9 ms·
Renaissance executives agree to pay around $7B to settle dispute with IRS
- sharmin123 5y agoLet’s Secure WiFi Network and Prevent WiFi Hacking: https://www.hackerslist.co/lets-secure-wifi-network-and-prevent-wifi-hacking/ https://www.hackerslist.co/lets-secure-wifi-network-and-prev...
- ceilingcorner 5y agoThe amount of human capital that has gone into financial engineering is depressing. Thousands of brilliant minds who are designing complex financial products instead of useful technology.
- itisit 5y agoPrompts one to ask what the incentive is?
- ceilingcorner 5y agoTo quote Margin Call, “The money is considerably better.” [When a rocket scientist is asked why he joined a Wall Street firm.]
- itisit 5y ago*rhetorically ask ;)
- chii 5y ago> designing complex financial products who's to say it wasn't useful? after all, somebody paid for this complex financial products, so objectively speaking, they must have found it useful enough to have paid for it.
- ceilingcorner 5y agoNo, that isn’t what “objectively useful” means. Wealthy people pay for this engineering because it helps maintain and increase their wealth. That’s about it. There is zero societal benefit from something like a CDO.
- chii 5y ago> There is zero societal benefit > what “objectively useful” means. what contradictory beliefs you hold. You are making a subjective value judgement (your own) on what makes something beneficial to society, and yet claim that the actual objective measure - that of using money to measure value - is not what "objectively useful" means. Value to society isn't an objective measure. Otherwise, social workers and charity would be rolling in money.
- ceilingcorner 5y agoNowhere did I say that “objectively useful = beneficial to society.” This is obvious if you consider another example. Imagine a marketplace for hitmen. Clearly some people would pay for such a thing. Does that make it useful? Maybe? Does that mean we should think it’s a good thing? Probably not.
- carnitine 5y agoAll the people who bought houses due to the ability of financial engineers to lower mortgage requirements by quantifying and hedging risk probably disagree.
- capiki 5y agoI mean, they pay for it via salaries, and the people who lose money in the market also pay them.
- kvathupo 5y agoWhy work for society's benefit at the expense of your well-being? I once asked an Oxford-educated post-doc, who had worked as a quant, "are you going to go back to finance?" He replied that he simply doesn't know. He wants to do mathematical research, but both academia and industry stifle such ambitions. For the former, unless you're in the literal handful at IAS, you'll have to waste the majority of your time teaching, advising, and writing grant proposals. For the latter, one lacks not only the time, but also resources for research (seminars, journal access, colleagues, etc.). The critical difference is that working in finance (or any ad factory) provides less stress and much more financial stability. Of the professors I've known, many work obscene hours every day of the week. Society will benefit, but at what personal cost?
- ceilingcorner 5y agoYes, one can’t really blame the individuals themselves. Especially when the incomes are double or triple that of academia. It is a deep structural problem.
- kristjansson 5y agoThat estimate seems … low
- dwohnitmok 5y agoYeah we're easily talking order of magnitude differences here if not even more (if you're not a tenured professor we might even be inching towards two).
- mellavora 5y agotry 10x. Because I fell into an edge case, had I moved from my post-doc to a professorship, I would have faced a 20% pay cut. And that's not because my post-doc was well paid; after I factored in the side-costs of the position I was not that far above minimum wage. And this was at an elite European research group where the professor was doing his best to take care of me. So I moved to industry.
- 5y ago
- em500 5y agoUseful technology like ad growth hacking, conversion optimization, engagement optimization and getting kids to open more loot boxes? Lets face it, the majority of white collar workers including software engineers are there for the money. Who can blame them, when they make twice to thrice as much as a lab virologist or three to six times as much as a school teacher?
- matheusmoreira 5y agoFrustrating, isn't it? I feel the same way about YouTube celebrities and sports players making millions while actually useful professions make significantly less. From what I've read the better paid doctors make about 300k/year. I also feel the same way about most consumer technology being developed today. It's mostly advertising and intellectual property exploitation. Nothing particularly useful, really. Yet the people involved are making ridiculous amounts of money. Actually useful technology brings us closer to a science fiction utopia, not some corporate world cyberpunk dystopia.
- jpadkins 5y agohere is a way to rationalize it (not sure if this helps you) doctors provide very valuable services to dozens - hundreds of people (treating disease). youtube/sports celebrities provide a small amount of value to 100k - millions of people (amusement or entertainment). so the value they get back from society is because of the number of people touched, not the depth of value for each person. If we figure out how to scale disease treatment like we scaled entertainment, then (fewer) doctors would be wayyy richer than entertainment stars.
- lotsofpulp 5y agoIntersection of supply and demand curves is the only thing needed to understand prices.
- matheusmoreira 5y agoThat makes sense to me but it still doesn't help... It just doesn't seem right to me that some random person can make a meme video and become a millionaire off of the ads alone. A society that enables these aberrations is sick and needs to be fixed. I used doctors as an example but engineers are also comically undervalued in my country despite their extremely valuable and necessary contributions to society. It's a joke. > doctors provide very valuable services to dozens - hundreds of people I think this scale is a bit off. Doctors see thousands of patients per year.
- lotsofpulp 5y ago
- wonderwonder 5y agoIf they did nothing but throw it into a stock market index fund for the last 11 years and compounded it at the standard 8% they would have profited 9 billion dollars. Not a bad way to make a buck. That's at a standard 8%, the stock market returned 9.2% the last 10 years. S&P500 returned ~13%. These guys know what they were doing and were laughing on the way to sign the settlement papers.
- teruakohatu 5y agoDoes anyone know how the Medallion fund has performed taking the tax settlement(s?) into account?
- ksherlock 5y agoFrom the WSJ report: Because the settlement relates to the tax treatment of Medallion’s gains, it doesn’t affect the fund’s historic returns, which top almost every other hedge fund.
- mikeyouse 5y agoFor a fun exercise, these activities took place between 2005 and 2015 -- call it 2010 to split the difference. If you assume that they knew they'd likely get dinged for the $7B and just kept that amount in their fund and invested it alongside their employee money - how much profit did they make by litigating this for 10 years to delay the payout?
- hamburgerwah 5y agoLargest insider trading ring in history and still running. To agree to 7 billion you can guarantee they are walking away with at least 60 billion squirreled away unseen.
- deleted 5y ago[deleted]
- putlake 5y agoThis isn't insider trading. It's tax fraud.
- tedunangst 5y agoNobody cares what it is or isn't. They're rich, they're bad, they need to be punished.
- zzt123 5y agoI believe they’re saying that the Medallion fund which RenTech runs is an insider trading scheme, probably due to the incredible rate of return over decades. And that for RenTech to agree to this penalty implies they have a ton of money sitting around that they shouldn’t, given the capacity constrained nature of the Medallion fund. On these I have no opinion. I may have misinterpreted the commenter.
- creato 5y ago
- putlake 5y agoHere's how they structured their affairs to claim long-term capital gains (via Sen. Carl Levin's testimony [0]): The key financial product involved in these fictions is called a ``basket option.'' ...basket option basics worked like this: The bank sold its hedge fund client a structured financial product, called an ``option,'' whose payoff equaled the profits generated by a ``basket'' of securities held in a designated account at the bank. The basket here is key. It was an open account with ever-changing contents. Technically, the account and the securities it contained were held in the name of the banks in its own trading account. The hedge fund put up 10 percent of the cash needed to buy the securities, and the bank lent the other 90 percent. This arrangement included a number of fictions which defied reality, but resulted in big profits for the hedge funds and the banks. First, though the structure was designed to create the appearance that the bank owned the assets in the basket option account, the hedge fund made all the trading decisions for those accounts--and in fact, used the bank's computerized trading system to execute trades in the account. RenTec estimates that its trading through basket options accounts averaged more than 100,000 trades each day, or about 30 million trades a year. Also, the hedge fund reaped all of the trading profits, even though the financial structure created the illusion that the bank owned the assets. The beneficial owner, the real owner, was the hedge fund. Now, second, the hedge fund's control of all the trading for the basket option account demolishes the fiction of a legitimate option. So the hedge funds set up new entities, which they controlled, to serve one function, and that was to act as the option holder. The hedge funds would then claim that their control of the option holder was totally independent of their role in making the trading decisions for the basket option account. Documents that we will explore today show the extraordinary lengths to which RenTec and the banks went to perpetuate the illusion that the option holder and trader were somehow independent, when in fact the hedge fund, RenTec, played both roles. The fictional option was structured so that it could be exercised more than 1 year after it was created. Under that structure, the hedge funds claimed that trading profits from the account were long-term capital gains and thereby qualified for the reduced long-term capital gains tax rate. The Tax Code gives long-term capital gains a reduced rate on the theory that it provides an incentive for investors to risk their capital on the kind of long-term investments that grow the economy and create jobs. The high-volume trading that, for example, RenTec conducted through its basket options does not meet that test. When securities are held for weeks or days or even seconds, it is surreal to characterize those trading profits as long-term capital gains. But that is what the hedge funds did. The banks and hedge funds used the fictional option structure to collapse millions of individual trades into one transaction, the execution of an option. As if by magic, the option structure transforms what would be short-term capital gains from an ordinary trading account into long-term capital gains subject to lower taxes. [0] https://www.govinfo.gov/content/pkg/CHRG-113shrg89882/html/CHRG-113shrg89882.htm https://www.govinfo.gov/content/pkg/CHRG-113shrg89882/html/C...
- djanogo 5y agoI wonder if Vanguards patented way to manage their funds to reduce taxes be affected by this settlement.
- philip1209 5y agoVanguard already gets a blind eye for their management structure’s taxation because they manage the retirement accounts of so many common people without greed.
- djanogo 5y agoBut they patented it, so other companies (Fidelity, Schwab etc.,) can't use it.
- CameronNemo 5y agoOnly for two more years, though. Then Blackrock, Schwab, Fidelity, and anyone else use the same method.
- lotsofpulp 5y agoIs there still any benefit for that patent nowadays? I thought it’s all the same between index ETFs and mutual funds. I notice no difference between Vanguard/Fidelity/Schwab/ML/etc offerings.
- loeg 5y agoNon-Vanguard mutual funds might have to throw off capital gains in situations where ETFs would not. ETFs are the same anywhere. The mechanism is described here: https://www.investopedia.com/how-vanguard-patented-a-system-to-avoid-taxes-in-mutual-funds-4686985 https://www.investopedia.com/how-vanguard-patented-a-system-...
- yborg 5y agoI think that died with John Bogle, unfortunately. They charged me $50 to rollover my employer Vanguard 401k to a Vanguard rollover IRA. With their conscience gone, Vanguard will trend to the norm.
- Barrin92 5y agoIt's always amazing to me how in the world of high profile white collar criminality you can make billions and your punishment is to pay a few percent of it back. I wish ordinary theft worked like this. Steal 500 bucks and your punishment is to return 100.
- 29athrowaway 5y agoThe IRS can not only give you civil penalties like fines. They can also give you criminal penalties. They also have their own courts where you almost always lose.
- deleted 5y ago[deleted]
- hellbannedguy 5y agoIt's time to tie alll Fees/Fines to 1040 income. (Patent fees, DMV fees, judicial fines, municipal code citations, school tuition, and even property taxes, etc.)
- throwaway0a5e 5y agoGet ready to see a lot of poor people ignoring the law just as much as the white collar crowd does then. A democratic society won't stand for the % of income that these fines and fees are to them being applied to everyone.
- deleted 5y ago[deleted]
- loeg 5y agoYour figures are sort of backwards. The article claims they saved $6.8B in taxes and will owe $7.7B in fines.
- ummonk 5y agoTo clarify, the 7.7 billion figure is the 6.8 billion owed plus ~900 million in interest and fines.
- dboreham 5y agoSomething something can't execute a transaction for the sole purpose of avoiding tax...
- Zezov 5y agoContrariwise, consider the famous quote from Judge Learned Hand: > Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.
- saltedonion 5y agoAt ren tech’s kind of returns it’s literally cheaper to pay the interest and fine than to borrow from anyone else.
- jychang 5y agoEh. I feel like they can probably get a cheaper loan from somewhere else.
- shrubble 5y ago7.7 billion in 2021 dollars must be much less than 6.8 billion in 2010 dollars (2005 to 2015 so figure 2010). What is a typical rate of inflation, compounded over 10 years from 2010 to 2021?
- andruby 5y agoWolframalpha is great for things like this 7.7B usd in 2021 is equivalent to 6.33B usd in 2010. [0] Or the inverse: 6.8 (2010 usd) is 8.28 (2021 usd) [1] [0] https://www.wolframalpha.com/input/?i=7.7+usd+in+2010 https://www.wolframalpha.com/input/?i=7.7+usd+in+2010 [1] https://www.wolframalpha.com/input/?i=6.8+2010+usd+in+2021 https://www.wolframalpha.com/input/?i=6.8+2010+usd+in+2021
- renewiltord 5y agoHuh, I recall people saying this 5 years ago only to be shouted down. I guess they stand vindicated. Pity they didn't have a way to monetize their correctness.
- dragonwriter 5y ago> Huh, I recall people saying this 5 years ago only to be shouted down. It was seven years ago, it was (among others) Sen. Levin, and they weren't shouted down; six years ago the IRS publicly agreed that the tax treatment was wrong and notified people how similar cases should be treated and must be reported going forward. What has gone on in the interim was Renaissance fighting that decision being applied to them.
- renewiltord 5y agoAll right then. Perhaps my memory is shit. I recall it being common to downvote anyone here on HN who alleged that Rentech was just a tax fraud.
- zz865 5y agoLol this website is for employees of tech companies that are worth billions but never pay taxes either. One day the IRS will come calling.
- cpcallen 5y agoAside from the technical difficulties (requiring a time machine and all that), is the IRS even authorized levy taxes on executives who lived and died before the US was even founded??
- Tycho 5y agoDoes anyone have a defence of this basket option business, why it should be treated as a long term capital gain? Is it really just a case of “let’s try our luck?”
- TechBro8615 5y agoThat's almost enough to pay for two weeks of the war in Afghanistan!
- malikili 5y agoWhatsApp to add new Messaging Feature? According to news reports, WhatsApp has begun chipping away at another message include that will permit clients to send responses to messages. https://bestapk4u.com/blog/whatsapp-update/ https://bestapk4u.com/blog/whatsapp-update/