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I'm flabbergasted by how much disinformation is infecting this threat. If you look at the list of legal actions the SEC has pursued at the bottom of the article

by cal5k 9y ago

I'm flabbergasted by how much disinformation is infecting this threat. If you look at the list of legal actions the SEC has pursued at the bottom of the article, they are all flagrant violations of securities law and clearly unethical practices. For example, in "SEC v. Jon E. Montroll and Bitfunder", the individual in question was accepting "investments" in his exchange that were clearly securities (probably fitting the definition of a public offering). He also failed to report a massive theft of Bitcoin and misappropriated customer funds. This guidance does not claim that Bitcoin or Ethereum are securities. This is the birth of a new industry. It's unregulated, messy, and the massive amounts of money involved have invited all manner of fraudsters and scam artists - just like the stock market did 100 years ago. There will be a regulatory shakeout and we can all hopefully get back to the business of building a useful ecosystem.

deleted 9y ago
[deleted]
toomim 9y ago
That list at the bottom is not exhaustive! It's just a few enforcement actions that the SEC wants you to read. They also do worse things. For instance, the SEC threatened to prosecute the DAO [1], which was certainly not a "clear unethical practice", or "flagrant violation" of securities law -- just a bunch of people voluntarily putting their money into a pool to vote on what to do with it. They could even withdraw their money at any time. [1] https://www.sec.gov/litigation/investreport/34-81207.pdf https://www.sec.gov/litigation/investreport/34-81207.pdf
- cal5k 9y ago
  "The Commission has determined not to pursue an enforcement action in this matter based on the conduct and activities known to the Commission at this time" I mean... it sounds to me like they did their due diligence. The PDF contains an in-depth look at how existing securities law intersects with what this group was doing. That's exactly what the SEC is supposed to do. DAOs are new and unfamiliar. They looked at what was going on and decided not to pursue further action. That seems quite reasonable to me.
  - toomim 9y ago
    No no, what happened is the DAO imploded on its own a whole year before the SEC even looked at it. The DAO was hacked in June of 2016, and the SEC didn't release that article until July of 2017. https://en.wikipedia.org/wiki/The_DAO_(organization) https://en.wikipedia.org/wiki/The_DAO_(organization) When the SEC says: > The Commission has determined not to pursue an enforcement action in this matter based on the conduct and activities known to the Commission at this time What they mean is: > We chose not to beat a dead horse, because it's already dead.
    - cal5k 9y ago
      I don't see why that matters. They clarified that DAO tokens are securities but decided not to pursue any action for a number of reasons, one of which being (and they've stated this elsewhere) that prior to their clarification there was ambiguity on this issue. The tl;dr is that they are clearly securities under existing law. Now that the SEC has clarified that fact companies are free to issue Tokens if they comply with the law.
    - JumpCrisscross 9y ago
      > When the SEC says...what they mean is: we chose not to beat a dead horse, because it's already dead The SEC charged Bernie Madoff's auditors after the scheme had been revealed [1]. In respect of the DAO, the SEC appears to be taking a "wait and see" approach. (With ICOs, on the other hand, we've seen enough.)
      - overdrivetg 9y ago
        [1] http://www.businessinsider.com/sec-charges-madoff-auditor-with-fraud-too-2009-3 http://www.businessinsider.com/sec-charges-madoff-auditor-wi...
  - tptacek 9y ago
    Again: what you can say with authority is that they decided not to pursue action at that time. You have no idea what their future plans are.
tptacek 9y ago
This comment is written as if it says something important, but really doesn't say anything at all. It would be monumentally newsworthy if there was clear guidance that Bitcoin and Ethereum "weren't securities" (more generally: that businesses that simply deal in Bitcoin were generally outside the purview of securities regulation). But we do not in fact know that right now. No expert believes that you can look at the list of current enforcement actions and reliably predict the SEC's next actions. They could keep taking out scammers for the next several years, getting practice by picking out the low-hanging fruit. Or, they could at literally any moment come down like a ton of bricks on the industry's most mainstream participants. We simply don't know. What we do know is that "coin-mediated" finance is enabling thousands of people to launch investment-driven businesses who would previously not have been able to do that before, not because of a lack of technical ability but because the laws made it prohibitively expensive. Those laws have not been repealed. A lot of reasonable people are waiting for the other shoe to drop.
- simik 9y ago
  Now we need a decentralized SEC, or some sort of crypto/ICO-centric auditors.
  - aje403 9y ago
    Exactly - Quis custodiet ipsos custodes? Perhaps we can tap the Winklevii's expertise to audit the SEC for malfeasance
  - jerf 9y ago
    The problem is that you need a decentralized SEC, that somehow obviates the existing SEC, and all other similar government-empowered agencies all around the world. Good luck with that. You've got a long road to hoe just to convince people that's a good idea; it certainly isn't obvious to me. Without that power inevitably just collapses back to the central authority for all kinds of reasons. (Many of which are the reason why the stable solution in the existing economy is indeed the existence of a distinct SEC.)
- cal5k 9y ago
loceng 9y ago
How can something structured as a Pyramid-Ponzi scheme be considered a legitimate new industry? I've yet to see anyone address - while referencing the Pyramid-Ponzi structures of the most popular crypto-assets - and give reason as to why this is okay (when traditional Ponzi schemes are not legal, and for good reason).
- flowctrl 9y ago
  Here you go. This chart breaks down the differences between Pyramid schemes, Ponzi schemes, and open public cryptocurrencies such as Bitcoin. By "open public" I mean that there is no central authority or organization. Bitcoin is a decentralized open source project run by community participation (anyone can run a node or miner, and millions of people do). https://i.redd.it/6zz58uq57n601.png https://i.redd.it/6zz58uq57n601.png
patrickaljord 9y ago
I think the concept of accredited investor needs to go away though. Why should only the super rich be able to invest in risky ventures? Why do I see so many on the left supporting these regulations that only favour the super rich? I'm not just talking about crypto-currencies but any venture really, since the internet at least, anyone with an internet connection should be free to invest as they want. I'm personally not into ICOs or gambling in general but if that's your thing you should be able to do so.
- vkou 9y ago
  > Why should only the super rich be able to invest in risky ventures? The poor can easily invest in a risky venture. Buy into an index fund.
- Sangermaine 9y ago
  >I think the concept of accredited investor needs to go away though. Why should only the super rich be able to invest in risky ventures? Because they can afford to take the hit if the investment fails.
  - CryptoPunk 9y ago
    People should be free to take financial risks. There's currently nothing stopping people from investing everything into a small business, or blowing it all at the casinos or on lottery tickets. There's no justification for singling out securities and limiting people's right to invest their money in them.
  - beiller 9y ago
    When I first read your comment I agreed, however as I think about it, this type of regulation prevents lower income people from transitioning to a different class. I'd say the funding spent on this type of regulation would be better spent on social safety nets.
- s73v3r_ 9y ago
  Because the rich can afford to lose.
JustAnotherPat 9y ago
SEC is pursuing investigation of Tezos. Hardly flagrant as you term it. In fact, by the book token.
- mbgaxyz 9y ago
  Source?
  - JustAnotherPat 9y ago
    https://cointelegraph.com/news/sec-refuses-request-for-information-on-disputed-tezos-ico-in-ongoing-lawsuit https://cointelegraph.com/news/sec-refuses-request-for-infor... >"This exemption protects from disclosure records compiled for law enforcement purposes, the release of which could reasonably be expected to interfere with enforcement activities. Since Exemption 7(A) protects the records from disclosure, we have not determined if other exemptions apply. Therefore, we reserve the right to assert other exemptions when Exemption 7(A) no longer applies,"
    - mbgaxyz 9y ago
      Hmm, also this: https://www.coindesk.com/cryptos-biggest-icos-stay-silent-sec-subpoenas/ https://www.coindesk.com/cryptos-biggest-icos-stay-silent-se...

by cal5k 9y ago

deleted 9y ago

[deleted]

toomim 9y ago

That list at the bottom is not exhaustive! It's just a few enforcement actions that the SEC wants you to read. They also do worse things. For instance, the SEC threatened to prosecute the DAO [1], which was certainly not a "clear unethical practice", or "flagrant violation" of securities law -- just a bunch of people voluntarily putting their money into a pool to vote on what to do with it. They could even withdraw their money at any time. [1] https://www.sec.gov/litigation/investreport/34-81207.pdf https://www.sec.gov/litigation/investreport/34-81207.pdf

cal5k 9y ago
"The Commission has determined not to pursue an enforcement action in this matter based on the conduct and activities known to the Commission at this time" I mean... it sounds to me like they did their due diligence. The PDF contains an in-depth look at how existing securities law intersects with what this group was doing. That's exactly what the SEC is supposed to do. DAOs are new and unfamiliar. They looked at what was going on and decided not to pursue further action. That seems quite reasonable to me.
- toomim 9y ago
  No no, what happened is the DAO imploded on its own a whole year before the SEC even looked at it. The DAO was hacked in June of 2016, and the SEC didn't release that article until July of 2017. https://en.wikipedia.org/wiki/The_DAO_(organization) https://en.wikipedia.org/wiki/The_DAO_(organization) When the SEC says: > The Commission has determined not to pursue an enforcement action in this matter based on the conduct and activities known to the Commission at this time What they mean is: > We chose not to beat a dead horse, because it's already dead.
  - cal5k 9y ago
    I don't see why that matters. They clarified that DAO tokens are securities but decided not to pursue any action for a number of reasons, one of which being (and they've stated this elsewhere) that prior to their clarification there was ambiguity on this issue. The tl;dr is that they are clearly securities under existing law. Now that the SEC has clarified that fact companies are free to issue Tokens if they comply with the law.
  - JumpCrisscross 9y ago
    > When the SEC says...what they mean is: we chose not to beat a dead horse, because it's already dead The SEC charged Bernie Madoff's auditors after the scheme had been revealed [1]. In respect of the DAO, the SEC appears to be taking a "wait and see" approach. (With ICOs, on the other hand, we've seen enough.)
    - overdrivetg 9y ago
      [1] http://www.businessinsider.com/sec-charges-madoff-auditor-with-fraud-too-2009-3 http://www.businessinsider.com/sec-charges-madoff-auditor-wi...
- tptacek 9y ago
  Again: what you can say with authority is that they decided not to pursue action at that time. You have no idea what their future plans are.

tptacek 9y ago

This comment is written as if it says something important, but really doesn't say anything at all. It would be monumentally newsworthy if there was clear guidance that Bitcoin and Ethereum "weren't securities" (more generally: that businesses that simply deal in Bitcoin were generally outside the purview of securities regulation). But we do not in fact know that right now. No expert believes that you can look at the list of current enforcement actions and reliably predict the SEC's next actions. They could keep taking out scammers for the next several years, getting practice by picking out the low-hanging fruit. Or, they could at literally any moment come down like a ton of bricks on the industry's most mainstream participants. We simply don't know. What we do know is that "coin-mediated" finance is enabling thousands of people to launch investment-driven businesses who would previously not have been able to do that before, not because of a lack of technical ability but because the laws made it prohibitively expensive. Those laws have not been repealed. A lot of reasonable people are waiting for the other shoe to drop.

simik 9y ago
Now we need a decentralized SEC, or some sort of crypto/ICO-centric auditors.
- aje403 9y ago
  Exactly - Quis custodiet ipsos custodes? Perhaps we can tap the Winklevii's expertise to audit the SEC for malfeasance
- jerf 9y ago
  The problem is that you need a decentralized SEC, that somehow obviates the existing SEC, and all other similar government-empowered agencies all around the world. Good luck with that. You've got a long road to hoe just to convince people that's a good idea; it certainly isn't obvious to me. Without that power inevitably just collapses back to the central authority for all kinds of reasons. (Many of which are the reason why the stable solution in the existing economy is indeed the existence of a distinct SEC.)
cal5k 9y ago

loceng 9y ago

How can something structured as a Pyramid-Ponzi scheme be considered a legitimate new industry? I've yet to see anyone address - while referencing the Pyramid-Ponzi structures of the most popular crypto-assets - and give reason as to why this is okay (when traditional Ponzi schemes are not legal, and for good reason).

flowctrl 9y ago
Here you go. This chart breaks down the differences between Pyramid schemes, Ponzi schemes, and open public cryptocurrencies such as Bitcoin. By "open public" I mean that there is no central authority or organization. Bitcoin is a decentralized open source project run by community participation (anyone can run a node or miner, and millions of people do). https://i.redd.it/6zz58uq57n601.png https://i.redd.it/6zz58uq57n601.png

patrickaljord 9y ago

I think the concept of accredited investor needs to go away though. Why should only the super rich be able to invest in risky ventures? Why do I see so many on the left supporting these regulations that only favour the super rich? I'm not just talking about crypto-currencies but any venture really, since the internet at least, anyone with an internet connection should be free to invest as they want. I'm personally not into ICOs or gambling in general but if that's your thing you should be able to do so.

vkou 9y ago
> Why should only the super rich be able to invest in risky ventures? The poor can easily invest in a risky venture. Buy into an index fund.
Sangermaine 9y ago
>I think the concept of accredited investor needs to go away though. Why should only the super rich be able to invest in risky ventures? Because they can afford to take the hit if the investment fails.
- CryptoPunk 9y ago
  People should be free to take financial risks. There's currently nothing stopping people from investing everything into a small business, or blowing it all at the casinos or on lottery tickets. There's no justification for singling out securities and limiting people's right to invest their money in them.
- beiller 9y ago
  When I first read your comment I agreed, however as I think about it, this type of regulation prevents lower income people from transitioning to a different class. I'd say the funding spent on this type of regulation would be better spent on social safety nets.
s73v3r_ 9y ago
Because the rich can afford to lose.

JustAnotherPat 9y ago

SEC is pursuing investigation of Tezos. Hardly flagrant as you term it. In fact, by the book token.

mbgaxyz 9y ago
Source?
- JustAnotherPat 9y ago
  https://cointelegraph.com/news/sec-refuses-request-for-information-on-disputed-tezos-ico-in-ongoing-lawsuit https://cointelegraph.com/news/sec-refuses-request-for-infor... >"This exemption protects from disclosure records compiled for law enforcement purposes, the release of which could reasonably be expected to interfere with enforcement activities. Since Exemption 7(A) protects the records from disclosure, we have not determined if other exemptions apply. Therefore, we reserve the right to assert other exemptions when Exemption 7(A) no longer applies,"
  - mbgaxyz 9y ago
    Hmm, also this: https://www.coindesk.com/cryptos-biggest-icos-stay-silent-sec-subpoenas/ https://www.coindesk.com/cryptos-biggest-icos-stay-silent-se...