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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

#181

Post by sailfast »

bduerst wrote: post #171
babyshake wrote: post #161

Earlier quoted context omitted.

Setting aside other ways crypto can and is being used, the most interesting thing about DeFi IMO is its compositional (and decompositional) nature. This mostly results in reinventing things that already existed in Wall St and other areas of the finance world, but are now available for anyone to use.

Can you give specific examples of these 'things' though?

Becoming "your own" domain registrar without having to deal with ICANN was another interesting one to me (after checking into how all those .eth domains popped up).

It was exciting when I first looked at it and then I realized that this was actually not "democratizing" anything so much as ensuring a new class of folks would be able to create new centralized "everythings" in a new environment outside of the current system - without the benefit of the years of testing, regulation, and (sure) cruft that our current systems have because they're subject to political forces (which is actually a feature).

Maybe starting the wild west over again is a good thing? My money's on "not really" at the moment.

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

#182

Post by sbierwagen »

cwp wrote: post #146
Animats wrote: post #141

Earlier quoted context omitted.

And that is why S-1 filings exist - to provide the answer to such questions. Somewhere, for this to work, there must be people paying more than 9.25% to borrow money. Who are they? What collateral are they putting up? Whatever the borrowers are doing must be high risk, or they wouldn't be paying interest that high. In effect, this is a junk bond they're selling - high interest, with a high chance of losing the princi…

Well, the downside is capped at "you lose all the money you invested". I think. Did I miss something?

That is a much worse risk than basically any other investment!

If you buy gold, the price will fluctuate, but it won't be lost. If you bought the Dow at the peak in 1929 and held it all the way to the bottom then you lost 89% of your money, but it didn't actually go to zero. When Ponzi schemes evaporate, the money disappears. You can sign on to whatever class action lawsuit comes out of it, but the lawyers are going to eat most of the proceeds.

It's more options trading than "investing", and Robinhood's profits demonstrate that most people lose money on options.

Blockfi's yields remind me of money market funds in 2008. They looked like bank accounts, and paid out mostly sane yields, but the fine print said "not a bank account, may evaporate". Well, when it threatened to evaporate, everyone freaked out: https://www.investopedia.com/articles/economics/09/money-mar...

When the NFT staking people are advertising yields of 132%, https://twitter.com/Route2FI/status/1492940519965605890 that's a huge blinking red sign that says SCAM SCAM SCAM, but 9.25% isn't as big of a warning as it should be. The moral hazard of every market bubble is sophisticated actors chasing yield on the way up, then claiming you were swindled, bamboozled, and had no idea what you were getting into, and urgently need a bailout when the bubble pops.

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

#183

Post by ar_lan »

sbierwagen wrote: post #132
thebean11 wrote: post #87

Earlier quoted context omitted.

Is BlockFi a scam though? Fraud is not what they are getting fined for, and it sounds like they can continue to operate if they meet these reporting requirements, and that the company intends to do that.

Check out the interest rates on their crypto accounts: https://blockfi.com/rates/ A guaranteed 9.25% APY on crypto deposits when US dollar savings accounts at FDIC banks do 0.50% is odd. Where is the extra money coming from?

If you check DeFi rates, 9.25% is fairly low currently.

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

#184

Post by omeze »

NelsonMinar wrote: post #168
ryanSrich wrote: post #165

Earlier quoted context omitted.

Why not? I could find countless SEC violations that are far worse than this from banking institutions that I guarantee you use on a weekly or monthly basis. Are those scams?

Yes, yes they often are. But I think you'll be hard-pressed to find many examples of legitimate banks having their primary customer offering being declared illegal and forced to stop operation immediately.

Erm, from recent memory: Wells Fargo (3rd largest US bank) had a nice 185 million fine for checking account fraud… https://en.m.wikipedia.org/wiki/Wells_Fargo_account_fraud_sc...

Not saying this justifies BlockFi’s behavior but the incentives for any bank is there!

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

#185

Post by anonporridge »

sincerely wrote: post #133
anonporridge wrote: post #130

Earlier quoted context omitted.

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 contr…

Ok, you didn't call it fraudulent, you called it fraud - is that not a distinction without a difference?

Ah, I did. Apologies.

I should not have conflated my personal feelings with it with the facts of its suspicious and unverifiable initial distribution.

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

#186

Post by sailfast »

ryanSrich wrote: post #165
NelsonMinar wrote: post #158

Earlier quoted context omitted.

We are literally discussing a company being found by the SEC to have sold an investment asset without appropriate disclosure and that asset being closed to American investors. This is not the example to make your case with.

Why not? I could find countless SEC violations that are far worse than this from banking institutions that I guarantee you use on a weekly or monthly basis. Are those scams?

FWIW, no. After the savings and loan crisis a lot of that went away.

Especially not typically fraudulent are the APY yield savings accounts whose deposits are insured.

Also I doubt you could find countless violations outside of (maybe?) insider trading based on MNPI at these institutions, but if you know of them you should report them - whistleblowers can make a lot of money!!

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

#187

Post by notpachet »

capableweb wrote: post #17
coconut08 wrote: post #7

Is there something about Gemini's version of the interest bearing account that makes it less problematic than Blockfi's offering? Why is it that Blockfi has taken so much heat and Gemini has seemed to fly completely under the radar? Does this suggest that the issue was the marketing and the implementation that was the issue rather than the product itself?

I guess it could have something to do with that Gemini is a registered exchange and regulated by the NYDFS, while BlockFi goes the more traditional cryptocurrency exchange route of "Let's see what turns out to be illegal when we get there".

That route has a pithier name: "disruption"

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

#188

Post by mbesto »

bduerst wrote: post #174
danbruc wrote: post #172

Earlier quoted context omitted.

Does Newegg do anything with the Bitcoins or are they immediately converting them into Dollars?

IIRC Newegg is using Bitpay, which costs ~1% and settles to USD daily. It also means no refunds allowed (even in USD) to the customer using it, only store credit.

Which is an entirely pointless way to transact commerce for 99% of the population. I get my paycheck in USD and then buy goods and services with it. If it converts to BTC and then BTC back to USD then whats the point? It's just paying with a credit card with extra steps.

What's the use case here?

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

#189

Post by clpm4j »

ryanSrich wrote: post #152
Tarsul wrote: post #119

Earlier quoted context omitted.

you're right but what I find even more jarring in crypto-threads is that usually the only argument (or at least the most prolific one) from the pro-crypto side is that the argument of the anti-crypto side is off-based. But that is not an argument pro-crypto that's at most an argument that's crypto-neutral. But maybe that's enough for the pro-crypto crowd because neutrality means that the show goes on. Nevertheless, i…

Being pro-crypto is like being pro-internet or pro-money. It doesn't make sense to say that. If I use Bitcoin to buy something legally online is that a scam? Am I getting scammed? Is the other person getting scammed? I just don't understand why people ignore the fact that crypto is a utility. Sure, you can hate a company that scams users into thinking their crypto token has some intrinsic value and then rug pulls a m…

Genuinely curious, if you're based in the US, why do you choose to spend your BTC as money? Why not spend your USD instead (for the computer parts that you mentioned in another comment)?

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

#190

Post by landemva »

hermitdev wrote: post #159
cwp wrote: post #146

Earlier quoted context omitted.

Well, the downside is capped at "you lose all the money you invested". I think. Did I miss something?

In general, yeah, you're capped at everything you invested basically ceasing to exist. Unless you bought on margin. Then, you can end up owing money, even if the asset is worthless. Not crypto related, but one of the things that made the financial collapse of 2008 so much worse were the number of institutions that were over leveraged at the time and couldn't make the margin calls when assets started tanking. The fund…

Another thing that made 2008 worse was bank regulators napping for a few years. Those ratings on mortgage debt stunk and nobody cared.
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