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SEC charges Kraken for operating as an unregistered securities exchange

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Re: SEC charges Kraken for operating as an unregistered securities exchange

#151

Post by xalava »

fallingknife wrote: post #131
pseg134 wrote: post #118

Earlier quoted context omitted.

They offered an unregistered security for sale. That is against the law.

But the only time that a judge has ruled on whether or not a crypto token is a security is in the XRP case, and it ruled that it was not (at least when it was sold on exchanges). This is not comparable to a ponzi scheme where the legality is not in question at all. And let's not ignore the fact that these exchanges have done this right out in the open for around 10 years now. Coinbase even had their IPO approved by t…

The SEC has been consistently saying that most crytoassets were securities. The only acknowledged exception, for which it had contradictory statements, is if a protocol is "sufficiently decentralized" such as Bitcoin and Ethereum.[1]

On the IPO, the registration is independant from such pursuits as the SEC raised during their approval. [2]

That said, there would have been better course of action to protect consumers, such as establishing an appropriate regulatory framework, but I may be too European.

[1] https://www.sec.gov/news/speech/speech-hinman-061418

[2] https://www.sec.gov/Archives/edgar/data/1679788/000000000020...

Re: SEC charges Kraken for operating as an unregistered securities exchange

#152

Post by pitaj »

pmulard wrote: post #94
jongjong wrote: post #80

Earlier quoted context omitted.

The SEC has no place in a free market. If people trust a company which co-mingles funds, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the SEC... How good is that?! If my startup fails because I hired the wrong people, I take the full b…

The FDA has no place in a free market. If people trust a company which poisons their food, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the FDA... How good is that?! -- I'd much rather pool our money into a commission that does this fo…

How many people have died because of FDA gatekeeping delaying the release of life-saving treatment?

Re: SEC charges Kraken for operating as an unregistered securities exchange

#153

Post by YeBanKo »

austhrow743 wrote: post #148
YeBanKo wrote: post #141

Earlier quoted context omitted.

> "don't commingle customer funds" This seems to be with accounting, not securities. > there's actually a pretty clear answer as to what would need to be done to be fully above-the-board and legal What needs to be done to be fully legal?

Shut down.

Why? Call it a gamble and let operate under casino license. The issue is only when cryptocurrency masquerades as investment.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#154

Post by humanizersequel »

ac29 wrote: post #102
ascendantlogic wrote: post #96

Earlier quoted context omitted.

At some point someone has to explain to you what law you broke and how you broke it. We'll see how this goes for the SEC. I'm not convinced they're going to end up on the winning side with these vague enforcement lawsuits substituting for policy/law from the legislative branch.

> At some point someone has to explain to you what law you broke and how you broke it The link at the top of this page is 90 pages of the SEC telling Kraken what rules and regulations they have broken. It is certainly possible the court will disagree with the SEC, but I wouldnt bet on it.

>It is certainly possible the court will disagree with the SEC, but I wouldnt bet on it.

I would (not a lot, but I would). They lost on the Grayscale trust, they lost on XRP being a security (extremely relevant here), they're seemingly settling with Binance... the court has been disagreeing with the SEC a whole lot on the matter of blockchain regulation lately.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#155

Post by westurner »

soks86 wrote: post #135
westurner wrote: post #108

Earlier quoted context omitted.

Presumably Coinbase and Kraken had to register as banks to offer FDIC-insured accounts (and debit cards)? Non-Security Deposits are interest-bearing products that are not securities. Non-Security Deposits: CD Certificates of Deposit, MMA Money Market Accounts, Treasury Bills, Savings accounts, Checking Accounts Do banks require SEC registration to offer interest-bearing Non-Security Deposit products? Have banks ever…

They absolutely are not banks or none of this would be happening. This also is about unregistered securities and not interest bearing accounts although that too is an issue because they're not banks. edit: They're Money Services Businesses and that's it. They might have some state-level lending licenses but I'm fuzzy on that.

FDIC: https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp... :

> The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation supplying deposit insurance to depositors in American commercial banks and savings banks.

https://www.sifma.org/resources/general/firms-guide-to-the-c.... :

> Any broker-dealer that is a member of a national securities exchange or Financial Industry Regulatory Authority (FINRA) and handles orders must report to CAT. Eligible securities include NMS stocks, listed options, and over-the-counter (OTC) equity securities.

Interledger Protocol works with any type of ledger, has a defined messaging spec, and has multi-hop audit trails: https://westurner.github.io/hnlog/#comment-36503888

Re: SEC charges Kraken for operating as an unregistered securities exchange

#156

Post by fallingknife »

fredgrott wrote: post #19
starttoaster wrote: post #11

Earlier quoted context omitted.

I'm guessing there was some moving of the goal posts at play here, by the feds, because the SEC does a huge background check on the operations of your company before you're allowed to be publicly traded, and if they didn't find anything there, I have a hard time believing they were breaking rules as the rules were written at the time.

Checking details of company registration is not the same as a background checK. Let me explain the difference.. I had a series 63 license from The SEC. Here is what I submitted: 1. Background info form to FBI which was checked. 2. Fingerprint form Far different when you register a company as public. Per their own docs they review accounting not background, see https://www.sec.gov/divisions/corpfin/cffilingreview

Sure. They don't review background. They don't go looking around for crimes. But if you straight up tell them "hey SEC, I'm breaking the law" you expect me to believe that they will actually just ignore it and approve? And that's exactly what Coinbase did in it's S-1, if you believe the theory that the SEC has always considered Coinbase to be an illegal operation.

Like do you really believe that if you filed an S-1 with the SEC that said "we raise money from investors and use the proceeds to pay distributions to previous investors" that the SEC would say "sure, whatever, go ahead and IPO your ponzi scheme. We don't review background." Because I sure don't.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#157

Post by cheriot »

pitaj wrote: post #152
pmulard wrote: post #94

Earlier quoted context omitted.

The FDA has no place in a free market. If people trust a company which poisons their food, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the FDA... How good is that?! -- I'd much rather pool our money into a commission that does this fo…

How many people have died because of FDA gatekeeping delaying the release of life-saving treatment?

What could possibly go wrong

> Bayer marketed diacetylmorphine as an over-the-counter drug under the trademark name Heroin.[91] It was developed chiefly as a morphine substitute for cough suppressants

https://en.wikipedia.org/wiki/Heroin

Re: SEC charges Kraken for operating as an unregistered securities exchange

#158

Post by palmfacehn »

pmulard wrote: post #94
jongjong wrote: post #80

Earlier quoted context omitted.

The SEC has no place in a free market. If people trust a company which co-mingles funds, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the SEC... How good is that?! If my startup fails because I hired the wrong people, I take the full b…

The FDA has no place in a free market. If people trust a company which poisons their food, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the FDA... How good is that?! -- I'd much rather pool our money into a commission that does this fo…

You have presented false alternatives.

Private regulation can exist inside of a free market. Consumers and producers of food or financial products can voluntarily participate with private ratings agencies. These standards can be higher or lower, based upon market preferences. The existence of a state backed monopoly is widely recognized as prohibitive to competition. State monopolies create issues around corruption, gatekeeping and more. Too many to expand upon here.

If you don't like free markets, that's fine. There's no need to misconstrue the options. The anti-market sentiment is somewhat surprising to see here.

https://mises.org/power-market/fda-approval-monopolists-sche...

https://www.greenchoicenow.com/v/food-pyramid-usda-dietary-g...

https://www.salon.com/2015/04/12/the_fdas_phony_nutrition_sc...

Re: SEC charges Kraken for operating as an unregistered securities exchange

#159

Post by donmcronald »

TacticalCoder wrote: post #104
KrakenEng wrote: post #89

Kraken's response: https://blog.kraken.com/news/kraken-continues-to-fight-for-i... > The complaint against Kraken alleges no fraud, no market manipulation, no customer losses due to hacking or compromised security, and no breaches of fiduciary duty. It includes big dollar amounts but does not allege a single one of those dollars is missing or misused – no ponzi scheme, no failure to maintain adequate reserves, and no…

My favorite part is this: > Meanwhile, groups of lawmakers from both sides of the aisle have questioned what they call SEC’s “regulation via enforcement” approach. They have asked why the agency’s actions against crypto firms seem less focused on “compliance and customer protection,” but were instead “calculated for maximum publicity and political impact.” Others have observed that the SEC’s strategy “does not protec…

> “calculated for maximum publicity and political impact.”

I'm not a fan of crypto currency, but a big part of my dislike for it is how difficult it is to actually use it. I don't mean technically though. I mean legally.

In Canada, all crypto transactions are considered taxable events. Did you sell a couch on Facebook Marketplace using Bitcoin? Time to calculate your capital gain or loss from a vaguely worded set of guidelines.

It's all political IMO. The real value in crypto is having a currency that isn't subjected to the whims of governments and the people that control monetary policy alongside the massive payment networks like Visa and MasterCard. Controlling the flow of money allows pseudo bans on things the people that control those systems don't like.

My hot take on the whole thing is that half the goal is to make it well known that all the remaining exchanges perform strict KYC and that crypto transactions are trivially easy to track while being extra complicated to report on your taxes (at least in Canada). Once that's done crypto currency doesn't have much value to anyone.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#160

Post by DennisP »

lmm wrote: post #138
SeanAnderson wrote: post #51

Earlier quoted context omitted.

Well, I had started the conversation about BTC not BCH. Personally, I feel that BCH has more of a team associated with it than BTC. That said, none of what we're talking about addresses the fact that, in 2018, Gensler said, quote, "Bitcoin. Ether. Litecoin. Bitcoin Cash. Why did I name those four? They’re not securities." Since then, things have changed, and now Gensler only highlights BTC as not a security. If the i…

> To me, it feels like chasing opinion and public sentiment - not following rigid, established legal patterns. The sentiment is an integral part of the established legal pattern - the Howey test is about "expectation of profit". Even if based purely on vibes, I think the man on the Clapham omnibus might well say: someone buying Bitcoin today, or Ethereum in 2018, is not expecting to profit from the efforts of their r…

Bitcoin still rolls out upgrades occasionally.

At this point Ethereum doesn't really have "a dev team." There are about ten independent client teams, who have public meetings to come to agreement on upgrades, plus an open research community.

When you say that an ETH buyer is "expecting to profit from the efforts of the dev team" which wasn't the case in 2018, are you talking about proof of stake? Because it's not all that different from proof of work. You run a client, process transactions, and get rewarded for doing that. Instead of buying a server rack you stake some ETH, but what you get rewarded for is running the protocol.

You don't get rewarded for just holding ETH. Unless the value of ETH goes up, but that's the same with Bitcoin and with Ethereum in 2018.

The Howey test, incidentally, is also about an investment contract. That's why an equity is a security, but a bar of gold is not, even if you bought the gold as an investment. Lack of contract is why the SEC lost their case against Ripple recently.

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