
FaceCash Files Formal Complaints Against Stanford, USC, Pomona, and AAU - thinkcomp
http://www.aarongreenspan.com/writing/brown.html
======
temphn
Sure, Aaron Greenspan/thinkcomp complains too much about Facebook. But here he
absolutely has the State of California dead to rights. This is about as
clearcut a concrete example as you can get of how "regulatory uncertainty"
kills businesses dead. The key bureaucrat involved won't even state the net
worth you need to be a payment processor in CA! His name is:

    
    
      Jacob Appelsmith
      jacob.appelsmith@abc.ca.gov
    

A polite email asking him why it is now official CA state policy to persecute
payment startups might be useful.

EDIT: Mr. Greenspan, your exhibit at the end made me laugh out loud:

<http://www.aarongreenspan.com/writing/20111019.aaupacket.pdf>

Awesome and very funny. You might want to make these pdfs bigger, or just make
the webpage one long html file.

~~~
thinkcomp
It's not just that.

The same bureaucrats perpetuate the falsehood that high net worth requirements
somehow protect consumers. They do not. The extremely expensive surety bonds
put in place as insurance (since FDIC protection does not cover money
transmitters) only go a very short distance, and beyond that, they only cover
_licensed_ money transmitters. This means that the whole system is pointless,
because consumers are _never_ protected from the highest-risk money
transmitters: those who never bothered to apply for a license (maybe because
the requirements are so high). So despite the facade of regulation and
consumer protection, the system actually increases risk while protecting
incumbent interests.

~~~
devs1010
I don't agree with the government and hate their authoritanarianism but isn't
this essentialy what the OWS protests are all about? Its become pretty well
known that big finance / big banking own the government and anything that
threatens them is going to be responded to very harshly. I just think you may
benefit form taking your message to a larger audience as it is more indicative
of the overall corruption of the government than anything else and may not be
specifically related to most other tech startups.

~~~
thinkcomp
Yes, this is definitely related to the general protests that people have
related to the banking industry, and especially debit card fees. See:

<http://www.aarongreenspan.com/writing/durbin.html>

So I agree--more people need to know.

------
DevX101
What Aaron's trying to get accomplished here is precisely the type of work
that lobbyists get paid for. And although he's right, the government can
stonewall him indefinitely unless they have some kind of executive order to
force a resolution. I'm sure that Paypal, VISA and friends have made campaign
contributions or have had long conversations over games of golf to delay any
competitive threat to their business model so he's got a steep hill to climb.

I'm assuming as a startup he can't afford to have a lobbying firm on retainer,
so the best outcome would be that the Times or the Journal picks up this story
and shames them into action.

But man, I admire the chutzpah and the brass balls it takes to pick this
fight. Good luck!

~~~
maximusprime
Or, he could just move on and do something that doesn't require fighting the
government.

Sorry, but I can't read anything by Aaron without thinking how much of an
unlikable character he is. Get the chip off your shoulder! Stop complaining.
Stop boasting you "Invented" facebook. No one invents websites.

Reminds me of Mugatu "Do you not know who I am? I _invented_ the piano key
necktie!"

~~~
inaequitas
I find this to be somewhat of a depressing attitude. While it's not mandatory
that everyone fight every fight worth fighting, I wouldn't actively discourage
those willing to take a stand for the things they find worthwhile. Especially
since this move is trying to resist corporate-backed bureaucracy that's
arguably not helping anyone.

~~~
maximusprime
Depends if you want to "change the world", or just live a very happy active
life doing things you love.

"finance" "gambling" "porn" - These will always be "high risk" sectors where
government wants to do a lot of regulation and interfering.

~~~
rhizome
_Depends if you want to "change the world", or just live a very happy active
life doing things you love._

How much of this decision should I put in your hands?

------
staunch
Wow, truly breathtaking that you managed to squeeze a claim of creating
Facebook in there.

Have you considered that maybe if you were more willing to break stupid
bureaucratic rules you wouldn't run into these roadblocks?

It's not even clear the law applies to you and very unlikely anyone is going
to care unless you're successful (at which point it would be worth fighting
over).

PayPal was arguably breaking all kinds of esoteric banking laws when they
started. They were getting constant threats from state attorneys. In the end
they worked it all out.

~~~
thinkcomp
I don't assume that politicians know anything about me. Context can be helpful
in getting a message across.

PayPal started before the USA PATRIOT Act made it a federal crime to violate
state money transmission statutes. Max and Peter weren't looking at jailtime
in 1999. Entrepreneurs (and investors, and directors) today in this space who
break the rules are. Besides which the California law only went into effect
this July, twelve years after PayPal started.

Also, it's extremely clear that the law does apply to us; that's why we were
able to get an exemption order.

~~~
staunch
1\. Take the risk anyway.

2\. Change your idea.

3\. Spend the next year trading letters with bureaucrats.

What Would Zuck Do?

~~~
thinkcomp
Though I generally disagree, you really might want to think twice before using
that last line with me.

~~~
staunch
You can argue and still have a sense of humor :-)

~~~
thinkcomp
That's a pretty mean-spirited brand of humor then.

~~~
staunch
Sorry then. I mean it sincerely though. Why are you letting yourself get
bogged down in bureaucracy when you believe it was your undoing at Harvard?

Every day you spend on this is a day lost to making your startup successful.

~~~
thinkcomp
No one "lets" themselves get bogged down in it. Bureaucracy happens, as it did
in this case, when you aren't planning on it. (This law only recently went
into effect and didn't exist in 2009 when I started on FaceCash.) I keep going
because when it does happen, it's a sign that you're onto something important.
If anything, I think it's a shame that more startups don't tackle problems
like these.

------
jellicle
Of course we only have one side of the story here, and considering that that
side is self-evidently crazy, it's hard to take it very seriously.

I'm all in favor of regulations to prevent outright theft and fraud of a great
deal of the public's money with no accountability. Gift card companies are
repeatedly defrauding the public. Money transfer companies are repeatedly
defrauding the public. Bitcoin gateways are repeatedly defrauding the public.
I don't give a shit if you think the Man is keeping you down; you're trying to
put your business risk (and perhaps your actual intent to defraud, but
ABSOLUTELY your business risk) onto the public, and for some reason you think
you're entitled to do so.

Your business risk ought to be borne by you, which means requiring you to get
a big fat surety bond before you start handling large amounts of public money,
so that when you fuck up your company (or intentionally bail with all their
cash), the public isn't left holding the bag for you. Too damn bad.

~~~
rhizome
So, how much should that surety bond be?

------
vsl2
Aaron, I applaud your principles and enjoy reading your somewhat
condescending(because the bureaucratic idiots deserve it) yet still controlled
responses. Incompetence drives me mad and I can't imagine how pissed off I'd
be if I were in your shoes right now.

Does FaceCash have a legal team or are you doing this all on your own? I
imagine you've researched every possible legal angle regarding the situation
and you certainly don't need a law degree for that, but professionals could
provide some additional insights, just from work experience (e.g. what happens
in situations with other similar regulations and stupidity). Having practiced
tax law in the past (three years in NY), I know that how certain things work
in that field that you can't pick up from reading statutes or cases.

Given that you've gotten the exemption for doing business in other states, are
you back to building out your business with the exception of in California? At
some point, you've got to move on and do what's best for FaceCash even if that
means not completely righting the wrong - unfortunately, incompetence and
bureaucracy may be able to stand much longer than you can afford to fight.

~~~
thinkcomp
I'm the legal team for now. I've talked to a number of lawyers, and most seem
to think that they can't do much more than what I have been doing. It makes no
sense to waste money on them in any case.

Since I only got the go-ahead to continue operating outside of CA as of
October 13th, I'm starting to think about building things up again.

------
natrius
This discussion will doubtlessly drift towards your claim of creating Facebook
when it's unrelated to the rest of your solid argument. I don't understand the
logic behind your decision to throw that in the mix.

~~~
rprasad
I assume that it was his attempt to give himself the appearance of authority,
because the lengthy rant sure as hell did not.

The guy displays shockingly poor decision-making. Why would I (as a
prospective customer) want to do business with a company that didn't do _basic
research_ into the regulatory environment of its target market?

The point of the capitalization requirement is not to inhibit startups --
rather, the point is to make sure that someone who wants to launch a business
_handling other people's money_ puts at least some thought into it. In this
case, the Aaron guy appears not to have put any thought into it at all, and is
now blaming _everyone else_ for his mistakes.

~~~
malandrew
AFAIK, the regulatory environment of his target market changed due to the
lobbying of the Money Servies Round Table. The changes made to the law
resulted in the company, which was previously legal, to fun afoul of the law.

------
luser001
I know some are going to hate on you here, but you're a real hero man.
Darwinspeed to you. You're helping all of us little guys here.

------
JoshTriplett
This seems like quite a lot of trouble to go to, rather than simply move to a
state with less regulatory insanity. Startups have enough windmills to tilt at
without taking on more.

~~~
thinkcomp
Moving doesn't make you exempt. Retailers want a national solution anyway.

~~~
JoshTriplett
States aren't allowed to regulate inter-state commerce, as much as they'd like
to think otherwise.

Worst case, you might have to say "Sorry, we can't accept customers from
California, because those customers might be breaking the law in their own
state", and you only need to do that if the law penalizes customers and not
just the businesses serving those customers.

Now, if you do business within a state with no such laws and another state
claims regulatory authority over your business, or if some federal regulation
attempts to enforce this ridiculosity, then by all means I'd suggest fighting
that tooth and nail. A business should only have to deal with one vertical
tower of authorities above them, not all the ones sideways of them too.

~~~
thinkcomp
That's the situation we were in. Initially the California DFI said we couldn't
do business in Massachusetts where there are no laws, or in Alabama and Idaho,
where we have licenses, without taking the risk that I might land up in jail
for violating California law. Hence the fighting.

~~~
JoshTriplett
That seems consistent with California having their own crazy laws about this,
though; you _are_ subject to California jurisdiction as a California company.
It's insane, and someone ought to fight it, but why do you want to spend your
time fighting it rather than working on your business?

I'm suggesting that you could go somewhere that doesn't have their _own_ crazy
laws about this, and only bother fighting it if some other state tries to
claim jurisdiction over you.

~~~
thinkcomp
If you could build a one-state only payment system and convince Best Buy to
adopt it, that would be a valid argument I suppose. The reality is that Best
Buy has one nationwide point of sale system. Same with Staples. Same with
K-Mart. Same with every large retailer. You add a tender type button in one
state and it shows up in 50 states. That's a problem when pressing the button
in 46 states is a federal crime.

Moving to Massachusetts now would be great until either A) The Money Services
Round Table lobbied the Massachusetts legislature for a repeat of the
"successful" regulations implemented in California, or B) we wanted to expand
to large businesses to compete with Google Wallet and Visa. So it would be of
limited benefit for a short while to move.

~~~
kragen
> You add a tender type button in one state and it shows up in 50 states.
> That's a problem when pressing the button in 46 states is a federal crime.

The "total with sales tax" button already does something different in every
state.

------
abalone
This poor fellow has a history of blaming the world for his own business
failures. Just lookback at his claims re: facebook vs his own competing site
at harvard. The money transmitter regulations are a reaction to a serious
problem with shady transmitters in california that prey mostly on poor people
sending money back home. In this funding climate there should be little
problem in raising the capital necessary to secure a bond if your payments
startup is attractive to investors. The problem is that nobody wants to fund
facecash.

~~~
thinkcomp
I actually thought that there had to be some horrible shady money transmission
story that inspired the law, too, so I looked for it. I couldn't find it. If
you find it, please let me know because I want to know what it is.

------
pbreit
I commend Aaron for fighting the battle but I'm afraid his scorched earth
tactics are working against him. He needs friends, not enemies. Would someone
like Gavin Newsom or Steve Westly would take a look at this?

The better approach probably is to use a third party to prove the concept. No
one has infiltrated the point-of-sale by offering to shave a few basis points
off card processing.

------
linusrus
"Or, he could just move on and do something that doesn't require fighting the
government."

This is exactly what not to do. But following maximusprime perspective, why
not just leave the US and take your business to another more business friendly
country (like it or leave it).

Aaron... don't stop complaining. Keep up the fight. It's not the government
you are fighting but other humans that use the 'government' as a facade. The
old folks don't understand the new kids... and they fear us for that. They
fear change.

Keep fighting for us. Fight for the USER.

------
plusbryan
What a frustrating situation. Best of luck fighting for the cause of less
regulation.

My advice - keep fighting the good fight by building and trialling your
product in other states and countries. As unfair and unjust the law may be,
there's no reason for you to sit "idle" when you could be building, growing
and learning. If you're successful, it'll be all the easier to convince the
state to license you.

------
jpdoctor
Srsly: I think you are on the cusp of something huge Aaron, and I wish you a
ton of luck, but for pete's sake: Move the company out of state already.

Contrary to conventional wisdom, you can fight city hall but is that really
where you want to spend your company's energy and time?

Turn your company into something so successful that CA offers you a tax break
to move back here.

~~~
thinkcomp
Moving would be a Pyrrhic victory. There would still be 46 similar laws
holding us and other startups back.

Winning is to convincing Congress to pre-empt state laws with a sensible
federal regulatory system.

~~~
dpe82
You do not want to open that door. At least as it currently stands a fair
number of states aren't yet completely owned by corporate interests and so you
can at least operate in some of them. Congress is. If congress got involved
you would get a uniform system for sure - your business would be uniformly
banned.

------
useflyer
I don't mean to come off as insulting, but the problem clearly seems to be
Aaron, and not California. He is overly combative, unwilling to accept olive
branches (and exemptions! resolving the issue!), and stubborn. Find the path
of least resistance, don't keep slamming into the same brick wall.

An entrepreneur should know how to problem-solve. MAKE IT WORK.

~~~
temphn
1\. Government by waiver is not the rule of law.

2\. The waiver was only issued because he was embarrassing them in front of
reporters.

3\. The waiver does not cover intra-state operations, which would mean he
would be unable to get early adopters from the most technology friendly place
in the country. He would also be unable to demo the product in front of
investors.

------
tzs
It's not clear those schools need licensing. The California law has an
exception for stored value systems used within an organization and its
affiliates. It depends on whether local merchants with whom the school has
made an arrangement to have the card accepted would count as affiliates.

------
kragen
I recall another online payment processor that got into conflicts with the
government over opaque laws:
<http://www.wired.com/threatlevel/2007/04/egold_owner_cal/>

~~~
Luyt
And that ended thus: _"In November Gold & Silver Reserve CEO Douglas Jackson
was sentenced to 300 hours of community service, a $200 fine, and three years
of supervision, including six months of electronically monitored home
detention. He had faced a maximum sentence of 20 years in prison and a
$500,000 fine. Judge Rosemary Collyer said the men deserved lenient sentences
because they did not intend to engage in illegal activity. Jackson's lawyer
claimed Jackson was spared the heavier fine because he is deeply in debt - the
Judge said "Dr. Jackson has suffered, will continue to suffer, and may never
be successful with E-Gold". Reid Jackson, Douglas Jackson's brother, and
E-Gold director Barry Downey were each sentenced to three years of probation,
300 hours of community service, and ordered to pay a $2,500 fine and a $100
assessment fee each."_

Source: <http://en.wikipedia.org/wiki/E-gold>

------
rfugger
Question: Did the state come after Mr. Greenspan, or did he pick a fight with
them because of this silly rule? If it's the latter, then I certainly
sympathize, but it doesn't seem like the best approach to having your business
succeed. Better to avoid attracting undue attention until you're big and well-
connected enough that any bureaucrat who threatens you with an arbitrary rule
is risking their own job. Until you're that big, you're likely under their
radar anyway.

~~~
rhizome
And hey, if you _don't_ wind up being under their radar, it's only prison,
right?

------
scottshapiro
tl;dr?

Do startups like WePay also face similar challenges?

~~~
thinkcomp
Yes and no.

WePay is an agent of The Bancorp Bank (because of laws like these), so they
are exempt from most money transmission laws.

On the other hand, FC § 1827 makes it a crime for any entity to aid an
organization that would otherwise require a license. So who knows what's going
on there.

[http://www.leginfo.ca.gov/cgi-
bin/displaycode?section=fin...](http://www.leginfo.ca.gov/cgi-
bin/displaycode?section=fin&group=01001-02000&file=1825-1828)

~~~
lisper
So why don't you work through Bancorp as well?

~~~
cookiecaper
Do you really believe the correct solution for these problems is to
essentially make every financial startup a DBA of HUGE_BANK_X? That's one of
the main reasons we don't see any innovation in the banking space where things
are desperately underdeveloped.

A benevolent banking startup could do a lot of things to really help
consumers, and they could do them EASILY with what we have in place now. They
could implement reasonable and sustainable fee structures and they could set
account transactions up such that fees are avoided instead of maximized. Big
banking wants to keep things right where they are, of course; if they could
possibly get a fee out of you based on your account's activity, they are going
to do everything possible to make sure that things execute in such a way that
that activity occurs: arbitrary holds and delays on checks, manipulation of
transaction post orders, intentionally confusing account summaries ("account
balance" and "available balance", and sometimes worse), nickel-and-dimed on
fees for normal usage ("0.50 analysis fee", "5.00 new card fee", "5.00
maintenance fee", and soon, "5.00 debit card fee"), and many, many other
things all collude to create a horrible experience for the end user.

"Front banks" like WePay, Braintree, or others, can't really do much about
these processes and have to forward the BS received from the big banks on to
their customers. You can create a pretty frontend, like BankSimple, but the
reality is that you can't really make much of a change when you're subject to
all of the same problems that your end users are already struggling to deal
with every day.

~~~
thinkcomp
This is the best comment on the page.

~~~
lisper
OK, then let me ask a different question: why don't you start a bank?

------
latchkey
I'm curious what the hebrew at the very bottom of the page says.

~~~
greyboy
From the 'About' page:

"What's with the Hebrew?

I've always liked languages (especially Hebrew), and the phrase on this web
site translates to a kind of personal ethos: societal longevity through truth
and innovation."

~~~
mkopinsky
Aha. I've found my place to add this comment.

The grammar in the Hebrew does not seem to be correct. In Hebrew, nouns often
precede adjectives. "Societal longevity" should properly be אריכות ימים
חברתית.

------
cpeterso
Despite the name, FaceCash identifies purchasers with a bar code, not their
face. FaceCash's face identification is the equivalent of credit cards with
your photo on them. The photo is just casual security and doesn't help for
online purchases.

My university's cafeteria linked student id cards with a debit system. To
ensure cafeteria cashiers checked the cards' photos, "secret shoppers" would
occasionally try to buy lunch with a card featuring a portrait of a friendly
golden retriever. :)

~~~
thinkcomp
This is incorrect.

The photo that matters for FaceCash is the one that is _downloaded from the
server onto the POS_. The one on the phone is just for show, and cashiers are
instructed to basically ignore it. So if you're a thief, you can't just put a
JPEG of your thief-face next to someone else's barcode. The correct owner's
face will still show up on the register.

------
powertower
Reading to the end I see that they gave him an exemption from the
regulation/law? Right? So what's the issue?

------
codex
This letter reads like some looney Usenet rant. Between my cringing and
facepalming, I began to see the beginnings of a reasonable argument here,
which makes this letter all the sadder.

~~~
DanBC
The quantities of CC'd addresses were kind of kook-like. There are better ways
to challenge unjust laws than writing loser-length mail to people who are
working lousy jobs with no power to change those laws.

------
newchimedes
I think it's awesome what you've done so far and am thoroughly impressed with
your patience and tactics so far to get as far as you have. It's about time
someone called out the government on their shenanigans because too many people
site back and chalk it up to "that's just the way it is".

------
foobarbazetc
Meh.

------
devs1010
The government is all over money transmissions now, they are putting
regulations in place in the name of fighting terrorism, war on drugs, etc I
don't think this is indicative of a larger problem of all startups being
affected by overwhelming regulation, the FaceCash guy chose to go into a very
heavily regulated field and I have a feeling he would face issues anywhere in
the US, if not from the state government, then from the feds

------
danbmil99
TIL I would not hire Aaron Greenspan as a general contractor to build an
extension to my house (particularly if any zoning variances were required).

~~~
thinkcomp
That's good, because I'd be a terrible general contractor!

