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Deal Judge: We're Going To Need A New Master of Coin

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Elie's idea of an Icelandic prison.

Ed. note: This is a new weekly column by Elie Mystal, Managing Editor of Above the Law Redline, wrapping up the week that was in law and finance. Elie is not a practicing attorney, and anything he says that you listen to can and will be used against you.

Issue #1: How can you get a permit to do a damned illegal thing?

Bitcoins are a "real" commodity, so says the Commodity Futures Trading Commission. Commissioner Mark Wetjen "I do believe we have the authority because if you think of any reasonable reading of our statute, bitcoin classifies as a commodity, "I do believe we have the authority because if you think of any reasonable reading of our statute, bitcoin classifies as a commodity."

Well maybe if Wetjen wishes really, really hard, Tinkerbell will spring to life and sprinkle enough regulatory pixie dust to give the CFTC the authority it believes it should have.

The issue has never been whether or not bitcoins are a commodity. The issue is that it's an underground currency designed to facilitate a whole bunch of shady stuff and buying gear in MMORPGS. The legitimate end of the business should be called "Bitcoin's Olive Oil."

Check out this statement from the usually intelligent Arthur Levitt, former head of the SEC:

“In today’s world, having a compliance officer is a mark of professionalism and I think the cryptocurrency industry views a compliance officer as a cousin of the devil himself,” said Mr. Levitt. “I think that’s wrong because we are in a steep learning curve and there is no better way to adjust irrational misunderstandings and regulations than by having this kind of transparency.”

A bitcoin pusher doesn't want a compliance officer because he has NO INTENTION TO COMPLY. That's like telling a pimp to be on the lookout for loose women.

Issue #2: Iceland makes poor use of its volcanoes.

A lot has been written about holding people "accountable" for the financial crisis. People write about it because the courts aren't going to actually do it, and I think we know that by now. The American system of justice is not really designed to put people in jail for the crime of finding a new way to make money that works until it doesn't. We're much better at jailing people for the crime of not making enough money to afford a good lawyer.

Iceland, is at the other end of the spectrum. Sigurjon Arnason, former chief of Landsbanki of Iceland, was sentenced to a year in prison by a Reykjavik court, this week. Arnason becomes the third Icelandic chief executive to be jailed for... well that's where it gets weird. Aranson was convicted for "misdeeds in the run-up to the nationalization of Landsbanki." Prosecutors alleged he manipulated the stock price of the bank before Iceland took over. That's a fine hook, I suppose, but Arnason is really going to jail because the economy blew up. There's no Icelandic law (that I am aware of) for "f**king up our economy," so... MISDEEDS!

In America, we also have no law specifically prohibiting being bad at capitalism. Maybe we should. Whether or not you have to cool your heels for an easy year in nice Icelandic jail or in bankruptcy court isn't as much a difference in the severity of "accountability" it's a difference in how we define accountability.

If Iceland threw Arnason into a volcano. well then American regulators could feel ashamed.

Issue #3: Though if you are looking for actual hypocrisy, we've got you covered.

From Matt Levine:

There's also a lot of stuff about mining Twitter for information, including, ghoulishly, getting notice of the Boston Marathon bombing just slightly ahead of the news reports, allowing clients of Dataminr to short the stock market ahead of everyone else. Go ahead and pay for that advantage, that's fine. But don't talk to an investor relations guy at Dell, that's insider trading. And don't get press releases a tenth of a second early, that's "insider trading 2.0." Those just wouldn't be fair.

Matt is a nice man who may or may not be emotionally dead inside.1 I think that qualifies as his biting rebuke of insider trading prosecutors that criminalize or over-regulate non-material advantages.

I'm going to go the other way. We recognize that "insider trading 2.0" is bad but this kind of data mining operation is still okay? How is it illegal to eat a piece of pie but PERFECTLY FINE for me to have sex with it?

Then again, I'm not Matt. We do agree that there's a lot of hypocrisy here, tho.

1. He's also a good friend of mine, was in my wedding, we get drunk together, etc., as he might say.