7 ms·

It's a shame. How much did the SEC spend chasing an unfunded startup? EDIT: I don't expect to stem the downvotes, but the SEC's time is better spent policing l

It's a shame. How much did the SEC spend chasing an unfunded startup? EDIT: I don't expect to stem the downvotes, but the SEC's time is better spent policing large-scale financial crime. Consider the opportunity cost here.

minimaxir 11y ago
Keep in mind that per the post, the SEC only sent a C&D after they tried to make money off of it. At that point, it's no longer a funny joke.
- elaineo 11y ago
  Whoa... Sand Hill Exchange never tried to make any money off the site. We did let people put their own money on the line.
  - minimaxir 11y ago
    > It is an enjoyable experience, but when we pushed aggressively to monetize we received a cease and desist from the SEC.
  - dragonwriter 11y ago
    > Sand Hill Exchange never tried to make any money off the site. We did let people put their own money on the line. You should probably correct your own announcement, then, since you say "when we pushed aggressively to monetize we received a cease and desist from the SEC". Allowing people to use their own money without trying to keep any of it isn't "monetizing" as that term is usually used of a service.
    - elaineo 11y ago
      That is fair. That's a mis-statement on our part. We should have said "we allowed users to monetize." Once again, Sand Hill Exchange never charged any sort of commission or took any revenue or profit. User deposits were limited to 1 bitcoin, or ~$250. Most users put in less than $10.
  - rrrx3 11y ago
    So, by fabricating entirely false financial pictures for companies, > We created bots to trade against incoming orders. They were like my friends. I even named them! My favorite was the “Jesse Livermore” bot. Opportunistic to a fault. > The bots would run every day and place orders against each other so the market looked like it was exhibiting lots of price movement and volume. For added credibility, we randomly generated trading histories for each company going all the way back to last year. So we had historical price and volume in addition to streaming quotes for chart data. and by then letting people speculatively place their own money into the already unbalanced and illegal equation, you somehow managed to wipe your hands of any responsibility for their actions? What in god's name are you smoking? You got off easy with a 20k fine. You belong in prison.
    - jboy55 11y ago
      Who knows if one of the creators had some options in one of the companies with 'fake' histories. They very well could be in prison. In fact, its amazing they continue to run the site, even without accepting money, creating 'fake' data and fake investors to show fake growth of something tied to a real security (you can still trade private stock), is inviting a shit tonne of legal hassles. "Oh hey, here's a list of private startup stock I own, can you please create some fake data to show a huge interest on your site so I can drive the private sale price and generate some sales?"
    - deleted 11y ago
      [deleted]
- cookiecaper 11y ago
  Why should the founders of SHX be punished for trying to make a little bit of profit? We like to whine about how burger-flippers don't get paid enough to literally lift a spatula but we're happy when the SEC goes after a few creative entrepreneurs trying to get ahead? Why shouldn't they be entitled to the profit their product can generate? As long as they weren't actively making misleading or fraudulent claims (e.g., leading users to believe they were actually investing in the companies), they should've been left alone. And by the way, a lot of people make money off of jokes. [1] [1] http://en.wikipedia.org/wiki/Comedian http://en.wikipedia.org/wiki/Comedian
  - rrrx3 11y ago
    Completely fabricating equities, along with their histories, activities, and level of market interest isn't fraudulent? Oh, ok.
  - rsynnott 11y ago
    > we're happy when the SEC goes after a few creative entrepreneurs trying to get ahead? That's one of the best euphemisms for 'fraudster' I've ever seen. > As long as they weren't actively making misleading or fraudulent claims Did you read the article?
rubyn00bie 11y ago
Well in all (sad) honesty, that's probably the only sort of violator they can go after. The banks and corporations have more than enough money to "avoid" (not violate) the SECs rules and regulations, as well as defend themselves. An unfunded startup seems like a big win for a department which can't enforce anything helpful for the average citizen.
- mhluongo 11y ago
  Good point -_-
- dragonwriter 11y ago
  > Well in all (sad) honesty, that's probably the only sort of violator they can go after. Well, lets check that by looking at the SEC Enforcement Division webpage [0], and a couple of the news for the past week: * Merrill Lynch Admits Using Inaccurate Data for Short Sale Orders, Agrees to $11 Million Settlement [1] * SEC Charges Deutsche Bank With Misstating Financial Reports During Financial Crisis [2] [0] http://www.sec.gov/enforce http://www.sec.gov/enforce [1] http://www.sec.gov/news/pressrelease/2015-105.html http://www.sec.gov/news/pressrelease/2015-105.html [2] http://www.sec.gov/news/pressrelease/2015-99.html http://www.sec.gov/news/pressrelease/2015-99.html
  - jboy55 11y ago
    I like this one, touting the benefits of microcap stocks got someone fined $4.6 million. I can only think the shit that would have come down if the founders had a stake (exercised options) in one of the companies on their exchange then created 'fake historical' data about it. http://www.sec.gov/news/pressrelease/2015-100.html http://www.sec.gov/news/pressrelease/2015-100.html
  - Dylan16807 11y ago
    Add "in a meaningful way" to "go after". Here they are charging a fine-per-revenue ratio of infinity percent, while the fines for really big bad actions are proportionally so small that they're almost meaningless.
  - deleted 11y ago
jdmichal 11y ago
Do you really think the SEC would have offered a $20,000 settlement if this was a major banking corp instead of an unfunded startup? Of course not. If they even did offer a settlement, it would have been an extremely large number. The SEC knew this was small fish and so offered the settlement to clear it off the plate. Furthermore, at what point does it suddenly become OK to chase after a financial security law violation? Is there a valuation limit? Cash flow limit? War chest limit? What exactly is the qualification to no longer be "a shame"?
- mhluongo 11y ago
  I don't know the answer to that, but this is the same problem any new fintech company suffers. Regulations often benefit incumbents and don't scale to new services testing the market. See eg anything related to bitcoin. How much do you think it cost them to go after Sand Hill?
  - jdmichal 11y ago
    The thing is, I don't care how much it costs the SEC to do their job. Their purpose is not to be a profit center based around prosecuting financial law violations. And actually, I'm very happy about that, because profit incentives in law enforcement creates very perverse incentives for the individual actors involved.
    - refurb 11y ago
      I get your point, but profit has nothing to do with it. The SEC has limited resources. I think the grandparent is questioning whether this is the best use of them.
      - dragonwriter 11y ago
        Honestly, I think nipping violations like illegal marketplaces in the bud -- getting them to conform or shutdown before they become major issues with widespread harms, is probably one of the most efficient uses of SEC resources. It's cheaper in direct costs than dealing with them once they become major problems, and results in less innocent people being harmed by both the violation and the enforcement action (while someone is culpable for any violation, when its by a firm there are going to be lots of innocent employees, customers, etc., who aren't doing anything culpable that are going to be negatively impacted by the enforcement action, however necessary it may be.)
rosser 11y ago
Only pursuing large-scale financial crime because "opportunity cost" just tells the crooks to play disposable, small-scale games.
anigbrowl 11y ago
I'm guessing it cost $19,995, incidentally.

minimaxir 11y ago

Keep in mind that per the post, the SEC only sent a C&D after they tried to make money off of it. At that point, it's no longer a funny joke.

elaineo 11y ago
Whoa... Sand Hill Exchange never tried to make any money off the site. We did let people put their own money on the line.
- minimaxir 11y ago
  > It is an enjoyable experience, but when we pushed aggressively to monetize we received a cease and desist from the SEC.
- dragonwriter 11y ago
  > Sand Hill Exchange never tried to make any money off the site. We did let people put their own money on the line. You should probably correct your own announcement, then, since you say "when we pushed aggressively to monetize we received a cease and desist from the SEC". Allowing people to use their own money without trying to keep any of it isn't "monetizing" as that term is usually used of a service.
  - elaineo 11y ago
    That is fair. That's a mis-statement on our part. We should have said "we allowed users to monetize." Once again, Sand Hill Exchange never charged any sort of commission or took any revenue or profit. User deposits were limited to 1 bitcoin, or ~$250. Most users put in less than $10.
- rrrx3 11y ago
  So, by fabricating entirely false financial pictures for companies, > We created bots to trade against incoming orders. They were like my friends. I even named them! My favorite was the “Jesse Livermore” bot. Opportunistic to a fault. > The bots would run every day and place orders against each other so the market looked like it was exhibiting lots of price movement and volume. For added credibility, we randomly generated trading histories for each company going all the way back to last year. So we had historical price and volume in addition to streaming quotes for chart data. and by then letting people speculatively place their own money into the already unbalanced and illegal equation, you somehow managed to wipe your hands of any responsibility for their actions? What in god's name are you smoking? You got off easy with a 20k fine. You belong in prison.
  - jboy55 11y ago
    Who knows if one of the creators had some options in one of the companies with 'fake' histories. They very well could be in prison. In fact, its amazing they continue to run the site, even without accepting money, creating 'fake' data and fake investors to show fake growth of something tied to a real security (you can still trade private stock), is inviting a shit tonne of legal hassles. "Oh hey, here's a list of private startup stock I own, can you please create some fake data to show a huge interest on your site so I can drive the private sale price and generate some sales?"
  - deleted 11y ago
    [deleted]
cookiecaper 11y ago
Why should the founders of SHX be punished for trying to make a little bit of profit? We like to whine about how burger-flippers don't get paid enough to literally lift a spatula but we're happy when the SEC goes after a few creative entrepreneurs trying to get ahead? Why shouldn't they be entitled to the profit their product can generate? As long as they weren't actively making misleading or fraudulent claims (e.g., leading users to believe they were actually investing in the companies), they should've been left alone. And by the way, a lot of people make money off of jokes. [1] [1] http://en.wikipedia.org/wiki/Comedian http://en.wikipedia.org/wiki/Comedian
- rrrx3 11y ago
  Completely fabricating equities, along with their histories, activities, and level of market interest isn't fraudulent? Oh, ok.
- rsynnott 11y ago
  > we're happy when the SEC goes after a few creative entrepreneurs trying to get ahead? That's one of the best euphemisms for 'fraudster' I've ever seen. > As long as they weren't actively making misleading or fraudulent claims Did you read the article?

rubyn00bie 11y ago

Well in all (sad) honesty, that's probably the only sort of violator they can go after. The banks and corporations have more than enough money to "avoid" (not violate) the SECs rules and regulations, as well as defend themselves. An unfunded startup seems like a big win for a department which can't enforce anything helpful for the average citizen.

mhluongo 11y ago
Good point -_-
dragonwriter 11y ago
> Well in all (sad) honesty, that's probably the only sort of violator they can go after. Well, lets check that by looking at the SEC Enforcement Division webpage [0], and a couple of the news for the past week: * Merrill Lynch Admits Using Inaccurate Data for Short Sale Orders, Agrees to $11 Million Settlement [1] * SEC Charges Deutsche Bank With Misstating Financial Reports During Financial Crisis [2] [0] http://www.sec.gov/enforce http://www.sec.gov/enforce [1] http://www.sec.gov/news/pressrelease/2015-105.html http://www.sec.gov/news/pressrelease/2015-105.html [2] http://www.sec.gov/news/pressrelease/2015-99.html http://www.sec.gov/news/pressrelease/2015-99.html
- jboy55 11y ago
  I like this one, touting the benefits of microcap stocks got someone fined $4.6 million. I can only think the shit that would have come down if the founders had a stake (exercised options) in one of the companies on their exchange then created 'fake historical' data about it. http://www.sec.gov/news/pressrelease/2015-100.html http://www.sec.gov/news/pressrelease/2015-100.html
- Dylan16807 11y ago
  Add "in a meaningful way" to "go after". Here they are charging a fine-per-revenue ratio of infinity percent, while the fines for really big bad actions are proportionally so small that they're almost meaningless.
- deleted 11y ago

jdmichal 11y ago

Do you really think the SEC would have offered a $20,000 settlement if this was a major banking corp instead of an unfunded startup? Of course not. If they even did offer a settlement, it would have been an extremely large number. The SEC knew this was small fish and so offered the settlement to clear it off the plate. Furthermore, at what point does it suddenly become OK to chase after a financial security law violation? Is there a valuation limit? Cash flow limit? War chest limit? What exactly is the qualification to no longer be "a shame"?

mhluongo 11y ago
I don't know the answer to that, but this is the same problem any new fintech company suffers. Regulations often benefit incumbents and don't scale to new services testing the market. See eg anything related to bitcoin. How much do you think it cost them to go after Sand Hill?
- jdmichal 11y ago
  The thing is, I don't care how much it costs the SEC to do their job. Their purpose is not to be a profit center based around prosecuting financial law violations. And actually, I'm very happy about that, because profit incentives in law enforcement creates very perverse incentives for the individual actors involved.
  - refurb 11y ago
    I get your point, but profit has nothing to do with it. The SEC has limited resources. I think the grandparent is questioning whether this is the best use of them.
    - dragonwriter 11y ago
      Honestly, I think nipping violations like illegal marketplaces in the bud -- getting them to conform or shutdown before they become major issues with widespread harms, is probably one of the most efficient uses of SEC resources. It's cheaper in direct costs than dealing with them once they become major problems, and results in less innocent people being harmed by both the violation and the enforcement action (while someone is culpable for any violation, when its by a firm there are going to be lots of innocent employees, customers, etc., who aren't doing anything culpable that are going to be negatively impacted by the enforcement action, however necessary it may be.)

rosser 11y ago

Only pursuing large-scale financial crime because "opportunity cost" just tells the crooks to play disposable, small-scale games.

anigbrowl 11y ago

I'm guessing it cost $19,995, incidentally.