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Aaron Greenspan sues Facebook, Sequoia, Andreesen, YC, others (scribd.com)
191 points by pbreit on May 8, 2013 | hide | past | web | favorite | 171 comments

The key to understanding this lawsuit lies in a technical point having nothing to do with the merits of the claims and which appears at pages 35 through 37 of the complaint.

In that section, the plaintiff, Think Computer Corporation, "respectfully requests that Civil Local Rule 3-9(b) be retired, or that Plaintiff be exempted from the Rule given its particular ownership [i.e., owned 100% by one individual] and tax structure [i.e., status as a Sub S corporation]."

The Civil Local Rules are the rules used by the federal court in the Northern District of California to regulate its proceedings procedurally, specifying who needs to do what in connection with the filing and prosecution of lawsuits in this court. These rules have the force of law and litigants who ignore them do so at their peril.

Rule 3-9(b), which the plaintiff asks be "retired," states that a "corporation . . . or other such entity may appear only through a member of the bar of this Court."

In other words, a corporation cannot represent itself in a lawsuit of this type and Think Computer Corporation has filed this action without an attorney representing it while purporting to represent itself in obvious violation of this rule.

A few comments about what I think this signifies:

1. The plaintiff's principal is a spirited individual who has very definite ideas about the money transmission laws and who feels highly aggrieved by the impact that California's 2010 law has had on his company.

2. Those ideas about these laws are, in my view, quirky ones that take significant liberties in interpreting how laws work. In other words, without detailing particulars, I believe that Mr. Greenspan's views of these laws will likely not hold up when tested formally in a court of law.

3. Point 2 above, coupled with the complaint's wild swinging out at multiple parties on dubious theories of liability, is the most probable explanation of why there is no lawyer representing the plaintiff in this action.

4. To sue investors basically for having chosen to fund high-profile startups that the plaintiff deems "unlicensed money service businesses" is flaky and will never hold up. If the action is not bounced for violation of Rule 3-9(b), it will be out the gate as to these defendants on grounds that it does not state a cognizable claim for legal relief.

5. To sue the startups themselves for allegedly providing unlicensed money services is also quite dubious. The money transmitter laws are basically laws that give state governments the authority to require that bonds be provided, that minimum capitalization requirements be met, and that other precautions taken, to ensure that whoever handles escrowed monies takes prudent steps to protect those whose funds are entrusted to them. If these laws are violated, the state authorities have the power to take legal actions to enforce them. Nowhere is there any express private right of action that gives any private citizen the right to file suit complaining about alleged violations of these laws. Therefore, it is a stretch for any private party such as Think Computer to seek damages, injunctive relief, or any other form of legal remedy owing to alleged violations of the money transmitter laws.

6. There are conceivably some legal remedies that might work if the facts support them, one of them being for false advertising claims under the Lanham Act (which is one of the claims asserted here). One competitor can indeed sue another competitor for private damages and other relief if the other competitor is gaining an unfair competitive advantage by falsely advertising that its products or services do something that is material to the customer's decision to use that product or service. Here, the result would turn on the ability to show that the parties sued are in fact engaged in false or deceptive advertising. Even here, however, the case is likely sketchy, in my view, from a quick review of the allegations made.

All in all, this is a most unusual case filed by an unrepresented party that cannot legally represent itself in the forum chosen and resting on legal theories that are a real stretch in most cases. I believe Mr. Greenspan is both sincere and passionate about what he believes but what he asserts is really a case to be made to the legislative policy-makers, not to the courts. There may indeed be incredible unfairness in the way in which these laws are framed and applied. But that does not mean a private party should be able to indiscriminately sue anyone around who happens to be offering services that involve some form of money handling, or their investors, for the results of the existing system. That in itself in not only a stretch but an abuse. Wrong parties, wrong framing. The action should therefore be dismissed forthwith by the plaintiff as having been ill-considered. If it is not, it will be dismissed by the court in fairly short order.

The complaint read more like a screed about everything that's wrong with America than a sincere attempt at obtaining relief.

That said, I'm a little bit sympathetic to the Rule 3-9(b) thing in this context. Even if he was serious, who would take the plaintiff's side of this case on contingency?

As an aside, I think Aaron would make a great plaintiff's lawyer. Combative, self-righteous, with a ton of "burn things down" energy. This is not a negative aspersion on his character--I think it's quite admirable in a way...

>Even if he was serious, who would take the plaintiff's side of this case on contingency?

I know I would take this case on contingency if the Plaintiff would agree to Amend the Complaint to Qui Tam. I could not just do it though, I would have to be admitted Pro Hac Vice. I imagine any other Plaintiff's attorney with experience in Qui Tam cases is thinking the same thing.

Excellent analysis as always, thanks. I was going to facetiously suggest you start billing HN for your services, but I then thought it might be an idea for you to throw a bitcoin address in your profile in case someone feels like sending you a tip.

It's funny, I was thinking literally the exact same thing. I just put some money onto Watsi, and I think I'll keep doing that every time we get 'grellas top-post.

Or startups could just hire him as their lawyer. Parse did and they are happy customers.

I did as well, and I found Grellas and his team to be fantastic to work with. I probably owe it to him to submit a more thoughtful, in-depth write-up.

Those of us now shackled to a different team of lawyers will have to make due with tokens of our appreciation. :)

The point of non-mandatory tipping though is that it feels good for both the sender and the receiver. It gives the sender the warm fuzzies for giving even a trivial amount, and the receiver gets a concrete demonstration that their efforts are appreciated. Hiring someone to do a job certainly pays better, but its transactional nature negates the mutual emotional benefit of a token of appreciation freely given.

I don't have the reference (or a link) but I remember pretty clearly that (might have been Cialdini or similar) a principal where attorneys would do for free what they wouldn't do for, say, $50 per hour.

As an example I serve on the board of a condo and I'm paid $0. Most likely if I was told I would be given $25 for every meeting I would think "my time is worth more than that" and it would actually be a negative (figures arbitrary.)

As soon as you bring compensation into the equation, people measure it against what they expect they should be compensated.

I saw a thread on reddit earlier discussing Dennis Rodman's entreaty for Kim Jong Un to "do him a solid" and release the American who was arrested for photographing homeless children in North Korea. One of the commenters argued that this actually could work, due to the Korean principle of "Jeong", or helping out friends simply for the sake of helping. An appeal to Kim's rational best interests would be measured against his own appraisal thereof, but a personal request from a friendly acquaintance doesn't carry with it that baggage of zero-sum gamesmanship, and so is more likely to be heeded. It was an interesting argument, and I certainly don't think the concept is limited to Koreans.

""do him a solid""

"or helping out friends simply for the sake of helping"

To expand on this and bring in the theory of reciprocity to the discussion. By doing the solid for Rodman, Kim Jong Un gets access also to something money or power can't buy that he may want going forward (other american basketball players).

But here's an interesting thing that I have learned over time about doing "solids" for people. You have to cash in the solid rather quickly in general. That small thing [1] that you helped someone out with 10 years ago isn't as likely to get you a return favor as something you did two weeks ago.

I'm trying right now to get something that <large co you've heard of and most certainly use> controls that money can't buy because they don't need money. So I'm working another angle whereby I try to find something that someone else needs that has some influence over them to get them to give me what I want in exchange for the favor that the party that has the influence wants. I suspect that when Bill Clinton tried to get Led Zepelin to play the concert he might have succeeded if there was something that the group needed that he could help out with. (Say theoretically an issue that access to key legislators could help with.)


[1] Meaning you didn't save someone's life I'm not sure how this would apply to Rodman and hostages it's all a matter of situation and degree.

> The point of non-mandatory tipping though is that it feels good for both the sender and the receiver. It gives the sender the warm fuzzies for giving even a trivial amount, and the receiver gets a concrete demonstration that their efforts are appreciated.

Note, though, that for tipping systems where the tip is not cash or something reasonably equivalent to cash, the receiver might find the tip annoying.

For instance, I would overall be unhappy if someone on Reddit gave me Reddit Gold. Sure, I'd be flattered that they liked my comment enough to want to reward me, but I've looked at Gold and did not really see anything in it that I was interested in. I'd certainly get much less out of Gold than the giver thought I'd get, and I'd end up feeling that I had just wasted their gift, and I'd feel bad. I actually wish Reddit had an option one could set to disable the ability of one's account to be given Gold.

PlanGrid did as well! Highly recommended.

Grellas has been our lawyer since 2008, we also highly recommend.

Same here!

I'd throw in .01 or .02 BTC (what are we to call these, Bitcents?) for that, I tried to read the complaint but simply don't know enough about law, especially CA law, to interpret this until I read his comment. HN's greatest attribute is the wealth of experts in different fields that are here to help elucidate these complicated things for we the confused.

I believe the preferred naming for 0.01 BTC is a Satoshi [1]. They were named such to honour the author of the original paper.

[1] Third sentence: http://en.wikipedia.org/wiki/Bitcoin

0.01 BTC is in fact a bitcent, and a Satoshi is much smaller (0.00000001 BTC)


Thank you for clarifying that. My mistake!

Round two!

A Satoshi is defined as 10 ^ -8 BTC. Actually, it's more accurate to say that a Bitcoin is defined as 10^8 Satoshis, as the Satoshi is the actual atomic unit of exchange.

Ahh thank you for clarifying that. My mistake.

The sidebar on the right mentions that a Satoshi is actually 0.00000001 BTC

Thank you. Round 3 =]

> Nowhere is there any express private right of action that gives any private citizen the right to file suit complaining about alleged violations of these laws.

I thought California 17200 allows for private citizens to sue on behalf of the general public and that no actual injury against the plaintiff is required. Is there something different about this case?

(below quote and link for other HN readers, I'm sure grellas is familiar.)

"Thus the statutory language allowing actions to be brought "by any person acting for the interests of itself, its members or the general public" effectively deputizes the world to find and bring environmental violators to the bar of justice."


The page you link to at envirolaw.org is out of date by almost a decade. It is discussing the law as it was before Proposition 64. Proposition 64, which passed in 2004, among other things changed the part of section 17204 which said "any person acting for the interests of itself, its members or the general public" to "a person who has suffered injury in fact and has lost money or property as a result of the unfair competition".

that's what I just posted, it sounds more like a qui tam like action except he should be convincing the state/govt to act

Is there any avenue for a company who might see themselves as a victim of their competition ignoring/abusing laws for a competitive advantage?

In this case, I don't think we even reach that question. When Greenspan's business did not obtain the appropriate license, it left the money transmission business, making it hard for me to understand how the remaining money transmission businesses (assuming that they actually are money transmitters) are his competition.

Maybe not presently, but my takeaway is that he accuses his would-be competition (and those funding them) of not following the law. I am not familiar with the law enough to know whether you can play the well-they-don't-have-to card.

But my question still stands, is there any recourse for a company who believes it is held to a double standard with regards to direct competitors?

I believe such a company could sue for unfair competition in California (but talk to an actual lawyer before acting on this belief--I am not a lawyer). The key is that it has to have actually been injured by the action of the competitors.

They might be able to seek a writ of mandamus compelling the appropriate authority to enforce the law.

Great synopsis. However, maybe this is more of a publicity stunt? He probably knows the case isn't going to work out in his favor, but perhaps he thinks the headlines will.

Aaron has been banging on about this for a long time — you can check his posting history here if you doubt his integrity. I think he really does sincerely believe these companies are doing something against the rules and hopes to get a ruling on the matter, either forcing them to follow the rules or creating an explicit exemption that Aaron can use for his own company.

Aaron's concern over the law has been dismissed out-of-hand over and over again on forums like HN. It must be maddening to build a successful business, then have a new law come up that regulates your business out of its market, and then see other people build businesses that should be subject to the same regulation but aren't because the law isn't being enforced fairly.

I'd expect that his position at this point is that he wants other people to care about this as much as he does, and if they won't, then he'll do his level best to force them to care about it.

I'm concerned about Aaron though. I like the guy, inasmuch as I can like anyone I've never met, and I worry that he's going to put himself into an unrecoverable position fighting this fight -- that it will ruin him financially, or worse still, harm his mental or physical health.

It's a terrible damn situation. It unfortunately is probably also unwinnable. That's totally unfair to Aaron, but sometimes life's like that. You have to know when to fight and when to fall back. In his place, if I could, I'd probably give everybody the finger and move to another country and restart operations there.

I think your explanation is excellent, however I disagree on one point:

"I believe Mr. Greenspan is both sincere and passionate about what he believes but what he asserts is really a case to be made to the legislative policy-makers, not to the courts."

The courts are the place where any man should/can make a difference in the country. For example, I can bring forth a lawsuit to fix something I think is wrong and if my claim is justified the justice system can over rule a governor, state house/senate, or if it makes it federal the President. Also I am pretty sure you can not sue a policy maker so this may be his only option.

He wouldn't be saying to sue the policymakers, he's be saying to have the policymakers change the policy.

But with that in mind my understanding of the courts is that they try to stay away from "judicial activism", and if they can't do that they try to limit it to tearing down bad laws instead of forming up new ones, as would have to be done here to find the defendants liable.

Except for the current supreme court.

...and the one before that, and the one before that, and so on back to Marbury vs. Madison.

Do you think this action has any chance of any positive outcome? I.e. is there realistically any way this could produce any positive benefit for Mr. Greenspan whatsoever?

>>> If these laws are violated, the state authorities have the power to take legal actions to enforce them. Nowhere is there any express private right of action that gives any private citizen the right to file suit complaining about alleged violations of these laws.

What? Why is this the case? Is this the same reason why citizens/competitors/the Sierra Club can not sue BP or Massey Energy for pollution or workplace safety violations? (If 50% of the damages came out of the EPA/OSHA chief regulator's salary I would get behind these suits.) Is there a distinction here between suing the violators than suing the government? Civil suits are for more than contract enforcement, right? What are the general legal terms I should be searching with to learn more?

You can start off with "cause of action" and "standing".

Strong corroboration from the source for your first point: http://www.aarongreenspan.com/writing/essay.html?id=60

"a corporation cannot represent itself in a lawsuit of this type"

Had that happen a few years ago in a different state. Cost us about $2000 in legal fees and the case was dismissed.

Qui tam? but that would be more like he was convincing the govt to take up a criminal case and not "I was personally damaged here and here's why I deserve relief"

My first though was this appears to be Pro Se. When that was confirmed I thought this guy needs an attorney because he is in way over his head. Finally, I thought a smart attorney could amend this Complaint to be a Qui Tam and actually give the Defendants cause for concern.

but then (and I only got through a bit of the reading) he could have just come out and said that...

Wow, thanks for the breakdown!

Do you represent any of the parties named in this? I think the answer is obvious, but thought I should ask anyway.

Perhaps I'm new here, but any chance the title might get 's/Greenspan/Aaron Greenspan/'? I got real confused as to why Alan Greenspan might be suing tech companies...

Unfortunately this change didn't help. I thought it said "Alan Greenspan" until I started reading the lawsuit, saw "Think Corp", and went back to re-read the HN headline.

I agree with pedalpete, the headline really should just say "Think Corp".

That would have helped me out a bit... I have no effin' clue who Aaron Greenspan is. Well, except that now I know he's the guy who is suing YC and a bunch of others.

He's been making the same rants in the comments here for a long time... and he hasn't found many sympathetic to his cause. I can't imagine suing YC (frivolously) will gain many friends.

His username is thinkcomp.


I agree, it isn't a person suing corporations, it's a corporation suing corporations. Can we have the title changed to "Think Corp"?

But, Aaron Greenspan is synonymous with Think Corporation, which he himself emphasizes in his request to press this claim, as a non-lawyer individual, without the usual (by rule) corporate counsel. Greenspan is the 100% owner, the author of this complaint, and the origin of its offbeat legal reasoning. To leave him and his personality out of the headline, and name the artificial corporate persona instead, would hide the real story.

I had the same reflex.


Thanks! (though the unexpected karma flood has ended :) )

Since title changes are being done anyway, this one should be changed to "Aaron Greenspan". There's only one famous Greenspan, and it's not this one.

My first thought was why Alan Greenspan would do this and what his incentive would be.

Wow, yeah, I was very confused until I read this comment. Guess that's what I get for paying too much attention to the comments before reading the article.

I too was shocked that Alan Greenspan was suing people. "The Fed has gone too far!!!"

Ya, I thought Alan Greenspan was retired.

Agreed. Had the same thought.

That's not strictly true, but actor Jason Alexander isn't usually known by his birth surname.

Sorry, guys. Fixed.

Even though I'm not a huge Greenspan fan (are there any?), I find this money transmitter stuff incredibly fascinating. I haven't reviewed the relevant legal code, but I strongly suspect that Greenspan is right in that:

(1) there are lots of little annoying laws related to money transmitters that makes it very difficult to get new payment stuff off the ground

(2) If you have deep pockets and good lawyers you can pretty much ignore these laws

I strongly suspect that the correct solution is to change the laws, but that this is also an even greater pain in the ass than protecting yourself with highly paid lawyers, esp. since relevant laws vary significantly from state to state. What exactly Greenspan is attempting to prove here is beyond me, but I'm still quite curious as to the results.

IANAL.. but at the very least, I'd say its poor strategy because the people he's suing (esp. VC funds) are well connected in Silicon Valley.

It looks like he's equating "pass through" transactions with being a (unlicensed) Money Transfer Agent.

Hypothetically, If I was going to start a PayPal alternative, I would figure out a way to stay somewhat compliant.

If that fails, seek a declarative judgement against XYZ agency to get legal clarification, without dragging all the VCs, Angels and unrelated companies into the case.

is the idea that the defendants pursued unfair and illegal business practices, promoting their services, while a law abiding service got swept behind? anyone know what the precedent is for this sort of thing?

"What exactly Greenspan is attempting to prove here is beyond me"

Not seeing that this has been date stamped by the court...yet. Typically you scribd the stamped copy so you know it has been filed.

Ahh, is this why all these tech giants use a non-money credit system for their stores and networks: Sony, Apple, Microsoft, Amazon(?), ... there must be many more.

Money transmission means moving money from one person to another. If you could use your Xbox to send money to a friend who also has an Xbox, then Microsoft would need a money transmitter license. Selling products, services, or "credits" for products or services, is not money transmission and doesn't require any kind of financial license.

So in the case of AirBnb, their service is helping people find places to stay?

Is all the money you pay to Airbnb for the service of helping you find a place to stay? Or is most of it being transmitted to the property owner after the end of your stay? Yes, it is; they are acting as a money transmitter. Money transmitters typically take some of the money; they're licensed businesses, not charities.

If Airbnb says that they are being paid for the service they provide, and part of that contract with their customer is to pay a property owner (like an Travel Agent), does that change things?

Would a Travel Agent be called a money transmitter?

As someone asking someone else who seems to know more about this than I, does this lawsuit have legs to stand on? [Edit: seemed to be answered here https://news.ycombinator.com/item?id=5677731]

Travel agents are also licensed in California (and other states). They also have to post a bond to cover any money they're holding on behalf of customers, just like a money transmitter.

I see. Looking into the background of all this, I think there is an argument to be made… whether it will be heard or not in this context is a different story.

Well maybe this presents the perfect opportunity for these VC and portfolio companies to retreat offshore to the tech seastead they created for their very own special SEZ (semi-jokingly).

How is being a "money transmitter" any different than buying the "inventory" and reselling it? Airbnb could have an "expense" paying their providers.

This seems crazy.

But wouldn't that apply to Xbox too? Most of the money you spend goes to the game developer.

The reason why companies use points instead of $ is: 1) Easy to keep the price consistent world wide 2) There is a casino chip theory that you spend more money when it is abstracted. People spend more when they use their credit cards as opposed to cash, etc. 3) You can sell point cards at retailers to the unbanked. In the Xbox case this is important because a lot of your audience is kids.

As for 3, Apple sell currency-denominated cards for the iTunes store without any problems.

2) is on the spot. As soon as you introduce an abstract that is one step removed from money, people are more willing to gamble with that abstract. This is true for everything from credits to casino chips and from stock/shares to options and derivatives. Also, the word "willing", in this context, is actually an intended pun, since this happens on a subconscious level.

There is a lot of literature on the topic; some pieces even establish a tie between that notion and the most recent banking crises and scandals. For example, stock options are not just one step removed from currency, but at least two or more.

Interesting stuff indeed.

I suspect that even applies to foreign hard currency that you're not familiar with.

I'm pretty sure all of those companies also take $'s for digital goods. Microsoft is the most famous for having a credit system, but you can still buy retail download games using $'s.

AFAIK, the only reason these companies would use a credit system is so that people need to buy credits in bulk, reducing the hit received from processing credit card transactions.

I think most larger companies use non-money credit systems because it gets more lock-in and is slightly harder for many people to parse how much they are truly spending.

I think it's reasonable to assume, by this point, that anything he does should fall under the rubrik of


Except, unfortunately, without notably increasing the humor value, so far.


"2013-05-08 Order to Show Cause ORDER TO SHOW CAUSE.

If, by 5/22/2013, an attorney qualified to practice in the United States District Court for the Northern District of California does not appear in this action to represent Plaintiff, the court will dismiss the action without prejudice. No hearing will be held on the order to show cause unless otherwise ordered by the court. Signed by Judge Edward J. Davila on 5/8/2013. (ejdlc1, COURT STAFF) (Filed on 5/8/2013) (Additional attachment(s) added on 5/8/2013: # (1) Certificate of Service) (ecg, COURT STAFF)."

He has to hire a lawyer or the case won't move forward, because you can't represent yourself when filing as a corporation. We'll find out within 14 days if Greenspan actually intended to take this case to court, or if it's just about the awareness/PR it creates.

He asked the court to waive that requirement ...

What you're reading above my comment is the response to that request. He has until the 22nd to retain a qualified attorney or the case will be dismissed.


78. Defendant Yishan Wong, in response to an article authored by Plaintiff on the website Quora, wrote the following comments (among others) indicating his knowledge of payments-related laws and regulations on June 15, 2011:

“Yeah, I am constantly amazed at how people haven’t yet learned that the paymentsindustry is really hard to get into. It was okay for first-wave companies like PayPal to besurprised by it, but anyone who does their due diligence before starting a paymentsstartup should know everyone – literally everyone, including regulators and thegovernment – is going to be working against you. If you can’t take the heat, get out of the kitchen and go start a photosharing startup.”

“Payment startups face a far more adversarial environment, including utter and totalhostility. It was okay for PayPal to whine about this (though they didn’t), because itwasn't known. But now it’s known. If you run a payments startup, you are fightingagainst thugs, actual criminals – both real ones and government ones. It is not normalbusiness. It is like trying to start a business in an actual warzone. Complaining aboutthis is just whining. There is no actual solution than to win. Anything else is, in fact, justwhining.”

Presumably with the hope of “winning,” Defendant Wong proceeded to invest his own personalfunds in Unlicensed MSB Defendant Balanced (part of a $3.4 million seed financing round)

Trying to create political pressure against these "thugs" isn't necessarily a bad move. Let's say you want to start a company which bypasses Taxi medallions. It's in your interest to create a PR storm over the unfairness of the medallion system. It's not OK to be surprised when the entrenched powers try to bite you (though it may not hurt to act surprised). Of course, if you don't have the stomach for it, you shouldn't be getting into the space.

Some context:

(1) Think Computer Corporation built FaceCash (https://www.facecash.com/) a mobile payment solution

(2) Aaron Greenspan is Think's President and CEO

Maybe he's trying to get these companies to lobby against "money transmitter" regulation.

Some additional context about past litigation:


For fuller context don't forget Aaron Greenspan vs Google, Inc. http://www.huffingtonpost.com/aaron-greenspan/why-i-sued-goo...

I'm one of the parties to this: I founded ActBlue back in Cambridge before coming to SF and building Meteor.

The funny thing is it came to my house yesterday as a single cover sheet plus a CD-ROM full of files, and I literally don't have a way to read a CD-ROM anymore.

If you don't have a way to read a CD-ROM, how do you know that it is "full of files"? Couldn't it be an audio CD?

Probably from the cover sheet attached to the CD. It's a safe assumption he hasn't been served with a mix tape.

It could be a DVD of You Got Served.

or if he was feeling really generous the entire Burn Notice series

> The funny thing is it came to my house yesterday as a single cover sheet plus a CD-ROM full of files, and I literally don't have a way to read a CD-ROM anymore.

This doesn't seem very funny.

There is something to be said about how in the US it's often best not to contact regulators at all, and to simply fly under the radar for as long as possible.

That said, this guy is seriously toxic. Just by responding to his emails in a friendly manner can get you named in a lawsuit... and to blame competitors instead of regulators... Seems like someone to be avoided at all costs.

Bear in mind this guy has spent a fortune and has been severely screwed over by regulators, while dozens of startups operate in the clear with similar services. He could probably get over the hurdles with funding, but who's going to put his feet into this mess? I'd be freaking out too.

Makes me wonder, if had he operated under the radar for a while, and gradually complied with newly imposed regulations, things would be ok. Even if he got a massive fine, that'd be good publicity, and he must be spending a ton on lawyers anyway.

Apparently that was first avenue of action. He says here : https://www.facecash.com/legal/brown.html

that he applied, but they required his company to raise 80 million dollars before he could pay $5,000 fee.

Strangely enough however, he also claims to have built facebook (although the language keeps it vague enough that you aren't aware of his contribution)

Not strange at all. See http://en.wikipedia.org/wiki/Criticism_of_Facebook#Aaron_Gre...

For some perspective, Stripe has only raised $40M to date.

Somehow I suspect suing everyone, including those who would otherwise be your friends/allies, isn't in the Dale Carnegie book...

To be fair, you'd be surprised by some of the stuff that's in the original version.

Aaron so far hasn't had any friends or allies in this. Nobody else (as far as I know) has committed to dealing with this law.

Reason for including YC in this nonsense:

The YCFunds share common management and are venture capital funds invested in a number of unlicensed money transmitters.

Can that really hold up? Can an investor be held liable for the decisions of a company they invested in? By that logic, what's to stop someone from suing Facebook shareholders?

The whole reason for this mess is that VCs refused to invest in his "legal" startup (didn't want to waste money on compliance costs?) and invested in a bunch of "illegal" competing companies instead.

It's regulated by criminal law, not civil code. The complaint quotes the law:

"Whoever knowingly conducts,controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both."

Presumably if individual Facebook shareholders had real influence over Facebook's actions you could sue them. I would guess the justification here is that YC's partners/etc have a real, tangible influence on the companies they invest in so they do bear some share of the responsibility.

California's money transmission business statute is quite broad:

2030. (a) A person shall not engage in the business of money transmission in this state, or advertise, solicit, or hold itself out as providing money transmission in this state, unless the person is licensed or exempt from licensure under this division or is an agent of a person licensed or exempt from licensure under this division.

. . .

(m) "Monetary value" means a medium of exchange, whether or not redeemable in money.

(n) "Money" means a medium of exchange that is authorized or adopted by the United States or a foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more governments.

(o) "Money transmission" means any of the following: (1) Selling or issuing payment instruments. (2) Selling or issuing stored value. (3) Receiving money for transmission.

. . .

(v) "Stored value" means monetary value representing a claim against the issuer that is stored on an electronic or digital medium and evidenced by an electronic or digital record, and that is intended and accepted for use as a means of redemption for money or monetary value or payment for goods or services. The term does not include a credit card voucher, letter of credit, or any stored value that is only redeemable by the issuer for goods or services provided by the issuer or its affiliate, except to the extent required by applicable law to be redeemable in cash for its cash value.


This appears broad enough to include Facebook Credits, bitcoins, etc.

houseSYSTEM failed -> Sue Facebook

FaceCash failed -> Sue Facebook + everyone

Aaron got rich by filing a frivolous lawsuit against Zuck, might as well try it again, huh? This time with even more victims.

Building successful companies is hard, let's go lawyering.

Why not, it seem to be a great business model, that's what America is all about lately.

Not in the world of startups it's not.

As long as there can be great exits, the VC will fund it.

Don't forget the self-published screed about the houseSYSTEM/Facebook saga: http://www.aarongreenspan.com/authoritas.html

It seems strange to file one suit against a ton of defendants, making it more likely that they will pool resources for defense. Or is that not possible in this context because of the nature of the complaint?

I don't think Greenspan actually cares about winning anything. This is about making everyone play by the same rules -- bringing attention to the fact that California makes it near-impossible for a startup to get licensed as an MTA, essentially shut down his company for trying to get licensed, while all these other startups just ignore the problem and operate illegally.

Can someone please translate this lawsuit into common language. It looks pretty interesting, but I'm not familiar with the laws on money transmission. Thanks!

This group of people knowingly broke the law and profited from it. I chose to obey the law and forgo profits. I would like some profits, hopefully conveyed by legal means, to make me whole.

I wonder if HN user thinkcomp (i.e. Aaron Greenspan) is willing/able to comment here. It would be interesting to know his motivations for doing this.

He's unlikely to comment now that it's in progress, but here's a comment on the topic from the past:


Probably legal reasons why he won't. Most companies make it a policy not to comment on ongoing litigation. Usually nothing good comes of it. Although there are exceptions...

> Most companies make it a policy not to comment on ongoing litigation. Usually nothing good comes of it. Although there are exceptions...

This might be the only case where the only good that could possibly come of it would be to comment.

I'd give my initial opinion based on a first light reading of the complaint, but I'm afraid Greenspan might find a way to construe that as money transmission and add me to the suit.

Pretty weird. On the one hand, there clearly went some effort into this. On the other hand, they are not represented by counsel (p.36), which makes the likelihood of the case being thrown out for procedural reasons regardless of the merits around 99%. All in all I'm leaning more towards publicity stunt...

Like others predict, I think this will get booted because of lack of standing. Interesting that Greenspan makes the broad First Amendment argument about being able to represent his corporation as legal counsel based on political speech rights found in Citizens United.. but that case is not on point and won't help here. The court is unlikely to explain why and probably will dismiss it for reasons Grellas notes in the first comment too. The complaint isn't as long as it looks for non-lawyers - just skim over the parts where he lists all the defendants. After page 37 it's just copies of the laws, regulations and screenshots.

Assuming he hired a lawyer to file his other case claiming arbitrary enforcement of the CA law against his company (discussed in paragraph 4 of the complaint linked to above), that one seems much more likely to go somewhere although relief at this point is pretty unclear.

Also the first time I've noticed someone use "pivot" in the Lean Startup sense in a legal complaint (fn. 3).

On page 35, in order to represent his own company as a non-lawyer, Greenspan appeals for an exception to the rule that his corporation, as the plaintiff, must retain legal counsel. He bases this request on (among other reasoning) the Citizens United decision.

Like Greenspan, IANAL, but I suspect his complaint will die quickly on that basis alone.

The court replied on 5/8 that he has until 5/22 to retain qualified counsel or it will be dismissed without prejudice.

Did anyone read the part where he explains that he is not being represented by a lawyer? ("REQUEST FOR CIVIL LOCAL RULE 3-9(b) EXEMPTION AND RETIREMENT.") That seems a very unusual decision indeed. Does anyone have any idea why he would do it that way? Is it probably a money issue?

Funny! After reading the first few pages, I said, "What lawyer is willing to put his name on this garbage?" and paged around in the document. Only to find no lawyer's name at the bottom, just his own. And now you confirm it.

Is there some way that this isn't idiotic? I have seen a federal judge in full-on "this case is a waste of my time" mode, and it is fearsome. I would never file a document with a federal court without having a very experienced lawyer involved.

Of course, I also wouldn't step to all of those rich and powerful people without a clear and sensible plan of action. If Greenspan has one, I can't extract it from this document. Is he a total loon?

Have you looked at Aaron Greenspan's legal credentials ? He is (or atleast claims) a fellow of Stanford Law School. Has build a site for searching legal articles and in general spent considerable time researching this issue

I looked. I don't see him saying he has a JD. I don't see him saying he passed a bar exam. I especially don't see him saying he's a practicing lawyer. I have no idea what "fellow" means in this context, but he's not listed in the staff directory.

"Spending considerable time researching the issue" is not sufficient for not looking like an ass when acting as a lawyer.

There's a theoretical side to law, but it's mainly a practical art. Sort of like software. It would be hubris for somebody who has "spent considerable time researching software" to make his first coding project something big enough that it gets reported nationally.

But real lawyers know not to represent themselves. It's too easy to get emotionally wrapped up in the case and lose perspective.

a friend dated someone who was a new lawyer and tried representing him/herself in a divorce. after crying on the stand it did not end well.

If the PR (making the tech community aware of the problems with CA's MTA laws, getting the VCs to stop ignoring it, and perhaps getting the legislature to reconsider how they treat startups that try to get licensed) is more important than the result of the suit, you wouldn't want to bankrupt yourself over the suit.

Yeah, that's kind of what I thought--a money issue. I have no idea whether Aaron Greenspan has money to burn on something like this. The fact that he was bringing suit on behalf of his computer company made me immediately imagine a monied plaintiff. But that could be a false assumption.

I agree that the PR could be beneficial to the industry as a whole. Let's hope this doesn't mess up a bunch of legitimate businesses in the process.

Well, that's one way to get blacklisted by everyone in SV.

It seems really odd to me that AirBnb is being included in this list.

    57. Defendant Airbnb, Inc. allows its customers to rent the homes of other
    customers for varying durations, in lieu of a hotel. To process each 
    transaction it holds onto the customer’s funds, and remits those funds
    to the property owner at the conclusion of the stay, minus its fee.
Well, okay, but wouldn't this apply to every company that acts as a marketplace between buyers and sellers?

Is the point of this to show the absurdity of the scope of the Money Transmission Act?

In most marketplaces, the buyer pays the seller. In this marketplace, the buyer pays the marketplace and the marketplace pays the seller. Any business that engages in the transfer of funds between people is a money transmitter and needs a license. Escrow service has always been regulated.

Probably should add the first name to the title. That family name is usually associated with somebody else...

Yes. For some reason, I assumed it was Alan Greenspan.

Does this have anything to do with this patent (listing Greenspan as the inventor), which has a publication date of March this year? http://www.google.com/patents/US8396808

It is better to ask for forgiveness than to ask for permission. It is easier to get a money transmitters license after you IPO than before. Taxi medallions, asinine sublet and renter laws are all examples of this. Legal gray areas make great businesses. The CA law he references was sponsored by the big financial companies to favor protectionism and so if enforced will raise hell and probably be overturned by the Feds and currency/interstate commerce laws.

"Fake it till you make it" as unfair competition? Interesting theory, but it seems like it would cause a lot of damage in the startup world.

The law would do a lot of damage to the startup world if it were enforced as written.

I don't have time to read much of the lawsuit, but is Think Computer suing for some sort of injunction to require all the companies listed to use Face Cash as only it has a California Money Transfer Act license?

And for those double taking at the name, Aaron Greenspan is the CEO of Think Computer.


From reading the complaint, it seems more likely that the expected result here is something like:

* State is forced to fairly enforce the rules that caused Think Computer so much trouble (re money transmitter regulations)

* Fairly enforcing the rules causes incredible amounts of grief & overhead for companies large enough to comply, and drives smaller companies out of business

* The grief drives those larger companies (and investors into the smaller companies) to push for these laws to actually get fixed

I could see there also being an interest here in having investors be penalized for knowingly investing in companies that were violating the law (having a board seat seems like it would give you enough access to realize that a portfolio company is a money transmitter and be able to ask them whether they're licensed).

>The grief drives those larger companies (and investors into the smaller companies) to push for these laws to actually get fixed

Huh? They're going to push to change a law that prevents smaller companies from competing with them?

>The grief drives those larger companies (and investors into the smaller companies) to push for these laws to actually get fixed

Huh? The law just got rid of many of their competitors, and they're going to push to change the law?

He's suing them for "unfair competition", because none of them have an MTA license, yet are still operating. As far as I can tell!


It seems strange to me that he would have standing to sue for the state to enforce its own laws, but IANAL

It's a way to set the precedent with a court decision in hand.

The most memorable twist on enforcement is Veoh suing Universal Music Group over the threats from UMG in hopes to be found not guilty, essentially asking the court to pretend Universal was suing them http://mashable.com/2007/08/09/veoh-universal/

I wonder if the smaller companies named in that should just do the absolute minimum and free ride on the HNW and big company/funds who will fight this without being hurt as much by the legal expenses. I know Coinbase raised $5mm, but they shouldn't burn even $250k on this suit. All the individuals are pretty high net worth, at least.

Interestingly enough, Stripe and WePay are not named while Balanced and Square are. Can anyone comment on why?

IANAL: They are Payment Processors, technically serviced by banks, and not a Money Services Business. The difference between them and say AirBnBs transactional payment service is a technicality, but I'm not a lawyer.

1. They might actually know what they are doing or 2. they aren't doing payments of the sort that needs this sort of license.

Stripe is backed by Wells-Fargo, aren't they?

Stripe uses Wells Fargo as an underwriter for the Merchants it on-boards. Wells Fargo did not invest in their earliest rounds but may take an equity stake in later/future rounds.

Who is Aaron Greenspan?

On the list USV, a dwolla investor is missing.

This doesn't seem as much like an actual attempt to gain compensation as it does to simply get a law changed.

I believe you're absolutely correct. It seems rather obvious that he has no standing here, and was not injured by the defendants' actions. But he is extremely knowledgable about these regulations and has a very valid set of complaints regarding the lack of clarity of the law and the lack of predictability in how it is enforced.

Well all of those companies are welcome to come move to Miami. Lots of office buildings and land for sale.


I can't speak on the legal merits of the case, but this does seem like a direct hit (that, it sounds like, won't work) on VC-istan.

They should start giving him EIR offers. He's earned it several times over. That might be the best way to make everyone happy.

He earned what "several times over"?

What logic compels you to conclude that if you get viciously and frivolously sued by someone and publicly badmouthed by him (on his weblog) you should give him a lucrative and prestigious employment (i.e. the Entrepreneur In Residence)?

Do you think a sane SV VC should employ a toxic person that publicly calls Zuckerberg a psychopat?

So far he filed a bunch of frivolous lawsuits against anyone who came into contact with him and looked at him funny. He always represents himself, so there's no cost for him but it hurts the defendants because they have to hire and pay for real lawyers.

His previous lawsuit has been dismissed by the judge http://www.plainsite.org/flashlight/case.html?id=716057

His other lawsuit (http://www.plainsite.org/flashlight/case.html?id=716056) is in shambles on procedural grounds because his California lawyer wants to withdraw from the case which would leave Greenspan as the only lawyer and, just like in this case, he sues on behalf of his company and a company can't represent itself, so his has to have an outside counsel to proceed.

What logic compels you to conclude that if you get viciously and frivolously sued by someone and publicly badmouthed by him (on his weblog) you should give him a lucrative and prestigious employment (i.e. the Entrepreneur In Residence)?

Let's start with the fact that his startup (lawsuit) actually does more good for society than 95% of these VC-istan social media companies (that are just excuses to waste young peoples' careers). If nothing else, he's drawing attention to the "we'll fund your competitors if you don't play our way" aspect of VC-istan, pointing out the problems with a law, and one could argue that he's (indirectly) shining light on the VC-istan collusion problem.

I'm not saying that Greenspan deserves to be a billionaire, but he's way past having earned EIR-- if VC-istan were the meritocracy it claims to be. That's an obvious fact at this point.

Do you think a sane SV VC should employ a toxic person that publicly calls Zuckerberg a psychopat?

Wait, so having a disagreement with one powerful person means that someone deserves to be completely blacklisted? Isn't this the kind of antiquated corporate conformity that people went to California (back when it was great; before conformist corporate asshats got in) to escape?

I've been called worse and I, frankly, don't think a person deserves not to have a career just because he says something nasty, about me or anyone. That's just a ridiculous and mean-spirited idea.

His other lawsuit (http://www.plainsite.org/flashlight/case.html?id=716056) is in shambles on procedural grounds because his California lawyer wants to withdraw from the case which would leave Greenspan as the only lawyer and, just like in this case, he sues on behalf of his company and a company can't represent itself, so his has to have an outside counsel to proceed.

The courage alone that Greenspan has shown proves him to have superior courage to 95+ percent of the VC-istan cool kids, most of whom are useless, morally redundant, corporate shills.

If nothing else, Greenspan has established that he's intelligent. That alone confers merit in a world where it can't be assumed.

I sincerely hope this guy kicks the door in at the heart of this financial industry in-crowd fortress.

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