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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

#331

Post by [deleted] »

dragonwriter wrote: post #315
darksaints wrote: post #299

Earlier quoted context omitted.

Theyre a public company (regulated by the SEC), offering SEC-regulated services. Of course they notified the SEC. The twitter thread that got merged with this thread was pretty clear about it: they notified the SEC, but they also notified other regulatory bodies and had the full expectation that the lending accounts would be regulated by another entity because they are not securities.

> the full expectation that the lending accounts would be regulated by another entity because they are not securities. Why do they think they aren't securities? Because they obviously meet the Howey test, and while they may have “expected” that they would be regulated by another body (and which and on what basis?), they obviously haven’t done what it would take to make them (for instance) FDIC-insured depository acco…

[deleted]

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

#333

Post by adrr »

darksaints wrote: post #287
adrr wrote: post #136

Earlier quoted context omitted.

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...

FDIC insured if the money is stored at a bank. Those are called brokered accounts. Not all sweep accounts use them and use money market funds or other securities. Also brokered accounts are fungible money can and does get transferred around behind the scenes. Some broker dealers will use the cash for overnight lending for income.

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

#334

Post by JumpCrisscross »

davedx wrote: post #180
JumpCrisscross wrote: post #98

Earlier quoted context omitted.

> lending the bank your money with an 0.04% interest rate. Is that a security? No. Banks are regulated separately and more strenuously than securities firms, much less issuers. If Coinbase wants to offer Lend as an FDIC-insured deposit account, I’m sure the SEC would be fine with it. But Coinbase can’t do that because it doesn’t follow the rules banks must follow.

But is Lend a security ? As far as I can tell, there's no contract for capital flows that you can trade with others. Lend isn't fungible, the USDC is.

> is Lend a security?

According to Coinbase, the SEC said "they consider Lend to involve a security." Not that it is a security. The second question is (a) more ambiguous and (b) a red herring from Coinbase.

If Coinbase is taking deposits from customers to engage in securities trading, it's acting as a bank or broker-dealer. It is registered and regulated as neither. Note that Kraken and Gemini have state banking charters. Coinbase is drawing a false equivalence. The entire enterprise stinks of bad faith, possibly fraud.

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

#335

Post by ncallaway »

goodcanadian wrote: post #229
JohnJamesRambo wrote: post #142

Earlier quoted context omitted.

To me it sounds like banks can’t compete and just keep the 4%, so now they have the SEC go after their competition that can. I don’t see the difference at all between a USD that makes (pitiful) interest in a bank savings account and a peg to USD that makes awesome interest in a Coinbase savings account. When I invest my USD with Wells Fargo bank they are converted to Wells Fargo Bucks that are tied to how efficient a…

Your "Wells Fargo Bucks" aren't classified as securities because Wells Fargo is a regulated bank (with all of the restrictions and protections that come with that). Coinbase is not a bank. It is as simple as that. This is really more like buying a corporate bond (which is a security) rather than putting a money in a savings account.

It seems pretty apparent that there are two options for a company that wants to offer this product:

- Offer it as a bank, while complying with the regulations for being a bank, OR

- Offer it as a security, while complying with the regulations for offering securities.

My read on this blog post is that Coinbase is trying to get out of the securities option by kinda pretending to be the banking option, but without actually complying with or falling under the jurisdiction of banking regulations. Is that about right?

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

#336

Post by [deleted] »

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…

[deleted]

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

#337

Post by paxys »

jrochkind1 wrote: post #3

Seems to be gone from the internet. Can't find it in archive.today or archive.org either. reddit comment thread: https://www.reddit.com/r/CryptoCurrency/comments/pk2rjl/coin... Which points to a tweet thread from Brian Armstrong of Coinbase that is still there for now.... https://twitter.com/brian_armstrong/status/14354409980546539... unrolled (and probably will still be there even if tweets deleted?) https://threadr…

I can see it fine right here - https://blog.coinbase.com/the-sec-has-told-us-it-wants-to-su...

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

#338

Post by thedufer »

darksaints wrote: post #329
dragonwriter wrote: post #315

Earlier quoted context omitted.

> the full expectation that the lending accounts would be regulated by another entity because they are not securities. Why do they think they aren't securities? Because they obviously meet the Howey test, and while they may have “expected” that they would be regulated by another body (and which and on what basis?), they obviously haven’t done what it would take to make them (for instance) FDIC-insured depository acco…

The Howey test doesn't apply here. If it's not securitized and it's not tradable, it's not a security. You can't trade a lending account...you can either hold it, or liquidate it. FINRA is an obvious choice. They already regulate securities lending, they already regulate margin accounts, they already regulate interactions with FDIC-regulated bank accounts.

> The Howey test doesn't apply here. If it's not securitized and it's not tradable, it's not a security.

Do you have a reference for that? Because that aspect doesn't sound relevant at all - the court case the Howey test comes from was about securities fitting your description (and, of course, the outcome was that they were considered securities).

The Howey case actually refers to them as "investment contracts", which I presume is language from the securities act itself. This seems like better terminology than "securities", if only because it doesn't so obviously conflict with the colloquial meaning. I'm not sure how we got here from there, although the "securities act" naming probably didn't help.

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

#339

Post by pavlov »

seibelj wrote: post #324
pavlov wrote: post #319

Earlier quoted context omitted.

It’s incredible. This guy sold $15M USD of worthless tokens to the public. Investors lost their money. Instead of feeling ashamed, he’s proud of having settled the case out of court and “laughed all the way to the bank”. Crypto ethics are truly well hidden.

No admission of wrongdoing, all money returned to investors, and IMO we didn't do anything wrong despite the SEC's opinion. I laugh to the bank because I've been in crypto for a decade!

Well, I stand corrected. You returned the money because you got caught. How upstanding.

Your crypto schemes are just boiler room scams dressed up in CS jargon.

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

#340

Post by jjulius »

seibelj wrote: post #324
pavlov wrote: post #319

Earlier quoted context omitted.

It’s incredible. This guy sold $15M USD of worthless tokens to the public. Investors lost their money. Instead of feeling ashamed, he’s proud of having settled the case out of court and “laughed all the way to the bank”. Crypto ethics are truly well hidden.

No admission of wrongdoing, all money returned to investors, and IMO we didn't do anything wrong despite the SEC's opinion. I laugh to the bank because I've been in crypto for a decade!

>I laugh to the bank...

Because it's money that counts above all else, right?

Edit: It seems like your former company has still been operating in a shady manner since your departure [1], making it that much harder for me to take anything you say in good faith.

[1] https://medium.com/@svenema/sec-powerless-against-crypto-rug...

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