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The SEC has told us it wants to sue us over Lend. We don’t know why

blog.coinbase.com

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Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#211

Post by qwertox »

Lazare wrote: post #191
mthoms wrote: post #175

Earlier quoted context omitted.

Excuse my ignorance but how is that any different from "interest"?

As in, the interest you might earn on a savings account? The rule is basically: "If you're giving someone else money in the hope of getting more money back later, it's a security UNLESS it fits into a list of exceptions, or if it meets the criteria to be added as a new exception." So a savings account would absolutely be a security, unless it fits into one of the recognised exceptions. One of those exceptions is the…

This is such a good explanation.

It made me understand that this is all about protecting the customers investment, and, if nobody is protecting it, then it would have to be the SEC who does it, but they can only do this if it is a security. If it isn't a security which has to be protected by the SEC -- like Coinbase is claiming -- then who is protecting it? This appears to be what the SEC wants to have answered. Coinbase instead wants the SEC to tell them what to do about it, but that they don't want to set it up as a security. Yet Coinbase would be happy with just proceeding without any protections in place.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#212

Post by rockbruno »

Tenoke wrote: post #197
rockbruno wrote: post #165

...How childish is for someone in an executive position to start whining on Medium in the name of the company about something as serious as legal issues? Did they start hiring 12 year olds after the recent mass exodus?

It's not childish. It can easily be a strategy to convince (retail) investors and users that Coinbase is in the right thus they shouldn't worry about this going too bad for them.

But surely there's a more formal and professional way of handling a serious subject than rambling on a blogging platform?

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#213

Post by andreareina »

TameAntelope wrote: post #186
mthoms wrote: post #175

Earlier quoted context omitted.

Excuse my ignorance but how is that any different from "interest"?

The Howey Test, I believe, is that Coinbase is taking the money being given to it by "account holders" and performing some "thing" to that money to generate value. I don't understand it nearly well enough to explain it, but the wonderful Matt Levine has given it a shot: https://www.bloomberg.com/news/newsletters/2021-08-09/money-...

I really hope this is showing up in the next Money Stuff.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#214

Post by subroutine »

mthoms wrote: post #210
Lazare wrote: post #191

Earlier quoted context omitted.

As in, the interest you might earn on a savings account? The rule is basically: "If you're giving someone else money in the hope of getting more money back later, it's a security UNLESS it fits into a list of exceptions, or if it meets the criteria to be added as a new exception." So a savings account would absolutely be a security, unless it fits into one of the recognised exceptions. One of those exceptions is the…

Very helpful, thanks. It sounds like you're saying the banks get a special carve-out to provide this service simply because the regulator is different. On a fundamental level though, I still don't see the difference. I do have to disagree with the last paragraph though. Consulting with relevant regulators when the legislation is unclear (or non-existent) seems like the opposite of a red flag.

Right, OP is saying that on a fundamental level, there isn't a difference (between LEND and a savings account), except that Coinbase is not a federally regulated FDIC insured bank.

Metaphorically, Coinbase just went to the police department and explained in great detail their intention to sell hard liquor without a liquor license. Under sworn testimony, they explained... 'you see, we are just providing the same product as licensed liquor stores, so it's all good'.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#215

Post by [deleted] »

bjackman wrote: post #194
dustintrex wrote: post #71

Earlier quoted context omitted.

Agreed, and this line pretty much sums it up: > Customers won’t be “investing” in the program, but rather lending the USDC they hold on Coinbase’s platform in connection with their existing relationship. "Give me money for a fixed period of time and I'll pay a guaranteed return on your principal. No, it's not an "investment", you're just lending it in connection with our existing relationship!"

I'm not an expert here but I read their argument as they don't expect this lending to be regulated as "investment" because the capital is not in theory at risk. So it's more like a savings account than an investment account. That's the impression I got from the article, but reading other comments in the thread it doesn't seem like that's an at all relevant definition of the term!

[deleted]

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#216

Post by TomSwirly »

uncomputation wrote: post #23

I actually initially wanted to be on Coinbase’s side here, but after a quick google of “Howey test” and reading even just the introduction on Wikipedia, I cannot imagine how they don’t see the SEC’s reasoning about Lend wrt Howey. If you want to argue that Howey does not apply or fight the decision/lawsuit, then fine. But feigning ignorance of something a (non-legal expert) programmer can connect the dots of instantl…

They are deliberately lying. You can see on their Twitter feed where people have made the same argument to them, which they ignore.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#217

Post by Reason077 »

bjackman wrote: post #194
dustintrex wrote: post #71

Earlier quoted context omitted.

Agreed, and this line pretty much sums it up: > Customers won’t be “investing” in the program, but rather lending the USDC they hold on Coinbase’s platform in connection with their existing relationship. "Give me money for a fixed period of time and I'll pay a guaranteed return on your principal. No, it's not an "investment", you're just lending it in connection with our existing relationship!"

I'm not an expert here but I read their argument as they don't expect this lending to be regulated as "investment" because the capital is not in theory at risk. So it's more like a savings account than an investment account. That's the impression I got from the article, but reading other comments in the thread it doesn't seem like that's an at all relevant definition of the term!

> "capital is not in theory at risk. So it's more like a savings account than an investment account."

But I guess if you want to offer a "savings account" then you need to be a licensed bank and meet all the requirements and regulations that come with that?

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#218

Post by TomSwirly »

bjackman wrote: post #194
dustintrex wrote: post #71

Earlier quoted context omitted.

Agreed, and this line pretty much sums it up: > Customers won’t be “investing” in the program, but rather lending the USDC they hold on Coinbase’s platform in connection with their existing relationship. "Give me money for a fixed period of time and I'll pay a guaranteed return on your principal. No, it's not an "investment", you're just lending it in connection with our existing relationship!"

I'm not an expert here but I read their argument as they don't expect this lending to be regulated as "investment" because the capital is not in theory at risk. So it's more like a savings account than an investment account. That's the impression I got from the article, but reading other comments in the thread it doesn't seem like that's an at all relevant definition of the term!

> the capital is not in theory at risk.

"In theory", and in practice, all investments are at risk.

How anyone can look at this gimcrack investment and think it's riskless is beyond me.

If Bitcoin were to drop to 1000 - and given it has no fundamentals and offers no actual services beyond a very volatile value store, why not? - then all of these companies would collapse like a house of cards and all these savings accounts would be worthless.

> So it's more like a savings account than an investment account.

If you recall, plenty of people lost everything they had in their savings account in bank crashes before FDIC insurance existed.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#219

Post by dragonwriter »

darawk wrote: post #196
staticman2 wrote: post #138

Earlier quoted context omitted.

You misunderstand the legal field if you think a lawyer should be given the benefit of the doubt when arguing on behlf of a client. Their job is to use the most persuasive propaganda they can get away with.

In this context, his job is to assess the legality of it before they create the product. Companies don't generally want to invest in building something they aren't legally allowed to market.

> In this context, his job is to assess the legality of it before they create the product.

No, in this cass (that is, the case of the article under discussion) his job is to act as a PR representative of the company in the course of action it has chosen which is leading to imminent legal conflict with the SEC.

It’s true that he also had the job you discuss, but this article isn't the output of that job; that would be found in confidential internal advisory memos to the board and other executives.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#220

Post by TomSwirly »

thaumasiotes wrote: post #190
mthoms wrote: post #175

Earlier quoted context omitted.

Excuse my ignorance but how is that any different from "interest"?

I'm guessing the concept is more like stock lending fees. You short a stock by borrowing shares and selling the borrowed shares. You'd short USDC the same way, if you could borrow them. The thing is that this really isn't an investment. An investment looks like this: - You ask me for funding for a project. I give you funding, in cash or in kind, and I get (partial) ownership of the project. If it does OK, I get some…

This is an investment. "To invest is to allocate money with the expectation of a positive benefit/return in the future."

If I put money in your bank-like-thing, expecting to get more back at the end, it's an investment.

> I'm guessing the concept is more like stock lending fees

Those are investments too. Their technical name is "repos", short for "repurchase agreements".

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