FTC to close down mobile banking app Beam(finledger.com)
finledger.com
FTC to close down mobile banking app Beam
https://finledger.com/2021/03/29/ftc-to-close-down-mobile-banking-app-beam-pending-district-court-judge-approval/
13 comments
> groupon clone in China
New New Pied Piper
New New Pied Piper
Without any clear understanding of the China daily deal market at the time—many of the players experienced similar issues—having spoken to no one at 24Quan who was close to the situation about what really happened, comments like this will do nothing other than perpetuating fake news.
Media are incentivized by maximizing eyeballs, not always standing for what really happened. Most news readers want to read what’s entertaining and confirms their cognitive biases, and care less about the dry facts behind which truth stands.
Beam was not able to speak openly before the Settlement about what really happened—FTC holding Beam at “gun point”, vendors requiring Beam to stay silent or else they will not release the customer funds. Beam now can finally speak openly, but does not have the PR budget to go against these fake news that has been in public domain in the last few months. That’s the price to pay for doing the right thing — making sure all customers are made whole and putting the preposterous “Ponzi scheme” stupidity to rest.
If you care about the truth more than the sensationalism and entertainment-at-the-expense-of-others, you’re probably the minority. Please stay well.
I can always be reached at aaron at meetbeam dot com.
Media are incentivized by maximizing eyeballs, not always standing for what really happened. Most news readers want to read what’s entertaining and confirms their cognitive biases, and care less about the dry facts behind which truth stands.
Beam was not able to speak openly before the Settlement about what really happened—FTC holding Beam at “gun point”, vendors requiring Beam to stay silent or else they will not release the customer funds. Beam now can finally speak openly, but does not have the PR budget to go against these fake news that has been in public domain in the last few months. That’s the price to pay for doing the right thing — making sure all customers are made whole and putting the preposterous “Ponzi scheme” stupidity to rest.
If you care about the truth more than the sensationalism and entertainment-at-the-expense-of-others, you’re probably the minority. Please stay well.
I can always be reached at aaron at meetbeam dot com.
Let’s first remove the misconception that it is anywhere near a Ponzi scheme. If it was, the news and Settlement will be mentioning that P work again. No mentions, no conclusive evidence of wrongdoing in the Settlement.
Contrary to FTC statement and CNBC reports, the timeline is the following, and Beam had the paper trail to show that this is factual —
1) October 1, 2020 - Beam's ACH service provider's API service stopped working. Funds locked in banking service provider.
2) Early October - Beam began proactively working with its ACH service provider, banking service provider to unlock the funds help at bank. Service providers initially refused to unlock funds unless Beam indemnifies them. Months long disputes with ACH vendor who locked up the fund.
3) November 16 - All of $2.6 million except around 80 customers who Beam was not able to reach had been refunded in full by Beam and Beam's service providers. The remaining amount of these around 80 customers accounted for <$90K in aggregate dollar amount.
4) November 18 or about - FTC, knowing that Beam had returned vast majority of the $2.6 million, still filed a lawsuit against Beam. CNBC article came out around the same time misstating that Beam had not yet returned the funds and it was FTC who “made” the fund return happen or to be happened.
5) By January - Beam had since then contacted all remaining 80 customers and the return of funds had been complete for all where customers can be reached.
FTC admitted explicitly to Beam on an internal call that they have not reviewed all the evidence —and that they WILL NOT review the full evidence proving Beam's innocence—which is against the principle of due diligence and fair justice. Beam offered full review of the facts and full disclosure of all facts and evidence, but FTC refused to examine the facts to rectify false allegations by FTC. This is clear evidence that this case was NEVER about truth-seeking, but a PR chess piece for FTC.
About Settlement
1 - There is zero conclusive evidence of finding of wrongdoing. Nil. Only false allegations.
2 - There is $0 penalty. When was the last time you saw FTC taking on an scrappy SME for months, only to come to a $0 settlement? Shows there’s more to the story.
To be clear, Beam as a company is not shutting down. Stop the misleading headlines just like when people call Beam a Ponzi scheme. False “entertaining” frivolous news comes and goes, but the damage on good people and startups is a permanent injustice.
If the “System” can take down any small, defenseless SME with explicit refusal to review the FACTs, simply sensationalizing a false make-believe story to paint a picture of the “System” being glorious, fired up by fake news, is this the world we want to leave to our children?
Contrary to FTC statement and CNBC reports, the timeline is the following, and Beam had the paper trail to show that this is factual —
1) October 1, 2020 - Beam's ACH service provider's API service stopped working. Funds locked in banking service provider.
2) Early October - Beam began proactively working with its ACH service provider, banking service provider to unlock the funds help at bank. Service providers initially refused to unlock funds unless Beam indemnifies them. Months long disputes with ACH vendor who locked up the fund.
3) November 16 - All of $2.6 million except around 80 customers who Beam was not able to reach had been refunded in full by Beam and Beam's service providers. The remaining amount of these around 80 customers accounted for <$90K in aggregate dollar amount.
4) November 18 or about - FTC, knowing that Beam had returned vast majority of the $2.6 million, still filed a lawsuit against Beam. CNBC article came out around the same time misstating that Beam had not yet returned the funds and it was FTC who “made” the fund return happen or to be happened.
5) By January - Beam had since then contacted all remaining 80 customers and the return of funds had been complete for all where customers can be reached.
FTC admitted explicitly to Beam on an internal call that they have not reviewed all the evidence —and that they WILL NOT review the full evidence proving Beam's innocence—which is against the principle of due diligence and fair justice. Beam offered full review of the facts and full disclosure of all facts and evidence, but FTC refused to examine the facts to rectify false allegations by FTC. This is clear evidence that this case was NEVER about truth-seeking, but a PR chess piece for FTC.
About Settlement
1 - There is zero conclusive evidence of finding of wrongdoing. Nil. Only false allegations.
2 - There is $0 penalty. When was the last time you saw FTC taking on an scrappy SME for months, only to come to a $0 settlement? Shows there’s more to the story.
To be clear, Beam as a company is not shutting down. Stop the misleading headlines just like when people call Beam a Ponzi scheme. False “entertaining” frivolous news comes and goes, but the damage on good people and startups is a permanent injustice.
If the “System” can take down any small, defenseless SME with explicit refusal to review the FACTs, simply sensationalizing a false make-believe story to paint a picture of the “System” being glorious, fired up by fake news, is this the world we want to leave to our children?
The people's deposit money is effectively gone. A few people might be able to find their money in an underlying bank to recover. The hope is the deposit is frozen and in the unwinding it'll be there waiting.
Per the article, FDIC insurance doesn't cover this because it's a 'neo-bank' and the underlying bank didn't fail.
The problem is how the deposits were used. If they're simply stored, it's easy to unwind, but the real problem is if the deposits were lent out or even used to pay other account's interest rates (which would qualify for a pyramid scheme?).
I'm not familiar with the rules regarding a neo bank's access to an underlying deposit in compared to the bank itself, but I wouldn't put it past CEO Du to utilize deposits in the worst way possible.
Per the article, FDIC insurance doesn't cover this because it's a 'neo-bank' and the underlying bank didn't fail.
The problem is how the deposits were used. If they're simply stored, it's easy to unwind, but the real problem is if the deposits were lent out or even used to pay other account's interest rates (which would qualify for a pyramid scheme?).
I'm not familiar with the rules regarding a neo bank's access to an underlying deposit in compared to the bank itself, but I wouldn't put it past CEO Du to utilize deposits in the worst way possible.
That would be a Ponzi scheme. It would be a pyramid scheme if people were promised higher interest rates based on how many other people they recruit.
They kind of were, weren't? As far as I understand, you'd get 1.5% minimum and you can raise it to 4% or 7% by bringing new people on board.
... how did it take this long to shut them down?
Genuine question — when does a referral bonus (pretty standard) turn into a pyramid scheme
When it becomes perpetual and when it becomes the dominant benefit that people get from the service?
Ah crap you're right got my p schemes mixed up.
Leaving error for posterity.
Leaving error for posterity.
> Per the article, FDIC insurance doesn't cover this because it's a 'neo-bank' and the underlying bank didn't fail.
wait ... wat? how do you know something is a "Neo-bank"?
wait ... wat? how do you know something is a "Neo-bank"?
This makes me really concerned for the more established companies operating this way like Wealthfront and SoFi. Even Fidelity’s checking account does the same sweep stuff. Does this mean they actually aren’t safe at all?
I didn't realize banks like Simple or Chime could basically have "fake FDIC insurance". time to move my shit back to my local credit union.
Both Simple [0] (soon to be closing down) and Chime [1] are FDIC insured. I'm not sure how Beam structured it but I'm not sure if it's the same thing...
[0] https://www.simple.com/help/articles/account-info/fdic-insur...
[1] https://help.chime.com/hc/en-us/articles/224459628-Are-Chime...
[0] https://www.simple.com/help/articles/account-info/fdic-insur...
[1] https://help.chime.com/hc/en-us/articles/224459628-Are-Chime...
so any neo-bank's consumers can be told the underlying bank didn't fail so they get nothing?
> FDIC insurance doesn't cover this because it's a 'neo-bank' and the underlying bank didn't fail.
where does it say that
where does it say that
I love the smell of a Ponzi scheme in the morning...
"The FTC also alleged that Beam wasn’t able to give users the high interest rates it said it would give.
The FTC first announced in November 2020 a complaint alleging that Beam and its founder Du promised that customers of the free mobile banking app could make transfers out of accounts and users would obtain their requested funds within three to five business days. However, the FTC alleged that some customers waited weeks or months to get their money.
"
"The FTC also alleged that Beam wasn’t able to give users the high interest rates it said it would give.
The FTC first announced in November 2020 a complaint alleging that Beam and its founder Du promised that customers of the free mobile banking app could make transfers out of accounts and users would obtain their requested funds within three to five business days. However, the FTC alleged that some customers waited weeks or months to get their money.
"
Direct link to the FTC Press Release: https://www.ftc.gov/news-events/press-releases/2021/03/mobil...
I know we like to complain about regulatory capture and all, but at least some bad actors do in fact get caught:
> In a complaint first announced in November 2020, the FTC alleged that Beam Financial Inc. and its founder and CEO, Yinan Du, also known as Aaron Du, promised users of Beam’s free mobile banking app that they could make transfers out of their accounts and would receive their requested funds within three to five business days. In fact, some users waited weeks or months to receive their money, which was particularly difficult for users who were struggling with lost income as a result of the COVID-19 pandemic, the FTC alleged.
> ...
> Beam also failed to give users the high interest rates the company promised, the FTC alleged. Beam repeatedly claimed that users would receive at least 0.2 percent or 1.0 percent, but many new users received a much lower interest rate of 0.04 percent and stopped earning any interest after requesting that Beam return their funds, according to the complaint.
(from the PDF)
> IT IS FURTHER ORDERED that Defendants must provide full refunds of the amounts held by or on behalf of Defendants for Covered Consumers (the “Full Refund Amount”), which consisted of at least $2.6 million on November 15, 2020, as follows
Then again, maybe this is just a slap on the wrist. This is equivalent to robbing a store, getting caught, and then the only punishment being "you aren't allowed in the store again, and you have to return the stuff that you stole." Which is pretty damn lenient by the standards of the rest of the US justice system.
Hopefully there will be a civil suit followup for additional damages. But even then, the company might just go into bankruptcy and the creditors are the one who get screwed. Meanwhile the executives who made the decisions in the first place just go home.
> In a complaint first announced in November 2020, the FTC alleged that Beam Financial Inc. and its founder and CEO, Yinan Du, also known as Aaron Du, promised users of Beam’s free mobile banking app that they could make transfers out of their accounts and would receive their requested funds within three to five business days. In fact, some users waited weeks or months to receive their money, which was particularly difficult for users who were struggling with lost income as a result of the COVID-19 pandemic, the FTC alleged.
> ...
> Beam also failed to give users the high interest rates the company promised, the FTC alleged. Beam repeatedly claimed that users would receive at least 0.2 percent or 1.0 percent, but many new users received a much lower interest rate of 0.04 percent and stopped earning any interest after requesting that Beam return their funds, according to the complaint.
(from the PDF)
> IT IS FURTHER ORDERED that Defendants must provide full refunds of the amounts held by or on behalf of Defendants for Covered Consumers (the “Full Refund Amount”), which consisted of at least $2.6 million on November 15, 2020, as follows
Then again, maybe this is just a slap on the wrist. This is equivalent to robbing a store, getting caught, and then the only punishment being "you aren't allowed in the store again, and you have to return the stuff that you stole." Which is pretty damn lenient by the standards of the rest of the US justice system.
Hopefully there will be a civil suit followup for additional damages. But even then, the company might just go into bankruptcy and the creditors are the one who get screwed. Meanwhile the executives who made the decisions in the first place just go home.
>> Then again, maybe this is just a slap on the wrist. This is equivalent to robbing a store, getting caught, and then the only punishment being "you aren't allowed in the store again, and you have to return the stuff that you stole." Which is pretty damn lenient by the standards of the rest of the US justice system.
The FTC is a civil agency, not a criminal agency.
Just b/c Beam and Yu settled with the FTC out of court doesn't mean the FBI can't go after them for criminal charges.
The FTC is a civil agency, not a criminal agency.
Just b/c Beam and Yu settled with the FTC out of court doesn't mean the FBI can't go after them for criminal charges.
The FBI doesn't prosecute, they just investigate. You mean the DoJ Criminal Division.
They were doing ACH pulls which can be clawed back for 60 days. More than likely they were hit by fraud and the custodian bank was making the decisions to hold the money to mitigate their loss. Beam isn’t holding anyone’s money, there is a bank that sets all all rules and takes all the risk.
I hear you, but shouldn't they be capitalized well enough so these known holds wouldn't prevent customers from withdrawing their funds?
If the only thing that happens is that the business disappears , with depositors fully recouped, id still say that's not good enough.
If the only thing that happens is that the business disappears , with depositors fully recouped, id still say that's not good enough.
Handling ACH fraud is tricky. There is no decent dispute resolution mechanism in ACH compared to what Visa/MC offer for cards. So FinTechs and their backing bank are on the hook for customer reversals for up to 60 days. In the new FinTech revolution, this is one of the most misunderstood things. Many FinTech entrepreneurs think they can put up a nice UI and offer great interest rates only to get hit by huge fraud losses as soon as they launch. I run a fraud prevention startup for FinTechs - sardine.ai - and I hear of a new FinTech hit by fraud every week.
There’s no scenario that Beam failing would risk the depositors losing money. Money is held in a FDIC insured bank account under the customers name. Beam is just a pretty interface on top of the bank account.
The holds are the same types of holds that you see at regular banks. Issue is that Beam explicitly made a claim that it only takes a few days to transfer out and falsely advertised an interest rate. Interest false statement is interesting because the underlying bank violated their bank charter if Beam put out false interest rate marketing materials and could be subject to fines.
The holds are the same types of holds that you see at regular banks. Issue is that Beam explicitly made a claim that it only takes a few days to transfer out and falsely advertised an interest rate. Interest false statement is interesting because the underlying bank violated their bank charter if Beam put out false interest rate marketing materials and could be subject to fines.
> As per the article, the FTC alleged that some customers waited weeks to get their money back.
Now I know that this is bad, but I have seen worse behavior from banks like Wells Fargo. Why is it that those banks just get monetary fines, but this new startup is forced to shut down ?
Now I know that this is bad, but I have seen worse behavior from banks like Wells Fargo. Why is it that those banks just get monetary fines, but this new startup is forced to shut down ?
Wells fargo committed fraud in a few different flavors, but was probably never at risk of losing customers' money (unintentionally). Reading between the lines of Beam's long withdrawal times, it sounds like they had fundamental liquidity problems and at risk of insolvency already, and the backing bank would have to cover things (or invoke FDIC insurance? I'm not sure if this situation would apply)
That's just a pragmatic explanation though: I'm not claiming there was any equivalency of fairness between the two. It seems to me that Beam should be dismantled, and also that Wells Fargo should have suffered some equivalent fate. But again, consider the pragmatics involved: Forcing Wells Fargo to be sold off piecemeal would just mean there were even fewer massive banks controlling that market.
That's just a pragmatic explanation though: I'm not claiming there was any equivalency of fairness between the two. It seems to me that Beam should be dismantled, and also that Wells Fargo should have suffered some equivalent fate. But again, consider the pragmatics involved: Forcing Wells Fargo to be sold off piecemeal would just mean there were even fewer massive banks controlling that market.
Wells Fargo at no point was unable to cover its customers' withdrawals.
I’m honestly kind of shocked to see the FTC is shutting down anyone. They are a notoriously weak regulator thanks to decades of special interest lobbyists convincing congress consumer protection is bad for business. It makes me wonder what on earth the FTC (and perhaps other federal agencies?) had on Beam that they would agree to this settlement.
RTFA! :) They were guaranteeing insanely high interest rates, it was designed to fail
Maybe a pyramid scheme that was caught early?
Ponzi which predictably collapsed when the rate of new funding couldn’t keep pace with the compounding interest payouts.
Brace yourselves for more stories like these.
Recently I got served a youtube add for a dapps (distributed apps) development workshop where the instructor went something like "learn how to create financial apps without any prior experience in just X days/weeks/months!!!".
If crypto and decentralized finance is going to make good on the promise of democratizing finance then we have a bumpy road ahead of us. I'm still optimistic that in the end this will lead to a greater good, but there will be casualties while we work out the kinks.
I just had to file a complaint with the FTC over voyager app. I had deposited cyrpto currency to the correct wallet and they never showed up in the app. Its been 8 days and support wont even get back to me.
You might also consider contacting your state Attorney General.
Yeah I think I might. I only mention this because I think its related to the article. possibly same type of story different company.
Even better, don't get involved with cryptocurrencies.
I'm downvoting you because it's OT here and the crusade for/against crypto is getting too tiring - there are enough threads focused on merits of crypto where you could share that sentiment.
> the crusade for/against crypto is getting too tiring - there are enough threads focused on merits of crypto where you could share that sentiment
Counterpoint: security of holdings/nonreversability has been a clear tradeoff with cryptocurrency from the start. It’s frustrating to see public resources diverted to reinventing the wheel without a balancing revenue line.
Put another way, there is arguing that cryptocurrency is stupid in general. And there is arguing that those who lose their money through it shouldn’t be entitled to the same level of public support as those who lose money in other investments.
Counterpoint: security of holdings/nonreversability has been a clear tradeoff with cryptocurrency from the start. It’s frustrating to see public resources diverted to reinventing the wheel without a balancing revenue line.
Put another way, there is arguing that cryptocurrency is stupid in general. And there is arguing that those who lose their money through it shouldn’t be entitled to the same level of public support as those who lose money in other investments.
On the other hand, some see it as the perfect fusion - crypto AND the established legal system. But as I said, this discussion is off topic here, and I would like if we could keep it where it belongs. It has leaked enough, everyone is already aware of the ongoing dispute.
The last paragraph goes:
> In other recent banktech and wealthtech news, SoFi will offer its users the ability to invest in IPOs for companies going public, the digital lender announced on Friday. Typically, these opportunities are reserved for institutional investors. SoFi expects to offer a couple of IPO securities in the months ahead that will be available for its "SoFi Invest members through the SoFi app."
Well played SoFi.
> In other recent banktech and wealthtech news, SoFi will offer its users the ability to invest in IPOs for companies going public, the digital lender announced on Friday. Typically, these opportunities are reserved for institutional investors. SoFi expects to offer a couple of IPO securities in the months ahead that will be available for its "SoFi Invest members through the SoFi app."
Well played SoFi.
which is why we should actually link to the FTC release, and not blog-spam. [0]
[0] https://www.ftc.gov/news-events/press-releases/2021/03/mobil...
[0] https://www.ftc.gov/news-events/press-releases/2021/03/mobil...
Website hijacks the back swipe on chrome for android
Let’s first remove the misconception that it is anywhere near a Ponzi scheme. If it was, the news and Settlement will be mentioning that P work again. No mentions, no conclusive evidence of wrongdoing in the Settlement.
Contrary to FTC statement and CNBC reports, the timeline is the following, and Beam had the paper trail to show that this is factual —
1) October 1, 2020 - Beam's ACH service provider's API service stopped working. Funds locked in banking service provider.
2) Early October - Beam began proactively working with its ACH service provider, banking service provider to unlock the funds help at bank. Service providers initially refused to unlock funds unless Beam indemnifies them. Months long disputes with ACH vendor who locked up the fund.
3) November 16 - All of $2.6 million except around 80 customers who Beam was not able to reach had been refunded in full by Beam and Beam's service providers. The remaining amount of these around 80 customers accounted for <$90K in aggregate dollar amount.
4) November 18 or about - FTC, knowing that Beam had returned vast majority of the $2.6 million, still filed a lawsuit against Beam. CNBC article came out around the same time misstating that Beam had not yet returned the funds and it was FTC who “made” the fund return happen or to be happened.
5) By January - Beam had since then contacted all remaining 80 customers and the return of funds had been complete for all where customers can be reached.
FTC admitted explicitly to Beam on an internal call that they have not reviewed all the evidence —and that they WILL NOT review the full evidence proving Beam's innocence—which is against the principle of due diligence and fair justice.
Beam offered full review of the facts and full disclosure of all facts and evidence, but FTC refused to examine the facts to rectify false allegations by FTC. This is clear evidence that this case was NEVER about truth-seeking, but a PR chess piece for FTC.
About Settlement 1 - There is zero conclusive evidence of finding of wrongdoing. Nil. Only false allegations. 2 - There is $0 penalty. When was the last time you saw FTC taking on an scrappy SME for months, only to come to a $0 settlement? Shows there’s more to the story.
To be clear, Beam as a company is not shutting down. Stop the misleading headlines just like when people call Beam a Ponzi scheme. False “entertaining” frivolous news comes and goes, but the damage on good people and startups is a permanent injustice.
If the “System” can take down any small, defenseless SME with explicit refusal to review the FACTs, simply sensationalizing a false make-believe story to paint a picture of the “System” being glorious, fired up by fake news, is this the world we want to leave to our children?
Contrary to FTC statement and CNBC reports, the timeline is the following, and Beam had the paper trail to show that this is factual —
1) October 1, 2020 - Beam's ACH service provider's API service stopped working. Funds locked in banking service provider.
2) Early October - Beam began proactively working with its ACH service provider, banking service provider to unlock the funds help at bank. Service providers initially refused to unlock funds unless Beam indemnifies them. Months long disputes with ACH vendor who locked up the fund.
3) November 16 - All of $2.6 million except around 80 customers who Beam was not able to reach had been refunded in full by Beam and Beam's service providers. The remaining amount of these around 80 customers accounted for <$90K in aggregate dollar amount.
4) November 18 or about - FTC, knowing that Beam had returned vast majority of the $2.6 million, still filed a lawsuit against Beam. CNBC article came out around the same time misstating that Beam had not yet returned the funds and it was FTC who “made” the fund return happen or to be happened.
5) By January - Beam had since then contacted all remaining 80 customers and the return of funds had been complete for all where customers can be reached.
FTC admitted explicitly to Beam on an internal call that they have not reviewed all the evidence —and that they WILL NOT review the full evidence proving Beam's innocence—which is against the principle of due diligence and fair justice.
Beam offered full review of the facts and full disclosure of all facts and evidence, but FTC refused to examine the facts to rectify false allegations by FTC. This is clear evidence that this case was NEVER about truth-seeking, but a PR chess piece for FTC.
About Settlement 1 - There is zero conclusive evidence of finding of wrongdoing. Nil. Only false allegations. 2 - There is $0 penalty. When was the last time you saw FTC taking on an scrappy SME for months, only to come to a $0 settlement? Shows there’s more to the story.
To be clear, Beam as a company is not shutting down. Stop the misleading headlines just like when people call Beam a Ponzi scheme. False “entertaining” frivolous news comes and goes, but the damage on good people and startups is a permanent injustice.
If the “System” can take down any small, defenseless SME with explicit refusal to review the FACTs, simply sensationalizing a false make-believe story to paint a picture of the “System” being glorious, fired up by fake news, is this the world we want to leave to our children?
Good, now do something about the car maker who advertise autopilots, but to regulators says it's not really an autopilot.
"An autopilot is a system used to control the trajectory of an aircraft, marine craft or spacecraft without requiring constant manual control by a human operator. Autopilots do not replace human operators. Instead, the autopilot assists the operator's control of the vehicle, allowing the operator to focus on broader aspects of operations (for example, monitoring the trajectory, weather and on-board systems)."
Looks like they lost their ACH payments processor back in Dec 2020 leading them to prevent being able to handle ACH returns:
https://abc7news.com/beam-financial-app-ftc-lawsuit-fintech/...
https://www.techinasia.com/tag/24quan
https://www.americanbanker.com/news/beam-financial-vanishing...
Du then goes to Harvard Business School to burnish his reputation and then starts Beam.