Securities laws are only helping scams

in securities •  6 months ago

Any small investor who cannot become accredited investor is not allowed to invest into private securities.
https://en.wikipedia.org/wiki/Accredited_investor

Also small investors have difficulty participating in IPOs.
https://www.sec.gov/fast-answers/answersipodiffhtm.html

So businesses cannot raise capital from small investors without registering with government as public offering of securities.
Registering with government as public offering is hard and undesirable for small startups and is hard for small people to participate.

So they resort to their last option - issue tokens that have 0 guarantees of return, which makes them non-securities, and let investors take risks donating their money hoping for returns. This is how ICOs were born and became popular.

The reason why there are so many scams is that small investors cannot distinguish a scam ICO from a good ICO because none of them give any guarantees. Normally, in a free world, scams would not do contractual promises as freely as honest startups, which would make it much easier for public to find good startups and for law enforcement to extinguish scammers, especially those who decided to do contractual promise to deliver something in exchange for investment.

Public should be aware of this and put pressure on regulators to do at least one of the following:

  1. allow small investors to invest into any private or public offering
  2. stop considering crypto tokens as securities
  3. decrease burden of registration and relax requirements for a legal IPO

It's time to abolish securities laws that help rich become richer and force poor to risk their money investing into tokens with zero contractual guarantees, feeding scammers. Regulators need to do more about how to enforce contracts rather than how to prevent people from entering into contracts.

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There should be regulations

or else it would be a fertile ground for scammers... edit: currently is a ferticle ground for scammer.
You hear things like an ICO is a poor man's ipo ... they are right. The question is why do IPOs have so many artificial barriers for entry.

Currently, we are between two extremes: the free-for-all ICO shitstorms with no regulations where a decent programmer can literally scam people into a coin, or tightly controlled financial system that really aim just to benefit select members of the society.

It is insanity i tell you!!

I am hoping this all would converge somewhere in the middle, but maybe I am wrong in assuming they are polar opposites.

There also should be more decentralization of power; or else we will (and we do have) huge power concentrated in the hands of the very few. History keeps showing us that having a strong centralization is very effective at doing economic work, but due to human nature and things beyond my simple mind, bad things tend to happen.

There also should be less retarded laws and definitions.
Take the example of the definition of Accredited Investor. What constitutes an "accredited investor" is not a trivial question, but tying it to net worth is just retarded. Having more money, even tens of millions, doesn't imply your a good investor, this is basically so the rich can pass down an easy-pass access to more riches via this definition. This also implies that the further you are from that "artificial" net worth limit, the harder it is to reach there. So this definition does help the rich get richer and the poor get poorer... in a way.

I actually like Brazil's definition of what is an Accredited Investor (the one on wikipedia), but I did not research shit.

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then you get whiners that lose money on a crypto and run to the gov't and class action lawyers to cover when their lack of due diligence and overinvesting in inherently risky assets goes bad. People that sue when they make a bad investment are what make the nanny state run in to limit our freedom!

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Why do class actions have such a success ? If ICO contract was not violated then justice should not award anything to plaintiffs. So the way justice works is the source of over-regulation problems ?

Actually I would beg to differ. People are generally unable to identify the worth of a project at the first glance. Many of my friends invest in ICO's but a very few actually do solid research. While classifying everything as securities is not the answer but regulations prevents profit mongers from hijacking the system.

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True, regulations are welcome.

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agree, certain flags always come up in scams. a coin with horrendous premine is not safe, for example

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that's their own fault then, I have looked at over 100 ICO's in the last year and a half and have only invested in two, Varitasium and Wax. I am not an expert and don't have a background in finance.

Sure, SOME regulation is needed but it should be in the form of punative measures for bad actors, not restricting everyone, that's like not letting anyone ever cross the street because a few people jaywalk.

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I think they invest based on some recommendation from some trusted sources. It's perfectly normal to trust your advisers and invest into something that you do not understand yourself. And it's also normal to pick a random coin and invest a little instead of gambling the same amount of money in Las Vegas considering that chances of winning in ICOs are higher than in Las Vegas. Some people gamble more, some less, it all depends on individual taste of winning and risk tolerance.

The problem with over-regulation, bad regulation and lawsuits is similar to problem with antibiotic killing useful bacteria in human gut. With help of good advisers community will eventually find a way to differentiate bad ICOs from good ICOs. With regulation, advisory business will not thrive and public will be forced to rely on regulation more and more, which benefits criminals more and more.

Yes helping them like bitconnect... Davor etc scammy

We DEFINITELY need more freedom. I support limited regulation. I'm glad Trump is repealing a lot of regulations.

Good subject! I am completely against any type of regulation, even if it scammy to invest. What I can say is, that they have even running companies ripping off poor people like Enron and Co. But there are many bad things happening under their watch and the "reward" for what some people cause is not prison. This is why if those things would have happened in Iceland, many people would be in prison by now. That is not good also.
The only thing in what I believe is good to do, to have a flesh and bones people who are doing that ICO. If so, then there are people to trace. This is the only way.

So true. I learned about the whole "accredited investor" thing a few years back.
It's unfair that you have to already be rich to invest in a good idea, that's one of the main reasons I love the ICO business model for fundraising.