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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

#191

Post by numtel »

nikanj wrote: post #85
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…

Luckily they can run the whole scheme from Elbonia, and people are more than happy to send over cryptos from the US.

Well, there is Nexo which is basically the same but headquartered in Bulgaria.

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

#192

Post by landemva »

bduerst wrote: post #170
ryanSrich wrote: post #160

Earlier quoted context omitted.

> How is it unfounded? The carbon and ewaste problems are well documented. Without a benchmark this means nothing. Just because a new technology contributes to ewaste we should just ignore it and bury it? No use in trying to fix it right? Just kill the technology because it contributes to ewaste. That doesn't make any sense. Not to mention the majority of the uproar around Crypto being a danger to the environment is…

That article you link is out of date. Global BTC energy consumption is now double[1] what it was in July, meaning the claim that it's somehow getting better spurious. The article also acknowledges that the energy consumption criticism is a valid issue (even despite the stats being out of date). [1] https://ccaf.io/cbeci/index

I think it is worth it to separate money from State. Now we just need the militaries to cut their defense-of-fiat-money forces in half.

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

#193

Post by thebean11 »

sbierwagen wrote: post #182
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?

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…

It's unlikely that every single borrower would default just like it's unlikely every stock in an index fund would go to zero. I wouldn't really compare it to options trading, junk bonds are a much better comparison. Lower potential return but also much less likely you would lose money than with options.

Obviously the devil is in the details, it's not clear if/how these loans are secured.

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

#194

Post by e4e78a06 »

AJ007 wrote: post #78
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…

I think a lot of these yields from “crypto” are on paper, and it’s misleading the “defi” operators and their investors in to thinking they have huge returns. That’s the only way that would systematically explain lending tokens at very high interest rates.

They're primarily lending to institutional customers (hedge funds, HFT's). If you look on DeFi markets borrowing a couple billion dollars is going to cost you a lot more than the 10% BlockFi is probably charging, due to how automated lending mechanisms work. The reason the yield is so high is because there's insufficient liquidity in ETH/BTC/stablecoins.

Notice also that these loans are undercollateralized. DeFi lending requires overcollateralization which often is not appealing to HFT's executing low-risk arbitrage trades that make a few bps of profit. They need big leverage to make decent money. In our normal financial system banks are willing to lend them money, but in DeFi nobody does undercollateralized loans.

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

#195

Post by CPLX »

thebean11 wrote: post #193
sbierwagen wrote: post #182

Earlier quoted context omitted.

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…

It's unlikely that every single borrower would default just like it's unlikely every stock in an index fund would go to zero. I wouldn't really compare it to options trading, junk bonds are a much better comparison. Lower potential return but also much less likely you would lose money than with options. Obviously the devil is in the details, it's not clear if/how these loans are secured.

There’s no reason at all to think that a complete and total default is unlikely.

It’s far from certain but it’s certainly plausible that the value of nearly all cryptocurrency’s will collapse to nothing at all.

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

#196

Post by SilasX »

endorphine wrote: post #128
SilasX wrote: post #81

Earlier quoted context omitted.

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.

So is mine. (And you can replace "object" with "find questionable or needing justification".)

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

#197

Post by chernevik »

vishnugupta wrote: post #106
babyshake wrote: post #97

Earlier quoted context omitted.

Are you able to speak to how your startup plays a role in cleaning up the ecosystem? It seems like there are a bunch of different types of things that need cleanup, everything from the likes of BlockFi and lending products to outright scams that are trying to steal your wallet credentials or steal your funds. I'd welcome any type of cleanup

We are at idea-validation stage so it's very early days for us. The overarching theme is educating users by making them aware of what they are/have getting/gotten into. Somewhat similar to rating agency in the traditional finance world (e.g., Moody's) but not exactly like them.

If you told me "I'm like a rating agency" I'd double my scrutiny of you, if I didn't simply walk away.

The agencies played a large role enabling the mortgage bubble that popped in 2008. They were essentially selling ratings to bond issuers without any real attention to the quality of the loans underlying the bonds.

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

#198

Post by schmichael »

landemva wrote: post #192
bduerst wrote: post #170

Earlier quoted context omitted.

That article you link is out of date. Global BTC energy consumption is now double[1] what it was in July, meaning the claim that it's somehow getting better spurious. The article also acknowledges that the energy consumption criticism is a valid issue (even despite the stats being out of date). [1] https://ccaf.io/cbeci/index

I think it is worth it to separate money from State. Now we just need the militaries to cut their defense-of-fiat-money forces in half.

I can respect this view on cryptocurrency. I don't agree with it (I expensive from an efficiency standpoint. If you look at Bitcoin for every day transactions it lags fiat in almost every functional dimension: latency, user experience, power usage, scalability, etc.

But! Bitcoin does have one completely novel trick! It can operate without State backing. No authorities. No trust between parties (whether minerminer, nodeminer, or nodenode). Centralization seems somewhat questionable these days, but I think "decentralized enough" is a fair assessment.

None of this is something I look for in a currency, but I can appreciate how cryptocurrencies fill that niche for those who do.

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

#199

Post by cwp »

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…

Heh, yeah. I think that falls under "lose everything you invested". If you invested more than you have, well, you lose more than you have. ¯\_(ツ)_/¯

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

#200

Post by jonathan-adly »

babyshake wrote: post #169
jonathan-adly wrote: post #72

1. This is a PR win for the SEC. It can now go to congress and say, see, we are working with Crypto companies! (while they really aren't, not in good faith anyway). 2. This is a win for Blockfi. Like other mentions, they gave their business a legal veneer for the sum for $100m. If you are of the opinion that all Cryptos and related companies are scams. Guess what? The SEC disagrees. 3. The same product (even better a…

> The same product (even better actually) is done via DeFi. That's where the real battle will be with major implications on the Ethereum ecosystem (or whatever Dapp blockchain you prefer). The US gov could require teams based in the US to require KYC in their apps for US citizens. And they can require US citizens to only use apps with KYC. But can they really do much beyond that?

That would be in violation of the securities laws that blockfi is accused of violating.

Per this case, the SEC stand is interest bearing crypto -> a security

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