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It's nice to see action like this being taken in cases so blatantly fraudulent. One thing to take note of here is that the reason why the SEC is taking action i

by ve55 9y ago

It's nice to see action like this being taken in cases so blatantly fraudulent. One thing to take note of here is that the reason why the SEC is taking action is not simply because of reasons related to tokens or securities, but instead due to defrauding and lying to investors. Hopefully we'll see more cases like this happening to the actors that deserve them the most. I need not mention names since I think others will do that for me.

wpietri 9y ago
Agreed. I heard an ocean of hype about how freedom from regulation would unlock untold innovation. It's been fascinating to watch this space rediscover the reasons that the regulations were created in the first place. One of the interesting questions for me is the extent to which the space will start to self-regulate. Once an investment type develops a bad reputation, it can be very hard to recover. That's why major stock and commodities exchanges are serious about regulating participants, and can be much more stringent than governmental regulators. Contrast, for example, the way investors feel about NYSE or NASDAQ stocks, versus the penny stock market, which is rife with scams. [1] Based on the history so far I'm not optimistic. But maybe they'll turn it around. [1] https://en.wikipedia.org/wiki/Microcap_stock_fraud https://en.wikipedia.org/wiki/Microcap_stock_fraud
- nikcub 9y ago
  > It's been fascinating to watch this space rediscover the reasons that the regulations were created in the first place. I've found that ICO's are almost identical to OTC pump and dumps - they're much less sophisticated versions of the same thing Opportunities that are marketed as investments first, products second. Website homepages that resemble the "investors" section of ordinary website with no actual "product" presence. Vague products in markets that are easy to obfuscate or fake. Affiliations that can be purchased. High profile board members or investors who can be purchased. Social media footprint where people talking about the stock outnumber customers, etc. If you've spent any time in Yahoo! message boards or Seeking Alpha looking at the hundreds of reverse-IPO's and pink sheet startups you'll recognize all of the same scams (and some of the same names! cough McAfee cough-cough)
  - TheSpiceIsLife 9y ago
    I'm only a casual observer of the financial realm, and thusly hadn't heard of a reverse-IPO. A reverse takeover or reverse merger takeover (reverse IPO) is the acquisition of a public company by a private company so that the private company can bypass the lengthy and complex process of going public. 1. https://en.wikipedia.org/wiki/Reverse_takeover https://en.wikipedia.org/wiki/Reverse_takeover
  - beager 9y ago
    This is why the hype typhoon of ICOs makes no sense on HN. If you did a "Show HN" with a site that was all pedigree and vagaries, no product, it would get torn to shreds. But by and large, ICO coverage seems breathless and overblown. It's nice to see the SEC take a more active role though. Maybe they can be a decent enough filter where the ICO world can grow enough trust to be a legitimate vehicle for investing.
- CryptoPunk 9y ago
  >>It's been fascinating to watch this space rediscover the reasons that the regulations were created in the first place. There are no regulations needed to go after fraudsters. If someone is committing fraud, they can be prosecuted under common law. So this space is not rediscovering anything. Everyone supports fraud being prosecuted. What everyone doesn't support is the creation of a centralized gatekeeper and a preemptive blanket ban on an entire category of digital value/information exchange, that is only lifted on a case-by-case basis if one is approved/registered by/with that gatekeeper. In other words, people oppose a law being passed to treat non-security tokens the way securities are treated now. That would be disastrous for personal freedom and economic evolution.
  - wpietri 9y ago
    > There are no regulations needed to go after fraudsters. If someone is committing fraud, they can be prosecuted under common law. This is apparently written from theory, not from data. Actual successful financial marketplaces, like the ones I named, have much more stringent regulations than that. Why? Because waiting for a fraud to blow up and then hoping the police can crack down on it is immensely damaging. Not only to the people who get suckered, but to everybody who hopes to use the marketplace. Think of it like food safety laws. In theory, the marketplace would take care of this, driving unsafe restaurants out of business through the magic of the invisible hand (plus a lot of visible vomiting from food poisoning). In practice, though, everybody supports food inspectors, food safety ratings, etc. Even restaurant owners, because they want people to not even think about safety. A trusted, regulated marketplace benefits all sincere participants. > What everyone doesn't support is the creation of a centralized gatekeeper [...] Sure. And we'll see how that works out. Historically, gatekeeping behavior both from regulators like the CFTC and the SEC and from marketplaces like the NYSE and NASDAQ arose in response to problems. It's not something people just made up. Now that the same problems are happening here, I expect there will be some response. Partly, it is regulators coming along and applying existing financial laws. Partly, it will be investors abandoning the whole asset class. But there's also room for the industry to self-regulate. Will the antiregulatory fetish, as typified by your response, win out? Or will, as often happens with other industries, some self-regulation happen? I look forward to finding out.
- rapind 9y ago
  I wonder though if this wasn't regulated wouldn't it eventually become just a filtering / spam problem that the market would solve? There'd be significant damage early on. Then buyers notice and the demand for a private sector solution would emerge. Like how email is mostly unregulated and yet it works remarkably well.
  - wpietri 9y ago
    Email works reasonably well because a) we can afford to burn computational resources, b) spamming is not very lucrative, and c) we can hide the impact from end users. Looking at my mail logs, 96% of recent mail on my server is spam. Sampling what I get, it's mostly incredibly dumb-ass garbage, built to take mostly small amounts of money from very unsophisticated people. Nobody is getting rich off it, partly because spamming is illegal and they will put you in jail [1] for it if you do it at large enough scales to make real money. Most importantly, end users don't see the spam, so they don't even know how terrible the medium is. For financial markets, the way it gets solved in the real world is mostly by investors moving to better markets, ones that are strongly regulated. And it's not just investors. Companies will list on highly regulated markets like the NYSE and the NASDAQ as shows of strength and as ways of tapping the more available, less expensive capital that comes from trust. So my bet is that the market will solve it by driving entire marketplaces or kinds of assets out of business. [1] e.g., https://www.theverge.com/2016/6/16/11952266/sanford-wallace-spam-king-jail-sentence https://www.theverge.com/2016/6/16/11952266/sanford-wallace-...
- vkou 9y ago
  > Agreed. I heard an ocean of hype about how freedom from regulation would unlock untold innovation. It's been fascinating to watch this space rediscover the reasons that the regulations were created in the first place. I have yet to see any crypto-coin-fueled innovations that solved real world problems. I have seen a lot of crypto-coin-fueled innovation in making more money with crypto-coins and their derivatives.

by ve55 9y ago

wpietri 9y ago

Agreed. I heard an ocean of hype about how freedom from regulation would unlock untold innovation. It's been fascinating to watch this space rediscover the reasons that the regulations were created in the first place. One of the interesting questions for me is the extent to which the space will start to self-regulate. Once an investment type develops a bad reputation, it can be very hard to recover. That's why major stock and commodities exchanges are serious about regulating participants, and can be much more stringent than governmental regulators. Contrast, for example, the way investors feel about NYSE or NASDAQ stocks, versus the penny stock market, which is rife with scams. [1] Based on the history so far I'm not optimistic. But maybe they'll turn it around. [1] https://en.wikipedia.org/wiki/Microcap_stock_fraud https://en.wikipedia.org/wiki/Microcap_stock_fraud

nikcub 9y ago
> It's been fascinating to watch this space rediscover the reasons that the regulations were created in the first place. I've found that ICO's are almost identical to OTC pump and dumps - they're much less sophisticated versions of the same thing Opportunities that are marketed as investments first, products second. Website homepages that resemble the "investors" section of ordinary website with no actual "product" presence. Vague products in markets that are easy to obfuscate or fake. Affiliations that can be purchased. High profile board members or investors who can be purchased. Social media footprint where people talking about the stock outnumber customers, etc. If you've spent any time in Yahoo! message boards or Seeking Alpha looking at the hundreds of reverse-IPO's and pink sheet startups you'll recognize all of the same scams (and some of the same names! cough McAfee cough-cough)
- TheSpiceIsLife 9y ago
  I'm only a casual observer of the financial realm, and thusly hadn't heard of a reverse-IPO. A reverse takeover or reverse merger takeover (reverse IPO) is the acquisition of a public company by a private company so that the private company can bypass the lengthy and complex process of going public. 1. https://en.wikipedia.org/wiki/Reverse_takeover https://en.wikipedia.org/wiki/Reverse_takeover
- beager 9y ago
  This is why the hype typhoon of ICOs makes no sense on HN. If you did a "Show HN" with a site that was all pedigree and vagaries, no product, it would get torn to shreds. But by and large, ICO coverage seems breathless and overblown. It's nice to see the SEC take a more active role though. Maybe they can be a decent enough filter where the ICO world can grow enough trust to be a legitimate vehicle for investing.
CryptoPunk 9y ago
>>It's been fascinating to watch this space rediscover the reasons that the regulations were created in the first place. There are no regulations needed to go after fraudsters. If someone is committing fraud, they can be prosecuted under common law. So this space is not rediscovering anything. Everyone supports fraud being prosecuted. What everyone doesn't support is the creation of a centralized gatekeeper and a preemptive blanket ban on an entire category of digital value/information exchange, that is only lifted on a case-by-case basis if one is approved/registered by/with that gatekeeper. In other words, people oppose a law being passed to treat non-security tokens the way securities are treated now. That would be disastrous for personal freedom and economic evolution.
- wpietri 9y ago
  > There are no regulations needed to go after fraudsters. If someone is committing fraud, they can be prosecuted under common law. This is apparently written from theory, not from data. Actual successful financial marketplaces, like the ones I named, have much more stringent regulations than that. Why? Because waiting for a fraud to blow up and then hoping the police can crack down on it is immensely damaging. Not only to the people who get suckered, but to everybody who hopes to use the marketplace. Think of it like food safety laws. In theory, the marketplace would take care of this, driving unsafe restaurants out of business through the magic of the invisible hand (plus a lot of visible vomiting from food poisoning). In practice, though, everybody supports food inspectors, food safety ratings, etc. Even restaurant owners, because they want people to not even think about safety. A trusted, regulated marketplace benefits all sincere participants. > What everyone doesn't support is the creation of a centralized gatekeeper [...] Sure. And we'll see how that works out. Historically, gatekeeping behavior both from regulators like the CFTC and the SEC and from marketplaces like the NYSE and NASDAQ arose in response to problems. It's not something people just made up. Now that the same problems are happening here, I expect there will be some response. Partly, it is regulators coming along and applying existing financial laws. Partly, it will be investors abandoning the whole asset class. But there's also room for the industry to self-regulate. Will the antiregulatory fetish, as typified by your response, win out? Or will, as often happens with other industries, some self-regulation happen? I look forward to finding out.
rapind 9y ago
I wonder though if this wasn't regulated wouldn't it eventually become just a filtering / spam problem that the market would solve? There'd be significant damage early on. Then buyers notice and the demand for a private sector solution would emerge. Like how email is mostly unregulated and yet it works remarkably well.
- wpietri 9y ago
  Email works reasonably well because a) we can afford to burn computational resources, b) spamming is not very lucrative, and c) we can hide the impact from end users. Looking at my mail logs, 96% of recent mail on my server is spam. Sampling what I get, it's mostly incredibly dumb-ass garbage, built to take mostly small amounts of money from very unsophisticated people. Nobody is getting rich off it, partly because spamming is illegal and they will put you in jail [1] for it if you do it at large enough scales to make real money. Most importantly, end users don't see the spam, so they don't even know how terrible the medium is. For financial markets, the way it gets solved in the real world is mostly by investors moving to better markets, ones that are strongly regulated. And it's not just investors. Companies will list on highly regulated markets like the NYSE and the NASDAQ as shows of strength and as ways of tapping the more available, less expensive capital that comes from trust. So my bet is that the market will solve it by driving entire marketplaces or kinds of assets out of business. [1] e.g., https://www.theverge.com/2016/6/16/11952266/sanford-wallace-spam-king-jail-sentence https://www.theverge.com/2016/6/16/11952266/sanford-wallace-...
vkou 9y ago
> Agreed. I heard an ocean of hype about how freedom from regulation would unlock untold innovation. It's been fascinating to watch this space rediscover the reasons that the regulations were created in the first place. I have yet to see any crypto-coin-fueled innovations that solved real world problems. I have seen a lot of crypto-coin-fueled innovation in making more money with crypto-coins and their derivatives.