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2/ First, the double-standard. Why didn't the NY AG throw the Martin Act at Merrill Lynch for doing something actually quite similar from 2009-12? Seriously, why the double standard??? Quoting the SEC's press release here: sec.gov/news/pressrele…
3/ "The maneuver freed up billions of dollars per week from 2009-12 that Merrill Lynch used to finance its own trading activities. Had Merrill Lynch failed in the midst of these trades, the firm’s customers would have been exposed to a massive shortfall in the reserve account."
4/ WAIT -- PLEASE STOP AND READ THAT AGAIN 👆. It's really important. So...Merrill Lynch commingled customer funds, used them to cover its own obligations, & had it failed its customers would have been exposed to a "massive shortfall in the reserve account." Where was the NY AG??
5/ But there's MORE! Merrill held $58bn/day (!!!) of customer securities in an account subject to its creditor lien. Per the SEC, "Had Merrill Lynch collapsed at any point, customers would have been exposed to significant risk & uncertainty of getting back their own securities."
6/ Yeah, that Merrill stuff was pretty bad, and it paid a $415mm fine to the SEC in 2016. But the SEC handled it in a manner that didn't spark sudden panic & customer withdrawals from Merrill. But today, #NewYork went w/ the "gotcha" approach & pockets of panic seem to be ensuing
8/ Second point--#crypto exchanges, clean up your act! You really need to voluntarily disclose #ProofofSolvency (h/t @nic__carter), #ProofofReserves & audited financial statements (h/t @wtogami). If you don't, regulators, investors & litigation will force it on unfavorable terms!
