Teku Seeks Audit
July 21, 2020 2:09 pm
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The Securities and Exchanges Commission (SEC) has charged Michael Barry Carter for effectively not using ethereum based smart contracts.
He apparently just stole some of the funds clients entrusted with the broker which is unnamed but SEC says Carter is a financial advisor in the McLean, Virginia office of a large financial institution.
Had these funds been deposited in an ethereum smart contract instead, then Carter or anyone else would have not been able to just steal them as the code rules must be followed.
They says he “falsified internal documents in order to effect dozens of unauthorized wire transfers, totaling millions of dollars, from the accounts of brokerage customers to his personal bank account.
According to the complaint, to generate some of the funds that he misappropriated, Carter sold securities without customer authorization…
The complaint further alleges that Carter made almost $1.5 million in unauthorized transfers from the accounts of an elderly advisory client, sending nearly $1 million to himself, and using some of the remainder to repay funds he had taken from a brokerage customer.”
So all of this could have been addressed by a few lines of code on ethereum and has been addressed by some dapps, like Melon for example.
That restricts to what address funds can be withdrawn to, usually the depositing address, and also the code restricts what the funds can be used for.
“As a financial advisor, Carter was entrusted with millions of dollars belonging to his brokerage customers, his advisory clients, and their families,” said Marc P. Berger, Director of the SEC’s New York Regional Office. “As alleged in our complaint, Carter instead took advantage of that trust for his personal gain.”
That trust requirement is precisely what ethereum solves by putting all trust in code. Meaning there can be risks if there is a bug, but logically you’d think the risk reduces the longer the same code keeps running unchanged.
While this exit scamming risk by people entrusted with the funds doesn’t easily reduce, primarily because the paper system has very little accountability.
If this broker was operating on an ethereum smart contract, then those that gave him the funds would be able to see what precisely he was doing with their money.
Because there would be such full accountability, the temptation to maybe just take a bit of their money as they wouldn’t know, wouldn’t even cross the mind because they would know and instantly.
SEC however is still stuck in the long gone age of the peasants when horse riding landowners passed the most stupid financial law ever, called the Securities Act 1933.
As such, instead of encouraging this digitization and improvement of investors protections, they’ve done all they can to keep everything in the old trust requiring archaic paper system.
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