TL/DR: Crypto is going nuts. I am trying to track who's turning off the lights in a spreadsheet. I welcome any updates.

TL/DR: Crypto’s innovation to date has been avoidance of existing regulatory authority and legal construct. Other than that, it is no different than existing financial markets. And that difference is eroding with bankruptcies from FTX, Celsius, Voyager, and BlockFi that are harming retail customers. The regulators are coming.

TL/DR: FTX is no more. Sam Bankman-Fried pretended to have Compliance, by which he meant some anti-money laundering checks and hiring a few poor souls from banking and regulators as Compliance staff. These served, like eco-green-washing, to make it seem like he was doing the right thing. But the company never had a real culture of compliance. Unethical practices, such as self-dealing trading with customer funds, were endemic. No Chief Compliance Officer could change that.

TL/DR: Mining company is fined $1.5 billion, which is half of their net income. You were too busy watching Elon set Twitter on fire to notice. If you did hear anything, it was that they literally flew bags of money from Switzerland to Africa. The upshot is: fining badly run companies is more "effective" (is that the right word?) than fining companies with high profit margins.

Some recent compliance news that has implications for all financial markets and especially crypto.

On October 19 three sage judges in the Fifth Circuit made an historic ruling and provided a blessing unto the people. The CFPB is illegally funded, they said, and the payday rule is no more. You may have seen the body yourself as it was carried triumphantly from the court by the Community Financial Services Association of America.

At the end of September 2022, the SEC and CFTC fined a bunch of banks a bunch of money.

The American Bankers Association (ABA) and it's friends, the U.S. Chamber of Commerce, Longview Chamber of Commerce, Texas Bankers Association, Independent Bankers Association of Texas, Texas Association of Business and the Consumer Bankers Association have sued the Consumer Financial Protection Bureau (CFPB) and the head of the agency, Rohit Chopra, for the following 2 word change to the CFPB Examination Manual, and I quote from the lawsuit:

“acts or practices that materially increase the risk of consumers being treated in an unfair, deceptive, or abusive manner, including discriminatory acts or practices.”

⅓ of a Trillion Dollars

This is a book about compliance and Compliance departments in the world of finance. Remember to wave your hand in a semicircle with your fingers fanned out while saying “world of finance.” It’s important. I’ll wait. Done? Good.

What you are looking at is the stock performance of 80 financial companies versus their total fines over the period January 2010 to July 2012. I also limited to fines over $10 million because it's a good cutoff--there's not much to say about a $5,000 fine versus a $50,000,000--and I got tired of sticking the data into spreadsheets.

Let me take a different tack on this story. The SEC went after one celeb--out of several, you can look them up, I've had enough of their names burned into my retinas.

The SEC did not go after the people who paid her to promote their platform, in particular: STEVE GENTILE, GIOVANNI PERONE, JUSTIN FRENCH. Whose names are in all CAPs because I found them via the class action lawsuit filed by the people who perceived profit possibility from the plutocratic pundits but instead paid personal pain.

Honestly, what financial failure isn't that same basic story of someone running up a tab while on a winning streak until, inevitably, the winning stops and all the money's gone ?

But the part that I found most interesting was about the legal compliance aspect. Or rather that there wasn't one.

Happen to have bought a lot of stock in the biotech company right before they have, say, an antiviral drug coming out during a pandemic? Well you did report it? No? You forgot to? But did file the paperwork after that mean article in the lamestream media? Well then, $200 fine for you buddy. I mean, that’s totally hypothetical and I am not suggesting anyone Google “Kentucky senator stock act” or just “stock act violation”. You’re in Congress, you’re the definition of ethical. Right?

I don't know what to think. Maybe you can help me. Here's the deal: As I doom scrolled on my phone on the way to fitful sleep last night I read a New York Times article, ‘Redlining Is Racist’: $12 Million Settlement Ends Lending Inquiry.

Ultimately, I was able to line up 154 financial industry related companies with their fines and revenues. I looked at the time period from January 2010 to July 2022. Here's punchline: 0.57%.

That's a bit less than two quarters and dime for every hundred dollars of top of the line income for the companies I looked at. A full 45% of the companies, 69 of them, paid less than a tenth of a percent of revenue in fines. That's a mere two jitneys for every hundred simoleons, per the Interweb.

The COO of Beyond Meat bit another man’s nose. The stock went down. Weird.

“Amazing that these people are trying to sell this as a book when its actually available for free on the SEC website!!!! bunch of scumbags.”

I found 1,120 records of fines over $1,000,000 of public companies between January 2010 and July 2022. That’s a total of $201,971,673,913 in cash paid out by banks. That must have really hit the shareholder value.

It didn’t.