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A Summary of

Money Stuff: Look Out for Cops in the Pump and Dump

by
Matt Levine
Money Stuff
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Pump and Dump Organization

  • Australian Securities and Investments Commission went on a "pump and dump" message board warning the members that “coordinated pumping of shares can be illegal" and may lead to arrest. Members of the message board disregarded the message despite an ASIC spokesman confirming the post was genuine.
    • The FBI would probably act much differently in a similar situation: they would probably post under a fake username like "yolo_crime420" instead of "ASIC" and monitor the illegal activity before taking action.
    • The number of people on pump-and-dump message boards who are cops is rising.

Overcollateralized Stablecoins

  • Several stablecoins are explicitly stablecoins that just are overcollateralized. The most famous is Dai, the stablecoin of MakerDAO. To generate Dai, the Maker Protocol accepts as collateral any Ethereum-based asset that has been approved by MKR holders. 
    • This is just a decentralized platform automatically transforming Ether into dollars at a specified level of over-collateralization with steps in place for making sure the collateral is sufficient.
    • In traditional banking, there are enough layers of opacity between your deposit and the underlying risky assets that you don’t think of them as being at all connected (that is, you trust that the bank will keep your $1 as $1).
      • In crypto, there should be more opacity, like in traditional banking, so stablecoin users won't be given the recipe for how to break the stablecoin.
      • Despite this, crypto people want the opposite as they value decentralization and transparency.

The kids have SPACs now

  • More than a dozen people age 30 and younger have been named as executives or board members at SPACs that have filed listing plans since June.
    • This is not too surprising. What is surprising is that we haven't yet seen an article about a SPAC started by people who have built big followings on Reddit.

"4"

  • The SEC's review of companies' EPS has brought cases against 3 firms over the past year. The initiative was built based on academic research that examined the unusually high absence of the numeral “4” in companies’ quarterly financial numbers.
    • Companies often round high 4s into 5s to make their earnings look better. This seems like a pretty modest red flag compared to some of the alternatives.

Good Metaphor

  • A 20-year-old crypto trader compared crypto trading to playing with "loose wires." You can potentially electrocute yourself, but you can also get an intimate understanding of how the internals work.
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