Yeah, its quite disturbing that YC declined to comment - especially knowing how many similar crypto companies they are funding. I don’t want to see YC get targeted and brought down by the Feds.

They've already had ~21 days[1] to make a statement, too...

[1]https://news.ycombinator.com/item?id=31431224

Wouldn't YC be one of the defrauded investors?

Sure, I'm expecting a statement more along the lines of "Here's how we attempted to do due diligence and failed (and thus failed in our responsibility to fund investors)" rather than accepting fiduciary responsibility for Stablecoin.

I think the due diligence at the point of acceptance into YC is fairly minimal. It might not even go beyond the application answers and the 10min interview... not sure though. I'd be curious to learn more about it.

*edit: Seems YC participated in the follow-on round after the batch ended, so I imagine some extra due diligence goes into that.

The point is that they are an investor and do not run the company. Would they have known about allocation strategy, how to evaluate that? Even if they did know, are they in a position to control or dictate anything within the company?

This applies to investors at any company. At some point you have decided to believe in the founders and executive team, rather than deal with daily operations and micromanaging your portfolio

Isn’t this one of cited reasons for a lack of diversity in VC funded founders — they invest in a founder as a person and their team, thus biased by personal relations, rather than the merits and details of the actual business plan?

Yes, VCs care more about the people behind the company than what the company does. Projects , products, and ideas evolve and the founders need to be adaptable. VCs don't always know the founders well, but they see a ton of founders and have learned to discern.

The personal network is often more used by founders, who provide introductions to investors. You have to be social to be a founder, which is really why networks are more noticeable therein.

there have been issues around this, insofar as how much the VC investors - who are part-owners, remember - are involved in the running of the company.

When Telegram did its failed ICO, a pile of the VCs who bought tokens behaved with sufficient involvement that the SEC deemed them underwriters, i.e. partially responsible for the offering.

So how much business help did Y Combinator offer this particular blatant Ponzi? Looking forward to YC and PG's comments on this.

yes, that's the way the scam works.

* all the laws are to protect investors from issuers

* splash around money to incentivise securities fraud

* buy a pile of tokens

* if the SEC doesn't bust the issuer, the VC wins big

* if the SEC does bust the issuer, the VC gets their money back and doesn't lose

it also realises liquidity much quicker than the long and tedious process of backing a tech company that does things

So did YC buy the tokens, or buy equity in the company? If the latter, then they're part-owners and may claim to have been completely hands-off, but might need to show it.