Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Founder of crypto lender Celsius Network arrested, charged with fraud

reuters.com

Post reply on HN
Print view View original

161–170 of 379 posts

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

#161

Post by gamblor956 »

legitster wrote: post #110
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…

> I think the way to understand this is that the SEC is concerned about protecting unsophisticated regular folks from being scammed. Keep in mind, the people the SEC are focused on "making whole" are the investors . The actual "unsophisticated investors" who make up the bulk of Celcius's customer base are going to get next to nothing out of the settlement. However, the sophisticated institutional investors who invest…

The SEC is not focused on making the "institutional investors" whole. That is happening in bankruptcy court, because Celsius declared bankruptcy, and that is how bankruptcies work: the senior creditors get their money back first. If you have problems with that, take it up with the bankruptcy court and U.S. bankruptcy laws that classify customers as junior creditors.

In fact, the SEC does not ever get involved in "making investors whole." It leaves that part up to the investors themselves.

The SEC's complaint seeks to bar Mashinsky from future involvement in crypto trading, to bar him from being an officer or director of a publicly traded company, and for the disgorgement of profits arising from maintaining the price of crypto tokens through market manipulation tactics. [https://www.sec.gov/news/press-release/2023-133]

Also, in your Pokemon example you claim that buying up Pokemon that completes your collection somehow constitutes market manipulation. But that's a thing collectors actually do...so...by definition not market manipulation but a fundamental part of the market for collectibles (and in the Pokemon hypo Pokemons have instrinsic value because they can be used and valued in a Pokemon game independently of their trading value, in addition to their trading fair market value based on their rarity as a collectible item). This is very different from what the Celsisus guy did; he used wash trading to artificially increase the price of a crypto token whose only value was in being traded.

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

#162

Post by codetrotter »

Vespasian wrote: post #119
codetrotter wrote: post #68

Earlier quoted context omitted.

> 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 n…

> 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.

I take issue with this statement because it reflects a fundamental misunderstanding that people have about Bitcoin.

The point is not to “HODL” the Bitcoins waiting for the USD or EUR value of the BTC to increase.

The point is among other things:

1. to be able to freely transact with anyone, and

2. to not have a central authority adjusting the purchasing power of your savings

As of yet we are still relegated to caring about the USD and EUR prices of Bitcoin, because in order to use our savings we have to exchange to fiat. But the ultimate goal is indeed to be able to use BTC directly for everything from buying a house to paying for groceries.

For example, I receive 100% of my paycheck in bitcoin.

From week to week I don’t have any desire that it increases in value of USD or EUR.

My main problem is when it decreases in value, so that my purchasing power is worse from having gotten my paycheck in Bitcoin.

But even then, over time it probably averages out.

And if not, well at least I am still receiving my paycheck in the currency I believe in, and maybe some day more people will believe in it too. And then finally some day I can buy my groceries with BTC directly.

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

#163

Post by afterburner »

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…

Crypto assets are illegal if you try to dodge taxes. Or, as a trading institution, pretend that you have no duty to follow tax laws on reporting client transactions. They're no different than equities if you follow all the laws.

This all seems weird to me in Canada. Here, it's been acknowledged for years that crypto = equities.

Fraud is illegal either way though.

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

#165

Post by afterburner »

jack_pp wrote: post #160
celdon25 wrote: post #120

Earlier quoted context omitted.

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.

When your house of cards comes tumbling down might as well take a bath to relieve the stress

No one can bother you in the bathroom.

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

#166

Post by banannaise »

saurik wrote: post #132
RC_ITR wrote: post #99

Earlier quoted context omitted.

Playing Devil's Advocate - The Pokémon card is a thing. I'm not buying it because I think it is a fungible asset that I can use to transact with (the thing I bought has a physical condition that can be graded, it is unique). No one was collecting crypto to complete their collection, they were buying crypto (not caring even a little bit about which particular unique token they bought) because they thought it would be…

People aren't buying Pokémon cards to "complete their collection": they are buying them because they think someone else will pay more for them later, presumably because they want to "complete their collection", but that makes just as little sense... they too will be buying it from the first person in order to sell it to a third person. There is supposedly a game attached to Pokémon cards, but that excuse to establish…

> There is supposedly a game attached to Pokémon cards, but that excuse to establish "utility" is pretty flimsy

Playing the game is a game. (There are dozens of major tournaments, including national and world championships, of people playing the game.) Collecting the cards is also, in a different way, a game. They have made a product that people do things with. You are essentially trying to define all products with resale value as securities.

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

#167

Post by jncfhnb »

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…

As others have pointed out this analogy is kind of bad. But… also you seem to clearly acknowledge within the hypothetical that performing an action would be a crime, and then do the action. And then you’re upset because it wouldn’t have been a crime if it hadn’t been made a crime… but it was and you knew that and you did it anyway.

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

#169

Post by afterburner »

legitster wrote: post #90
vorpalhex wrote: post #86

Earlier quoted context omitted.

> Suddenly, anyone buying and selling them becomes a criminal. No, people buy and sell securities all the time. You simply need to follow the regulations for handling securities which includes certain types of tax and risk effort. If you keep selling securities while not following the KYC and tax stuff for those securities, you will in fact be breaking the law. Nor did the SEC magically throw down one day and start c…

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.

> This is a HUGE deal because handling crypto through a brokerage would basically neuter it.

Nah, it's still an equity. People don't buy pizza with their Microsoft stock, but they still buy Microsoft stock.

Even crypto fanatics use Venmo.

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

#170

Post by wpietri »

legitster wrote: post #154
wpietri wrote: post #140

Earlier quoted context omitted.

Mashinsky definitely has a "reasonable way of knowing" about these laws. More than that, anybody starting a company has a positive duty to clients and investors to make sure that it's legal before things get too far.

Maybe a better example would be the pot industry. Pot is blatantly illegal at the federal level. So everyone currently running a dispensary is theoretically operating fraudulently with their business partners. Does that mean they have a duty to their own business partners or customers or investors to shut down their own business?

They are not operating fraudulently. Their customers are buying and getting marijuana. Their investors surely know the risks as well.

If we're looking for an analogy in this space, I think it's more like snake oil. So imagine a company started selling a new "nutritional supplement" or "herbal blend" that helped with anxiety. But it turned out the secret ingredient was weed. That would be a fraud on investors and they could well get charged for that on top of the base drug charges.

Post reply on HN