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Comment by z9znz | Hacker News Reader

I have had limited but direct experience with CFTC (because of a cryptocurrency related project I did for a client), and I was not impressed.

In this case, CFTC came at us with claims that we were breaking rules and then required us to prove that we were not. Just looking at our website it was very clear what we were doing and what we were selling (education content), and there was not a hint of anything to suggest that we were selling investments or commodities. Even still, we had to give our corp attorney annotated screenshots of our website, illustrating exactly what our business was, and have that sent back to CFTC.

After doing so, we heard nothing back from them. They should have been satisifed by what we sent (presumably they were), but they didn't even both to say, "Ok, you may go."

The whole thing felt really arbitrary and amateur.

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> it was very clear what we were doing and what we were selling (education content), and there was not a hint of anything to suggest that we were selling investments or commodities

Lots of “educational” crypto content is thinly-veiled sales.

> we had to give our corp attorney annotated screenshots of our website, illustrating exactly what our business was

An attorney signing to your business being bona fide informational, and not one that e.g. profits from affiliate sales or coin drops, is material. What looks irrelevant at first glance is germane, at least for a regulator doing a first pass.

> they didn't even both to say, "Ok, you may go."

Not sure about commodities and futures, but for securities you may never go. You are always under force of jurisdiction, a set-up intentionally more intrusive than most American regulation.

>>they didn't even both to say, "Ok, you may go."

>Not sure about commodities and futures, but for securities you may never go.

Weird, the IRS didn't seem to have a problem notifying me when they were satisfied with my faxed explanation of a discrepancy they found. Maybe they're just unusually good at respecting their subjects as federal enforcement agencies go?

I'm not from US, but in my experience the tax office is a different agency compared to many others. They are happy if you are "honest taxpayer" so to say. Other agencies have different incentives.

"FTX" wasn't registered with the CFTC, only one of the 130 FTX-related entities was registered, specifically "FTX Derivatives US LLC".

…which until recently was 'LedgerX' (still its domain name), & wasn't part of the bankruptcy filing, seems to be operating normally, & has reassured customers their assets are, per its regulated processes, separately custodied (not with the unlicensed/offshore FTX).

So while it takes some time for these things to unravel – it could be the next domino to fall! – there is at least a plausible story that the actual CFTC-licensed entity here (fka LedgerX) was spared the theft & bankruptcy.

That would be a credit to the CFTC's regime, rather than the knock portrayed here.

(I believe that this spin comes from a advocacy group for maximal regulations, firing a salvo to support its factions in DC, taking advantage of confusion about which related but legally-distinct entities are licensed.)

This comment undermines the whole story and shows that bettermarkets isn't interested in reality, only pushing their agenda.

I think this experience could be replicated anywhere in the world. This type of agency (as well as tax offices) will pursue low-hanging fruit while overlooking more complex and critical situations. And the lack of actionable feedback really underscores their inefficiency.

> The whole thing felt really arbitrary and amateur.

Lack of domain knowledge + corruption + a lack of incentives to improve (because they are part of the government, it is difficult to hold them accountable for their claims)

Well, it's quite popular in the MLM scene to wrap investments into some type of educational material. I believe OneCoin did just that, you paid for education packages and then got tokens as a gift. Maybe that's what they were looking at.

> In this case, CFTC came at us with claims that we were breaking rules and then required us to prove that we were not. Just looking at our website it was very clear what we were doing and what we were selling (education content), and there was not a hint of anything to suggest that we were selling investments or commodities. Even still, we had to give our corp attorney annotated screenshots of our website, illustrating exactly what our business was, and have that sent back to CFTC.

Obviously I don't know the full story, but there really should be more diligence than just reading your website and taking your word for it, so I can't fault them just for requesting more information.

-1: this is often how regulatory bodies work. In particular, their non-response gives them better CYA in case there's malfeasance vs an explicit approval.

Then they are not good at regulating, are they not? A regulatory body should be able to say who they think is doing it wrong and who isn't.

Do you actually mean to say that a regulatory body should publish who they suspect is committing fraud or am I mis-reading your comment? Given they have a limited time to review select entities and a limited view into them, that would be an impossible feat, not to mention the legal liability if/when they were wrong.

As far as I can tell - FTX (at least international / not FTX.us) broke only 1 law - they broke their own terms and conditions :-

8.2.6 All Digital Assets are held in your Account on the following basis: (A) Title to your Digital Assets shall at all times remain with you and shall not transfer to FTX Trading ...

Excluding this stipulation, which they will be prosecuted for - what exactly the CFTC/SEC/NYSE/NASDAQ/Secret Service/DEA/Texas Rangers were meant to do about a company in the Bahamas is beyond me.

You mean the law(s) they broke involved stealing users assets? Reminder so, terms and conditions are not law nor is there any guarantee they hold up in court if challenged.

If their terms and conditions said "by depositing your assets on our exchange you are signing them over to us" then there would be no crime at all.

Terms and conditions aren't necessarily enforceable, and they really aren't necessarily enforceable when it comes to financial services, and they really really aren't necessarily enforceable when it comes to blatant fraud.

> Excluding this stipulation, which they will be prosecuted for - what exactly the CFTC/SEC/NYSE/NASDAQ/Secret Service/DEA/Texas Rangers were meant to do about a company in the Bahamas is beyond me.

The point is to look tough on crypto, so they can garner support for expanding budgets to deal with a new mandate. It's pure show.

Parent in context was saying the regulator should communicate to the party under investigation, not to the general public.

I think the problem is that, let’s say the police drives past your house and sees a pile of bodies.

Then they check on you and find you are a serial killer and arrest you.

Now, if you were smart and buried the bodies, is the police supposed to knock on your door and say: “Good job, keep doing what you are doing because you are obviously doing nothing wrong, as evidenced by the lack of bodies on your lawn.”

They don’t do that, they simply drive past and probably assume you’re honest but reserve judgement until later.

What does the -1 part of your comment mean and how does it relate to the rest?

He means he downvoted the comment. The original comment wasn't notable. I've also dealt with regulators and they primarily gather information and review it on their own.

Ok, odd to downvote a comment because you agree with it and then to go on to provide more support for why the comment is correct...

i think you're describing an agency whose members don't feel sure what they're even supposed to do.

many people i know (most engineers, but not all) would say it's a symptom of "big government", the parts that exist and pay unmotivated employees as to their mission.

(i find myself wondering almost off topic how this might or might not be analogous with small kernels and big kernels in operating systems.)

The problem with the CFTC is that they should just be merged with the SEC. The wall between the two is just an odd historical oddity.

that sounds too logical ! :)

seriously though, it's true, i realize, that the idea of refactoring doesn't happen well at government agency scale, does it?

Perhaps the trick is to donate to politicians who oversee these agencies...

But if you plan to do it guys, only do it when the fundraiser raising tens of millions happens to be your well-connected-to-the-elite mom, a lawyer and teacher at Stanford teaching tax laws!

With the Ryan Salame part of the donations they covered both parties.

Do you mind sharing a link to the website (which is selling education content)?

> illustrating exactly what our business was, and have that sent back to CFTC.

Could it be that they were collecting data from you to build models for future analysis? Instead of paying people to research companies, and enter data into a system, force 20% of all companies to provide this data regardless of suspicions of wrongdoing?

There's that saying "looks like a duck, quacks like a duck." Maybe they start from the position "I don't know what a duck looks like, or what it sounds like. I think you're a duck. What do you look like? What do you sound like?"

That's just a guess. I have experience working elsewhere in the federal government. They often just throw darts at the wall to prove they are doing their job. New management will take over a department, and want to demonstrate change of some kind. Don't try to attach any rational thought to these actions.

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