> While we have informed users that there are no absolute guarantees against risks
I'm... uh.... fairly certain this was not the crux of their marketing which severly downplayed the underlying risk. There is also a huge spectrum between "we cannot guarantee that there is 0 risk" (which seems to be what the above sentence is saying), and "there exists a risk that all of your funds disappears in 24 hours".
It seems like there is some serious rewriting of history going on here.
Question though, do the founders here have any potential criminal liability from this whole situation (including apparently lying about what they were doing with their customers funds)?
Also, if your entire clientbase is in a single groupchat, you should be much more prepared for a bank run. This is like common-sense stuff. The fact that this is a bad business model isn't really my concern.
> The bank managers and investors are not being bailed out -- they have already lost everything.
The bank managers will walk away having earned millions of dollars in salary and bonuses, funded by risky bets, and the investors will walk away without bearing the consequences of the risks SVB took. Their investments in SVB went to zero, but there's still money that's been lost.
> The only money they have is from an unregistered sale of securities which was only undertaken because they HAD NO MONEY.
Don't you think this would come out at trial? Sounds like the only reason they came out with an unregistered ICO was in order to generate revenue it needed to continue operating. That's a huge red flag for me if I'm an SEC investigator
> who were told their money was theirs was in fact lent to Alameda.
Even if we assume for a second that this wasn’t some sort of overt theft scheme and not only just an accounting failure with double counted deposits, what was the least bad scenario here?
That SBF et al were so obsessed with their altruistic charity stuff that they thought they could gamble their billions and turn it into 100 billion and become neo-Bill Gates?
Some kids who had no rules making crazy high risk bets on other crypto stuff, blindly believing in their ability and leveraging their parent company’s name to over extend themselves… Then FTX came to the rescue with customer deposits and hoping growth would cover the downside, while not telling anyone or changing controls as far back as April 2021?
> The project itself made mistakes early on by not sufficiently warning people of the risks of the DAO, which gave justification for the do-over.
This is the weakest justification I've heard out of all of them. How do you get a "do-over" for not realizing that weird new financial instruments are risky? And how does rolling back the risk make people more aware of risk? Anyone who was not aware of the risk the whole time deserves the most to lose their money.
The right time for the DAO to say "wait, guys, this is risky as hell and we have no idea what we're doing" and give back the money was before they lost the game they had created.
(The fact that you refer to this loss as their "smart" "contract" getting "hacked" indicates that you still don't want people to be aware of the risks.)
I don't see that happening any time soon. The automated nature of the takedown system (which is really required due to volume) is going to have a set false positive rate. the very same companies/groups that will invest in these media type things are the same groups that will never accept that type of penalty.
the question is does this actually managed to side channel the investment around the major players and allow it to actually go against the market without penalty, or is this just another way to pump up an ICO on the promise of an ecosystem that will ultimately fail, but leave a lot of money out of investors hands and conveniently into those marketing it right now... I'm leaning towards the latter, but I might be wrong.
> But I think there is a real possibility they did nothing wrong here.
They did blatantly lie about their liquidity problems. They didn't mention it in their fluff blog post. Their CEO smirked on national TV and insisted it was not about liquidity. Turns out it was. That's the problem.
> They had a reasonable expectation that even if the value was totally lost, they wouldn't have their collateral locked forever. Their investment, yes, but not their collateral.
They literally handed their money to a computer program that works outside of human control and cannot be interfered with... which means if something goes wrong no one can intervene and sort it out. This is a risk they took willingly. It's not the first time a computer program malfunctions, and won't be the last.
You make it sound like they were funding Musk's purchase of Twitter, when in fact they simply had too much of their money locked in treasury bills (typically considered the safest possible investment) to face off a sudden and massive run on their bank.
> The Bloomberg article is incomplete, it doesn't mention that depending on how big the error is it could be considered securities fraud and that might automatically void the agreement.
No, not really. The Bloomberg article goes into great lengths about the implications of a lower than expected number of active users accounts, and points out in no unclear terms that the claim does not even hold if that number is significantly large, mentioning even half the number of users.
>It sounds like "the banks," who would be in an even more privileged position to know if the $420 offer was legitimately secured
Speculation. What's not speculation however is that the company suffered material harm as a byproduct of malicious prosecution.
If I, as a government employee, open a public investigation into someone whom I know to be innocent and cause that entity harm I have incurred liability. The SEC knew Elon had the funding, they used weasel words to imply he did not. The SEC would have lost in court. _All_ contracts have contingencies, this was no different. Saying that because a contingency existed the funds were "not secure" is horsecrap.
> The founder in this scenario was offered $400,000 of liquidity at Series A and $750,000 at Series B and encouraged to do so by their board of investors to de-risk their own life.
This is from the article. I would tend to agree with you.
> Is it really so hard to believe that such an unprecedented mass movement would break the underlying business assumptions of a pre-IPO startup that was heavily dependent on their credit lines?
This sounds more like an insurance issue which Robinhood didn't want to deal with.
I'm... uh.... fairly certain this was not the crux of their marketing which severly downplayed the underlying risk. There is also a huge spectrum between "we cannot guarantee that there is 0 risk" (which seems to be what the above sentence is saying), and "there exists a risk that all of your funds disappears in 24 hours".
It seems like there is some serious rewriting of history going on here.
Question though, do the founders here have any potential criminal liability from this whole situation (including apparently lying about what they were doing with their customers funds)?
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