Why Is Coed Cherry Shutting Down? | Hacker News Reader

Why Is Coed Cherry Shutting Down?

coedcherry.com

62 pointscreer80 comments

Interesting how this small business isn't able to use their bank as a simple pass-through mechanism while massive entities like FTX are able to play with billions of dollars. Know Your Customer is penny wise and pound foolish.

> Know Your Customer is penny wise and pound foolish.

That's the point.

I think the point was honesty will only get you so far in this world. They could easily keep the business running but decided against it 'because honesty'

FTC had to do bank fraud to do so. That's the point of these laws: they make illegal activity easy to prove and win convictions on.

No man, neither of those points are even remotely true.

Not only that, but the banks themselves (not necessarily Bank of Montreal), are the biggest law breakers of these regulations.

As an example: https://violationtracker.goodjobsfirst.org/parent/bank-of-am...

The HSBC drug cartel money laundering scandal should've resulted HSBC losing their banking license and bank employees involved going to prison, but no.

I think there needs to be a law that unless you are committing a crime, the bank cannot refuse to work with you. Probably won't pass muster at the courts, but something has to be done to say wait a second, financial services should be a right, either let the post office do it as a bank of last resort, or force the corporate banks to stop discriminating.

The government often uses regulations to shut 'undesirable' businesses off from bank accounts, when it cannot kill the businesses itself (for legal or political reasons). The prime example of this is "Operation Choke Point", but there are other, more subtle ones. Banks like money, but they are unwilling to challenge the regulators which protect them.

For those reasons (and others), I don't think your proposed legislation would work.

Financial services _for individuals_ should be a right. Companies don’t need any more rights than they have already.

Doesn't this very story look like evidence that they do?

No. The banks are responding to a number of legitimate risks that they wish to avoid. They have a legal obligation not to facilitate money laundering and human trafficking and adult businesses are more likely to be involved in these.

You are mixing up a few things:

- "risks that they wish to avoid" seems merely to be a risk to their reputation "what are people going to say should stuff happen". It's a level of "legitimate" that applies to anything. That one is not illegal because sex work is not a protected class (more or less). Otherwise it would be.

- "They have a legal obligation not to facilitate money laundering and human trafficking". Hmmmm. No. A law against, say, human trafficking cannot make adult businesses illegal. Or if it aims to do that, it needs to name it. These businesses are not illegal. A bank has some obligations to be vigilant against some things - and might demand lots of paperwork and might still often do the wrong thing. But society does not need them to go vigilante and blacklist entire domains of legitimate activity.

And blacklisting / red lining is exactly what laws might try to prevent. Seems that sex work needs to become a protected class. (Never mind that "protected class" is american law, not canadian.)

I think you are the one mixing things up. I never said anything about adult businesses being illegal. This is about banks, which are businesses, choosing to avoid transacting with other businesses in direct response to obligations imposed by the government. Anti discrimination law in both Canada and the US protects individuals, not companies, so it’s unclear why you would mention protected classes in a discussion about an Ontario-incorporated business and their commercial banking relationship.

A gig worker or freelancer who sets up an LLC is essentially no different than an individual. They should have protections.

I don’t think most freelancers and gig workers are having trouble opening bank accounts.

I don't agree with sex work, but I will absolutely defend the rights of people to get paid for their labor.

Of course people should be paid for their labor. You don’t need a commercial bank account for this, even if your labor is sex work.

Here is how the insurance industry does it:

There are a bunch of people who nobody wants to insure. The government basically divides up those people, and forces insurance companies to take them on as customers, since insurance is legally required in some cases.

In order to make sure these customers don't hurt the main business, the insurance company has a separate legal entity to handle those customers.

That's a great idea! Someone should create a bank that specifically serves entertainment businesses. Install an ethics/business practices review process to weed out the bad players and reputational risk is turned into opportunity. The bank's promise of no hassle/no uncertainty would attract customers in droves.

BitSafe is such a bank, in The Netherlands

Okay but the problem to be solved here isn’t analogous. In the case you described, they’re uninsurable be used they’re legitimately high risk, and the government forces their insurance as a favor/pity/charity.

In the case of adult entertainment etc, the government’s regulation has cause the risk, and that untouchability, so it can’t then endorse the very interaction it was banning. If it could permit these businesses to use banking, then the solution wouldn’t be necessary in the first place.

Establishing a bank is not easy, ask Walmart, but maybe that is what some industries need. Guns, Porn, weed, whatever, if it’s legal then create their own credit union.

It’s concerning because the (increasingly monopolistic) banks and the credit card companies are simultaneously a type of private tax on all purchases and the judges/juries of public morality.

This is one in a long string of cases where people cannot operate fully legal business because of the policies of the financial institutions.

Very interesting first hand account on getting shut-off from banking institutions because your business deals with Adult Entertainment (in Canada)

I wonder how Vegas/Nevada does it, or the bigger porn site like PornHub? Are the laws in (some parts of) the US that different than in Canada? I've always heard that Visa/Mastercard were impossible for Adult Entertainment.

Nevada is a sovereign state and can charter banks and regulate banks operating in its jurisdiction.

Mindgeek C suite has connections in the banking industry.

> Nevada is a sovereign state

I think this is why you're getting downvoted. A "sovereign state" is a state that has the highest authority over a territory, but Nevada remains subject to US Federal law.

(I do not know to what extent US states have leeway on banking regulations)

States are indeed the highest authority over a great many matters within their territory. They share sovereignty with the federal government. That is a central feature of our system.

The US has a dual chartering system where banks can be chartered by a state regulator or the US comptroller of the currency. In either case they are subject to the same overlapping set of state and federal laws and mostly the same regulations, just applied by different regulators.

https://dfpi.ca.gov/the-dual-chartering-system-and-the-benef...

Wasn't Mindgeek cut off from Visa/Mastercard?

https://www.reuters.com/business/finance/mastercard-visa-sus...

There is precedent for a new, domain-friendly bank. Wikipedia explains Silicon Valley Bank was founded to serve tech startups needing banking and loans while having no revenue yet. I expect specific banking needs have happened in other fields. And the porn industry does represent a lot of money.

I'm surprised the adult entertainment industry doesn't just form it's own credit union or bank.

Maybe it wouldn't get federal approval (US or Canada), so that's why it never happened?

Given how necessary credit card processing is to any business these days, I’m surprised they don’t try to get a law passed that credit card processors must handle any business that isn’t actually illegal.

For once, this shutdown (or Omegle's for that matter) has nothing to do with credit card companies.

But yeah, the idea could be a smaller bank serving under-served industries and demographics - and for whom getting in the press for some random BS wouldn't matter.

You'd definitely need a better poster child than sex work for that in the US. There's no way conservatives would vote for something with that as poster child and some democrats wouldn't either. The US as a whole regardless of team is pretty puritan.

You don’t have to be a puritan to find pimps distasteful, even if they are cyber.

Edit: Child evidently has a reading comprehension problem and didn't understand "don't have to be a puritan." The emphasis is on cyberpimps. Whether or not you approve of pornography or prostitution you can still find pimps, who are by nature exploitative, distasteful without being a puritan.

Puritan is defined as finding porn etc distasteful, so it really is. one who practices or preaches a more rigorous or professedly purer moral code than that which prevails https://www.merriam-webster.com/dictionary/puritan

It’s the objection itself not the reason for it that’s important. In other words objecting to porn on artistic grounds is still puritan.

Reason is very obviously hardcoded into the definition with "moral" word.

Ergo,

>objecting to porn on artistic grounds is still puritan.

is not true

Valuing “good” art is a moral stance. It’s a judgment of what human behavior is good or bad.

It's moral stance if you define good as moral. In other words, your reasoning is a circular reference, and not very useful

Different definitions of the word good here. Someone who values “plucky” art is making a moral judgement in the same way someone who thinks it should be destroyed, preserved, created, or …

It’s defining something as positive or negative which makes this a moral judgement not the specific value assigned.

I use positive/negative here because someone may believe there’s an incorrect solution to a math problem without judging such errors in terms of morality.

I don’t think that word means what you think it means in the context it’s being used. In this case a moral judgment simply means with respect to ethics. One could morally judge something to be good, bad, or neutral.

One way or another the system has to have a way to handle high fraud vendors. It appears the vast majority of porn vendors experience high fraudulent card use as well as high chargebacks. Perhaps the merchant gateways could just charge really high onerous fees instead.

This isn’t about credit cards but normal banking services. They can’t maintain a company bank account to do things like pay taxes, which is why crypto doesn’t work for them.

Taxes (at least US federal) are one of the few things you can pay for in unlimited amounts with cash.

They have a nice page about how to make an appointment (recommended 30-60 days in advance): https://www.irs.gov/payments/what-to-expect-when-you-pay-cas...

"Hi, IRS? I've got a billion dollars worth of 'other, unspecified' income I need to pay taxes on in Cash. My name? Uh...."

If the person on the phone had said “Capone, Al” instead of “Uh…” he’d possibly not gone to jail.

Even ill gotten gains are taxable and the theory of one crime at a time suggests that even “other, unspecified” could be with paying taxes on to reduce the likelyhood of successful criminal persecution.

They’d have nailed him with something else - it just might not have been so easy.

That said, pay your taxes even if you’re a criminal for sure!

Fun fact: One of the most closely guarded pieces of paper in those offices are the tax receipt forms. Because if you can produce a tax receipt it's good as cash for meeting your tax obligations.

From what I understand, the US cannabis industry has this problem, because pot is still illegal at the federal level.

That means that they can’t get banking.

Probably means that dispensaries are juicy robbery targets.

Yes - the one on a major road near us had pretty frequent attacks. Our local political representative actually gave a presentation about how they were working to reduce the crime risks since a lot of neighbors were concerned (like LA banks in the 80s). It sounds like they now have a pretty elaborate setup: there were multiple police reports where someone showed up with a gun and got stuck in the mantrap, and the officers just waited until they got hungry/thirsty enough to surrender.

Which "they" would do that? The US Government finds it rather convenient that they can use the banking system to shut down things they don't like that it would be unconstitutional for them to shut down directly, they're not in any hurry to give that power up.

My guess is that a lot of the adult entertainment industry knows that they're in bad company.

I didn't see anything (maybe I missed it) about where they source their content, but unless they're producing their own content or sourcing it scrupulously, then, yeah, I could see it being way outside a bank's risk profile, even if they were cool with porn.

Actually, checking out the WaybackMachine, it looks like a standard thumbs site with random pics from all over.

I don't entirely blame the bank for being concerned about CSAM.

I was thinking revenge porn and, to a lesser extent, copyright violation. But, yeah, CSAM too.

Good use case for bitcoin. Not as user-friendly as fiat and traditional banks, but bitcoin literally can't cancel you no matter what.

(2022)

(November, per archive.org)

Reminds me of this lady in the Bundestag (need to turn on subtitles with auto translate)

https://www.youtube.com/watch?v=xNLPIepG0C8

Alternatively, a pretty decent AI translation:

https://www.reddit.com/r/Bitcoin/comments/17rr215/german_mem...

> What has changed are new government regulations coming into effect in many countries called "Know Your Customer Laws."

These laws are not new.

> and rebrand your business with a more neutral name

Can someone explain what the name means? I don't understand why it's not neutral.

“Coed” as a noun informally/imprecisely refers to female college students (for reasons that I have no idea, as it seems like it should be a symmetric label to me, given that a coed college requires both men and women, but the use of “coed” as a noun overwhelmingly means women).

“Cherry” suggests virginity.

I’ve never heard of CoedCherry until this HN post, but from the name, I’d assume they were an adult site focused on college or college-age women.

Historically, very few colleges admitted women, thus when they began doing so, they became "coeducational" institutions, but the prominent feature of such institutions was the (then minority) presence of women, who thus became associated with the term. There's little in history or language that is symmetrical or equitable - although, these days, the smart money on the unspecified college student is that she's a woman.

In the USA, Coed is a vintage slang for young ladies in a college (nearly always used in a “sexy” context in the modern day) and cherry is slang for virginity.

PS: I swear when I wrote this there weren’t 4 other perfectly good replies visible yet. Apologies for the redundancy

“Coed” has multiple meanings but has a widely accepted porn definition: female college student

“Cherry” is a fruit but also has multiple widely accepted porn definitions centred around virginity

The venn diagram of where they overlap makes it obvious they are in the adult industry.

I imagine this is going to be downvoted to hell or get a slew of outraged replies acting like I'm clearly stupid or being intentionally ridiculous, but it makes me wonder how condom companies stay in business.

It's sex related. Why not randomly shut them down too?

(That's a rhetorical question. No, I don't need anyone to eli5 me. It won't help.)

It's a great question. I'd expand the scope to sex toys, because it's a pretty classic niche for small businesses. I live in Canada, can I make and sell sex toys, or will banks shut me down because they're worried about their image?

It's not about their image, it's about legal liability. There's less of that for selling dildos.

Why not be cryptocurrency-only? A lot of the seedier sectors of the online economy (adult and gambling) are very crypto friendly. Plenty of web hosting takes crypto. And the artists themselves are very savvy. I don’t see why you need a traditional bank anymore for this sort of business in 2023.

The second to last section addresses that.

You would still need to declare your crypto earnings on your tax return, and convert some of them into your local fiat currency to pay taxes.

Yes but the industry is not illegal, it’s just banks not wanting to work with him. He can cash out on normal exchanges and file taxes normally.

Fair point, that could be an option.

I’ve heard in the past that the off-ramp from crypto to fiat could be unreliable at exchanges but I don’t know personally whether that is true, either in general or for Canadian customers.

how do you cash out business amounts of money without a bank account though? if the bank doesn't want to work with him, it means he doesn't have anything to connect a Coinbase account to. Unless he wants to deal in large amounts of cash (which; cannabis clubs have to do, so it's not out of the question), he can't cash out.

I wish they had elaborated on crypto 'just isn't there yet' further. It would be nice to know what points of friction exist.

>when we can pay employees in cyrpto and they can use cyrpto to heat their houses, then maybe it will be a viable option.

None of crypto is able to do this. Even worse is how this did exist about a decade ago, but it fully regressed into an exotic account for wealthy individuals.

Well, crypto can totally heat your house, just not in the way they think...

>It would be nice to know what points of friction exist.

Is this a serious question? You can't buy food at the grocery store with crypto. Employees likely don't even know how to accept a salary in crypto. Your landlord doesn't accept rent payments in crypto. Your bank and auto lender don't take mortgage/car payments in crypto. Your utility providers don't accept crypto. BTC block time is too slow for literally any point of sale transaction.

Is that enough friction for you?

All the crypto naysayers on HN would do well to read this.

This is a good point. Because banks have problems that make them difficult or impossible to use, crypto by definition does not have problems that make it difficult or impossible to use. It is an obvious truth because we all agree that there can’t be two different things that suck. That’s physically impossible.

This is more than a year old and it's a porn site

Who cares

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