Don't Steal Money from Day Traders Before They Lose It
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Re: Don't Steal Money from Day Traders Before They Lose It
#2I think the subtitle is much more informative:
> Boiler room guys knew customers were going to lose their money, so they allegedly spent it themselves.
But it was also illegally long.
Re: Don't Steal Money from Day Traders Before They Lose It
#3Just by the title I knew it had to be a Matt Levine story.
Re: Don't Steal Money from Day Traders Before They Lose It
#4I'd always wondered if crypto exchanges actually bother to buy the crypto that you ask them to. For most people they wouldn't know the difference as eventually they'll withdraw in fiat money anyway
Re: Don't Steal Money from Day Traders Before They Lose It
#5Honestly, this sort of seems fine as long as they covered winners.
It doesn't actually matter from a black box standpoint who took their bets as long as they were given the proper outcomes.
It isn't any different from running a casino really, except it has potentially better odds.
Re: Don't Steal Money from Day Traders Before They Lose It
#6Honestly, this sort of seems fine as long as they covered winners. It doesn't actually matter from a black box standpoint who took their bets as long as they were given the proper outcomes. It isn't any different from running a casino really, except it has potentially better odds.
You know they probably can't cover the winners, though. The SEC doesn't make stuff like bucket shops illegal on principle; they make it illegal because people got scammed.
Re: Don't Steal Money from Day Traders Before They Lose It
#7I'd always wondered if crypto exchanges actually bother to buy the crypto that you ask them to. For most people they wouldn't know the difference as eventually they'll withdraw in fiat money anyway
Very few crypto exchanges support fiat withdrawals. Most are crypto-in, crypto-out, only.
Re: Don't Steal Money from Day Traders Before They Lose It
#8This is so interesting - one wonders if this is strictly immoral. I propose this thought experiment: What if there was a version of this fraudulent brokerage that conducted this behavior in the open?
Let's say their policy is something like, "You trade for real under favorable commissions and margins. If we decide via internal algorithms that you are liable to lose money, we will instead pocket your trade and credit you 10% of the money you would have lost back. If you win, you win in full as normal."
Would this be immoral? Illegal?
Re: Don't Steal Money from Day Traders Before They Lose It
#9This is so interesting - one wonders if this is strictly immoral. I propose this thought experiment: What if there was a version of this fraudulent brokerage that conducted this behavior in the open? Let's say their policy is something like, "You trade for real under favorable commissions and margins. If we decide via internal algorithms that you are liable to lose money, we will instead pocket your trade and credit…
That's basically taking a short position on whatever the customer thinks they're buying, right?
Whenever the customer wants to sell their position, you'd have to pay them whatever the value was at that time, whether the position had gone up or down. Big risk, unless you're confident that the customers are going to reliably make terrible trades, on balance.
It might still be fraud maybe if you claimed to be performing a service that you're not performing, but if you actually told your customers that you were doing it (as in the situation you ask about), then I can't see how it could be breaking any laws. And I'm not certain why your customers would even care, and might even prefer it, due to the "get 10% back if you lose everything" clause which you don't get with normal day trading.
Re: Don't Steal Money from Day Traders Before They Lose It
#10Huh, got through the whole article without the author referencing the origin of the term “bucket shop.” Nothing new under the sun when it comes to market manipulation. I like the idea of a whole new generation of crypto market manipulators rediscovering techniques that haven’t worked in eh real markets in 100 years.
https://en.m.wikipedia.org/wiki/Bucket_shop_(stock_market)
The transaction goes "in the bucket" and is never executed. Because no trading of actual securities occurs, the customer is essentially betting against the bucket shop operator in a game based on abstract security prices.