don't Touch My Junk guy was. Everyone else tolerates these sorts of step by step encroachments on liberty till there is none left.
[1] Though afterwards they will hate FaceCash for all eternity and look to trip it up whenever possible, but Mr. Greenspan has no other cards to play at this point.
If anyone does choose to write to him, and I encourage everyone to do so, please be polite even if you are firm.
I have talked to just about all of the people on that list with an e-mail address ending in .gov. So they should be familiar with the issues, and they will probably be surprised to hear that the public cares.
Moving to Massachusetts now would be great until either A) The Money Services Round Table lobbied the Massachusetts legislature for a repeat of the "successful" regulations implemented in California, or B) we wanted to expand to large businesses to compete with Google Wallet and Visa. So it would be of limited benefit for a short while to move.
The "total with sales tax" button already does something different in every state.
And while I admire your goal to hit it out of the park with national retailers, from your "Where can I use FaceCash?" page (http://www.facecash.com/where.html), it looks like you were trying to grow the business with small local companies anyhow. If you moved the business to another state, you could at least get on with growing your business organically.
The better approach probably is to use a third party to prove the concept. No one has infiltrated the point-of-sale by offering to shave a few basis points off card processing.
This is exactly what not to do. But following maximusprime perspective, why not just leave the US and take your business to another more business friendly country (like it or leave it).
Aaron... don't stop complaining. Keep up the fight. It's not the government you are fighting but other humans that use the 'government' as a facade. The old folks don't understand the new kids... and they fear us for that. They fear change.
Keep fighting for us. Fight for the USER.
My advice - keep fighting the good fight by building and trialling your product in other states and countries. As unfair and unjust the law may be, there's no reason for you to sit "idle" when you could be building, growing and learning. If you're successful, it'll be all the easier to convince the state to license you.
Contrary to conventional wisdom, you can fight city hall but is that really where you want to spend your company's energy and time?
Turn your company into something so successful that CA offers you a tax break to move back here.
Winning is to convincing Congress to pre-empt state laws with a sensible federal regulatory system.
An entrepreneur should know how to problem-solve. MAKE IT WORK.
2. The waiver was only issued because he was embarrassing them in front of reporters.
3. The waiver does not cover intra-state operations, which would mean he would be unable to get early adopters from the most technology friendly place in the country. He would also be unable to demo the product in front of investors.
Do startups like WePay also face similar challenges?
WePay is an agent of The Bancorp Bank (because of laws like these), so they are exempt from most money transmission laws.
On the other hand, FC § 1827 makes it a crime for any entity to aid an organization that would otherwise require a license. So who knows what's going on there.
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin...
Aaron is doing the right thing.
From what I've heard they're totally dysfunctional internally. Also, every time you add a middleman, the price of your product goes up. We can charge 1.5% flat per transaction because there are no middlemen. We run the whole network.
A benevolent banking startup could do a lot of things to really help consumers, and they could do them EASILY with what we have in place now. They could implement reasonable and sustainable fee structures and they could set account transactions up such that fees are avoided instead of maximized. Big banking wants to keep things right where they are, of course; if they could possibly get a fee out of you based on your account's activity, they are going to do everything possible to make sure that things execute in such a way that that activity occurs: arbitrary holds and delays on checks, manipulation of transaction post orders, intentionally confusing account summaries ("account balance" and "available balance", and sometimes worse), nickel-and-dimed on fees for normal usage ("0.50 analysis fee", "5.00 new card fee", "5.00 maintenance fee", and soon, "5.00 debit card fee"), and many, many other things all collude to create a horrible experience for the end user.
"Front banks" like WePay, Braintree, or others, can't really do much about these processes and have to forward the BS received from the big banks on to their customers. You can create a pretty frontend, like BankSimple, but the reality is that you can't really make much of a change when you're subject to all of the same problems that your end users are already struggling to deal with every day.
AFAIK Bancorp is not particularly huge by contemporary standards. But I see only three alternatives to being an agent of a bank:
1. Be a money transferor
2. Be a bank yourself
3. Get the law changed
None of these is very easy to do. Being an agent of a bank could be the path of least resistance.
"What's with the Hebrew?
I've always liked languages (especially Hebrew), and the phrase on this web site translates to a kind of personal ethos: societal longevity through truth and innovation."
The grammar in the Hebrew does not seem to be correct. In Hebrew, nouns often precede adjectives. "Societal longevity" should properly be אריכות ימים חברתית.
My university's cafeteria linked student id cards with a debit system. To ensure cafeteria cashiers checked the cards' photos, "secret shoppers" would occasionally try to buy lunch with a card featuring a portrait of a friendly golden retriever. :)
The photo that matters for FaceCash is the one that is downloaded from the server onto the POS. The one on the phone is just for show, and cashiers are instructed to basically ignore it. So if you're a thief, you can't just put a JPEG of your thief-face next to someone else's barcode. The correct owner's face will still show up on the register.