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Blockfi agrees to pay $100M in penalties and pursue registration

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Re: Blockfi agrees to pay $100M in penalties and pursue registration

#121

Post by altairprime »

z16a wrote: post #104
Animats wrote: post #74

Basically, the Investment Act of 1934 says: 1. You have to file a prospectus (an S-1) before collecting money. 2. You have to disclose a lot of stuff, like who's really behind this, where the money goes, what the risks are, what's happened so far, and what the business plan is. 3. Lying in an S-1 is a crime. Crypto schemes tend to violate 1), because 2) would show that their scheme is a scam, and if they tried to cov…

Please clearly articulate how Blockfi is a scheme or a scam.

> BlockFi made a false and misleading statement for more than two years on its website concerning the level of risk in its loan portfolio and lending activity.

As the order linked above indicates, BlockFi knowingly deceived investors. In the financial/investing context of this discussion, “to scheme” is to plan and execute deception, with intent of personal gain. Thus, my attempt to reword using your provided language rather than the order’s:

> BlockFi’s scheming led investors to believe that BlockFi was a lower-risk investment than it was in reality.

Note that any errors in translation from SEC wording to your provided terminology are my own, and that I’m making a good-faith effort to help build a verbal bridge from your confusion to an example of specific language in the order that addresses it. If my verbal bridge is insufficient, then please accept my apologies and I hope you’re able to find the answers you seek from others, or in the order itself.

(I am not your lawyer, this is not legal advice.)

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#122

Post by AviationAtom »

I had a hunch some action of this sort was coming down the pipeline. The problem is that so many of these companies give the appearance of being fully law-abiding companies, but there isn't necessarily an easy to check that.

I found it somewhat alarming that people proclaimed that 9% APY interest could be made, in such a way that it implied no risk, in much the same way cash in an FDIC-insured bank account is well-protected.

I think much of this is moving so fast that it's going to take some time before the offerings really come close to offering the same level of safety one finds with an FDIC-insured bank account.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#123

Post by schmichael »

ryanSrich wrote: post #109
Animats wrote: post #74

Basically, the Investment Act of 1934 says: 1. You have to file a prospectus (an S-1) before collecting money. 2. You have to disclose a lot of stuff, like who's really behind this, where the money goes, what the risks are, what's happened so far, and what the business plan is. 3. Lying in an S-1 is a crime. Crypto schemes tend to violate 1), because 2) would show that their scheme is a scam, and if they tried to cov…

Conflating anything related to crypto as a scam is just lazy and anti-intellectual. This is one of HN's weakest traits IMO. I find great value in following topics and threads on HN, but it's unrelenting hate for crypto and crypto adjacent topics is unfounded.

> it's unrelenting hate for crypto and crypto adjacent topics is unfounded.

How is it unfounded? The carbon and ewaste problems are well documented. Any fixes for that (eg Proof of Stake) have either compromised Bitcoin's original focus on decentralization, continually delayed release, or both. Over a decade after Bitcoin's launch few use cases have emerged and none of them have proven durable. The ICO craze came and went. DeFi is still muddling along with ever more convoluted cryptoshadows of regulated fiat finance. NFTs are all the rage but currently about as intellectually stimulating as baseball cards. Hacks and scams abound far beyond any other industry.

Both "sides" of the crypto debate are welcome to share their opinions on HN. The constant stream of blockchain links on HN makes me think there are plenty of at least crypto-curious folks around. I'm not sure why the pro side feels so attacked. Share your thoughts. Share your use cases. Advance the field. Prove us on the other side wrong.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#124

Post by missedthecue »

dna_polymerase wrote: post #65

HSBC got fined $84M for laundering mexican drug cartel money. The proportions don't add up. https://www.complianceweek.com/regulatory-enforcement/hsbc-h...

They paid $84M to the European regulator.

The US regulator made them pay $1.9 Billion.

https://www.reuters.com/article/us-hsbc-probe/hsbc-to-pay-1-...

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#125

Post by xur17 »

tcgv wrote: post #77
PragmaticPulp wrote: post #69

Where is the $100 million going to come from? Do they have that much money to spare? Or are their customers about to take a haircut? On that topic, where does BlockFi's profit come from? They're offering 9% (previously 12%) interest on deposits. Are they really re-loaning that money to other people at the 20-30% interest rate required to produce those returns (high interest rates come with high default rates, so you…

Not sure how BlockFi works exactly but most lending DeFi apps have really high collateral requirements and liquidate positions in case of violation of collateral requirements charging a penalty to close open positions early and ensure protocol assets are preserved before a "default" event can ever happen. They're not really "capital efficient".

If you have some time, this [0] is a pretty good write up of a number of different cefi lending platforms. The part I find most interesting is that most places lend to Genesis Trading to generate most of their return, in some cases also lending out smaller portions themselves.

[0] https://prohashing.com/guides/earning-interest-on-crypto

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#126

Post by missedthecue »

consumer451 wrote: post #114
mint2 wrote: post #93

Earlier quoted context omitted.

Yeah hsbc should have been fined more.

Shouldn't the director(s) be held responsible at all? It seems like if people escape consequences this behavior will continue.

Only if you can prove they committed a crime. HSBC has more than 230,000 employees. Statistically, someone will always be doing something wrong.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#127

Post by xur17 »

nazgulnarsil wrote: post #99
heyitsguay wrote: post #95

Earlier quoted context omitted.

Doesn't that just push the same question back a level? Where are these other platforms getting their profits from to sustain such high yields? If there's high demand for high-interest crypto loans, that means there should be platforms one can point to to trace the source of profit - the high-interest loans that fund the high-yield deposit platforms that fund this medium-yield deposit platform? The whole thing sounds…

not if more tether can be printed from thin air to pay the interest.

Fwiw, UST != USDT.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#128

Post by endorphine »

SilasX wrote: post #81
endorphine wrote: post #43

Earlier quoted context omitted.

Would you mind elaborating on why you chose to make the disclosure? It puzzles me because I don't see how it's relevant to the rest of the comment.

Sure, after you justify why you'd object to someone disclosing more bias than they have to. (And my comment throttling lets up.)

I'm not objecting; this was an honest question.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#129

Post by smoovb »

smt88 wrote: post #27
300bps wrote: post #20

...and at the end of the day DeFi will be so regulated it will have all the bad parts of DeFi and regular finance.

Regulations are the good parts of regular finance. There are no financial regulations that currently harm me, a consumer. We honestly need to return to a time when we had a bit more financial regulation.

Regulations are the costly part of regular finance. DeFi is exploring a low friction space in finance and need to be given the freedom to continue to do so.

$100m fines, chargebacks, compliance, transaction fees and the labor behind these are all fat that could be trimmed with DeFi.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#130

Post by anonporridge »

aaaaaaaaata wrote: post #62
anonporridge wrote: post #57

Earlier quoted context omitted.

Also the Ethereum unregistered security fraud.

What was/is(?) fraudulent about it, from the perspective of a single citizen who invested?

I never said fraudulent. Just an unregistered security, which is potentially illegal because the Ethereum foundation that sold and profited off the initial premined tokens to the public without proper disclosure required of a legal security sale.

The result is that we now have no idea how much insider trading actually went on in that premine sale. For example, it could be the case that most Ethereum is secretly controlled by a tiny, tightly knit cabal of people who collude to pump up the price to a false valuation. If this were true, it would be incredibly problematic with their planned transition to proof of stake, because a tiny number of people would effectively have full control over the fate of the protocol and all the money outsiders hold in ETH.

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