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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

#281

Post by Tenoke »

hnthrowaway2 wrote: post #261
Tenoke wrote: post #197

Earlier quoted context omitted.

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.

It is charitable to call it childish. It is unprofessional. And it indicates a culture of "the rules don't apply to us because we are so cool".

Again, the reasoning behind it is likely for convincing investors/users they are in the right and as far as I can tell it is working - I see a lot of tweets of people buying Coinbase's response and raging against the SEC and people like balajis retweeting them.

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

#282

Post by elliekelly »

gnee wrote: post #89
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…

When you put your money into a saving account, you're lending the bank your money with an 0.04% interest rate. Is that a security?

It is. But since it’s issued by a bank it’s largely exempted from the Securities Act[1] along with many other types of securities. For example, a lot of life insurance policies are technically securities, too.

[1]https://www.law.cornell.edu/uscode/text/15/77c

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

#283

Post by gitfan86 »

koolba wrote: post #221
darawk wrote: post #196

Earlier quoted context omitted.

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.

You’re mixing up what would be asked to the in house lawyers. It’s not a binary: Is this legal? It’s: Can we get away with this?

Sometimes people assume that lawyers write contracts with the goal of the contract never being breached. But plenty of times they write contracts with the goal of breaching it being of little significance for their client.

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

#284

Post by artfulhippo »

When I interviewed with Coinbase in 2018, it seemed that their core competency was strong relationships with regulators (not tech). And now they're picking a fight with the SEC? What's going on inside COIN? Office politics must be tense: unanimous support for this PR move seems unlikely.

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

#285

Post by edanm »

itogglebits wrote: post #187
dehrmann wrote: post #129

Earlier quoted context omitted.

Reductio ad absurdum is a valid argument.

That's not reduction ad absurdum. [0] [0] https://en.wikipedia.org/wiki/Reductio_ad_absurdum

That's exactly reductio ad absurdum.

Quoting your own link: > [a] form of argument that attempts to establish a claim by showing that the opposite scenario would lead to absurdity or contradiction.

The claim parent is attempting to establish is "how old a law is doesn't matter". The extreme example is ignoring an old law that abolishes the slave trade, and claims it is unimportant because it is decades old, which (parent is claiming) is absurd. Therefore, the original claim is absurd.

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

#286

Post by elliekelly »

alasdair_ wrote: post #118
fogof wrote: post #42

> They have only told us that they are assessing our Lend product through the prism of decades-old Supreme Court cases called Howey and Reves ... These two cases are from 1946 and 1990. Trying to make out like Howey is some obscure precedent from decades ago which the SEC is nitpicking over. The Howey test is the test applied to determine if something is an investment contract.

The Howey Test is absurdly broad. Two kids pooling their pocket money to buy the extra large bag of candy with a plan sell the extra gummy worms meets all four parts of the Howey Test and is unlicensed securities creation. Reminds me of the Bloomberg article "Everything Everywhere is Securities Fraud" https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...

Your example very clearly doesn’t meet the Howey test though?

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

#287

Post by darksaints »

adrr wrote: post #136
darksaints wrote: post #106

Earlier quoted context omitted.

Once you package it up into a tradable instrument, it becomes a security, which would either be regulated by the SEC (bonds) or the CFTC (swaps or futures). But if it isn't tradable (which a lending account is not), it's not a security. It's likely the jurisdiction of FINRA or the FDIC.

My sweep account on my brokerage is regulated by the SEC. I can’t trade it. Some of the challenger banks are using sweep accounts instead of standard deposit accounts. Just look at the ones with a broker dealer license.

Sweep accounts are not regulated by the SEC, they're regulated by the FDIC and other bank-related regulatory bodies. They may be offered by SEC regulated brokerages, but that doesn't mean that the accounts themselves are regulated by the SEC.

https://www.sec.gov/oiea/investor-alerts-bulletins/ib_banksw...

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

#288

Post by ethbr0 »

tylerhou wrote: post #198
bjackman wrote: post #194

Earlier quoted context omitted.

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!

I don’t understand how you can make a profit larger than the risk-free rate of return without at least some risk; i.e. any risk free profit should be arbitraged away. If Coinbase has truly found risk-free profit it would be more profitable to sell it as an investment to some hedge fund, not give away free returns to retail.

Answer: Legal ambiguity carries its own risk.

Therefore, rates in more ambiguous instruments should be higher than those in more certain ones, no?

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

#289

Post by elliekelly »

mthoms wrote: post #185
tobias3 wrote: post #144

Maybe they should have asked Brett Redfearn (former SEC director working at Coinbase) about the SECs reasoning. He left Coinbase in July? I guess the revolving door corruption failed (and/or he figured out where the wind is blowing)... This is really all too transparent and obvious. A risk-free investment with 4% APY. What-aboutism about other exchanges (which are unregulated and off-shore). Not "understanding" the p…

As a kid I made over 4% APY interest on my savings account. Risk free. Yes, I realize their are important differences here but I don't think that getting a 4% risk-free return should be seen as an "obvious" problem.

Do you know why it was risk free (to you)? Because of government regulations and government guarantees. There’s no such thing as a risk-free investment. Your investment risk was borne by your state and federal government.

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

#290

Post by xtat »

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…

I'm truly boggled as to how many on this page seem to think the SEC's reasoning makes sense, let alone how the SEC reached this seemingly narrow-minded or lazy conclusion in the first place.
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