[HN Gopher] CFTC charges two individuals with multi-million digi...
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CFTC charges two individuals with multi-million digital asset pump-
and-dump
Author : PragmaticPulp
Score : 88 points
Date : 2021-03-05 18:42 UTC (4 hours ago)
(HTM) web link (www.cftc.gov)
(TXT) w3m dump (www.cftc.gov)
| mrtweetyhack wrote:
| Idiots deserve to be relieved of their money
| miguelmota wrote:
| December 2017 were crazy times in crypto. John McAfee would
| promote a "Coin of the day" for like two weeks straight and the
| price would sky rocket immediately. People had bots to watch for
| his tweets to programmatically place market buys on exchanges
| right away before the pump in price from flood of people buying
| the coin.
| 99_00 wrote:
| To make the old school scams believable you need to wrap it in
| some high tech story that people believe but don't understand.
| sneak wrote:
| > _"Manipulative and fraudulent schemes, like that alleged in
| this case, undermine the integrity and development of digital
| assets and cheat innocent people out of their hard-earned money,"
| said Acting Director of Enforcement Vincent McGonagle._
|
| Even if they explicitly conducted a pump-and-dump, nobody was
| cheated here.
|
| There doesn't need to be a disclosure notice on shitcoin shilling
| for a reasonable person to assume that it is a risky investment
| that may result in 100% lows.
|
| Meanwhile, thousands are engaging in this exact behavior and
| going unprosecuted.
|
| The fact that these specific people were chosen for the
| enforcement of this specific not-crime is, to me, highly suspect.
| [deleted]
| PragmaticPulp wrote:
| > Even if they explicitly conducted a pump-and-dump, nobody was
| cheated here.
|
| A pump-and-dump is a scheme designed to cheat people. The cheat
| is to deliver misleading statements to convince others to
| purchase something, while quietly doing the opposite of what
| you're promoting.
|
| Pump and dump schemes are a well-known type of fraud:
| https://www.investopedia.com/terms/p/pumpanddump.asp
|
| > Meanwhile, thousands are engaging in this exact behavior and
| going unprosecuted.
|
| That doesn't make this right.
|
| We can't catch and prosecute everyone, but that doesn't mean we
| can't catch and prosecute anyone.
| gruez wrote:
| >There doesn't need to be a disclosure notice on shitcoin
| shilling for a reasonable person to assume that it is a risky
| investment that may result in 100% lows.
|
| Where do you draw the line? If "shitcoins" are open season for
| fraudsters, what's next? micro-cap/penny stocks?
| gamestop/hertz?
| vmception wrote:
| the agency involved has no jurisdiction, unless Congress
| recently changed something. there is nothing to see here.
|
| this has nothing to do with anyone's opinions on what happened,
| the people exercising that opinion don't have the authority to.
| next!
| Red_Leaves_Flyy wrote:
| when a rich person tweets something and makes a ton of money it's
| market manipulation.
|
| When a hedge fund tells a journo to write an article it's
| business as usual.
|
| To be clear: I think both are worthy of the same scrutiny. The
| double standard is what bothers me.
| wnevets wrote:
| Isn't Jim Cramer's entire existence based on pumping and
| dumping stocks for hedge funds?
| pas wrote:
| As long as he's not cooperating with them and/or not holding
| covert positions, he can say whatever he wants.
| nickysielicki wrote:
| Neither deserves any scrutiny. So long as influential people
| exist, there will exist opportunities to profit off that
| influence. Forbidding this fully is impossible, which means
| that criminalizing it just makes unfair selective enforcement
| possible. This isn't justice, it's getting caught with your
| hand in the communal rich-influencer cookie jar.
|
| Legalize insider trading, legalize pump and dumps, let the
| chips fall where they may. It's happening either way, so lets
| just be honest about it.
| eli_gottlieb wrote:
| >Legalize insider trading, legalize pump and dumps, let the
| chips fall where they may. It's happening either way, so lets
| just be honest about it.
|
| Fuck that. That kind of thing will give us another Great
| Depression faster than we can blink.
| Grustaf wrote:
| When you say it's impossible to "forbid", you probably mean
| "prevent" as it's most definitely possible to forbid it.
| Either way, the situation is the same with any crime.
| Obviously that is not a reason to legalize anything in
| particular.
| abfan1127 wrote:
| The first rule of governance is only make laws which can be
| enforced without bias. If you can't enforce the law without
| bias, it shouldn't be a law. Put another way, the
| government shouldn't pick winners and losers.
| worik wrote:
| Why is that the first rule of governance?
|
| When, where, has there ever been a law that is not
| enforced with bias?
| foerbert wrote:
| I don't see how this can hold, without some severe
| restrictions on what you actually mean by 'bias.'
|
| As a kind of silly example, I posit that muggings closer
| to police stations are more likely to result in an
| arrest. Now we have bias in enforcement based on police
| station location. Do we need to build floating police
| stations equidistant from every place a mugging could
| take place? And this is generously assuming muggings in
| police stations are discounted from this analysis. If you
| don't, perhaps muggings in police stations are legal?
|
| I strongly suspect you're somehow only applying this
| particular standard to (potential) white collar crime,
| which seems absurd.
| abfan1127 wrote:
| I agree its a challenge many laws don't meet, and perhaps
| I wasn't clear, so lets take another chance to clarify.
| Lets take your example. Muggings have a clear victim. A
| mugger clearly used violence or threat of violence to
| forcibly remove someone else's property against their
| will. Now, if the Law said only its only illegal to mug
| citizens (tourists, illegal aliens, etc), then clearly
| the law is picking winners and losers here. If the law
| says its illegal to mug anyone, but reports of muggings
| to tourists went categorically uninvestigated, then the
| government is choosing winners and losers, not via
| legislation, but by implementation, which is also wrong.
| In this case, the fix isn't the mugging law, but the
| implementation.
|
| I'm a baseball fan. Everyone knows that everyone cheats
| in the game of baseball. Whether its hiding small things
| like pine tar, or like the Astros using electronic
| devices relaying signals. When there's marginal
| enforcement, and marginal discipline, then its not really
| a law, and its only used against the current regime's
| enemies so to speak. So, why keep it as a law? Further,
| if we make all electronic communication devices legal,
| then pitchers and catchers can have an ear piece, and
| this concept of signs and sign stealing is moot.
|
| The same applies to all governance. If you can't apply
| the same laws uniformly, then they become the tool of the
| state to suppress its enemies, i.e. choosing winners and
| losers.
|
| [1] - https://www.sportingnews.com/us/mlb/news/astros-
| scandal-time...
| Grustaf wrote:
| Both examples are very bad. Surely the "bias" in the rule
| referred to the person committing the crime, not the
| target. And the rules in baseball are neither laws, nor
| apparently enforced with bias. Seems like they're not
| enforced at all.
|
| Of course it would be nice with bias free laws in some
| abstract sense. But I've never heard anyone say it was an
| absolute precondition. Then we'd have no laws.
| Grustaf wrote:
| According to whom?
| ralph84 wrote:
| Indeed. EVERYONE involved in finance, from Warren Buffett on
| down, talks their book. EVERY transaction in finance involves
| asymmetric information. Might as well stop pretending these
| facts aren't true.
| PragmaticPulp wrote:
| They aren't accused of talking their book. They're accused
| of fraudulent statements.
|
| Warren Buffet saying that he's confident in Coca Cola's
| business model while holding a stake in Coca Cola is fine.
|
| Warren Buffer saying he's going to buy a lot of Coca Cola
| stock because he loves it (driving the price up) but then
| secretly unloading his Coca Cola position amid the
| resulting price bump would be a fraudulent pump and dump
| scheme.
|
| Let's be clear here: The accused perpetrators were using
| their platforms to endorse coins for the purpose of selling
| those coins to unsuspecting victims.
| worik wrote:
| Warren Buffet on down through the layers of non-criminal
| financial managers (that set is not as big as it should be)
| do not lie about their holdings. They do not pretend that a
| investment is good simply so other people will want it,
| drive up the price, then sell. That is what John McAfee is
| accused of doing.
|
| A big difference.
| wpietri wrote:
| "Forbidding this fully is impossible" applies to all crime.
| The correct inference isn't, "so fuck it", it's, "We need
| enforcement sufficient to keep the crime in check."
|
| The reason not to legalize this specifically is that the more
| people perceive a market as rigged, the less they'll invest.
| Our capital markets, for all their flaws, make it much easier
| for people to create economic value. If you legalize scams,
| etc, not only do you harm honest participants, you harm the
| economy as a whole.
| [deleted]
| metalliqaz wrote:
| just throw the sheep to the wolves, got it
| berniemadoff69 wrote:
| If what you are looking for is a kind of wild west (legalize
| white collar crime), you honestly may as well legalize
| murder, and let victims of white collar crime practice
| vigilantism
| worik wrote:
| Really? Let the lies fly?
|
| So long as influential people exist, and opportunities exist
| to profit off that influence then there will be a need for
| state agencies to police them (the influential people). As
| Elon Musk found when he was investigated following his
| promise to take Tesla private at $4.20 a share (I hope my
| memory has got that right). He had all sorts of sanctions
| made against him, and it was just stoned tweeting.
|
| One of the justifications for a state is to protect the weak
| from the strong. It is imaginable that it could be done away
| with (the rule of law protecting the ignorant from the
| insiders) but if you are going to imagine, imagine what that
| world would look like.
| gruez wrote:
| >when a rich person tweets something and makes a ton of money
| it's market manipulation.
|
| >When a hedge fund tells a journo to write an article it's
| business as usual.
|
| Did the hedge funds also secretly accumulated positions in
| assets, deceptively promoted the assets through media as
| valuable long-term investments, then sold their holdings as
| prices rose sharply following the deceptive endorsements?
| Because that's what macfee is being indicted for, not because
| he "tweets something and makes a ton of money".
| holtalanm wrote:
| They regularly short stocks, then tell everyone why that
| stock is a bad investment, prompting people to sell off and
| tank the price, resulting in them making $$ on the short
| positions, so.......yeah?
|
| That is literally what Melvin Capital was doing with GME
| originally, and that is what sparked the GME short squeeze
| back in January.
| mola wrote:
| How do you call the short bets? Why is that not accumulating
| positions then used media to convince ppl to sell stocks
| making they're positions profitable.
| edgyquant wrote:
| Hedge Funds publicly disclose their position
| mox1 wrote:
| ...Yes, isn't that the point of a hedge fund? They probably
| follow the rules a bit more, but of course the hedge fund has
| a position. Their 200 page quarterly SEC filing (which will
| be released to the public in 2 weeks) clearly indicated that
| on page 127.
| Red_Leaves_Flyy wrote:
| Hedge funds manipulate markets:
|
| https://www.cfainstitute.org/en/research/cfa-
| digest/2013/11/...
|
| Hedge funds routinely refuse to disclose their abnormal
| holdings and sell to realize profits.
|
| https://www.jstor.org/stable/43303849?seq=1
|
| Former manager Jim Cramer admits as much:
|
| https://seekingalpha.com/instablog/2918951-g-hudson/1026551-.
| ..
|
| Sure I don't have some gotcha smoking gun that links some
| third string financial columnist to a hedge funds actions,
| but if I did I wouldn't be blabbering about it here. I'd
| report it up SEC, retain a lawyer and collect my reward.
| gruez wrote:
| >Hedge funds manipulate markets:
|
| >https://www.cfainstitute.org/en/research/cfa-
| digest/2013/11/...
|
| A quick skim of the article suggests that they're doing it
| to make their own funds look better, rather than as some
| sort of pump&dump scheme that you suggest.
|
| >Hedge funds routinely refuse to disclose their abnormal
| holdings and sell to realize profits.
|
| >https://www.jstor.org/stable/43303849?seq=1
|
| the first paragraph of the introduction says why they're
| confidential in the first place: to avoid getting front-
| runned and to avoid free-riding. I don't see anything
| nefarious here, unless they're also simultaneously
| deceiving people into investing.
|
| >Former manager Jim Cramer admits as much:
|
| >https://seekingalpha.com/instablog/2918951-g-hudson/102655
| 1-...
|
| >First information is widely distributed to make investors
| wonder about the company and to put fear into those longs
| that hold the stock. Next, high volume shorting takes place
| to drive the company's share price down.
|
| Again, there's nothing wrong with holding a position in a
| company and spreading news about it, as long as your
| holdings are disclosed. Short-sellers do this all the time
| when they publish short reports.
| pas wrote:
| Besides everything being "securities fraud[0]" tweets are only
| market manipulation if they are false/deceptive. With the right
| disclosures it's business as usual.
|
| [0]
| https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...
| byset wrote:
| "Funding secured!"
| ganoushoreilly wrote:
| hell, i'd argue being rich isn't even the qualifier. I'd say
| it's anyone that's not a part of that financial system.
|
| The powers that be in finances are nervous, the things that
| gave them advantage and the edge, some legit, some not, are all
| becoming increasingly available to retail.
|
| Mean while we allow stock shorts.. and failures to deliver to
| constantly roll over or be hidden in sneak behind closed door
| actions.
| Red_Leaves_Flyy wrote:
| My problem with shorts is that FTDs are not punished. The
| punishment for a hedge fund, or other large financial firm
| should be painful. CEO throwing temper tantrums on Bloomberg
| painful. Not crippling or debilitating, but just painful
| enough to make these bag holders think about the potential
| consequences of their actions before they short.
|
| An FTD should have an automatic fine and liquidation event to
| allow immediate delivery.
|
| When I don't pay my bills my services get cut off and I get
| fined. Favourably treating company failures differently than
| consumers is about as anti-capitalist as things can get. This
| dichotomy is prima facie evidence that the stock market has
| been designed to be in favor of whoever has the biggest bag
| of cash/deepest rolodex and against the American people who
| despite our massive exposure to the markets have virtually no
| say in their operations nor the individual companies therein.
| worik wrote:
| Not a surprise.
|
| A cryptocurrency scam.
|
| John McAfee scamming.
| lavezzi wrote:
| Can someone tell me how this differs from what McAfee 2.0
| (Michael Saylor) is doing as we speak?
| sgpl wrote:
| It differs in that: he's not dumping it and his company is
| following proper public disclosure guidelines.
| lavezzi wrote:
| 1) MicroStrategy is taking a substantial position in BTC
| before disclosing publicly. Subsequently he is on a PR tour
| de force telling everyone and their mother that they need to
| invest in BTC. That seems pretty similar to what McAfee was
| doing.
|
| 2) On 2-12-21, MicroStrategy transferred 50,000 shares of
| Class A company stock to Alcantara LLC, of which Saylor is
| the sole owner. Until that date Alcantara hadn't received any
| MicroStrategy stock, or any other securities, since March
| 2012. These 50,000 shares have been transferred by the LLC
| "as a gift" to a charitable foundation for no consideration.
|
| What evidence do you have that he isn't "dumping" it?
| sgpl wrote:
| I'm sorry but how's transferring his company stock to some
| LLC evidence of dumping? This is done all the time for a
| litany of reasons.
|
| Anyways since you want evidence, you're welcome to check
| the company's disclosures to see that they aren't dumping
| bitcoin, in fact they seem to be buying more [1]. This
| disclosure is from today (5th March 2021).
|
| As for the gift of shares to a charitable foundation,
| Michael Saylor has been funding the Saylor Academy [2]
| since 1999 so it seems like it very well could be for that
| or another valid charitable cause. It's also not evidence
| of dumping.
|
| [1] https://www.microstrategy.com/en/investor-
| relations/financia...
|
| [2] https://en.wikipedia.org/wiki/Saylor_Academy
| lavezzi wrote:
| He's marketing his own company's stock as an investment
| vehicle for Bitcoin, shilling Bitcoin, and then dumping
| his own stock. He's clearly not planning to dump Bitcoin,
| otherwise the whole plan goes up in smoke.
|
| Seems like a pretty sweet setup for an experienced
| fraudster.
|
| https://twitter.com/michael_saylor/status/133755689074262
| 425...
| vmception wrote:
| CFTC doesn't have jurisdiction over this. They only regulate
| derivatives and _verrrry limited_ authority over spot market
| activity that affects derivatives.
|
| As this is in coordination with DOJ and the SEC, this is just
| tacked on to see what sticks.
|
| I don't see the securities fraud (SEC) or the commodities fraud
| (CFTC) sticking. Therefore, I don't see the money laundering or
| wire fraud or the associated conspiracy charges sticking either.
| Unless they traded Greyscale ETFs or some other unregistered
| security, which would be a dumb and illiquid way to trade fairly
| liquid spot assets.
|
| The spot markets are regulated like products. So this is a FTC
| issue, too bad they have no teeth. But the FTC knows what digital
| assets are too.
| wmf wrote:
| CFTC has had jurisdiction over crypto for a while but if anyone
| was going to challenge that I could imagine McAfee being the
| one.
| vmception wrote:
| that's not the point, the CFTC still has limited authority
| even if it declares something to be under its authority.
|
| here is something that shows the current state of the CFTC's
| authority being unresolved by federal courts, specifically
| regarding spot commodities
|
| https://www.skadden.com/insights/publications/2018/10/recent.
| ..
| VHRanger wrote:
| NY supreme court ruled that tether was covered under
| commodities law last year, so CFTC can have it stick.
|
| Crypto is either a commodity, or a security. It's not outside
| the law
| vmception wrote:
| CFTC is a federal agency, they regulate commodity
| derivatives, not commodities, a New York court doesn't evolve
| the case law for a federal agency. And none of this has
| anything to do with "crypto being recognized as a particular
| asset class". Nobody is arguing about the CFTC saying crypto
| is a commodity, the CFTC has limited powers in what they can
| do with something being a commodity because they regulate
| commodity derivatives.
|
| here is something that shows the current state of the CFTC's
| authority being unresolved by federal courts, specifically
| regarding spot commodities
|
| https://www.skadden.com/insights/publications/2018/10/recent.
| ..
| snypher wrote:
| "Two individuals" - one is John McAfee, and for pumping Dogecoin?
|
| "As is typical of pump-and-dump schemes, they secretly
| accumulated a position in a digital asset through bitcoin trading
| in anticipation of price spikes following McAfee's misleading
| public endorsements on social media."
|
| $2M is small fry - I wonder how much DOGE Elon Musk holds, and
| how his, or anyones behavior towards these speculative coins is
| any different.
| walrus01 wrote:
| I guess this means John McAfee won't be eating his own
| genitalia, as he promised?
|
| http://dickening.com/
| warent wrote:
| Am I a prude? idk why I've never found this kind of humor
| funny
| lquist wrote:
| I don't believe Elon is selling
| glsdfgkjsklfj wrote:
| The difference with Elon and McAfee is that Elon (and the
| paypal mafia) have white collar crime in their DNA. Paypal
| growth held a 1:1 correlation with online prescription drug
| scam (or online prescription crime rings, depending who you
| ask).
|
| McAfee is the lowest amateur compared to those guys.
| Permit wrote:
| > Paypal growth held a 1:1 correlation with online
| prescription drug scam (or online prescription crime rings,
| depending who you ask).
|
| This correlation is about as compelling as these ones:
| https://www.tylervigen.com/spurious-correlations
| glsdfgkjsklfj wrote:
| except paypal being the payment choice and making lots of
| early concessions to work with those companies in their
| early days is a well documented fact.
|
| They would not have gotten off the ground in the early days
| without it.
|
| oh, and pirates and global warming the canonical reference
| for your point around here :)
| kube-system wrote:
| > Paypal growth held a 1:1 correlation with online
| prescription drug scam (or online prescription crime rings,
| depending who you ask).
|
| And they were both caused by an increase in.... people using
| the internet.
| wpietri wrote:
| I agree with your point. But Paypal was notorious for poor
| controls early on. I have to wonder how much VC money that
| officially went to Paypal actually ended up being seed
| money for online criminals of many stripes.
| tyingq wrote:
| _" and for pumping Dogecoin?"_
|
| I double-checked that it wasn't an Onion story. Who was
| plausibly pumped or dumped for a joke currency?
|
| Though, I guess with a market capitalization of $5,382,875,000
| the joke was already out of hand.
| byset wrote:
| Yeah. Once it's got a price and trades on markets, it ain't a
| joke anymore.
| divbzero wrote:
| Dogecoin must be priciest joke in history.
| cwkoss wrote:
| Maybe the priciest intentional joke
| zamalek wrote:
| Doge is more abundant than Bitcoin and is easier to mine,
| so it does have functional differences from Bitcoin. Some
| people may value those functional differences, so it isn't
| _entirely_ a joke.
| joshspankit wrote:
| There were literally thousands of shitcoins at the time
| that can also be more abundant and easier to mine.
| byset wrote:
| _I wonder how much DOGE Elon Musk holds, and how his, or
| anyones behavior towards these speculative coins is any
| different._
|
| So you're speculating that the world's richest man (give or
| take) risked a felony conviction by running an illegal Dogecoin
| pump-and-dump scheme? Is that right?
|
| I'd wager that Musk's Doge-pumping buffoonery is more of a
| hobby than a revenue-generating side gig. If he ends up in
| federal prison, It'll be for cooking Tesla's books.
| fny wrote:
| Second this. I don't think he owns any asset he promotes
| besides TSLA. The rest are clearly for the lulz.
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