In recent weeks, Matt Levine has written about two potential ways of driving a stock price down. The first via literally hacking into computers:

Joshua Mitts and Eric Talley of Columbia — discussing a different approach, which is that you could just trade on the fact that you could hack into the computers. Then you can disclose the hack and hope that the company’s stock will go down. Cybersecurity breaches tend to be bad news. This approach is … look, I have my doubts about how lucrative it is; cybersecurity breaches tend not to be such bad news … but it has the advantage of not being blatantly illegal. Of being legal? I mean, that is not legal advice, but her

In the second case, it’s not so much true hacking, rather it’s akin to growth hacking.

Shares of the Snapchat parent company sank 6.1 percent on Thursday, wiping out $1.3 billion in market value, on the heels of a tweet on Wednesday from Kylie Jenner, who said she doesn’t open the app anymore

So I am inclined to allow it, though I am of course neither your nor Kylie Jenner’s lawyer. But as a way to profit from celebrity, shorting a company’s stock and then being mean about its products on social media seems pretty easy, and the markets would be more amusing if someone tried it. Social media companies profit because their users provide content for free; I like the idea of the users profiting by deciding to stop.


Software updates as SEC violations

Could disclosures on software updates be a securities violation? From Matt Levine in Bloomberg:

The U.S. Department of Justice and the Securities and Exchange Commission are investigating whether Apple Inc. violated securities laws concerning its disclosures about a software update that slowed older iPhone models, according to people familiar with the matter.

The government has requested information from the company, according to the people, who asked not to be named because the probe is private. The inquiry is in early stages, they cautioned, and it’s too soon to conclude any enforcement will follow. Investigators are looking into public statements made by Apple on the situation, they added.

While the slowdown has frustrated consumers, U.S. investigators are concerned that the company may have misled investors about the performance of older phones.

It is fun to imagine more extreme hypotheticals. What if Apple sold phones that it knew would explode after one year, and they all exploded and killed millions of people? And the Justice Department looked into it, examined the facts and the law, and said: “You know, this looks like securities fraud. The real victims here are Apple’s shareholders, who had no warning that the phones would explode and kill their users, and who have now lost money when the stock dropped.” If you were an alien trying to understand the U.S. legal system from cases like this one (also opioid casesclimate-change lawsuitsgun control, etc.), you might conclude that its purpose is to protect shareholders from losing money when the companies they own harm consumers. 

via Sergeant Spoof’s Time Has Passed at

Paying for performance

Matt Levine on charging higher fees for increased performance. It’s not looked upon well, which doesn’t make sense.

One mental model you might have is: Shouldn’t the active managers’ share of the pie be reduced by competition? If Fund X outperforms by 60 basis points but takes 44 for itself, shouldn’t Fund Y swoop in and offer to outperform by 60 basis points but take only 30 for itself? Just asking the question makes it obvious that the answer is no. Sure, right, if lots of active managers could predictably outperform, then they might compete with each other on price. But as long as reliable outperformance is rare, investors should rationally prefer to pay a lot for outperformance rather than to pay less for underperformance.

Full post Is Paying for Performance Bad? at

You can’t “blockchain” everything

Matt Levine on the “blockchain” projects attempting to adopt to real world, which doesn’t function as neatly as needed. Blockchain opens up a a lot of new possibilities, but you can’t simply port physical businesses to a blockchain. New models are needed in some cases, and in most, blockchain isn’t the answer.

Levine, of course, references “tech” company Juicero:

You might call this the Juicero Problem: You can build a computer ecosystem and associate it with bags of fruit, and encourage people to use the computer ecosystem to squeeze the bags of fruit, but not everything that happens to the bags of fruit in the real world can be completely controlled by your computer ecosystem. You can’t prevent people from squeezing the bags with their hands. The world exists, and it is messier than your protocols want it to be.

via The Blockchain Is Not the World at Bloomberg

There’s reason for banks to worry about bitcoin

And here’s a good reason for banks to be wary of Bitcoin:UBS Group AG Chairman Axel Weber said the Swiss bank won’t trade Bitcoin or offer it to retail clients as increased regulation could lead to a “massive” drop in value.

“This is something where the price is really unclear,” Weber said in an interview Wednesday with Bloomberg TV at the World Economic Forum in Davos, Switzerland. “We fear that in the future if these investments implode and the market corrects, then investors will be looking at ‘who sold us this?’”

If some dude on the internet sells you a hugely volatile asset with no intrinsic value and it immediately loses 50 percent of its value, you’re like “well played, dude on the internet.” If a bank does it, though, you sue.

from Matt Levine in Crypto Finance Meets Regular Finance at

Cowen & Levine on Where Tech Will Take Finance

Two of my favorite writers discussed where fintech is headed.

From Matt Levine:

The point of most innovations in consumer finance has been precisely to reduce its presence in our lives: Instead of talking to a bank teller to get money, you use an ATM. Instead of physically walking into a broker’s office to talk about which stocks to buy, you buy index funds through a web page. Or, now, you click to enroll in an app and it does all of your asset-allocating and stock-picking and tax-harvesting and so forth for you. I think that a lot of financial technology is heading in the direction of perfecting that vanishing act, so that in 20 years you’ll just think about financial things less than you do now.

Really ambitious proponents of blockchain technology, though, envision a world in which a lot of identity information — your citizenship and marital status and college degrees and employment and certifications and whatnot, maybe your fingerprints and retinas and DNA, as well as of course your credit information — are encoded on a blockchain and used in every aspect of your life.

And from Cowen:

Perhaps I expect bigger changes than you do, so let me follow up on a few possible future scenarios. Here’s one to start with: Big data and algorithms will become so good that only the good credit risks will be able to borrow. Of course this will help many creditworthy people, but the social-insurance function of credit might disappear with large numbers of risky borrowers locked out of the loan market and perhaps some insurance markets too.


Levine is, as usual, quite level-headed about new developments and seemingly prepared to be underwhelmed. Cowen sees bigger potential problems, which he’s also wont to do.

Star Ratings and Blockchain Stock

Matt Levine shared some thoughts on the upcoming ICO from’s subsidiary, T0 (t-zero)

There are two fundamentally different ways to think about “the blockchain” in finance. One way emphasizes the qualities that originally made bitcoin interesting: its trustless, decentralized nature, in which no one owns or controls the system as a whole. This is of course the philosophy behind bitcoin and Ethereum, but it is also the philosophy behind some of the more interesting and successful initial coin offerings. “The point of an ICO, done right,” I wrote recently, “is that you are not building a business; you’re building an unowned system for everyone to use.

The other way to think about “the blockchain” ignores those philosophical ideas and just treats blockchain as a technology improvement.

He goes on to portray what a mere technology improvement would look like for T0:

“All stock securities will eventually become tokens” [Overstock CEO Patrick Byrne’s quote] sounds ambitious, and in a way it is. If it’s true, then the opportunity for blockchainy stock exchanges like tZero’s to displace incumbent banks and exchanges is enormous. But in another way it is a retreat from the more interesting ambitions of blockchain proponents. It’s not a new form of business organization, a new way to build decentralized protocols to displace corporations as the engine of technological innovation. It’s just the regular old form of business organization, through public stock corporations, but on the blockchain.

Not exactly the future most crypto-enthusiasts are looking for. It needs to be more than that.