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April Fools Sees Fake Extra Millions For Users of Brokerage Site
Upstart online brokerage site Zecco had an unfortunate April Fool's day snafu that they are claiming was an honest mistake. Users logged on to find larger balances than they should have, sometimes millions of dollars extra, and many of those users started trading with the nonexistent money. Happy April Fool's Day. "... when Zecco realized it, the company apparently started to force sell, even at a loss, charging the losses to the customers along with a '$19.99 broker-assisted trading fee.' Oops."
TFA and the summary both state that the broker "started to force sell, even at a loss, charging the losses to the customers". However, they are silent on what happened to those who were ahead on their trades. Did they get to keep the profits?
Those who can make you believe absurdities can make you commit atrocities. - Voltaire
Let me see if I get this straight (understanding that the summary has a typo and should read they shouldn't have on the second statement. Or, and this is the link to the consumerist story.
You log in your account and find a huge sum of money in their. Or, I hit the jackpot you think. Now you go and start using it for trade. TFA is a bit lightly on the details, but looks like this trades were go, meaning basically, market fraud. Not, to add some salt on all this, they go out to reverse the money, sell the stocks people bought at a loss, charge than the loss and ask for a commission??? I see lawsuits coming from so many points it gets ridicule.
From the consumerist post: "west: ummmm, this is ridiculous. so i thought it was an april fools joke, put in an order for SKF, and it went through then Zecco just sold it â"-- more than likely making me take the loss please let me know if any of you experienced this! lol....and they charged me $19.99 for commission". So basically they did an April's fool joke, it went wrong, and they are trying to make people pay for their mistake.
Impressive. They do get credits because you need a lot of balls to joke with the market after all it went through recently. And no, I don't buy the "honest mistake" line.
--- "When you gotta do something wrong. You gotta do it right. (Fighter)"
... if a ridiculously large amount of money shows up unexpectedly in your bank account, rushing out to spend it wildly before the mistake can be caught is not actually the smartest of the available options. The authorities look disapprovingly on such activities.
Life needs more saving throws.
Exactly. Bidding because you think you'll actually use the money is stupid; bidding because you think it's a prank is at least somewhat reasonable. From the comments in the linked article, sounds like there were several at least who did this, and were quite surprised when they actually went through. Zecco is going to have a "fun" time sorting this stuff out.
It's true, we're doomed, I tell you!!!
*reaches for tinfoil hat*
More seriously, original post is here. They're claiming it was a mistake in a feed...
http://preview.tinyurl.com/ca37sl
An abstract...
"The surge in "Buying Power" was an accidental extension of credit to the customers' accounts. Actual funds were not deposited therein. After the error was discovered, the mistaken credit was withdrawn. However, not before some executed trades on the lines of credit, including including one guy who bought over $1 million in shares. The company then acted to reverse the errors, saying on their blog, "Except in a very small number of egregious and fraudulent cases, customers will not be responsible for losses (or gains) incurred for trades in excess of their buying power."
Wonder how they define "egregious and fraudulent"?
*removes tinfoil hat, reaches for lawyer*
If a large amount of money shows up in your bank account, and you have no idea how it got there, spending it WILL land you in jail if you withdraw the money and hide it or blow it.
This is the case even if you ask the teller if the money is yours and he/she says yes. Once they figure out the truth, they WILL hold you responsible for the cash.
I see no difference between that and this case. These folks knew they did not actually have an account worth millions, yet they bought stock based on money they did not have. Gee, what did they think was going to happen; of COURSE the broker is going to get their cash back ASAP.
If I was the broker, I would waive the trading fees for selling your shares, but would hold the account holder responsible for any losses. Maybe, in a goodwill gesture, sign over the gains (if any) also, but that would be the limit of my generosity.
SirWired
Screw ups like this are why I hate April Fools with a passion. Anyone that works under me knows that if they participate in an April Fools joke at work that I will be very angry at them. Things that start as an April Fools joke can easily end in injury or lawsuits. Either the day ought to be a national holiday or it should be abolished. Some jokes are very funny, but too many end in disaster. One year I had someone give two weeks notice because they thought they had won the lottery, later the same day she came in and sheepishly retracted her notice. Imagine if she had quit on the spot, and said a few choice words to the folks in the office. I might not have been able to keep her on had her reaction gone just that much further...
Indeed. But there are some fringe cases that I'm sure will cause headaches. Like:
-Zecco customer with $20,000 in their account.
-One day they log in and see that they now have $1,020,000 in their account.
-They make an investment for, let's say, $15,000.
Does Zecco cancel the investment, or honor it, or what? Consider:
A. If the investment went up, the customer can claim that they were trying to invest $15k of their $20k, that it was a legitimate transaction, and that they should be allowed to keep the gain.
B. If the investment went down, the customer can claim that their investment strategies were unduly influenced by their seemingly-increased buying power. They claim Zecco's mistake is responsible for their overly-risky investment, and that Zecco needs to cancel the trade, and restore their account to the way it would have been if the trade had never happened. They can say "You canceled the investments of all those other customers! Why not mine?"
If Zecco cancels all transactions (including those of type A), there will be plenty of legitimately angry customers. They tried to play by the rules, and yet had their sound investment (and associated gain) taken away. On the other hand if Zecco cancels only transactions of type B (but lets type A go through), they will lose a lot of money: for that one day everyone was only able to make investments that made them money! What a deal! Yet if Zecco says it won't cancel any transactions for amounts below a person's previous buying power, people can still argue that their strategy was disturbed by the mere presence (and psychological effect) of all that other money sitting there.
And a further complication: what if someone makes two $15k investments on that day? They spent over their 'real' limit. But which transaction was the one that spent the "money they don't actually own"? Also, having an extra million $ is obvious. But a customer could legitimately claim that they thought they had $30k in the account (when it fact it should have been $20k). It's up to Zecco to report it correctly, and if they don't then customers will become legitimately confused and may make trades somewhat beyond their previous buying power. Even if they are trying to act in good faith.
All this to say that this is going to be a mess for Zecco to sort out. They will likely have to make concessions to numerous customers, which will cost them a ton of money.