Slashdot Mirror
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
... 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.
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 After the error was discovered, the mistaken credit was withdrawn.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*
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.