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Comment by frostwarrior | Hacker News Reader

Serious question, how can you sue over this kind of thing?

I thought the whole point of crypto is that it's not regulated. And that also meant that if you got screwed then you are SOL.

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They can be sued if they claim that they hold more assets than they are issuing. If you tell everyone that it's a dollar per coin, and suddenly there are 5 billion coins, you better have $5 billion to your name somehow.

Not sure if there have been similar lawsuits in the crypto world yet.

For that to be true, that coin needs to abide to the same laws as real currency.

If I say that "1 dollar = 1 virtual thingy" and suddenly there are a lot of virtual thingies and their price fall, then what's the crime aside me personally being a lying f*ck that can´t be trusted anymore?

I don't see how "legitDollarCoins" is legally more legit than, say, lootboxes.

You don’t need a crime to sue somebody. You need a tort.

Turns out that lying to people on a large scale is a crime named 'Fraud'.

It's a security and is regulated as such. So SEC, torts, etc.

In this case if you're marketing $TOKEN as a stablecoin and there's no resources to back it up then it's literally a $PONZICOIN.

$USDC might be okay, I know they've made moves to back their coin in dollars and treasuries.

It's simply fraud. There are laws against fraud.

Tether isn’t a real company operating in a country that applies laws to it. That’s the whole point.

Tether is a company and laws have been applied to it.

https://ag.ny.gov/press-release/2021/attorney-general-james-...

https://www.bloomberg.com/news/articles/2021-07-26/tether-ex...

It's basically all uncharted waters. Yesterday's freakout over Coinbase saying that all customer assets could be seized in the case of bankruptcy was basically them saying they have absolutely no idea what would happen because no precedent exists. In reality, regulatory agencies have broad authority and can seek more when needed to deal with unexpected events. If they think Coinbase or Tether represent a systemic risk, they will find a way to bail out investors because the downside risk of doing nothing is too great. It's possible some of the major crypto institutions have reached Too Big To Fail status regardless of whatever statutory authority exists to protect them. The biggest problem is simply that ownership is anonymous so we have no idea which countries have the most exposure or who to rescue.

> If they think Coinbase or Tether represent a systemic risk, they will find a way to bail out investors because the downside risk of doing nothing is too great. It's possible some of the major crypto institutions have reached Too Big To Fail status regardless of whatever statutory authority exists to protect them.

That's silly. The only people who actually believe this are the ones who have so bought into the hype that they don't realize that crypto is not a functional part of our system of currency that underlies our economic production. Crypto is an asset that is prone to bubbles that provides little to no actual economic production. The "major crypto institutions" will have to be bailed out privately, if at all.

It doesn't matter if it's a scam or if it provides value. Lots of activity leading up to the 2007 crisis was scammy but once enough people and institutions were exposed it had to be dealt with. If Moderna says they put all the cash in Tether and now they're broke and can't produce vaccines, they'll get bailed out.

All that being said I don't actually think that we'll see anything like that. There will be some negative wealth effect but unlikely any systemic risk. Traditional financial institutions have been leery of crypto from the start and they still control the vast majority of capital.

Moderna might get bailed out...though I am skeptical how they would justify having so much cash in Tether rather than an actual bank and as such I highly doubt they would get terms as favorable as the banks got in 2008.

Tether itself certainly would not get bailed. There is literally zero chance that the US Government would decide to help keep Tether pegged. Tether simply isn't important enough to the broader economy, it only exists so that sketchy businesses that have trouble interacting with banks can have an easier access.

You don’t get to just decide that regulation doesn’t apply. The SEC can decide to regulate you, for offering a security or fraudulent statement later for instance

I'm certain that with billions of dollars on the line a creative lawyer will find some avenue to attempt to get the money back. At the very least there's an arguable case that they've committed some level of fraud by mis-stating how well backed it is. The question of whether you'd win, and whether you'd be able to enforce any judgement are different issues.

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