Founder of crypto lender Celsius Network arrested, charged with fraud • Hacker News Board

Re: Founder of crypto lender Celsius Network arrested, charged with fraud

#111

Post by Animats » Thu, Jul 13, 2023, 5:36 PM UTC

vkou wrote: post #81

legitster wrote: post #69

Let's say I run a swap meet for people to buy and sell Pokémon cards. There are lots of scammers out there, but I promise people they are going to get good prices. And I even offer to buy cards off of people at good prices to drum up interest. Tomorrow, the SEC decides that Pokémon cards are securities (far-fetched, but work with me here) Suddenly, anyone buying and selling them becomes a criminal. I tell people via…

Let's say that your analogy has zero actual bearing on what actually happened in this situation, and end the conversation there. He misrepresented Celsius. That's fraud. It doesn't matter if you do it with dollars, bitcoins, scrip, or Pokemon cards.

> Let's say that your analogy has zero actual bearing on what actually happened in this situation, and end the conversation there.

Yes.

Here's Celsius's web site archived in early 2022.[1] See what they claimed. They went all the way to being a fake bank. In their own words:

"Meet Celsius: a community of over 1 million users that earn up to 17% yield on their crypto. Get paid new coins every week and borrow cash at 1%. Buy coins, earn yield, borrow, and transfer with no fees. Available on web and mobile apps."

[1] https://web.archive.org/web/20220103153602/https://celsius.n...

Re: Founder of crypto lender Celsius Network arrested, charged with fraud

#112

Post by [deleted] » Thu, Jul 13, 2023, 5:36 PM UTC

icepat wrote: post #20

chx wrote: post #16

Earlier quoted context omitted.

Deleted. Read https://ic.unicamp.br/~stolfi/bitcoin/2020-12-31-bitcoin-pon... https://www.ic.unicamp.br/~stolfi/bitcoin/2021-01-16-yes-pon... instead.

> If you rolled back every bitcoin transaction ever made you would end up with people in debt because the transaction fees were paid. This can be said about every bank transaction that charges a fee as well. Not a crypto fan at all (I find it rather silly overall), however this is not a particularly strong angle to attack it from.

[deleted]

Re: Founder of crypto lender Celsius Network arrested, charged with fraud

#113

Post by saurik » Thu, Jul 13, 2023, 5:37 PM UTC

wpietri wrote: post #87

legitster wrote: post #69

Let's say I run a swap meet for people to buy and sell Pokémon cards. There are lots of scammers out there, but I promise people they are going to get good prices. And I even offer to buy cards off of people at good prices to drum up interest. Tomorrow, the SEC decides that Pokémon cards are securities (far-fetched, but work with me here) Suddenly, anyone buying and selling them becomes a criminal. I tell people via…

The important difference being that Pokemon cards don't meet the Howey test: https://www.investopedia.com/terms/h/howey-test.asp So yes, if finance were unregulated, then he wouldn't have been violating the securities regulations that didn't exist. But they did exist, and the Howey Test is from 1946, so it shouldn't have been a surprise. A lot of people tried to pretend that the existing financial regulations, many o…

Which point of the Howey Test do you feel is not satisfied by Pokémon cards? (If your answer has anything to do with the existence of the game, I am curious what you think of baseball cards.)

You state that they don't satisfy the test with quite some certainty but left the reasoning to the reader; but, it would seem, to me, like Pokémon cards are no different from many of these cryptocurrencies the SEC is interested in:

In this case, some company decided to print a bunch of supposedly rare things that they pinkie swear are actually rare, even though this company can print more any time they want. People who buy these cards from the company don't even know what they are buying, which seems particularly egregious, and maybe should be regulated as an illegal lottery!

They then sell these things to people who are absolutely buying them with the expectation that they will go up in value. The people who print the cards insist they have "utility" in the form of a game people can play, and yet I have never heard of anyone actually playing this game... hell: the only 10 year old I know well happens to be obsessed with these cards and is presumably in the target market, and I'm not even certain he knows how to play the game!

Instead, this kid just keeps his cards in binders and talks constantly about their rarity and potential later sale value, as even our children are being turned into amateur investors by the marketing efforts of this company; and the reality is that--like other so-called "collectible" crazes--most of these cards are going to be near-worthless in the long term as this is just a bubble being held up by the company's management efforts designed to shill their shitcards.

Re: Founder of crypto lender Celsius Network arrested, charged with fraud

#114

Post by alangibson » Thu, Jul 13, 2023, 5:38 PM UTC

elforce002 wrote: post #37

And now "crypto" bros are moving to AI. The never ending story.

AI has real use cases besides just doing crimes. I mean AI's most profitable use case right now is definitely crimes, but it can also be used to put people out of work.

Re: Founder of crypto lender Celsius Network arrested, charged with fraud

#115

Post by ChainOfFools » Thu, Jul 13, 2023, 5:38 PM UTC

duckhelmet wrote: post #45

wpietri wrote: post #32

Earlier quoted context omitted.

And unfortunately I think the tech industry unintentionally enabled it in a few ways. The internet/mobile boom was a real leap for humanity. (Not an unmixed one, any more than the printing press was. But a real leap nonetheless.) This left a lot investors looking for the Next Big Thing. I think it made regulators very cautious of possibly harming something that could be The Future. Journalists were accustomed to tell…

It's understandable why these were modded into invisibility ;) -- @nancyhn: “The banking industry is a fraudster's paradise. The difference is they don't get arrested, they get bailed out with bonuses. It seems there are a lot of short memories here who don't remember 2008.” -- icepat: “If you rolled back every bitcoin transaction ever made you would end up with people in debt because the transaction fees were paid.…

Strongly agree with the point made about the miners being criminally overlooked in all of this. If crypto and Bitcoin are camouflaged pyramid schemes, the people at the top of the pyramid- even above the exchanges and the hucksters and the VCs, are the small handful big miners who have been doing it even before BTC was a few dollars each.

There's a huge misdirection in the very thin narrative about minors, which is that "everyone knows" they've always had to sell the entirety of their coin bases to break even. This is completely taking the miners at their word when there is absolutely no reason to believe any of it.

The reason the price is stabilized every time it should fall is because the miners, and the OG miners alone, have the ability to collectively throttle back on selling their newly mined coins to the market and can do so almost indefinitely because of the massive profits they realized on early gains held long term. This is the true source of number go up and I'm surprised how little attention it's been given, probably because miners are notoriously publicity shy. You'll notice they're never talked about it any of these articles.

Re: Founder of crypto lender Celsius Network arrested, charged with fraud

#116

Post by bandrami » Thu, Jul 13, 2023, 5:41 PM UTC

RetpolineDrama wrote: post #97

BlandDuck wrote: post #82

Earlier quoted context omitted.

I think the way to understand this is that the SEC is concerned about protecting unsophisticated regular folks from being scammed. If you started aggressively marketing your Pokemon cards, presenting them as financially sound investments, and regular people started putting their entire pension savings into them lured by false promises and being scammed, then the SEC might well take an interest in Pokemon cards as wel…

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Re: Founder of crypto lender Celsius Network arrested, charged with fraud

#117

Post by bandrami » Thu, Jul 13, 2023, 5:42 PM UTC

wpietri wrote: post #87

legitster wrote: post #69

Let's say I run a swap meet for people to buy and sell Pokémon cards. There are lots of scammers out there, but I promise people they are going to get good prices. And I even offer to buy cards off of people at good prices to drum up interest. Tomorrow, the SEC decides that Pokémon cards are securities (far-fetched, but work with me here) Suddenly, anyone buying and selling them becomes a criminal. I tell people via…

The important difference being that Pokemon cards don't meet the Howey test: https://www.investopedia.com/terms/h/howey-test.asp So yes, if finance were unregulated, then he wouldn't have been violating the securities regulations that didn't exist. But they did exist, and the Howey Test is from 1946, so it shouldn't have been a surprise. A lot of people tried to pretend that the existing financial regulations, many o…

The most amusing part of crypto is watching libertarians learn in realtime why these regulations exist

Re: Founder of crypto lender Celsius Network arrested, charged with fraud

#118

Post by legitster » Thu, Jul 13, 2023, 5:43 PM UTC

vorpalhex wrote: post #92

legitster wrote: post #90

Earlier quoted context omitted.

The regulations for handling securities are through a brokerage. This is a HUGE deal because handling crypto through a brokerage would basically neuter it. Imagine trying to buy a pizza with Bitcoin, but you have to go into your Charles Schwab account and wait 3 days for the Bitcoin transaction to settle. In a brokerage system you would get the ownership stake aspect of crypto, but none of the transactional ones.

The settlement time on stocks is minutes. There is no requirement that brokerages are slow to settle. That is your brokerage choosing to be risk adverse.

The requirements are set by the SEC:

https://www.sec.gov/about/reports-publications/investor-publ...

Re: Founder of crypto lender Celsius Network arrested, charged with fraud

#119

Post by Vespasian » Thu, Jul 13, 2023, 5:43 PM UTC

codetrotter wrote: post #68

Forgeties79 wrote: post #58

Earlier quoted context omitted.

I get what you’re trying to say, but honestly? All this does is hurt the reputation of crypto further. It’s yet another headline about crypto scams/ponzi scheme/etc. projected to an audience that is weary of being easily scammed out of money they believe to be safer elsewhere. No one who is skeptical or on the fence about crypto is going to see this headline and go “oh good! They must be catching the bad guys, so now…

> All this does is hurt the reputation of crypto further. There is exactly one legitimate “crypto”, and it is named Bitcoin. All else ranges from speculative promises about future possibilities (smart contracts etc) to straight up scams. Don’t let the people abusing the name of “crypto” detract from the greatness that was the invention of Bitcoin.

It seems to me that after more than 10 years Bitcoin can be most accurately described as "an investment vehicle hopefully not correlated with the stock market".

I guess that's fine and nothing out of the ordinary since people constantly invent new financial instruments.

But since more and more trades happen on regulated exchanges and (as was expected) regular financial regulations such as KYC and AML apply it seems not that revolutionary to be honest.

No reasonable person would (or does) use Bitcoin as an actual currency if they expect the value to increase in the future so it can't become a means of exchange for real world goods.

Most of us have established and secure alternatives for that and inflation doesn't really matter for most of my income (which is spent within 30 days). Even people in countries with unstable government mostly seem to prefer other methods.

Maybe I'm missing something but given all that the underlying technology of Bitcoin and friends look like an implementation Detail that doesn't really matter.

Re: Founder of crypto lender Celsius Network arrested, charged with fraud

#120

Post by celdon25 » Thu, Jul 13, 2023, 5:44 PM UTC

reaperman wrote: post #105

legitster wrote: post #69

Let's say I run a swap meet for people to buy and sell Pokémon cards. There are lots of scammers out there, but I promise people they are going to get good prices. And I even offer to buy cards off of people at good prices to drum up interest. Tomorrow, the SEC decides that Pokémon cards are securities (far-fetched, but work with me here) Suddenly, anyone buying and selling them becomes a criminal. I tell people via…

You may be aware already, but if you replace Pokemon with Magic the Gathering cards this actually becomes almost unbelievably close to a true story (minus the SEC story arc). The first "huge" bitcoin exchange[0] was originally a Magic card exchange which got extended to support cryptocurrencies. "Mt. Gox" = "Magic the Gathering online exchange". If it hadn't been hacked it would likely be in Coinbase's shoes right no…

Mtgox was not run very professionally, so I doubt they would have lasted this long. I had to deal with them on IRC to get my money out. I was told that the person with the keys to get my withdrawal was “in the bathtub”. This was on the last day or so before everything was shut down and during the actual crisis, mind you.