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How are the founders of these apps not in prison? I remember getting hundreds of “replace your savings account” ads that abruptly ended with the Luna collapse.

JumpCrisscross 4y ago
> How are the founders of these apps not in prison? These are private losses. We have lots of problems. It’s ludicrous to prioritise public resources for prosecuting those while led others into a bonfire. Put a tax in place and yes, I would fully support public enforcement.
- mattnewton 4y ago
  While part of me agrees, part of me also thinks we have all these security laws for a reason, and allowing people to claim they don't have to follow them because of what is effective just a fancy ledger doesn't sit right. I am not a securities law expert by any means but some of the tactics used in the crypto world seemed directly contrary to the intent, if not the letter, to me. I would not be surprised if we see a couple lawsuits filed sometime later this year by the state.
  - animal_spirits 4y ago
    I'm sure any private individual can sue these founders and take them to court. But the SEC isn't going to do it.
    - 0xB31B1B 4y ago
      LOL as of today the SEC can’t do it, horrible case ruling from 5th circuit of approvals basically makes SEC enforcement of rules illegal.
      - animal_spirits 4y ago
        That ruling stated that the SEC isn't allowed to enforce rules _without_ a jury. They can still take people to court but there needs to be a jury involved. https://www.reuters.com/legal/government/sec-in-house-judges-violate-right-jury-trial-appeals-court-rules-2022-05-18/ https://www.reuters.com/legal/government/sec-in-house-judges...
- nullc 4y ago
  If there isn't criminal enforcement these scams will continue to grow and amplify. Risk of private action can be mitigated by making sure the victim's best recovery comes from selling their position along to a greater fool. At the end of this process the last bag holders individual losses are enough to not justify the cost of litigation. Costs which are all the greater for private individuals because they lack the governments power to investigate. (and if fools run out a bit too soon, a bit of the initial income can be used to vacuum up the remainder)
nl 4y ago
Because it happened last week...
_vdpp 4y ago
What laws did they break? Legitimately curious.
- vishnugupta 4y ago
  IANAL. When an entity takes customer deposits it gets hyper regulated, a notch or two below commercial bank. These apps circumvent those regulations by accepting deposits in crypto. Regulators are are also in bit of a spot because it's an entirely new beast. For most of the current use case crypto acts like unregistered security but in in some minor way it's also a currency. So regulators are biding their time because coming down with a heavy hand will attract a bad rep as big hedge funds are also getting into crypto. Also, IMO current legal codes aren't good enough to tackle crypto at the moment, see this[1] for example. It's an active area of legal research so will take time to crystallise. So these apps are slipping through this regulatory crack. Do they deserve to go to jail? I'm not so sure. But they do know what they are doing. [1] https://www.imf.org/en/Publications/WP/Issues/2020/11/20/Legal-Aspects-of-Central-Bank-Digital-Currency-Central-Bank-and-Monetary-Law-Considerations-49827 https://www.imf.org/en/Publications/WP/Issues/2020/11/20/Leg...
  - _vdpp 4y ago
    It almost sounds like a carnival or arcade where you can buy tokens and gamble them to try and win tickets. I wonder if that’s a potential defense.
    - blihp 4y ago
      Nope. Just watch... this has all happened before and it will all happen again.
    - vishnugupta 4y ago
      The thing with crypto is it's getting rapidly enmeshed with main-street finance. For instance one can take loans against crypto, retirement accounts are offering crypto exposure and so on. It's relatively easy to deal with money-like substances that are precisely confined (closed-loop as they are called sometimes) such as carnival tokens, or Starbuck reward points. Problem starts when they start leaking into day-to-day finances.

JumpCrisscross 4y ago

> How are the founders of these apps not in prison? These are private losses. We have lots of problems. It’s ludicrous to prioritise public resources for prosecuting those while led others into a bonfire. Put a tax in place and yes, I would fully support public enforcement.

mattnewton 4y ago
While part of me agrees, part of me also thinks we have all these security laws for a reason, and allowing people to claim they don't have to follow them because of what is effective just a fancy ledger doesn't sit right. I am not a securities law expert by any means but some of the tactics used in the crypto world seemed directly contrary to the intent, if not the letter, to me. I would not be surprised if we see a couple lawsuits filed sometime later this year by the state.
- animal_spirits 4y ago
  I'm sure any private individual can sue these founders and take them to court. But the SEC isn't going to do it.
  - 0xB31B1B 4y ago
    LOL as of today the SEC can’t do it, horrible case ruling from 5th circuit of approvals basically makes SEC enforcement of rules illegal.
    - animal_spirits 4y ago
      That ruling stated that the SEC isn't allowed to enforce rules _without_ a jury. They can still take people to court but there needs to be a jury involved. https://www.reuters.com/legal/government/sec-in-house-judges-violate-right-jury-trial-appeals-court-rules-2022-05-18/ https://www.reuters.com/legal/government/sec-in-house-judges...
nullc 4y ago
If there isn't criminal enforcement these scams will continue to grow and amplify. Risk of private action can be mitigated by making sure the victim's best recovery comes from selling their position along to a greater fool. At the end of this process the last bag holders individual losses are enough to not justify the cost of litigation. Costs which are all the greater for private individuals because they lack the governments power to investigate. (and if fools run out a bit too soon, a bit of the initial income can be used to vacuum up the remainder)

nl 4y ago

Because it happened last week...

_vdpp 4y ago

What laws did they break? Legitimately curious.

vishnugupta 4y ago
IANAL. When an entity takes customer deposits it gets hyper regulated, a notch or two below commercial bank. These apps circumvent those regulations by accepting deposits in crypto. Regulators are are also in bit of a spot because it's an entirely new beast. For most of the current use case crypto acts like unregistered security but in in some minor way it's also a currency. So regulators are biding their time because coming down with a heavy hand will attract a bad rep as big hedge funds are also getting into crypto. Also, IMO current legal codes aren't good enough to tackle crypto at the moment, see this[1] for example. It's an active area of legal research so will take time to crystallise. So these apps are slipping through this regulatory crack. Do they deserve to go to jail? I'm not so sure. But they do know what they are doing. [1] https://www.imf.org/en/Publications/WP/Issues/2020/11/20/Legal-Aspects-of-Central-Bank-Digital-Currency-Central-Bank-and-Monetary-Law-Considerations-49827 https://www.imf.org/en/Publications/WP/Issues/2020/11/20/Leg...
- _vdpp 4y ago
  It almost sounds like a carnival or arcade where you can buy tokens and gamble them to try and win tickets. I wonder if that’s a potential defense.
  - blihp 4y ago
    Nope. Just watch... this has all happened before and it will all happen again.
  - vishnugupta 4y ago
    The thing with crypto is it's getting rapidly enmeshed with main-street finance. For instance one can take loans against crypto, retirement accounts are offering crypto exposure and so on. It's relatively easy to deal with money-like substances that are precisely confined (closed-loop as they are called sometimes) such as carnival tokens, or Starbuck reward points. Problem starts when they start leaking into day-to-day finances.