Comment by nerdponx | Hacker News Reader

Comment by nerdponx | Hacker News Reader

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I know we like to complain about regulatory capture and all, but at least some bad actors do in fact get caught:

> In a complaint first announced in November 2020, the FTC alleged that Beam Financial Inc. and its founder and CEO, Yinan Du, also known as Aaron Du, promised users of Beam’s free mobile banking app that they could make transfers out of their accounts and would receive their requested funds within three to five business days. In fact, some users waited weeks or months to receive their money, which was particularly difficult for users who were struggling with lost income as a result of the COVID-19 pandemic, the FTC alleged.

> ...

> Beam also failed to give users the high interest rates the company promised, the FTC alleged. Beam repeatedly claimed that users would receive at least 0.2 percent or 1.0 percent, but many new users received a much lower interest rate of 0.04 percent and stopped earning any interest after requesting that Beam return their funds, according to the complaint.

(from the PDF)

> IT IS FURTHER ORDERED that Defendants must provide full refunds of the amounts held by or on behalf of Defendants for Covered Consumers (the “Full Refund Amount”), which consisted of at least $2.6 million on November 15, 2020, as follows

Then again, maybe this is just a slap on the wrist. This is equivalent to robbing a store, getting caught, and then the only punishment being "you aren't allowed in the store again, and you have to return the stuff that you stole." Which is pretty damn lenient by the standards of the rest of the US justice system.

Hopefully there will be a civil suit followup for additional damages. But even then, the company might just go into bankruptcy and the creditors are the one who get screwed. Meanwhile the executives who made the decisions in the first place just go home.

>> Then again, maybe this is just a slap on the wrist. This is equivalent to robbing a store, getting caught, and then the only punishment being "you aren't allowed in the store again, and you have to return the stuff that you stole." Which is pretty damn lenient by the standards of the rest of the US justice system.

The FTC is a civil agency, not a criminal agency.

Just b/c Beam and Yu settled with the FTC out of court doesn't mean the FBI can't go after them for criminal charges.

The FBI doesn't prosecute, they just investigate. You mean the DoJ Criminal Division.

They were doing ACH pulls which can be clawed back for 60 days. More than likely they were hit by fraud and the custodian bank was making the decisions to hold the money to mitigate their loss. Beam isn’t holding anyone’s money, there is a bank that sets all all rules and takes all the risk.

I hear you, but shouldn't they be capitalized well enough so these known holds wouldn't prevent customers from withdrawing their funds?

If the only thing that happens is that the business disappears , with depositors fully recouped, id still say that's not good enough.

Handling ACH fraud is tricky. There is no decent dispute resolution mechanism in ACH compared to what Visa/MC offer for cards. So FinTechs and their backing bank are on the hook for customer reversals for up to 60 days. In the new FinTech revolution, this is one of the most misunderstood things. Many FinTech entrepreneurs think they can put up a nice UI and offer great interest rates only to get hit by huge fraud losses as soon as they launch. I run a fraud prevention startup for FinTechs - sardine.ai - and I hear of a new FinTech hit by fraud every week.

There’s no scenario that Beam failing would risk the depositors losing money. Money is held in a FDIC insured bank account under the customers name. Beam is just a pretty interface on top of the bank account.

The holds are the same types of holds that you see at regular banks. Issue is that Beam explicitly made a claim that it only takes a few days to transfer out and falsely advertised an interest rate. Interest false statement is interesting because the underlying bank violated their bank charter if Beam put out false interest rate marketing materials and could be subject to fines.

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