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Initial Coin Offerings Horrify a Former S.E.C. Regulator

nytimes.com

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Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#131

Post by mycall »

Alex3917 wrote: post #55
nostrademons wrote: post #46

Earlier quoted context omitted.

Co-ops disintegrate when the people involved can't agree on the way to spend the money. Fights break out, trust declines, and eventually the co-op breaks up in a series of acrimonious disputes (oftentimes including lawsuits and/or shady behavior). So far, this seems a common failure mode for ICOs as well. So yeah, like co-ops.

> Co-ops disintegrate when the people involved can't agree on the way to spend the money. That's because currently most co-ops are either run by hippies, or else exist only as tax dodges. But there's no reason they can't be run as dictatorships, the only real requirement is that the majority of the wealth generated gets captured by the people creating it. As the tools for running co-ops get better, we'll see more exa…

> That's because currently most co-ops are either run by hippies, or else exist only as tax dodges.

Maybe in the U.S., but there is between 1 and 2 billion people working in coops. You just don't know about it since corps don't want people to know there is another, probably better way, to run a business.

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#132

Post by BearGoesChirp »

banderman wrote: post #118
wtfrmyinitials wrote: post #107

Earlier quoted context omitted.

I don't need the government to protect me from myself. Adults should be able to make their own decisions

The track record of humanity's decision making indicates that your statement is not accurate for a significant portion of the population.

Where do we draw the limit at limiting adults for their own good?

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#133

Post by mikeash »

Alex3917 wrote: post #55
nostrademons wrote: post #46

Earlier quoted context omitted.

Co-ops disintegrate when the people involved can't agree on the way to spend the money. Fights break out, trust declines, and eventually the co-op breaks up in a series of acrimonious disputes (oftentimes including lawsuits and/or shady behavior). So far, this seems a common failure mode for ICOs as well. So yeah, like co-ops.

> Co-ops disintegrate when the people involved can't agree on the way to spend the money. That's because currently most co-ops are either run by hippies, or else exist only as tax dodges. But there's no reason they can't be run as dictatorships, the only real requirement is that the majority of the wealth generated gets captured by the people creating it. As the tools for running co-ops get better, we'll see more exa…

Is that really true? Searching around, I can't find anything talking about what a co-op is that doesn't mention member control as a big part of it.

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#134

Post by Alex3917 »

arkades wrote: post #125
Alex3917 wrote: post #102

Earlier quoted context omitted.

> Isn't a co-op that's run as a dictatorship basically a corporation? In double-entry land, the ownership of labor is diluted every time new capital is contributed. Obviously people contributing capital should get rewarded, but the fact that causality only runs in this direction is super broken. Whereas in triple-entry land, capital can get diluted every time you add new labor. This works because the technology allow…

You are making references - “triple entry” - that seem to take for granted familiarity with certain concepts. Can you unpack that a bit?

Triple-entry is the intellectual idea that blockchain enables as a technology. It refers to the idea of cryptographically authenticating entries in a ledger, which makes double-entry accounting scale in terms of the auditing costs.

Currently business owners keep track of whether they are making or losing money by entering each transaction into a spreadsheet (or something similar), as per the rules of double-entry accounting. But each of those entries needs to get audited by a human third-party, which costs money. With blockchain much of the auditing work gets pushed onto computers, so you can audit trillions of rows for the same cost as auditing a few thousand spreadsheet rows without blockchain.

This means you can create more complex types of businesses. In practice, it means you can create businesses where the incentives of the stakeholders are aligned in more efficient ways.

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#135

Post by JumpCrisscross »

xadhominemx wrote: post #112
JumpCrisscross wrote: post #103

Earlier quoted context omitted.

> "knowledgeable employees" of private investment firms are allowed to participate in PE deals even if they are not accredited investors. These people almost always earn more than $200,000 a year and so qualify as "accredited investors" under the SEC's definition. Keep in mind, too, that start-ups can compensate their unaccredited employees with equity just the same. Disclaimer: I am not a lawyer. This is not legal n…

>These people almost always earn more than $200,000 a year and so qualify as "accredited investors" under the SEC's definition Actually not, because accredited investors must have cleared $200k for the two previous calendar years and most people who co-invest under the knowledgeable employees exemption are PE associates who have been on the job for less than two years.

> most people who co-invest under the knowledgeable employees exemption are PE associates who have been on the job for less than two years

Source? (Private equity associates are entry-level number crunchers. Their fraction of carry is a rounding error, if positive.)

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#136

Post by JumpCrisscross »

xadhominemx wrote: post #115
JumpCrisscross wrote: post #98

Earlier quoted context omitted.

> Wallstreet has a monopoly on IPOs, they are clearly threatened by the ICO boom For a longest time, Wall Street had three tricks: securitization (breaking cash flows into securities), portfolios (putting securities in a box) and leverage (borrowing and lending). (One could argue swaps are a fourth.) That's it! IPOs? Securitise a company. CDO? Portfolio mortgage securities. Mortgages? Securitise them! Now there are b…

Even if blockchains/cryptocurrencies replace fiat currencies and ICOs replace IPOs on a stock exchange, little about Wall Street does will actually change. Securitizing and aggregating securities into portfolios, lending, marketing and pricing securities, advising issuing entities, etc., the things investment bankers occupy themselves with every day, do not go away because of cryptocurrencies and ICOs.

> the things investment bankers occupy themselves with every day, do not go away because of cryptocurrencies and ICOs

Pardon me, I was being facetious. We agree. I was responding to a comment claiming investment banks "are clearly threatened by the ICO boom" [1]. Wall Street is more likely to coöpt, as opposed to be replaced by, blockchains.

[1] https://news.ycombinator.com/item?id=15790978

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#137

Post by xadhominemx »

JumpCrisscross wrote: post #135
xadhominemx wrote: post #112

Earlier quoted context omitted.

>These people almost always earn more than $200,000 a year and so qualify as "accredited investors" under the SEC's definition Actually not, because accredited investors must have cleared $200k for the two previous calendar years and most people who co-invest under the knowledgeable employees exemption are PE associates who have been on the job for less than two years.

> most people who co-invest under the knowledgeable employees exemption are PE associates who have been on the job for less than two years Source? (Private equity associates are entry-level number crunchers. Their fraction of carry is a rounding error, if positive.)

I don't have a source, but most capital deployed by private investment firms (ie, the firms where the exemption is relevant) is deployed by traditional PE shops. And in my direct experience, the employees at traditional PE shops who invest via the exemption are almost always associates. And also in my direct experience, the vast majority of PE associates are on the job for two years, three max.

Private equity associates very rarely receive carry, which is why they co-invest instead.

*edited for clarity

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#138

Post by xadhominemx »

JumpCrisscross wrote: post #136
xadhominemx wrote: post #115

Earlier quoted context omitted.

Even if blockchains/cryptocurrencies replace fiat currencies and ICOs replace IPOs on a stock exchange, little about Wall Street does will actually change. Securitizing and aggregating securities into portfolios, lending, marketing and pricing securities, advising issuing entities, etc., the things investment bankers occupy themselves with every day, do not go away because of cryptocurrencies and ICOs.

> the things investment bankers occupy themselves with every day, do not go away because of cryptocurrencies and ICOs Pardon me, I was being facetious. We agree. I was responding to a comment claiming investment banks "are clearly threatened by the ICO boom" [1]. Wall Street is more likely to coöpt, as opposed to be replaced by, blockchains. [1] https://news.ycombinator.com/item?id=15790978

Your parody is very good!

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#139

Post by smokeyj »

ghaff wrote: post #76
Chirael wrote: post #59

Earlier quoted context omitted.

I think the idea of accredited investors is that those investments are very risky, and it limits them to people who can "afford" the risk. An accredited investor may be able to bear the brunt of 9 investments being a total loss, to get to the 10th that hits it out of the park, while a non-accredited investor may have her/his life savings (or a substantial enough part of it) wiped out on the first 1 or 2 deals. I'm no…

That and a lot of people really aren't qualified to judge the risk and fall victim to "You can't lose!" scams. Being rich is no guarantee of financial sophistication of course but there's some correlation. And, as you say, they're less likely to be wiped out even if they lose their investment. I agree it's not a perfect system and people who want to can find other ways to throw away their money. But we're probably no…

> I agree it's not a perfect system

I think it's a great system. But I also hate poor people and don't want them to have the same opportunities I have. Let them play the lottery instead right?

Re: Initial Coin Offerings Horrify a Former S.E.C. Regulator

#140

Post by conanbatt »

exogen wrote: post #123
conanbatt wrote: post #122

Earlier quoted context omitted.

Predatory investors love people like you. They get higher returns and much better negotiation power because some people advocate to take down their competition!

Who's losing their life savings or ending up in financial ruin in this scenario? Also I've never even heard of a "predatory investor", I'm pretty sure you just made that up.

If you are an investor, accreditation rules eliminate 95+% of the population as competition for your investment. That means you will get higher returns and better negotiation terms. Even founders cant invest in their own bethren! Think about that. YC startup founders could get together, talk to each other, and NOT be able to invest in each other.

Neither could employees that have access to internal financials. You could believe your company is doing great, but you cannot invest. You dont have the chance to compete for the resource with the investors that can.

This also means less money goes into investment.

Result:

- Qualified investors get higher returns - Employees get lower wages because there is less capital invested - Founders get less money - Fewer startups are created

In the name of protecting compulsive gamblers?

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