It's a shame. How much did the SEC spend chasing an unfunded startup?
EDIT: I don't expect to stem the downvotes, but the SEC's time is better spent policing large-scale financial crime. Consider the opportunity cost here.
EDIT: I don't expect to stem the downvotes, but the SEC's time is better spent policing large-scale financial crime. Consider the opportunity cost here.
Furthermore, at what point does it suddenly become OK to chase after a financial security law violation? Is there a valuation limit? Cash flow limit? War chest limit? What exactly is the qualification to no longer be "a shame"?
The reality is that there is a point at which it is no longer OK to chase after a securities law violation. This is why the SEC doesn't go after PE firms that aggressively use carried interest (e.g. a partner puts his salary into the fund and later _only_ pays long term capital gains on his redemptions). There's _too_ much at stake in those cases so the SEC backs off.
Where do you think SEC staff go after they leave the SEC, and what do you think they make there? The SEC makes those enforcement actions against major banks that it _has_ to. The other stuff gets quietly dealt with.
The SEC cannot allow something like this to operate with cash at play, but the whole thing should have been cleared up with a couple of visits and phone calls.
How much do you think it cost them to go after Sand Hill?
Squashing tiny companies might make them feel better, but it's not impactful. Going after companies defrauding investors / playing it fast and loose for millions is how you clean up finance.
Putting out big fires like that is a good -- but expensive -- way to grab headlines, sure. Something the SEC definitely needs to do to the extent it can.
Dealing with small things like a little market that lets you bet real money on company valuations in a market with deliberately falsified trade histories is how you prevent something from becoming one of those big fires, relatively cheaply for all involved, and before lots of people get hurt by it. Also an important thing for the SEC to do.
The SEC has limited resources. I think the grandparent is questioning whether this is the best use of them.
I mean just juxtapose this (from the article):
"For added credibility, we randomly generated trading histories for each company going all the way back to last year.....
We pasted descriptive text cribbed from the websites of banks and registered exchanges to make our website look like a serious business."
Source: https://medium.com/@eiaine/how-startup-growth-hacks-resulted...
With what Ivanplenty said in this thread:
"'Sand Hill Exchange' accepted items of real value (USD and BC) that could be used to 'purchase' (or bet on) things named after real securities that trade (or are expected to trade) on public markets for a profit."
(Source https://news.ycombinator.com/item?id=9642353)
What a scary world if the SEC didn't shut these guys down with a slap on the wrist! (Assuming Ivanplenty is correct and they monetized as he stated.)
I mean they are literally inventing trading histories and collecting bitcoins and dollars to trade on them. That's the kind of market that sends real investors scurrying away from it, and I'm glad the SEC protects investors from that happening, by simply shutting it down. It is positively a good thing. (Also, the history of investor protection is because snake-oil salesmen really did take advantage of investors, selling them the clear blue sky:
http://en.wikipedia.org/wiki/Blue_sky_law
So it's not like this is some theoretical thing. The problem happened first, and the solution simply solved it. There are a lot of areas where the legal system can improve, but the existence itself of the SEC and the fact that it shut this exchange down is not one of them. This is absolutely warranted and called-for. Yes, you need to register if you want to do this type of thing, and you need to play by the rules.)
See eg Coinbase's comments on the BitLicense. There's an opportunity to move fintech forward in the US, and actions like this- regulators trying to pad their resume- are stifling.
At that point, it's no longer a funny joke.
As long as they weren't actively making misleading or fraudulent claims (e.g., leading users to believe they were actually investing in the companies), they should've been left alone.
And by the way, a lot of people make money off of jokes. [1]
Oh, ok.
That's one of the best euphemisms for 'fraudster' I've ever seen.
> As long as they weren't actively making misleading or fraudulent claims
Did you read the article?
You should probably correct your own announcement, then, since you say "when we pushed aggressively to monetize we received a cease and desist from the SEC".
Allowing people to use their own money without trying to keep any of it isn't "monetizing" as that term is usually used of a service.
> We created bots to trade against incoming orders. They were like my friends. I even named them! My favorite was the “Jesse Livermore” bot. Opportunistic to a fault.
> The bots would run every day and place orders against each other so the market looked like it was exhibiting lots of price movement and volume. For added credibility, we randomly generated trading histories for each company going all the way back to last year. So we had historical price and volume in addition to streaming quotes for chart data.
and by then letting people speculatively place their own money into the already unbalanced and illegal equation, you somehow managed to wipe your hands of any responsibility for their actions?
What in god's name are you smoking? You got off easy with a 20k fine. You belong in prison.
In fact, its amazing they continue to run the site, even without accepting money, creating 'fake' data and fake investors to show fake growth of something tied to a real security (you can still trade private stock), is inviting a shit tonne of legal hassles.
"Oh hey, here's a list of private startup stock I own, can you please create some fake data to show a huge interest on your site so I can drive the private sale price and generate some sales?"
An unfunded startup seems like a big win for a department which can't enforce anything helpful for the average citizen.
Well, lets check that by looking at the SEC Enforcement Division webpage [0], and a couple of the news for the past week:
* Merrill Lynch Admits Using Inaccurate Data for Short Sale Orders, Agrees to $11 Million Settlement [1]
* SEC Charges Deutsche Bank With Misstating Financial Reports During Financial Crisis [2]
[0] http://www.sec.gov/enforce
Not exactly supporting your case, also, FWIW-- I'm fairly well versed in this as my major was economics with an emphasis on finance. I spent many, many months (years) of my life doing this sort of analysis. Please next time don't rush for an anecdotal example and perhaps you'll learn something in the process, eh?
Profits are misleading. Revenue is not; in the market they must meet epectations which are not monetarily equal to, or even representative of, their tax obligations (payments).
Profits are dependent on tax laws, costs (factored in or not), and revenue. Revenue is a number. Revenue is objective. I.e. Profit is more malleable than revenue.
I find it unfortunate that we live in such a world where stark "realness" is needed, but thems the breaks.
Imagine you arrested a millionaire for some petty theft like stealing a $100 watch (which is the sort of thing that happens sometimes). Well it'd be appropriate to give a short jail spell or fine the person a few hundred or even a few thousand dollars, depending on the circumstances. But not to fine the person $500,000 just because s/he happened to be a millionaire and could easily have afforded it. Proportionality is a two-way street.
Of course, I am not saying that the system is necessarily fair, just that we should try to critique it using a meaningful context rather than an emotional one.
It's like speeding tickets, a speeding ticket isn't a deterrent if you can continue to pay the cost. It simply punishes those whose marginal income is deeply affected by the cost of the ticket, in essence it deters the poor(est).
The perpetrator in your case, should be charge $500,000 because he has more than enough money to not steal. How Finland deals with speed tickets comes to mind as the correct approach:
http://www.theatlantic.com/business/archive/2015/03/finland-...
Why? You couldn't let out loans as a bank at all if you had to maintain 100% reserves.
Plus how would you possibly enforce that? I can't lend my brother $100 with the promise to pay it back now?
Nor do they "make up" money. They have the money when they lend it out, it comes from the "fractional reserve" that they are required to have, or cash assets above and beyond that.
Likewise I could personally loan out money up to the amount of money I have, even with fractional banking, but I couldn't loan out money up to my entire net worth, as it's not all liquid.