How is this any different from Ashton Kutcher being publicly bullish about Bitcoin, or Mark Cuban endorsing unikrn? Or more generally, any celebrity flaunting high-priced luxury goods like BMWs and Rolexes?
Yeah, it feels great to be all self-righteous and lecture Mayweather, but that energy would be far better spent imparting financial literacy on the hundreds of millions who don't know any better.
This is a fluid development, but basically until Stox proves that it isn't a security, then securities regulations apply. In this case it means lots of disclosures for safe harbor from litigation when it goes bust. (PSLRA)
How is it different than bitcoin or unikrn? Loaded question, but the main thing is that not all tokens are the same. As in, just because something is tokenized doesn't mean the same things apply. Even the SEC understands that, and proved so with their no action report from a few days ago, even though nobody read it and just used the headline to confirm their worldview.
Regulations apply to securities. Bitcoin isn't considered a security. Unikrn might be. Stox might be. This is a factor of how they are offered, issued, and used.
It's not exactly how it works but there is lots of precedent that allows the SEC broad discretion in this regard & upholds their very broad view of what is a security.
So while it's not true it's a fairly good starting point for a group to take when they float securities looking item.
Right, but that doesn't mean digital token sales are securities offerings until proven otherwise. The recent SEC communication did not assert that, and only concluded that DAO tokens, which are among the most security-like tokens to be created, were securities.
The investigative report they released [1] is quite informative, and suggests to me that the vast majority of tokens being traded and sold do not meet the SEC's definition of a security. Mind you, I'm not a lawyer, so take what I say with a grain of salt.
I agree with you, but you simply can't do any business with that logic because all of your affiliates have to treat your tokens different if they are or are not securities.
Exchanges have to have assurances that they are not securities, otherwise they may retroactively be sanctioned as unregistered broker-dealers. For the traders themselves, securities are subject to insider trading logic which doesn't apply to non-securities. It is a tough landscape, and creating a legal basis for not being a security is a prerequisite, for now.
When actual broker-dealers (like TD Ameritrade, ETrade etc) start trading tokenized securities offerings, it will be extremely advantageous because they have much more robust infrastructure and trillions of dollars of assets under management already. So people that register their tokenized offerings as securities now may have the first mover advantage in the future for attracting liquidity, but a big disadvantage now.
>When actual broker-dealers (like TD Ameritrade, ETrade etc) start trading tokenized securities offerings, it will be extremely advantageous because they have much more robust infrastructure and trillions of dollars of assets under management already.
Maybe. But maybe in the long run, the regulated industry, as encumbered by regulatory friction as it is (e.g. $10 per trade), is a dinosaur, and will be thoroughly eclipsed by this new unregistered blockchain token market with its nearly frictionless transactions.
Bitcoin is not a security so I don't think the comparison is valid. Your other examples don't involve securities or the SEC. I'm not familiar enough with Unikrn to comment on that.
I get that the SEC exists for very good reasons - but a part me wishes that ICOs and cryptocurrencies as a whole could remain unregulated. Sort of like an economic free-for-all zone: risky, experimental, not for the faint of heart.
At the same time, I guess the only way for these to become mainstream is for them to be regulated. Hopefully regulations help them thrive rather than dampen growth. Time will tell.
Regardless I'd like to see the SEC at least send a warning shot Floyd's way, cause he seems out of his depth and he's trying to bring his fans with him.
The reason for the SEC to prevent fraud, Ponzi-schemes and related shenanigans before they implode isn't to protect the individual fools and their money - courts could prosecute that stuff after the fact. Rather, regulation happens because the collapse of this kind of scheme tends to have collateral damage impacting people beyond those who chose to use such investments - the employees of companies that go bankrupt, the homeowners who first pay high prices for home and then can't pay their mortgages when the economy tanks, etc don't have any choice their implicit participation in any "economic free-fire zones".
You can create whatever crazy investment you want as long as you limit it to qualified investors. But those people mostly won't fall for pump-and-dump ICOs.
During the dotcom bubble, there was a guy that moved from the East Coast, New Jersey or similar, to Orange County CA. He had next to no technical ability or background. When he moved, it was on the last thread of his pants, he was broke. The story (in The Industry Standard or Wired or similar at the time) included an example of that poverty: him pulling his own cracked tooth out with some help from a bottle of jack, on his way out to California.
He gets to Orange County, settles in, and has a bright idea. To defraud people by starting a new tech company that is going to be in the media player / streaming space. He proclaims that his company has invented an advanced new codec, among other things. He proceeds to raise something like $16 million from wealthy people in Orange County, using each investor as a referral to the next (dentists, doctors, wealthy older people, and so on). His product, used in demonstrations to said wealthy people, consisted of a skin over top of Microsoft's media player. People started to very gradually get suspicious, so he hired armed guards to stand outside his office, supposedly to protect him from death threats that had been made (actually to prevent people, employees and investors, from getting easy access to him). The rest of his story melts down from there, with him essentially wiping out the ~$16 million he defrauded investors out of. His side of the story of course, was that they were going to build an amazing new media player, and that investors conspired to make him look bad and blah blah.
Those qualified investors fall for all sorts of dumb schemes.
16 million is like nothing. Bancor claims to have raisen 250 million (by public records, though you don't know how much they recycled their own money through that ico)
Based on that response I have to assume you weren't in the tech industry in the 1990s. $16 million was considered a large sum of venture capital during the mid 1990s, just a few years prior to the story taking place. By 1998/1999 it was still considered a large amount of venture capital, despite the wave of capital that would make companies like Webvan infamous.
The price floor worked as intended. It meant that those who wanted to get their money out had ample time to do so, and the result was Bancor effectively returning a large chunk of the ETH sent to it.
Qualified doesn't mean clever, it just means "losing isn't a big deal."
The only people to whom losing a 50-100k investment won't be life-changingly bad are either high net worth or high income.
There is a lot of frustration from this crowd about not being able to invest a sensibly small amount of money in an ICO / early stage startup / other risky thing. As a curious technologist who can handle a bit of risk, I can empathize! But we're not who the SEC is designed to protect. They're there to stop situations where people get half their life savings ripped off, and that is completely sensible.
There's long been talk of having web-portable, cryptographically secure endorsements for things you want to prove about your identity: that you've over 18, that you hold a valid driver's license, etc, but they've never gotten off the ground. Basically, same as CAs, except for validating that "this identity has that attribute".
This would be another use case.
Edit: if you meant proving you own enough ETH tokens, rather than USD, that's a lot easier and (I assume) possible now.
I dunno, I get the feeling that Matt Levine and the other finance pundits' analysis, though understandably smarmy to believers, is a bit closer to the mark; "The conventional wisdom is that cryptocurrency is about re-learning all of the lessons of modern finance in a sped-up way."
It's true that buying shares in any new offering is risky. It's true that celeb endorsements can convince some otherwise careful people to behave riskily. It's true that selling shares in a decent index fund to buy shares in an initial offering is risky. And people should be careful. (duh.) It's a good reason to be skeptical of stuff like celeb endorsements and guarantees of resturns.
But there's another side to the SEC regulation system. It has been captured by the industry it's supposed to regulate. It serves the existing investment industry very well, and main street investors not so much (witness the Madoff mess). The tonnage of legal work required to meet the regulations raises a barrier to entry to new players. Google, in their IPO, managed to innovate in this area. But they already had a lot of political clout.
It would be helpful if there were ways to expand access.
The concept of an ICO is still somewhat new to me and I'm trying to figure out how Mayweather is so sure he is going to make money on this offering. Correct me if I'm wrong, but in the simplest terms:
I'm assuming Mayweather is not an owner of STOX, just a 3rd party participant in the offering. His plan would be to attempt to corner the market on STOX tokens on release and then pray to Cthulhu that demand for the tokens outpaces supply, triggering a rise in price. He then starts to sell his tokens, taking advantage of good old fashioned price arbitrage (which he himself was trying to influence). Does this sound about right?
No one is saying the SEC exists to prevent Floyd from saying what he wants to say. The SEC exists to protect less informed investors from being influenced by what Floyd says. That's why they have rules about disclosures and/or accredited investors, which are lagging behind on ICOs
Actually the SEC just makes sure things are fair. Investors, analysts, CEOs, etc... can pretty much say what they want. SEC rules are specific and Floyd hasn't broken any.
>No one is saying the SEC exists to prevent Floyd from saying what he wants to say. The SEC exists to protect less informed investors from being influenced by what Floyd says.
By preventing Floyd from saying what he wants to say.
Not really. Floyd can say whatever he wants to say, he just needs to warn people that they might not be able to weather the loss. Just like if I was to say that I think Apple's stock is going to soar now that they've discontinued the iPod and can focus more embedded development into the Apple Watch and TV and something something pulled out of my ass, I should also state that:
All statements and expressions are the sole opinion of the commenter and are subject to change without notice. The Commenter is not liable for any investment decisions by its readers or subscribers. It is strongly recommended that any purchase or sale decision be discussed with a financial adviser, or a broker-dealer, or a member of any financial regulatory bodies. The information contained herein has been provided as an information service only. The accuracy or completeness of the information is not warranted and is only as reliable as the sources from which it was obtained. Investors are cautioned that they may lose all or a portion of their investment in this or any other company.
>Floyd can say whatever he wants to say, he just needs to warn people that they might not be able to weather the loss.
While I am least opposed to generic disclosure requirements (as opposed to a requirement of getting the approval of and registering with some specific regulatory authority, as is the case with getting an exemption to the prohibition on offering securities to the public) like you describe, it is still a prohibition on what Mayweather can say.
The law essentially says, "you cannot say X, unless you say Y and Z". It is a prohibition on what he can say under particular conditions. That being said, I haven't fully considered the implications of disclosure requirements, and would hold it as a possibility that it can be justified, on the grounds that "saying X, without saying Y and Z" is indisputably fraud, under all circumstances (those this is a very high bar to clear, and I'm not sure that the prohibition clears it).
> It’s impossible to know if Stox paid you to promote their ICO. It’d be fairly sleazy if they did, but either way, you have a responsibility to be forthcoming about what you stand to gain and what your passionate followers stand to lose.
FTC ruled that paid sponsors must disclose that fact on Social Media posts.
True, but it doesn't appear to be readily enforced. One of the lawsuits involving the Fyre Festival revolves around sponsored social media posts that failed to disclose that sponsorship.[1] Certainly, someone could come and sue Mayweather, but not before he dumps the pump.
Yeah but with ICOs he doesn't really need to be paid directly. If he justs buys at the ICO price, promotoes it 'own his own', and dumps it after his marketing efforts have increased the price, that would be legal (?).
Why aren't we talking about the fact that Stox is basically a bucket shop? Isn't that the bigger issue than the celeb who is promoting the bucket shop??
"Tali Yaron-Eldar, Israel’s income tax commissioner from 2002 to 2004, in 2007 founded eTrader, a binary options firm that targets Israelis, along with Shay Ben-Asulin, who also co-founded AnyOption, one of Israel’s largest binary options companies with revenues in the tens of millions of dollars. In 2011, Ben-Asulin was indicted by the United States for securities fraud, and last month he was convicted of fraud by an Israeli court for helping an Israeli credit card company, ICC-CAL, illegally clear billions of shekels of charges from porn, binary options and gambling websites, as well as conceal the number of canceled transactions."
AnyOption was bought by invest.com and the customer numbers bragged about in the STOX ico are those of anyoption.
From my limited understanding, ICOs are more or less a tax on being stupid, as (relatively) intelligent individuals ride the cryptocurrency wave, profiting off the naive greed of the dumb. In other words, money made off cryptocurrencies are zero sum. Similar to how money made from stocks are zero sum (for every buyer their must be a seller and if one made money the other must have lost for the buyer to have gained, yadda yadda) if you ignore dividends.
Any truth to this statement? I've tried to gather some more information but I still fail to see the advantage of any cryptocurrency for the average person conducting an average, typical transaction. I don't see how everyone investing in crytocurrencies can make money.
EDIT: It seems this comment has riled a few people up. Basically, all I was trying to say is that the simplistic stock market (one without dividends) and bitcoins are very similar as they seem to be built on irrationality.
People taking advantage of this irrationality in my view is how "dumb" people end up broke and the ICO sponsors or what have you run away with the dumb people's money.
Ignoring dividends, what intrinsic value do stocks have? I'd be curious to know how the stock market, ignoring dividends, is not a zero sum game. Maybe my understanding of "zero sum" is incorrect.
This is like saying "ignoring calories, what intrinsic value does food have?"
The whole point of stocks is that they pay dividends, or in the case of some high-growth tech companies, they have some probability of paying dividends in the future.
Hmm. I only invest passively so I can't say I'm super knowledgeable about this. My understanding is that stocks do not inherently give you dividends. Food inherently has caloric value, so I'd say that's the difference. Also, I thought the whole point is that stocks are tied to the (expected) performance of the company itself, and the value is that when you sell if you basically made a return on betting on the company before it appreciated.
Finally, even if there are dividends wouldn't that affect the stock price and therefore be irrelevant (as the stock itself already accounts for it)? Are you suggesting that without dividends the stock market would not function?
Stocks are set up to have some sort of inherent value tied to the company, or nobody would buy them. The typical ways are dividends paid out of profits, company buyouts, and the on hand assets of the company that can be sold. The market is just a pricing mechanism around all that.
I disagree with the premise. I guess the point I'm trying to make is that stocks would be purchased even if there were no dividends. Case and point, (and to remain on-topic): cryptocurrencies.
False. It is not a matter of a disagreement, it is one of fact. Companies like Amazon have nonzero stock price while paying no dividends only because there is a market expectation that eventually a company in the future will pay dividends to shareholders.
Also, you are begging the question compared to your remark about how ICOs and stocks are similar in your top level post.
I'm not sure what you're stating to be "False." That stocks would be purchased without dividends? That's obviously true. Stocks need not have dividends to be valuable, only just have someone else willing to pay more than what you did.
Which brings me to the next point: this expectation you speak of is part of the irrationality. Suppose there was a company that publicly stated that it would never give out dividends, but it was making bank. People like yourself would assume at some point in the future dividends would be paid out and therefore what you stated would apply, even if no dividends were never paid out (assuming the company's trajectory and what not stayed the same).
You also seem to imply the "expectation" of the market is always correct or rational. We both know that's not true, either.
> Suppose there was a company that publicly stated that it would never give out dividends, but it was making bank. People like yourself would assume at some point in the future dividends would be paid out
Because there's uncertainty in the world. People lie, the world changes, etc. Company A says no dividends ever, while maintaining soaring stock prices. Company A fires its CEO and Company A gets a new CEO. The new CEO doesn't say there will be dividends, but you assume they'll turn around so you buy, etc.
Well then the value of that stock reflects the future dividends of that stock in that scenario, weighted by how likely that scenario is to happen. Not sure what your point is then.
Australia has a system called "imputation credits" or "franking credits".
Say a company BigCo makes an operating profit of $100. They decide to pay that out as a divident to shareholder Mary. Australia's company tax rate is 30%, so BigCo sends $30 to the tax department, and the remaining $70 to Mary.
Say Mary's personal tax rate is 50%. On the face of it, Mary would pay 50% of the $70 (ie. $35) to the tax department, leaving $35 in her own pocket. However, this would mean that the original $100 profit had been taxed at 65% ($30 + $35)! This is seen to be inequitable, and a disincentive to owning shares.
So instead what happens is this, Mary gets a "franking credit" of $30 along with the $70 dividend. The franking credit is just a book-keeping entry to record the amount of tax that BigCo paid on its original $100 profit.
At tax time, Mary's accountant proceeds as follows. (1) Add the franking credid ($30) to the divident amount ($70), thus reverse-engineering BigCo's original profit ($100). (2) Apply Mary's personal tax rate (50%) to that whole profit, getting $50. (3) Ensure the tax department gets that $50, regardless of who and where it comes from!
In this case, BigCo has already paid $30 of the $50 total tax obligation on the original $100 profit, so Mary is only up for the remaining $20. By that means, BigCo's original profit of $100 is eventually taxed, in total, at Mary's personal tax rate of 50% - not at the double-taxed rate of 65%.
This might just seem like a whole lotta shakin' goin' on - but wait, there's more!
Say the dividend was paid to another company (SmallCo) instead of to Mary. SmallCo's tax rate is also 30%, so when you apply the franking credit, you'll find that SmallCo pays no tax on the $70 dividend.
Now say it was paid to a self-managed superannuation fund (SMSF) in so-called "transition to retirement" phase. These are only taxed at 17%. 17% of $100 is $17, so the total tax expected by the tax department, on the original $100 profit, has been overpaid by $13 ($30 - $17), and the tax department will refund that $13 to the SMSF! The SMSF gets the $70 dividend, and not only pays no tax on that, but also, gets a $13 refund cheque.
Then we get to the apogee of this process, the quintessence of financial wizardry, a situation so warming to the heart as to impose some risk of dangerous palpitations. Say the SMSF has gone into "pension mode". In that mode, it pays no tax. Thus, when the fund receives the $70 dividend, it also receives a full refund of the $30 tax originally paid by BigCo!
As I understand it, BigCo can actually choose to pay the full tax, part of the tax, or no tax, on its origial $100 profit. The dividend is correspondingly said to be "fully franked", "partly franked", or "unfranked". A dividend recipient ("X") might get a mixture of franked and unfranked dividends from various sources. "X" would add all franking credits to a notional "franking account", then use that account at tax time to offset their normal tax obligations.
The shareholders of any company can give themselves a dividend if a majority agree to it and the company has money to pay for the dividend. That is an inherent part of all stock in for-profit companies. So stocks don't inherently give you dividends, but they do inherently come with the possibility of dividends.
> Ignoring dividends, what intrinsic value do stocks have?
Voting rights, claim on corporate assets in the event of dissolution (coordinated use of the former can trigger the latter; though that's rare in practice because if you don't like the way the corporation is run, you usually just sell out.)
Dividends are, in effect, a periodic partial dissolution that a corporation has chosen to conduct.
> I'd be curious to know how the stock market, ignoring dividends, is not a zero sum game.
Er, because the sum of net returns is not fixed at zero, or fixed at all, so it's not a zero or even fixed sum game.
> Isn't the sum of net returns fixed to the total amount of stock multiplied by the purchase price?
(1) A value which continuously changes over time based on the decisions of participants in the market is not “fixed”, and
(2) that aside, no, the value you suggest is not the same as total net returns.
If you if ignore the claim on assets (which is the fundamental purpose of stock), then, the sum of all returns must be zero. But you can't meaningfully ignore that.
That's like saying “aren't all money-based markets zero sum, if you ignore the use-value of the goods/services sold”?
In regards to (1), I don't get it. Just because the value changes doesn't mean it's not fixed. A trivial example is 100 = XA + YB + ZC. Fixed, yet weights for each value can change. And with (2), what's the value then?
But the long and short of it is that stock is part ownership of a company. Companies are not zero sum, they create wealth through a process that Paul Graham explains in http://www.paulgraham.com/wealth.html. The trading of stock itself is a zero sum game - each time it happens someone is trading ownership worth a certain amount for the same value in money. But owning stock goes up and down with the prospects for the company.
Stocks that don't pay good dividends should be reinvesting that money in future growth. At some point in the future the company will then increase its dividends.
If stocks are a zero sum game then so is business in general. But business isn't just a giant casino. Useful stuff is produced.
Stocks are valued off of their discounted future cashflow, so ignoring dividends (and capital distributions) basically takes all of their value off the table.
Based on what I've seen in the off-media, I don't know that Mr. Mayweather understands much outside of boxing; I fear this article would fall on blind eyes if he would even read it.
Then again, thats partly the purpose of the SEC, right? To protect people from ignorance?
The attitude expressed in the article, of assuming one group of adults has a right to create laws restricting what is offered in the marketplace to other groups of adults, to protect the latter from their own naivety and bad judgement, is incredibly paternalistic. It exudes a superiority complex and disdain for the personal autonomy of presumed lesser men and women.
>ICOs, like any other securities offering, come with risks.
There has been no statement from the SEC that all token sales qualify as securities offerings.
Yeah, it feels great to be all self-righteous and lecture Mayweather, but that energy would be far better spent imparting financial literacy on the hundreds of millions who don't know any better.
http://www.cnbc.com/id/100696230
https://www.coindesk.com/celebrity-investor-mark-cuban-parti...