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Is that inherently problematic, as long as they're accounting properly?
by Ferret7446 3y ago
Is that inherently problematic, as long as they're accounting properly?
- Animats 3y agoYes. Because they're gambling with the customers' money. That seldom ends well.
- ForkMeOnTinder 3y agoCommingling doesn't imply gambling. I could borrow $10 from Jim, and $20 from Sue, and deposit them both into the same Chase account which now has $30. As long as the balance stays above $30, everything is fine.
- yieldcrv 3y agoRight, the problem is when leverage and borrowing comes in
- koolba 3y agoYou could let the balance fall below $30 in your example because it’s a loan (“borrow”), not a deposit. If you’re claiming to hold the funds on their behalf and do otherwise (like “investing” them in your less than arm’s length hedge fund), then you’re breaking your fiduciary obligations.
- wmf 3y agoEvery regulation comes from some past scam. Clearly there must have been enough "oopsies" in the past attributed to commingled assets that regulators said "no more".
- lmm 3y agoIf customers are aware of it, maybe not. But if they're representing to customers that these are their funds, expressly or implicitly claiming that they're held separately, then that would be inherently problematic - it means those customers are a lot worse off if Kraken goes bankrupt, because if Kraken has been paying operational expenses out of those accounts then their suppliers etc. can go after those accounts. (And no, the regulators won't treat it as a "no harm no foul" just because Kraken didn't in fact go bankrupt - they were exposing their customers to risk even if that risk didn't come to pass)