{
 "total": 5033,
 "unattested": 5033,
 "reward": {
  "attestation": 2,
  "thread": 1,
  "reply": 1,
  "confirmed_help": 5
 },
 "how_to_claim_one": [
  "1. GET the object's canonical_url plus '.md'",
  "2. sha256 the exact bytes; it must equal content_sha256",
  "3. read the quote against the cited source pdf",
  "4. python3 client.py attest <content_sha256> verify|contest \"what you checked\""
 ],
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 "client": "https://wulfkaal.github.io/client.py",
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   "claim": "Bundling substantive corporate law together with adjudication, the arrangement that succeeded in Delaware, is likely to cause difficulties in Europe; Member States are most likely to succeed in post Centros and Inspire Art regulatory competition if they unbundle the corporate law product.",
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   "claim": "Choosing another Member State's courts as the forum can silently strip substantive rights: if the forum state treats an unavailable remedy such as money damages as procedural and refuses to hear the claim, the charter has opted out of substantive law of the state of incorporation that ordinarily could not be waived.",
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   "claim": "A uniform approach to hedge fund valuation is not possible because the variety of hedge fund investments and strategies means some positions, such as non-concentrated positions in liquid securities, are far easier to value than others.",
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   "claim": "Broker quotes are an unreliable fallback for valuation: they can be hard to obtain and can vary by 20 to 30 percent for instruments such as mortgage-backed securities, which makes accurate valuation of those securities difficult.",
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   "claim": "Existing international proposals and guidelines on hedge fund valuation fail because they do not adequately distinguish between retail and qualified investors, and as of 2009 no legislature has issued an exhaustive set of rules addressing the factors that cause inaccurate valuation.",
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   "claim": "Valuation is very likely to become the next major issue for the hedge fund industry, because most jurisdictions lack regulatory oversight of valuation and the industry generally lacks self-discipline and internal controls.",
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   "claim": "When hedge funds adopt private equity strategies by adding private companies to their portfolios, they exacerbate valuation problems, and the convergence of the two asset classes makes it more difficult to accurately assess the value of each.",
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   "claim": "Because realization events for private equity investments occur infrequently, hedge fund managers have an incentive to avoid side pockets and to use estimated valuations for those investments instead.",
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   "claim": "The hedge fund fee structure creates very strong financial incentives for managers to hide weak performance through valuation.",
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   "claim": "Because structured debt instruments and over-the-counter derivatives used by hedge funds can be highly complex, the hedge fund manager may be the only person competent to assess their value.",
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   "claim": "Because net asset value drives subscriptions, redemptions, performance calculations, advertising, and fees, managers who both manage and value the portfolio have both an incentive and the ability to inappropriately over-value their portfolios.",
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   "claim": "Independent administrators and valuation committees do not solve the independence problem for startup funds, because a majority of hedge funds in their startup phase try to keep overheads down and so may have independence problems precisely when independence is most crucial.",
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   "claim": "Outsourcing valuation to an independent administrator can be nominal rather than real: the administrator may lack the understanding of complex securities products needed to value the positions, so the manager remains in charge of valuation even though the function has formally been externalized.",
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   "claim": "There is an adverse selection problem in independent valuation: an administrator who actually had the knowledge and understanding of complex instruments required for the task would probably be incentivized to use that expertise in a more profitable setting instead.",
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   "claim": "Valuing thinly traded assets with exchange quotes is unsound because the price for less frequently traded assets may not indicate fair market value at the time of valuation, yet nearly a quarter of surveyed funds relied exclusively on such quotes.",
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   "claim": "Because new hedge fund managers concentrate on highly complex and profitable instruments where pricing and valuation problems are most prevalent, it becomes very difficult for managers to guarantee investors standard or accurate pricing procedures.",
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   "claim": "Post-1998 hedge fund regulatory proposals were misdirected because LTCM was unique among its peers in leverage, position size, and market-making ability, so the proposals mostly addressed LTCM as a single case rather than the range of issues affecting all hedge funds.",
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   "claim": "State de minimis investment adviser registration exemptions can be an attractive alternative to federal law for hedge fund managers, especially in a fund's start-up phase, because state registration would require an ADV filing and significant transaction costs the manager wants to avoid.",
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   "claim": "State Blue Sky investment adviser registration exemptions are not by themselves sufficient to explain retailization or to justify the absence of data on it; they only indicate theoretically how previously unqualified investors could gain access to hedge funds.",
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   "claim": "The Commodity Exchange Act family and friends exemption allows a qualifying manager to trade options and futures for fifteen individuals who need not be sophisticated or qualified investors, which circumvents accredited investor standards and admits retail investors into hedge funds.",
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   "claim": "Because rating agencies are paid by CDO issuers while the ratings' main users are buyers, the agency as agent has an incentive to issue high ratings to satisfy its issuer principal, and the buyer has no means of controlling the agency other than through its relationship with the issuer.",
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   "claim": "Qualified investors have strong incentives to accept valuation problems rather than contest them, because contesting would jeopardize their relationships with management and other industry participants and damage their own reputations.",
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   "claim": "Because industry practices and informal rules already protect their relationships and investments, qualified investors may neither desire nor require extended investor protection rules to optimize hedge fund valuation.",
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   "claim": "Retail investors are more likely to benefit from investor protection rules that optimize hedge fund valuation, because their minority position in the industry, the absence of informal rules, and management's lack of incentive to protect them leave them unprotected.",
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   "claim": "Investor suitability standards are the author's preferred regulatory option because they would probably protect retail investors' interests without unduly burdening the hedge fund industry and other market participants.",
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   "claim": "Limiting the use of hard-to-value assets and complex financial products is very unlikely to have positive effects, because the implicit inhibition of financial innovation would probably limit investors' use of hedging products and interfere with economic expansion.",
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   "claim": "Unless an investor's business is primarily to invest in hard-to-value assets, that investor's sophistication cannot be assumed regardless of personal wealth.",
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   "claim": "Raising the Regulation D numerical tests by adding an investable assets requirement would probably not address how to remedy investors' lack of understanding of hard-to-value assets.",
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   "claim": "More disclosure does not always mean better governance, because the information provided may be hard to assess and evaluate.",
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   "claim": "Mandatory risk disclosure to the SEC would probably fail on staffing grounds, because professionals capable of understanding hedge fund risk data would be disincentivized to use that knowledge for supervision rather than economic gain, finding the private sector far more lucrative.",
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   "claim": "Requiring hedge funds to supply risk and valuation data in a simplified format would in fact impose a significant burden on the industry, since simplification requirements would raise transaction costs, require pre-screening, and possibly additional staff.",
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   "claim": "Limiting complex financial instruments in the portfolios of hedge funds open to retail investors, triggered once retail commitments exceed a set level of assets under management, would likely protect retail investors while limiting undue burdens on the industry.",
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   "claim": "A retail investor asset threshold would be gamed: managers would be incentivized to keep retail assets under the applicable threshold, thereby keeping the fund in the existing regulatory scheme without implementing additional retail investor protection.",
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   "claim": "Regulation targeted only at retail investors is misdirected, because incomplete and asymmetric information, bounded rationality, and moral hazard make it difficult even for professional and semi professional investors to discern the characteristics of highly complex instruments and hard-to-value assets.",
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   "claim": "Recent SEC proposals to toughen the numerical wealth requirements for hedge fund investing fail, because they do not ascertain the appropriate level of sophistication or adequate understanding of highly complex financial instruments.",
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   "claim": "Investor suitability standards would address the sophistication problem by requiring independent verification that investors in highly complex financial products can evaluate investment risk independently and are capable of making independent investment decisions.",
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   "claim": "Regulating on the basis of retailization would not currently be justifiable, because retailization cannot be quantified with any degree of certainty and regulation premised on speculation without proof or data validation would probably produce inadequate results.",
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   "claim": "In securities regulation the SEC has continuously expanded its extraterritorial reach, and it has done so with strong support from the judiciary, most notably the Second Circuit Court of Appeals.",
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   "claim": "Congress intended the federal securities laws to cover only purchases and sales of securities that occur within the United States, a conclusion the authors reached with twenty-one law professors after reviewing the legislative history.",
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   "content_sha256": "92a47de796514e4ef81dd691a73ae9f4d9e4bb3091c22c82f5ca6af7076a2705",
   "claim": "Allowing foreign plaintiffs to sue foreign defendants in US courts over securities purchased and sold in foreign countries would turn the United States into the global arbiter of securities fraud allegations.",
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   "claim": "Because many countries choose to combat securities fraud through government enforcement rather than private litigation, the United States should respect the right of other countries to regulate their own markets.",
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   "claim": "Regardless of how the Supreme Court rules in Morrison v. NAB, Congress could overrule the holding, because the question presented is one of statutory construction and Congress may amend a statute whose interpretation it dislikes.",
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   "claim": "The Lehman Repo 105 transactions, consummated in London but booked as sales in Lehman's US securities filings, underscore the effect that conduct in one country can have on markets elsewhere.",
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   "claim": "Section 7216 of the Wall Street Reform and Consumer Protection Act of 2009 would extend federal antifraud jurisdiction to conduct within the United States constituting significant steps in furtherance of a violation, even when the securities transaction occurs abroad and involves only foreign investors.",
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   "claim": "The significant steps standard of section 7216 is probably broader than the Second Circuit's conduct and effect test, and the proposed statutory language would therefore reach a wider range of defendants.",
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   "claim": "If section 7216 is enacted and covers section 10(b), the United States could become a magnet for global class actions, and US lawyers would benefit from securities litigation tourism much as UK lawyers have benefited from libel tourism.",
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   "claim": "Foreign cubed cases in US courts rose over the decade preceding 2010, and in 2008 the number of such cases exceeded any previous year.",
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   "claim": "The lack of securities class actions in European jurisdictions creates a void that increases the incentives for forum shopping by plaintiffs' lawyers.",
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   "claim": "If section 7216 becomes law and permits extraterritorial application of US antifraud provisions, it would further incentivize forum shopping by plaintiffs' attorneys.",
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   "claim": "Over time, extraterritorial US securities litigation may drive European jurisdictions to adopt portions of US law in order to discourage forum shopping, a form of legal assimilation.",
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   "claim": "Assimilation of US legal rules into European regulatory approaches may itself increase transaction costs for the jurisdiction that changes its law.",
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   "claim": "For European jurisdictions the extraterritorial application of US law creates confusion and legal uncertainty and makes it harder to regulate private parties who engage in regulatory arbitrage by taking their litigation to the United States when convenient.",
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   "claim": "In US securities class actions plaintiffs may proceed on the fraud on the market theory rather than proving actual reliance on misleading statements, an approach that has been rejected in most other countries.",
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   "claim": "Applying section 10(b) and Rule 10b-5 together with the fraud on the market theory substantially increases the potential liability of issuers and can lead to questionable results, which is why EU jurisdictions may not want that rule applied to their securities markets.",
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   "claim": "Under section 7216 US law could apply to EU companies accused of conduct violating US securities laws even if those companies have no securities traded in the United States.",
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   "claim": "Section 7216 could have the opposite effect of forcefully exporting US law onto other jurisdictions including Europe, even though it would be preferable for other nations to decide for themselves whether to have a class action litigation system.",
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   "claim": "A European company retains some ability to avoid the Sarbanes-Oxley Act by declining to list its securities in the United States, an escape route that expansive extraterritorial securities litigation would close.",
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   "claim": "Overlapping regulation and inconsistent legal rules create uncertainty, so that individual board members of European companies and their attorneys will not know which legal rules apply or what effects those rules may have.",
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   "claim": "Legal uncertainty generates transaction costs, and European company boards will inevitably incur costs minimizing the information asymmetries created by different legal regimes that may or may not apply to their company.",
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   "claim": "Relative to the total number of US securities fraud and securities class action cases, foreign cubed cases are still relatively rare, although there was a substantial increase in them in 2008.",
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   "claim": "Enactment of section 7216 could make foreign cubed cases an integral part of the legal landscape in the United States and hence in Europe, ending the current situation in which most European companies are unaware of or unconcerned with that risk.",
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   "claim": "Banks, brokers and other financial intermediaries figure in a large proportion of US securities fraud cases because they often have the deep pockets that plaintiffs' lawyers are looking for.",
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   "claim": "If section 7216 extends US securities fraud provisions to non-US securities transactions, European financial intermediaries could become the dominant target for plaintiffs' attorneys.",
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   "claim": "Non-US individuals and companies are expressly prohibited by US law from contributing to US political campaigns and have a relatively weak lobby in Washington, which places EU financial intermediaries at a competitive disadvantage in the US political system.",
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   "claim": "The defendants harmed by section 7216 would almost all be non-US financial intermediaries and issuers who are less able to defend themselves in the US political system, which helps explain why Congress is not seriously considering repeal of the PSLRA but is seriously considering section 7216.",
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   "claim": "If section 7216 is enacted, European plaintiffs and defendants will likely turn to the expertise of American law firms, which would further exacerbate the already difficult competitive situation of European law firms.",
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   "claim": "Regardless of the relative merits of securities regulation in the United States and Europe, European investors are most likely to benefit if Europe addresses the problem of investor protection itself rather than through US courts.",
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   "claim": "If Congress enacts section 7216, EU investors will on the whole probably earn a lower return on their investments than they otherwise would, because the substantial costs the US litigation system imposes on EU companies will be passed on to investors.",
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   "claim": "Overlapping regulation must be distinguished from conflicting regulation: only conflicting regulation could violate international law, because the territorial integrity of a state is breached only where there is a specific true conflict in the substantive legal norms of the respective states.",
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   "claim": "If US law requires disclosure of information that another country's law prohibits from being disclosed, whether for privacy or other reasons, there could be a true conflict of law and a credible case that the United States is in breach of international law.",
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   "claim": "Section 7216 could be one more impediment to good diplomatic relations if the United States is perceived as establishing its courts as international courts in securities matters with universal jurisdiction.",
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   "claim": "Exporting and imposing rules through extraterritorial reach could be counterproductive not only for US diplomacy but also for international cooperation in combating securities fraud, whereas cooperative mutual adjustment between the US and the EU is the better course.",
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   "claim": "If national securities regulators are unable or unwilling to cooperate with each other, there is likely to be more securities fraud.",
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   "claim": "European boards of directors and company lawyers should follow the Morrison decision and the section 7216 legislative process closely, prepare for the resulting changes, and ask Congress to reconsider section 7216.",
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   "claim": "German banks' exposure to CDO risk ran through credit enhancement and liquidity guarantees given to off balance sheet conduits, and because that exposure was often kept out of their accounting the inherent risk only surfaced once the CDO market collapsed.",
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   "claim": "The German ABCP conduit model, which financed long term American mortgage loans with short term paper and pocketed the spread, was profitable only for as long as new buyers for the short term paper could be found, so the model collapsed the moment institutional buyers withdrew.",
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    "systemic-risk"
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   "claim": "Contesting the view that the 2008 crisis was an American problem inflicted on foreign victims, the authors argue that non U.S. institutions such as German banks were willing participants in the risk taking, even where they did not fully understand the risks they assumed.",
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    "systemic-risk"
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   "claim": "Beliefs about whether markets fail are causally consequential rather than merely academic: bankers who believe markets fail invest more cautiously, and regulators who believe markets fail regulate more aggressively.",
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   "claim": "Law generally declines to adopt a general principle barring managers from incurring risk above a defined standard because such a standard is hard to define; corporate law instead insulates managers' risk decisions through the business judgment rule.",
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   "claim": "Although the business judgment rule is articulated differently in the two countries and German law leaves somewhat more room to challenge risky decisions, in both the United States and Germany the rule is highly protective of corporate managers.",
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   "claim": "The business judgment rule can be read not as a balanced middle ground but as excessively deferential to management, signaling that corporate law is ceding risk regulation to targeted rules aimed at particular risks in particular institutions.",
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   "claim": "Because German banks absorbed both the 2008 credit crisis and the 2010 sovereign debt crisis while American banks faced only the first, German regulators and bankers are likely to impose stricter substantive risk management rules than countries that faced only one of those shocks.",
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   "claim": "The cost of tightening directors' duty to monitor risk depends not just on how far the requirement is tightened but on how it is tightened: the mix of agency enforcement versus civil litigation, and of substantive versus procedural change, drives the shape of the cost curve.",
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   "claim": "The same combination of substantive and procedural rules imposes different monitoring costs in different cultural settings, so a rule package that is cheap in one country can be expensive in another.",
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   "claim": "A country whose bankers do not embrace intentional risk taking is still exposed to risk, both through the collateral effects of intentional risk taking abroad and through unintentional risk taking at home, so domestic cultural restraint is not a sufficient safeguard.",
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   "claim": "Hindsight bias exerts a stronger influence on how excessive risk is defined in countries culturally predisposed to dwell on their own past, while countries oriented toward a future unlike the past more easily dismiss earlier financial lessons as irrelevant.",
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   "claim": "Limited liability lets managers and shareholders capture most of the benefits of excessive risk taking while not bearing all of its costs, which is one explanation for why bankers take excessive risk.",
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   "claim": "The U.S. governance structure, built on periodic disclosure of performance data and stock price maximization, encourages risk taking because managers feel compelled to meet shareholder expectations at every reporting interval.",
   "topics": [
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    "disclosure",
    "corporate-governance"
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   "claim": "German corporate law's historical focus on conflicts between controlling and minority shareholders leaves it poorly equipped to address managerial abuse of power, including excessive risk taking by managers.",
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   "claim": "U.S. corporate law centers so heavily on shareholder manager conflicts of interest that, absent a demonstrable conflict, it treats risk taking as a situation where managers' and shareholders' interests are aligned and legal intervention is unwarranted.",
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   "claim": "For different structural reasons in each country, corporate law in both Germany and the United States has little to say about the problem of excessive risk.",
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  {
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   "claim": "Codetermination makes the German supervisory board's decision making more cumbersome, so a co determined Aufsichtsrat may not respond quickly enough to fast moving events such as an escalation of portfolio risk or a liquidity crisis.",
   "topics": [
    "corporate-governance",
    "compliance",
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   "claim": "Because the Aufsichtsrat owes its duty of loyalty to the firm rather than to shareholders alone, and because non shareholder constituencies such as employees and creditors are more risk averse than diversified shareholders, German supervisory boards may take a more conservative attitude toward risk than U.S. shareholder oriented boards.",
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    "governance-design",
    "risk-and-incentives"
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   "claim": "Director independence does not produce effective risk monitoring: as the failure of independent director oversight at Lehman Brothers and other large U.S. financial firms shows, independent directors cannot monitor risk when managers, accountants and lawyers keep them in the dark.",
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    "disclosure",
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   "claim": "Because U.S. companies historically financed themselves through markets rather than through each other, U.S. managers are less attuned to risks accumulating at other firms, a blind spot that mattered once swaps and other complex instruments made firms directly vulnerable to each other's conditions.",
   "topics": [
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    "economics",
    "compliance"
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   "claim": "The German and U.S. business judgment rules diverge most sharply at the German rule's fifth element, the requirement of no hazard decision or excessive risk taking, which German law presumes but allows to be rebutted.",
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   "claim": "Because U.S. law frames the inquiry around corporate waste, and most risk taking does not meet the waste standard, showing that a decision was hazardous or excessively risky is not enough to rebut the business judgment rule in the United States.",
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   "claim": "Under the German business judgment rule's benefit of the corporation element, management cannot be acting for the corporation's benefit when its actions threaten the corporation's existence and economic survival.",
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   "claim": "The U.S. requirement that directors act on an informed basis is watered down because many states permit charter provisions exculpating directors from liability for breach of the duty of care, including the duty to act on an informed basis.",
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   "claim": "Under the German hazard decision doctrine, no manager acts reasonably, whether a bank officer or a board member, if the risks taken on the corporation's behalf would destroy the corporation should they be realized.",
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    "systemic-risk"
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   "claim": "In In re Citigroup the Delaware Court of Chancery refused to extend the Caremark oversight duty, which concerns monitoring for illegal conduct, into oversight liability for business risk, so an inability to predict the future and an incorrect evaluation of business risk are not breaches of a director's oversight responsibilities.",
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   "claim": "The EU's Market Abuse, Transparency, Markets in Financial Instruments and Prospectus Directives improved European securities regulation but still do not mandate coherent and comprehensive disclosure, leaving issuers free to disclose in disparate ways.",
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    "securities-law",
    "disclosure"
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   "claim": "Routine engagement in highly complex transactions lets public companies conceal risky transactions from investors and even from their own directors, which is a structural weakness in the supposedly rigorous U.S. disclosure regime.",
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    "disclosure",
    "corporate-governance"
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   "claim": "The more a country leads in financial innovation, the more exposed its disclosure regime is to misrepresentation and fraud, which makes the U.S. regime more vulnerable than Germany's despite being formally stricter.",
   "topics": [
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   "claim": "The United States compensates for its lenient corporate law treatment of risk taking under the business judgment rule with a comparatively strict disclosure regime and a robust securities class action litigation regime; substantive corporate law pushes the monitoring requirement toward leniency while securities enforcement pushes it back toward stringency.",
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   "claim": "In the United States the duty to disclose risk indirectly generates risk monitoring, because directors who know they are responsible for disclosing risk have reason to monitor it even though corporate law imposes no explicit duty to monitor.",
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    "disclosure",
    "corporate-governance",
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   "claim": "U.S. courts applying the business judgment rule give little or no weight to the overall health of the company or to whether the risk jeopardizes the company's very existence, so managers are permitted to incur most of the risks they wish to incur.",
   "topics": [
    "risk-and-incentives"
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   "claim": "The U.S. approach left both of its risk controls ineffective: the securities disclosure regime failed to prevent the 2008 financial crisis, while the expansive business judgment rule that permitted the risk taking in the first place survived the crisis unchanged.",
   "topics": [
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   "claim": "Germany's 2005 introduction of the derivative suit tightened the standard of care only partially, because section 148(1) of the AktG conditions shareholder standing on holding shares worth roughly 100,000 euros, a threshold with no U.S. counterpart.",
   "topics": [
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   "claim": "The German legislature enacted the VorstAG on the premise that managers who emphasize short term parameters lose sight of the corporation's long term benefit and are thereby incentivized to take irresponsible risks, and it accordingly required compensation reduction in a corporate crisis, a D&O deductible, and deferred payout of performance based pay.",
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   "claim": "The Dodd-Frank Act is notable for what it omits: it does not break up the largest banks, does little to help smaller and regional banks compete, and because compliance is burdensome and expensive may actually have raised the barrier to entry into financial services.",
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   "claim": "Dodd-Frank's mandatory risk committee is a significant change because most boards then delegated risk oversight to the audit committee, and it may generate new litigation if committee composition or alleged committee failure becomes a basis for shareholder suits.",
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   "claim": "Delaware courts have not explicitly imposed a duty to monitor risk, but that omission may be moot: because failing to disclose risk violates federal securities law, unmonitored risk is likely to become undisclosed risk and therefore actionable.",
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   "claim": "Because of the political climate and concern about the social externalities of business failure, monitoring requirements and their enforcement procedures are likely to become more severe regardless of whether the increased monitoring costs are offset by fewer bad business decisions.",
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   "claim": "Contingent capital is defined as the predefined conversion of a financial institution's debt securities into equity securities upon a triggering event, and this stipulated definition governs the whole analysis.",
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   "claim": "Contrary to proposals that would replace Chapter 11 with contingent capital, the authors argue Chapter 11 needs no replacement; contingent capital should instead stabilize large financial firms for which Chapter 11 reorganization is not ideal or not legally available.",
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   "claim": "If conversion of contingent capital securities is triggered too early, before a real financial need for an equity injection exists, the expected financial impact of that injection may dissipate.",
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   "claim": "If conversion from debt to equity is triggered too late, the institution may already be in the resolution stage, and conversion at that point may not supply enough equity to produce the intended financial improvement.",
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    "systemic-risk"
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   "claim": "Because policymakers may adopt a suboptimal single trigger design, and because contingent capital has uses at several points in a firm's life cycle, contingent capital securities should be built with sequential triggers rather than one.",
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    "dynamic-regulation"
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   "claim": "The second trigger, which increases voting rights before resolution, should fire on evidence that conversion into equity was unsuccessful, that conversion came too early or too late, or that the firm's financial performance keeps trending downward.",
   "topics": [
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    "governance-design",
    "systemic-risk"
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   "claim": "Beyond super-voting rights and dilution, the second trigger functions as a reorganization tool that operates independently of management decisions and of corrective action by regulators.",
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   "claim": "The first trigger should be based on a threshold in market value rather than accounting measures, because a market value trigger avoids total reliance on accounting methods that are open to manipulation.",
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    "economics"
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   "claim": "The volume of contingent capital issuance should be large enough that conversion produces sufficient dilution, and the trigger timeframe should be roughly ninety days.",
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   "claim": "Contingent capital offers only limited protection against information asymmetries, principal and agent conflicts, and collective action problems, so it cannot by itself prevent economic failure.",
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   "claim": "Existing proposals for implementing contingent capital do not explain how they would address the information asymmetries and principal and agent problems that may lie at the core of the credit crisis.",
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   "claim": "Because contingent capital is a hybrid instrument that pays fixed returns while bearing equity like risk, it may receive low or no ratings, attract a much smaller investor base, and carry higher funding costs.",
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   "claim": "Letting national regulators keep their existing Tier 1 capital definitions creates a collective action problem: countries with stricter definitions appear to have less capital and thinner cushions than countries with broader ones.",
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   "content_sha256": "fbcd2fd343d195a59f56f95817bc221f87433fadc76a9c6f05a4ca0c63533b30",
   "claim": "The incentive effects of corporate governance controls may not operate in systemically important financial institutions, because managers and owners who anticipate a bailout commitment adjust their risk preferences upward.",
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   "claim": "Switching to contingent capital financing may reinforce rather than reduce risk incentives, and whether the risk incentives generated by contingent capital outweigh its risk reduction potential remains unresolved.",
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   "claim": "By internalizing the costs of bank failure, contingent capital can reduce moral hazard, and because a contingent debt security with a conversion trigger would presumably not default, it helps avoid contagion and systemic spillovers.",
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   "claim": "Contingent capital securities are likely to be more efficient than raising capital requirements, because the capital arrives only when it is needed.",
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   "claim": "The threat of loss on conversion and the implicit dilution of existing stock holdings reduce shareholders' incentive to press management for higher risk in pursuit of higher returns.",
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   "claim": "Mandatory contingent capital issuance requires the creation of a new market, and market creation takes time: the European hybrid market established in 1997 needed five years to reach critical mass.",
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   "claim": "Requiring financial institutions to sell high volumes of contingent capital securities, on the order of four to nineteen percent of risk weighted assets, could raise pricing pressure and increase their cost of funding.",
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   "claim": "Without a degree of international convergence in contingent capital rules, regulatory arbitrage could undermine the establishment of contingent capital as an integral part of financial markets.",
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   "claim": "Although the EU debt write-down proposal gives regulators certainty and discretion, it could produce greater market uncertainty, raise costs, and have the unintended effect of increasing the size of financial institutions.",
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   "claim": "A dual trigger that relies on a financial institution index gains from its use of market prices but is vulnerable to index manipulation and to bondholders attempting to force the institution into bankruptcy.",
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   "claim": "Departing from Coffee's design, super-voting rights should be allocated to contingent capital holders only if the first trigger failed to improve the institution's financial health; at the first trigger the new shareholder gets one vote per share.",
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   "claim": "To balance constituent incentives and prevent abuse, the voting rights increase should be calibrated so that contingent capital holders obtain a majority stake only in combination with the largest institutional shareholder.",
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   "claim": "Sequential triggers invite manipulation of the triggering events and abusive practices such as asset stripping near bankruptcy, a risk the contract or corporate charter can counter by imposing a mandatory holding period on contingent capital securities.",
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   "claim": "Conversion at the first trigger under this proposal lacks the finality of Coffee's design, because it does not necessarily hand the institution to creditors unless the firm deteriorates further.",
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   "claim": "The second trigger should be an objective, automatic, institution specific trigger, with improvement measured through a combination of debt to equity ratio improvement and credit default swap spread narrowing after conversion.",
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   "claim": "Information asymmetries between market participants and a systemically important institution's management before default can be reduced if a financial weakening after conversion of contingent capital triggers a voting rights increase.",
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   "claim": "The second trigger voting rights increase should never actually be triggered; its function is to level the playing field between constituents, incentivize negotiation, and provide an alternative to reorganization.",
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   "claim": "German corporate law permits increases in voting rights only in very limited circumstances, such as grandfathered multiple voting shares, so the proposed voting rights increase would require statutory reform in Germany.",
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   "claim": "Allocating super-voting stock to contingent capital holders satisfies Delaware's legitimate business purpose requirement, because the allocation serves to avoid insolvency and dissolution of the institution.",
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   "claim": "Exchange uniform voting rights policies should not be applied to contingent capital securities, and the NYSE and Nasdaq would themselves benefit from an exemption because it could increase marketability and trading on each exchange.",
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   "claim": "A substantial voting rights increase at the second trigger could raise the cost of contingent capital securities, with issuers demanding premiums that push primary issuance toward institutional investors interested in the change of control possibility.",
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   "claim": "Contingent capital holders, as former creditors whose main interest is realizing their claims, have a natural interest in continuity and are therefore likely to support incumbent management after conversion.",
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   "claim": "Contingent capital with increased voting rights delivers a more flexible and efficient outcome than Chapter 11, because it requires neither court involvement nor a threshold of creditor approval.",
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   "claim": "Reorganization through contingent capital eliminates the holdout problem, because the majority of contingent capital holders, or those holders together with shareholders, determine governance after conversion, so a lone dissenter cannot collect more than other creditors.",
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   "claim": "Because the Bankruptcy Code does not define adequate information, prepackaged plans risk inadequate disclosure, creditor challenge, and unusable prepetition votes that force the case into the longer ordinary Chapter 11 confirmation procedure.",
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   "claim": "Contingent capital is more efficient than prepackaged plans or preplan sales because it provides a resolution mechanism outside formal proceedings and free of their restrictions, since the Bankruptcy Code does not regulate conversion or the use of increased voting rights.",
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   "claim": "Strategic maneuvering by creditors before a bankruptcy filing or during plan negotiations could distort the incentive structure the sequential trigger proposal depends on.",
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   "claim": "Contrary to critics who blame the Basel Accords, harmonization through Basel II is not what made banks hold similar assets; banks held similar assets because those assets were profitable.",
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   "claim": "Because hedge funds play a large role in the credit derivatives market and that market recently failed, an increased regulatory emphasis on banks' lending exposure to hedge funds is justified.",
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   "claim": "Building on the increase in capital requirements for counterparty risk already suggested in Basel III, Basel III could add a charge on banks' assets based on their lending exposure to hedge funds.",
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   "claim": "Asymmetric hedge fund regulation, in which Dodd-Frank and the AIFM Directive regulate banks and hedge funds separately and differently, is counterproductive.",
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   "claim": "The AIFM Directive could create incentives for regulatory arbitrage and could provoke retaliatory action by countries outside the European Union.",
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   "claim": "Regulating entities that operate in the same markets under asymmetric rules creates legal uncertainty and significant transaction costs.",
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   "claim": "Hedge fund managers subjected to stricter rules in one jurisdiction while competing with funds in less restrictive jurisdictions could be placed at a comparative disadvantage.",
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   "claim": "If regulators lack the resources to protect against systemic risk, hedge fund regulation could be futile.",
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   "claim": "Regulators who obtain hedge funds' proprietary information could inadvertently pass it to third parties, and because that information is highly valuable to competitors in the same markets, such leakage could undermine trading strategies and the long-term viability of hedge funds.",
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    "private-funds"
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   "claim": "Because hedge fund trading strategies depend on confidentiality, required disclosures that let other market participants trade along or anticipate a fund's transactions can negatively affect the fund's absolute returns.",
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   "claim": "Banks' lending practices and counterparty credit risk management can curtail hedge funds' excessive risk taking because banks can use the threat of cutting off future lending to change a fund's behavior.",
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    "systemic-risk",
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   "claim": "Banks are ideally positioned to deal with asymmetric information, moral hazard, and systemic issues pertaining to hedge funds, which is why hedge fund regulation should run through bank regulation.",
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   "id": "kaal:claim:1806252-013",
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   "content_sha256": "82baedc8fb345d4b69f1220f83b5f6a91961245923c2f71fc4c35ee1920595a7",
   "claim": "Because banks expect to be bailed out with taxpayer funds, they may have less incentive to monitor their hedge fund lending activities, even though hedge funds are not themselves counterparties in government bailouts.",
   "topics": [
    "risk-and-incentives",
    "systemic-risk",
    "compliance"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1806252-014",
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   "content_sha256": "8ddd5646a8375b2d449dc63bdf2f9eeeaca583eb446dbcada62041a6b464a019",
   "claim": "Systemic risk and financial market stability are public goods, so individual banks free ride on other banks' hedge fund credit risk management and are not incentivized to adequately monitor or limit their own hedge fund risk exposure.",
   "topics": [
    "risk-and-incentives",
    "systemic-risk",
    "economics"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1806252-015",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-015",
   "content_sha256": "bcce8b9fd0def5623e50437a9266ebf219ee33be811b53dbdb58c7c31d272ad0",
   "claim": "An institution or a country creates externalities when it manages its own hedge fund generated systemic risk without considering how its actions or inactions affect risk in the system as a whole.",
   "topics": [
    "systemic-risk",
    "risk-and-incentives",
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1806252-016",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-016",
   "content_sha256": "f55175703e1ec26870dd2675e0a5584ca71a42558392b5926fa0de69e9101b99",
   "claim": "Even if hedge fund investing does have systemic implications, systemic risk is multifaceted enough that addressing it could require more than one regulator in a single jurisdiction, so the SEC alone may be unable to accomplish the task.",
   "topics": [
    "systemic-risk",
    "risk-and-incentives",
    "institutional-design",
    "securities-law"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1806252-017",
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   "content_sha256": "f4cc48d428e2b0e7d584eab3e74d0525e69ab5fb9094afb1a5e41f7c8b352c28",
   "claim": "The SEC would be better advised to interpret the rulemaking authority it received from Congress than to increase requirements on hedge funds in order to address concerns over potential systemic risk.",
   "topics": [
    "securities-law",
    "dynamic-regulation",
    "systemic-risk",
    "risk-and-incentives",
    "private-funds"
   ],
   "is_failure_mode": false
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  {
   "id": "kaal:claim:1806252-018",
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   "content_sha256": "054c6e2ed5df87b89e90f0852f9ea84c0bd06ec0d63b2ed38bf80a5516be5925",
   "claim": "A lack of regulatory guidance creates legal uncertainty, and legal uncertainty in turn generates transaction costs.",
   "topics": [
    "law-and-legal-systems",
    "economics",
    "securities-law"
   ],
   "is_failure_mode": false
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  {
   "id": "kaal:claim:1806252-019",
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   "content_sha256": "bcf3fd6f022aab6b64f17240764620a60559d94298cbed7cfaf4d513abe6e843",
   "claim": "Because the AIFM Directive exposes depositaries to strict liability in certain circumstances, depositaries must weigh the risks and benefits of serving EU alternative investment funds, and a negative assessment would harm the depository business and, implicitly, hedge funds.",
   "topics": [
    "law-and-legal-systems",
    "private-funds"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1806252-020",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-020",
   "content_sha256": "ad1876d16810bdd46ce445ffb9c700640bfffeb5a56bb91dfacc4e5905c87c2f",
   "claim": "Discrimination against non-EU jurisdictions under the AIFM Directive could provoke retaliatory action, and retaliation combined with a lack of intra-European cooperation could damage the European financial services industry and the whole European economy.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1806252-021",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-021",
   "content_sha256": "12c790bdcd84b2bd2c03506a3562ca686e2f31aeabc298657484b6e3f25cae09",
   "claim": "Market failure in complex financial instruments, rather than hedge fund activity as such, could have been a contributing factor in the recent credit crisis.",
   "topics": [
    "economics"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1806252-022",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-022",
   "content_sha256": "0e1caf2b884ff28692826a9276abf922c03cd2ef37cb3447c1d1ca9e31add8ef",
   "claim": "Although hedge funds manage only a small proportion of the investment universe compared with banks, they do manage a proportionally large part of complex financial instruments such as CDOs and other derivatives.",
   "topics": [
    "private-funds",
    "economics"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1806252-023",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-023",
   "content_sha256": "3f18f90b1f5e14a31352308ec1f0425729dd772f1a85e720ff3834c11148f4b6",
   "claim": "British Bankers' Association data show that since 2000 hedge funds steadily increased their share of the credit derivatives market while banks' role in that market progressively declined.",
   "topics": [
    "private-funds",
    "economics",
    "empirical-evidence"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1806252-024",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-024",
   "content_sha256": "3aa56df0b13a8368793fb3621180ef57632c451ee7400a8c1d241a60037e8f42",
   "claim": "Legislators had disincentives to impose harsher requirements on the hedge fund industry before the crisis, because harsher regulation could have driven franchise taxes and other business to offshore centers.",
   "topics": [
    "regulatory-failure",
    "law-and-legal-systems",
    "economics",
    "private-funds"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1806252-025",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-025",
   "content_sha256": "7313abb61c32024a111d0e096dd229bec0c8732dfdcb31ce481cc6ba300235ea",
   "claim": "Basel III capital charges based on a bank's lending exposure to hedge funds could help address the threat of regulatory arbitrage.",
   "topics": [
    "systemic-risk",
    "regulatory-failure",
    "defi"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1806252-026",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-026",
   "content_sha256": "079b8112c6be2c898a4c47b78a4aaba5c95696930d07528105fecde24b3924ed",
   "claim": "Implementing the hedge fund lending charge through Basel III would require no separate national implementation, because compliance falls on banks that have already joined the framework, so transaction costs for national regulators would be avoided.",
   "topics": [
    "systemic-risk",
    "economics",
    "dynamic-regulation"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1806252-027",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-027",
   "content_sha256": "ce3c7660661974e060bb767c965cd56dca24916f7af2dff9b580e23e6bac1098",
   "claim": "Even combining hedge fund regulation via Basel III rules with the de minimis investment rules in Dodd-Frank could leave some issues open, and calibrating such a regulatory combination requires time and experience.",
   "topics": [
    "systemic-risk"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1806252-028",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-028",
   "content_sha256": "556906b3861818d0e7bea1b016906c511c63512561a1d3e4551468829632f9d4",
   "claim": "A standard objection to indirect regulation is that counterparty credit risk management will not work effectively unless the lending bank has an exclusive relationship with the hedge fund that lets it control the relationship.",
   "topics": [
    "risk-and-incentives",
    "compliance"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1806252-029",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-029",
   "content_sha256": "d95af2654558cf8755c56d795a5bf7bf1630a72712c3114c888108a0fafc8e60",
   "claim": "Contesting the exclusivity objection, exclusivity of a banking relationship is not the only effective way to exercise control and manage risk: the intensity, endurance, and quality of the relationship also influence how much control a bank can exercise over a hedge fund.",
   "topics": [
    "risk-and-incentives",
    "systemic-risk",
    "compliance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1806252-030",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-030",
   "content_sha256": "17722ca0206e5487b6dd2230e68fff9ea67f6e487c2c518dae5dc81ccb4830a7",
   "claim": "Because some hedge fund trading strategies depend on the immediate availability of capital and will not work without sufficient lines of credit, banks may retain enough influence over hedge funds even where funds use multiple lenders.",
   "topics": [
    "systemic-risk"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1806252-031",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-031",
   "content_sha256": "a8ebcc5d85c3e34dee4a52a44d4db261d32e876cfb0fc1e8cb971313a9b6700b",
   "claim": "Banks' role in monitoring hedge funds is not easily comparable to the principal agent problem between securities buyers and credit rating agencies, because banks have more influence over hedge funds than securities buyers have over rating agencies and their ratings.",
   "topics": [
    "ai-and-agents",
    "corporate-governance",
    "systemic-risk",
    "compliance",
    "risk-and-incentives"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1806252-032",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-032",
   "content_sha256": "ab69dac4be1e082284c019884e096987c43197b77a52743c267615f2065c8f60",
   "claim": "The numerical wealth requirements used to define qualified hedge fund investors fail as a regulatory device, because investors who meet the wealth thresholds do not always have the knowledge, understanding, and sophistication needed to invest in highly complex financial instruments.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1806252-033",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-033",
   "content_sha256": "fd5cc225f31c435b89e657dfda05378b754eb5bed2b7f9582837f4599b354837",
   "claim": "Requiring advisers to adopt written policies to prevent and detect securities law violations presumes those violations are foreseeable, yet because Dodd-Frank substantially changed securities law, the foreseeability of potential violations is itself further curtailed.",
   "topics": [
    "compliance"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1806252-034",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-034",
   "content_sha256": "891138a7933451ce5130dd118b19519dde0e63d8a8d3753882eefdec5203b11d",
   "claim": "Without the threat of systemic risk and without a clear delineation of the social externalities that hedge funds cause, the purpose of direct hedge fund regulation is unclear.",
   "topics": [
    "systemic-risk",
    "risk-and-incentives",
    "private-funds"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1806252-035",
   "canonical_url": "https://wulfkaal.github.io/claims/1806252-035",
   "content_sha256": "2c891ffb6aef660c30a19ffb4771aedfea89fbf5814e86127852eba55d2be6a5",
   "claim": "Registering hedge funds with regulators and requiring disclosure of pertinent information could help minimize the moral hazard, social externalities, and systemic risk generated by the hedge fund industry.",
   "topics": [
    "securities-law",
    "private-funds",
    "disclosure",
    "risk-and-incentives",
    "systemic-risk"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-001",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-001",
   "content_sha256": "3021a6f3a54f11bd5e1da809f7ae7faa5bab4dd246e6a496378ce2a778d19ed9",
   "claim": "Because Morrison ties Section 10(b) to the location of the securities transaction rather than to the place where the deception originated, the logic of the holding implies that the SEC likewise has no enforcement rights over securities transactions occurring outside the United States.",
   "topics": [
    "securities-law",
    "compliance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-002",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-002",
   "content_sha256": "1d9f64851395007c88a027de2afdd04c892f3e2b87ab475676f81bc5fb9b6b8d",
   "claim": "Before Morrison, U.S. courts refused to adopt a bright line rule for the extraterritorial reach of Section 10(b), and the resulting case by case conduct and effects analysis was applied inconsistently.",
   "topics": [
    "law-and-legal-systems",
    "securities-law"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-003",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-003",
   "content_sha256": "f314d2b09d7d550666d557392b589ca0e39755d9352f76b609c8d0e5288ed931",
   "claim": "The plaintiffs' reading that Section 10(b) covers transactions anywhere in any security of a class listed on a U.S. exchange is inconsistent with Morrison, because the opinion turns on the location of the transaction and on the holding that Section 10(b) has no extraterritorial application.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-004",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-004",
   "content_sha256": "cbae6b67d33f4f837d3b59e7134ed078a18a0db5586d2f491bd4d4a79188c46f",
   "claim": "Morrison itself refutes a listing based reading of Section 10(b): the Court knew that National Australia Bank had registered and listed shares in New York, yet held that Section 10(b) did not reach trades in those ordinary shares in Australia.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-005",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-005",
   "content_sha256": "b016e02007fac90ddf49000d2eb1fd9e0edae76982188f06fb904c63c9cead9a",
   "claim": "There is no substantive difference between a foreign issuer listing ADRs on a U.S. exchange and listing its ordinary shares there, so Section 10(b) coverage of foreign transactions should not turn on which arrangement the issuer chose.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-006",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-006",
   "content_sha256": "0b33a976bfb595a3ec4f49c0890d5cc7905b15dc23cb127c32a0fad54d1beac8",
   "claim": "Section 30 of the Exchange Act is Congress's only articulation of the extraterritorial reach of Section 10(b), and Congress did not intend the Exchange Act to have extraterritorial effect beyond that provision.",
   "topics": [
    "defi"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-007",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-007",
   "content_sha256": "f44ae2bf5a24af7e5fc136742ed821da2a9b63aca03896b3667392202a2fd641",
   "claim": "The Supreme Court should have summarized its Morrison holding in language matching the opinion's logic, namely that Section 10(b) applies only to securities bought or sold in the United States; the Court's summary language instead invited confusion.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-008",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-008",
   "content_sha256": "99d1c2603bc0b8c12cc0a697c5a943a61ccc22cf8e337734ccc43bddff70ed45",
   "claim": "Permitting Section 10(b) suits over dually listed securities traded outside the United States would undermine Morrison's own policy rationale, because it would interfere with the laws of other countries and turn the United States into a haven for plaintiffs' lawyers suing over foreign exchange purchases.",
   "topics": [
    "securities-law"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-009",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-009",
   "content_sha256": "677b82774a9762a9457ed6f4adb813599b518862aeecd16bf3a81c50c493bd4c",
   "claim": "Judge Baer's dismissal of the Porsche complaint reaches the correct result under Morrison, but parts of his reasoning require further refinement.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-010",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-010",
   "content_sha256": "404c02fe7f3c18d0c953117ba07c5552762f4f27c506680b08000338e6e78105",
   "claim": "The Porsche swap transactions were not the functional equivalent of a transaction on a U.S. securities exchange, but neither were they the functional equivalent of a transaction on a German exchange, contrary to the implication of Judge Baer's opinion.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-011",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-011",
   "content_sha256": "22a69e78745668d251290281df23ee8c9ae1845a686299b3c4fd95f0094e07f1",
   "claim": "The economic reality of swap agreements does not justify fixing the location of the transaction in every case solely by reference to the market where the reference security trades, even though Judge Baer was right that the Porsche swaps were not U.S. transactions.",
   "topics": [
    "economics"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-012",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-012",
   "content_sha256": "b1d2469a422b3db96270b2bfc9a8008f76960a553f919976ec2c8bf87aded63a",
   "claim": "Morrison provides no clear parameters for classifying privately negotiated transactions as domestic or foreign, because the case involved publicly traded securities and never reached the question.",
   "topics": [
    "law-and-legal-systems"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-013",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-013",
   "content_sha256": "37b05368421e12668a29e09bd0685a066946dbd4a42fb6a43b60e4ec45f3fb4f",
   "claim": "If the presence of a single U.S. party sufficed to locate a privately negotiated derivative transaction in the United States, U.S. parties could sue in U.S. courts regardless of other factors such as where the counterparties were located.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-014",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-014",
   "content_sha256": "5601c41ba53db505da5805b9f6995057ba22f1f300faf6a97251266eaabc61c4",
   "claim": "Locating a private transaction by the location of the parties is often unworkable, because the parties are frequently institutions simultaneously present in the United States and abroad, and individual parties are often in transit.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-015",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-015",
   "content_sha256": "e0b1ca92c827e09a1b84c55491d5907ae1cb9f0817deb252a874952339a6a3f0",
   "claim": "Given the defects of a party location analysis, courts should de-emphasize where the parties are and instead use a totality of the circumstances approach to determine where a privately negotiated derivative transaction took place.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-016",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-016",
   "content_sha256": "84dec0aeea32ad93bfdf4ee8874f53543c22d8af6275431d0320c132c5bb4591",
   "claim": "Treating the U.S. location of a broker as making the securities purchase domestic would circumvent most of the Morrison holding, since a foreign buyer of foreign securities could invoke U.S. law simply by routing the order through a U.S. broker.",
   "topics": [
    "regulatory-failure"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-017",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-017",
   "content_sha256": "519d759ccca502b5038743d83e17e72ba3978ae80ba7efaf80fceb52fa385674",
   "claim": "Non-U.S. investors have a strong incentive to route foreign trades through U.S. brokers if that preserves a U.S. cause of action, because their home jurisdictions rarely offer the attractive features of the U.S. system such as broad discovery, higher damages, class actions, and no exposure to defendants' costs.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-018",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-018",
   "content_sha256": "dddd590d4dc981d13d0a60b65ab77ae6306714df8fe855e91dd67b868c7d6aa1",
   "claim": "For exchange traded securities, the location of the exchange rather than the location of the plaintiff's broker should be the controlling factor under Morrison, although it is uncertain whether all courts will adopt this bright line test.",
   "topics": [
    "defi"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-019",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-019",
   "content_sha256": "29be5b845db9b8e9a590bea9ea4ae5b82abf39379f2860616702da25c6ac0157",
   "claim": "Porsche could be exposed to substantial U.S. sanctions even though neither its own common stock nor Volkswagen's traded in the United States, solely because of swap agreements to which Porsche was not a party.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-020",
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   "content_sha256": "daddad394a9c719dc19297d3f233118aa39ec886959343d009285c7d346724b6",
   "claim": "If Section 10(b) were held to reach swap agreements based on stocks traded outside the United States, plaintiffs' attorneys would use that holding as precedent to limit Morrison broadly, and other courts might create a general exception for U.S. derivative contracts referencing non-U.S. securities.",
   "topics": [
    "law-and-legal-systems",
    "securities-law"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-021",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-021",
   "content_sha256": "11bc99bcedcef69c6a185a6c914aea38c9f4060e910c5ff95de84be681a2d0db",
   "claim": "Unless courts can construe Morrison for swap agreements and other derivatives consistently with both the logic and the language of the opinion, Congress will have to enact new clarifying legislation.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-022",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-022",
   "content_sha256": "d430022c130bdae1f572a32490397d4cb6433658017d5ff55913898e5ab71a24",
   "claim": "The Second Circuit should uphold Judge Baer's ruling on a totality of the circumstances basis and explain more fully how those circumstances determine the location of a swap agreement under Morrison.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-023",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-023",
   "content_sha256": "cf695467ba677f6800c1d1900c7f0016ce83c421469f0a25905c670fc15ddf21",
   "claim": "On its face Section 929P(b) of the Dodd-Frank Act addresses only the jurisdiction of the district courts and does not expand the geographic scope of the substantive provisions of U.S. securities law.",
   "topics": [
    "law-and-legal-systems"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-024",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-024",
   "content_sha256": "bd415102cca59b808e587d331e2f868a2551cfe1f096fb4973be2cb050326934",
   "claim": "There is a substantial likelihood that U.S. courts will read the Dodd-Frank Act as giving some extraterritorial effect to SEC and DOJ suits, so Morrison cannot be expected to survive intact in actions brought under Section 929P(b).",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-025",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-025",
   "content_sha256": "ded2da68ba857eef0a34474098d862dc353366e18c2a1d392483c590fc66684e",
   "claim": "Section 929P(b) may not have been necessary, because Section 10(b) already gives the SEC enforcement authority whenever a single U.S. securities transaction is affected by the alleged fraud.",
   "topics": [
    "securities-law",
    "compliance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-026",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-026",
   "content_sha256": "37dbb4c8d396fa93ba8f1ea259af506a976e397fe462e8c84d3033d45787772d",
   "claim": "Foreign-cubed rulings such as Morrison determined the size of the plaintiff class in private suits, but were irrelevant to the SEC's ability to enforce wherever a U.S. securities transaction is connected to the alleged fraud.",
   "topics": [
    "securities-law",
    "compliance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-027",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-027",
   "content_sha256": "a7e0ec3ae47cffce19ed9b136fc593f1ec37ca4f23b05c1eb1f3f650779a3c38",
   "claim": "Read as more than a jurisdictional grant, the Dodd-Frank provision becomes an open-ended statute rather than the targeted authority the SEC already held under Section 10(b) and Section 30, and it is undesirable for the SEC to use such powers unilaterally without consulting foreign regulators and the U.S. foreign policy establishment.",
   "topics": [
    "securities-law",
    "compliance",
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-028",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-028",
   "content_sha256": "38d6be2d49e22ee5aa16cc155e8204fcdd18f0ae7fd2c439a5823a442f25923f",
   "claim": "Section 929P(b) risks complications where the SEC proceeds unilaterally in situations in which coordinated enforcement with foreign regulators would be more effective, for example insider trading cases involving exchanges whose home regimes do not recognize comparable insider trading rules.",
   "topics": [
    "securities-law",
    "compliance",
    "institutional-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-029",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-029",
   "content_sha256": "fc38bfbb4b2cb0d0ff5470a9a21064d68e319d01a0377e30276b247289466e95",
   "claim": "Expanded SEC enforcement under the Dodd-Frank provision runs a serious risk of being perceived as an encroachment on the corporate governance of foreign companies.",
   "topics": [
    "governance-design",
    "corporate-governance",
    "securities-law",
    "compliance"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-030",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-030",
   "content_sha256": "9ab0b6988dce3cc31e48bfbaa0e64dc0832d60e36bbddac722cb2dc02711d345",
   "claim": "Overuse of the Dodd-Frank extraterritorial enforcement provision by the SEC or the DOJ could deter foreign companies from having U.S. operations.",
   "topics": [
    "securities-law",
    "compliance"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1765901-031",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-031",
   "content_sha256": "7918b4a243dd013510d39f7d17779d96a316663914e336ec6ad5b9292eb8433c",
   "claim": "Extending private rights of action extraterritorially would expose non-U.S. companies to Section 10(b) liability based on any U.S. conduct, including conduct inside U.S. business operations alleged to have produced securities fraud abroad, and much of global securities litigation would migrate to the United States.",
   "topics": [
    "law-and-legal-systems"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-032",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-032",
   "content_sha256": "5c3d053e4edd9493a24eab7c3711d403e17791a12c2f04ccfbadbc65775b5d6b",
   "claim": "A private right of action in foreign-cubed cases would compel EU companies to modify U.S. business operations that expose them to Section 10(b) litigation, including operations unrelated to U.S. securities markets or U.S. investors.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-033",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-033",
   "content_sha256": "09f0817cab9fec7f7c2f3531ea2853473992a22d87adb06d26e2a4e74983a7ba",
   "claim": "Changing national rules in a spirit of cooperation among states and regulators is more productive for preventing securities fraud than imposing U.S. rules on foreign nations through extraterritorial imperialism.",
   "topics": [
    "securities-law"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-034",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-034",
   "content_sha256": "7a61bb9605974b1cbe9965adb0bd6953f1a734d5b5053cd6b1fff2260ca2e4c1",
   "claim": "Regardless of what the SEC study concludes, Congress should decline to reinstate private rights of action in foreign-cubed cases.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-035",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-035",
   "content_sha256": "a99ac52369383ffb6b32b6d55fc2fd5062a9d471ed330b5f2f7605e6587ef6b7",
   "claim": "The SEC study is very unlikely to produce an extraterritorial extension of private rights of action so long as Republicans control the House of Representatives.",
   "topics": [
    "securities-law",
    "economics"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-036",
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   "content_sha256": "32ea701de46682b78c3b14a9dc02171450927ec393a9408bcefee309ae51171c",
   "claim": "Because of the ambiguities in Morrison and Dodd-Frank and the consequences of a broad reading for persons and companies in European and other jurisdictions, Congress should clarify its intent in Section 929P(b) with respect to SEC and DOJ suits over securities transactions outside the United States.",
   "topics": [
    "law-and-legal-systems"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1765901-037",
   "canonical_url": "https://wulfkaal.github.io/claims/1765901-037",
   "content_sha256": "7458867cc15a0d24cd9ed7f7e67d1948964587c47f6b75e137f84dc99048420b",
   "claim": "A clear and restrained U.S. approach to extraterritoriality will bring predictability to global securities markets and avoid a downturn in international economic cooperation.",
   "topics": [
    "law-and-legal-systems",
    "securities-law",
    "economics"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:2061166-001",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-001",
   "content_sha256": "ef5dc4be528f9e9295c6a7dd19c1d979709d57bc00b7b8e4875a666d928d8b35",
   "claim": "Where bank resolution regimes are not coordinated across jurisdictions, the same systemically important financial institution can be handled in opposite ways: it might petition for reorganization under German law and emerge leaner and more competitive, while its United States operations are liquidated under the Boxer Amendment of the Dodd-Frank Act.",
   "topics": [
    "systemic-risk",
    "regulatory-failure"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-002",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-002",
   "content_sha256": "cee026e81adb523d4d1553122b01171cc1543dcf8b0085dce3df70f1003c7149",
   "claim": "The authors contend that the European Commission's goal of maximum harmonization through a global single rule book may not be achievable, and that a legal framework for private ordering of contingent capital is the more realistic route to an adequate level of convergence.",
   "topics": [
    "risk-and-incentives",
    "contingent-capital"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:2061166-003",
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   "content_sha256": "c856c639728acddaa383ca702ef3abc45766d072ffc4248d3f5bad1b030c334d",
   "claim": "Contingent capital is stipulated as the predefined conversion of a financial institution's debt securities into equity securities, and on that definition it supplies an option for the efficient restructuring and resolution of failing financial institutions.",
   "topics": [
    "contingent-capital",
    "systemic-risk"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:2061166-004",
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   "content_sha256": "6d374aa0affa72c739fd4f582ff1b66642036d0036b4883a1ea0ecbb0f8f90e0",
   "claim": "Purely national crisis measures proved ineffective during the financial crisis because they could not reach cross-border banking operations or contain contagion, as the failures of Lehman Brothers, Fortis, the Icelandic banks, Northern Rock and Hypo Real Estate Holding demonstrated.",
   "topics": [
    "systemic-risk"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-005",
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   "content_sha256": "91443f5df92fded60494872d451539720188bacbbdf88d62eeef12aa75c8487c",
   "claim": "Because most national crisis responses took the form of public bail-outs adopted without broad international consensus, they increased the threat of international regulatory arbitrage and damaged the global competitiveness of national financial markets.",
   "topics": [
    "systemic-risk",
    "regulatory-failure",
    "institutional-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-006",
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   "content_sha256": "ed0f4917e5a63238f13118ba404663353d848749d2e2c3f5c56d3af6fcb78463",
   "claim": "Mutual recognition of countercyclical capital buffers hollows out the national discretion the Commission proposal appears to grant: the financially strongest Member States with the largest financial sectors will effectively set the buffer size for smaller Member States whose institutions do business there.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-007",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-007",
   "content_sha256": "a3d478a38c5607dafac81199377036d9ffd72b4dabb1936ae3a0c853f2898736",
   "claim": "Even the residual national discretion to set countercyclical buffers between 2.5 and 5 percent is misleading, because a Member State such as the United Kingdom is unlikely to sustain a 5 percent buffer while Germany requires only 2.5 percent and thereby hands German banks a competitive advantage.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-008",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-008",
   "content_sha256": "5be48c213bb4c341b3e25500ed35ab8883c025b76ae05696fd6df730931ba8ac",
   "claim": "The authors identify a drafting defect in the proposed CRD IV Regulation: the distinction drawn by financial institution in Article 51(a) is ambiguous and the cross reference to the institution referred to in point (a) of Article 87 is unclear and indeterminate, so the provision requires clarification or amendment.",
   "topics": [
    "contingent-capital",
    "law-and-legal-systems"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-009",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-009",
   "content_sha256": "b2ff6e30e55441db81e3aa678672a32d184bda47658a2743ada649bdde9796a0",
   "claim": "Placing bank reorganization in the hands of an administrative supervisory authority rather than a bankruptcy court, as Swiss law does, trades better sector knowledge and a faster procedure against the cost of very broad agency discretion.",
   "topics": [
    "systemic-risk"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:2061166-010",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-010",
   "content_sha256": "16447c0b31861935dd00511a9844a42a387e8fe00748a2f722fd84a2b3d163cc",
   "claim": "Reliance on public bail-outs, unaccompanied by any threat that management, shareholders and creditors would share significant losses, created an asymmetric incentive for excessive risk taking by financial institutions.",
   "topics": [
    "risk-and-incentives",
    "systemic-risk"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-011",
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   "content_sha256": "b099f87f7a63220204f03835e5b3dd3015f68103253dd20692eceebc09744f51",
   "claim": "Before the 2010 reform, the German regulatory intervention regime for financial institutions contained no procedure that would have reliably permitted a bank to be operated as a going concern during the financial crisis.",
   "topics": [
    "systemic-risk"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-012",
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   "content_sha256": "de0b73c8cca6f1d354cd2b48e893fb09f3c362727bed2e88f1e49cae278e67fd",
   "claim": "The German provision allowing appropriate compensation of shareholders whose rights are impaired can defeat the statute's own purpose, because time is of the essence in bank reorganization and the appointment of a court-appointed expert to value shareholder claims may significantly slow the procedure.",
   "topics": [
    "systemic-risk",
    "corporate-governance",
    "economics"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-013",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-013",
   "content_sha256": "6d662376789f30b46139e9419ed6cdeff43fcc7907117723252cb830d8967e16",
   "claim": "The German voluntary reorganization procedure has a structural gap: groups of financial institutions, financial holding groups and conglomerates cannot petition for protection under it, even though these are precisely the entities that qualify as systemically important and pose the highest risk to market stability on failure.",
   "topics": [
    "systemic-risk"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-014",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-014",
   "content_sha256": "e3a8e8e8c0056d9635a4e7199cdb1c052f8bc6d6ca9cb7d029d47c819d43fcae",
   "claim": "Because German law fixes no threshold conditions or determining factors for market reception or market confidence, the systemic relevance and contagion determinations that turn on those factors can never be made in a reliable and objective manner.",
   "topics": [
    "systemic-risk",
    "risk-and-incentives",
    "economics",
    "law-and-legal-systems"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-015",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-015",
   "content_sha256": "d78abfa9ef0e9d9f1040f3cb145d77c95de18f73f3c1d930dac5f345da125b75",
   "claim": "Because the amendments to the German Banking Act sharply increase the supervisor's intervention powers, the prospect that any systemically important bank would voluntarily petition under the German stabilization or reorganization procedure is remote at best.",
   "topics": [
    "systemic-risk"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-016",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-016",
   "content_sha256": "6f5e20c3d3beb098e964fcc0a91cbb40e536689b00794932432d184809dd54b3",
   "claim": "The supervisor's discretion to set a deadline for a recovery plan before issuing a transfer order is unlikely ever to be exercised in practice, because in a crisis time will be of the essence to prevent contagion.",
   "topics": [
    "systemic-risk"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-017",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-017",
   "content_sha256": "0878a8b841966c9268be0dd31742d1583c12cfe9e95c8ff2445eabe0c0eb60cd",
   "claim": "Requiring only that consideration be commensurate with the value of transferred assets invites frequent and significant disputes over valuation, a problem compounded when the consideration consists of shares in the bridge bank, whose own value must then also be assessed.",
   "topics": [
    "systemic-risk",
    "economics"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-018",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-018",
   "content_sha256": "0cd41b02872f0e88f9fea98ed77ac6b16fc75c25cbff569abaa08095943a2fa8",
   "claim": "The German bank levy is internally inconsistent because financial institutions without systemic relevance must contribute to the reorganization fund yet are ineligible to receive support payments from it.",
   "topics": [
    "systemic-risk"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-019",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-019",
   "content_sha256": "8534bedacfca4f223d212b702b3a30963098acc104a7f5d9665170844a52aaa9",
   "claim": "The German reorganization fund's maximum volume of 70 billion euros may not suffice in a financial crisis, and the availability of those funds and the time needed to raise them are an even greater concern than the ceiling itself.",
   "topics": [
    "systemic-risk"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-020",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-020",
   "content_sha256": "a2d36146101fa8ccc7217bd79afe74823e5f3fc59933fcc2146553848834359b",
   "claim": "The German Banking Act requirement that a bridge bank have its head office inside Germany is of highly questionable compatibility with European Union law, specifically the principle of free movement of capital under Article 63 TFEU.",
   "topics": [
    "systemic-risk",
    "law-and-legal-systems"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-021",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-021",
   "content_sha256": "0995b82152d392c968123886a7acae7c9919adad536c0a84d234b16503772b9e",
   "claim": "Contingent capital supports general risk control and reduces moral hazard by holding shareholders responsible and internalizing the costs of bank failure rather than externalizing them onto taxpayers.",
   "topics": [
    "contingent-capital",
    "risk-and-incentives",
    "corporate-governance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:2061166-022",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-022",
   "content_sha256": "bd8979c3222b172f518be25cf0b2a0c33b85706a3167b50dd6648248a85ed07e",
   "claim": "Because conversion carries a threat of loss and implicit dilution of stock holdings, contingent capital reduces shareholders' incentive to push management toward higher risk in pursuit of higher returns.",
   "topics": [
    "contingent-capital",
    "risk-and-incentives",
    "corporate-governance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:2061166-023",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-023",
   "content_sha256": "9fd7aad9a41c85c86c61ab04e8381cc19b3a7e6839ad5e43712a0e4a332e5c0d",
   "claim": "The authors contend that the European Commission's suggested floor of 4 to 19 percent of risk-weighted assets in pre-qualified bail-inable debt under the targeted approach is unrealistically high.",
   "topics": [
    "systemic-risk",
    "contingent-capital",
    "risk-and-incentives"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:2061166-024",
   "canonical_url": "https://wulfkaal.github.io/claims/2061166-024",
   "content_sha256": "46135c97b6e82195ad28519385ffdff4874d89c272d561a96a23fd916d04d000",
   "claim": "Implementing the European Commission's debt write-down proposal has the potential to increase funding costs for financial institutions and to make their funding more volatile.",
   "topics": [
    "systemic-risk",
    "contingent-capital"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2061166-025",
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   "claim": "Article 13 of the Swiss Banking Act, which authorizes boards of systemically important banks to issue mandatory convertible bonds subject to disclosure of the conversion triggering event and permits tranches with multiple triggers, could serve as a model for other European legislators and for the United States legislator.",
   "topics": [
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   "is_failure_mode": false
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   "content_sha256": "d5a1fd6665905f91008683dab892c4cfe13475158656757b7b5dd65701e60223",
   "claim": "Enacting the proposed German Corporation Act amendments that would give contingent capital securities a statutory basis would require substantial changes across other areas of German law, and is unlikely to be achieved unless European Union law requires it and the standards are internationally recognized.",
   "topics": [
    "contingent-capital",
    "law-and-legal-systems"
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   "content_sha256": "e70110dd8320ffad409492bb14b591fac57663bb14b9e249bb834307f56e7e18",
   "claim": "Efficient calibration of the triggering event is the central design problem for contingent capital, and the optimal design of a trigger that converts debt into equity remains unclear.",
   "topics": [
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  {
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   "content_sha256": "587b1183a7af72577e5951ae63684de80b4b3365852fea1cd5cefc5249a03c93",
   "claim": "Mandating the issuance of contingent capital does not guarantee that a viable market in contingent capital securities will develop.",
   "topics": [
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    "economics",
    "defi"
   ],
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  {
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   "claim": "Building critical mass in the contingent capital securities market could require banks and other financial institutions to buy their competitors' contingent capital securities, which would raise ethical, antitrust and incentive concerns.",
   "topics": [
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    "reputation",
    "economics",
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   "content_sha256": "4cfd95b93104d8330dceeb4fb88b5f74a5cdd66ca6a1ca3f22baa645c9ccf568",
   "claim": "The authors posit an inverse relationship between trigger uncertainty and market development: as the uncertainty generated by trigger designs increases, issuance volume of contingent capital securities falls, while the risk and the pre-conversion interest rate on those securities rises.",
   "topics": [
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   ],
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   "claim": "A trigger that fires too early wastes the equity injection: conversion occurs without a real need for capital or additional voting shareholders, and the effect of the injection may have dissipated by the time it is actually needed.",
   "topics": [
    "contingent-capital"
   ],
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   "claim": "A trigger that fires too late is equally useless: by then the financial institution may already be in the resolution stage, and conversion at that point will not supply enough equity to turn the company around.",
   "topics": [
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    "systemic-risk"
   ],
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   "content_sha256": "15dca352c47abb617094920dbce1994687de02f3dba096be708516c16194c63a",
   "claim": "Dual trigger proposals draw their central strength from reliance on market prices, but the index leg is a major disadvantage because it can create incentives to manipulate the index or to force an entity into bankruptcy before conversion occurs.",
   "topics": [
    "contingent-capital",
    "economics"
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   "content_sha256": "16f4222a4e4bcdc65daa18ca99fb3a4726d81a7fe93807f8a762b5be29897551",
   "claim": "A second, sequential trigger placed before reorganization or resolution cushions the risk that policy makers misstructure the first trigger, absorbing the negative effects of inadequate or untimely conversion at the moment the institution needs capital.",
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    "systemic-risk",
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   "claim": "Conversion of contingent capital securities from debt to equity should be timed to occur once problems are first detected but before the early intervention powers of regulatory authorities are triggered.",
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   "content_sha256": "336bb0c1960cd69e356f214cbc8871c8ff43f414e6a19d8a3a760c0af1f1c6d7",
   "claim": "Using contingent capital as a preventative tool does not foreclose the statutory core power or the debt write-down tool within resolution; if early contractual write-down and conversion fail, authorities remain free to intervene and impose a haircut on shareholders, debt investors and other private parties.",
   "topics": [
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   "claim": "Convergence of contingent capital standards is impeded by a first mover problem: single jurisdictions hesitate to impose contingent capital requirements before they know how competing jurisdictions and their financial institutions will structure their own rules.",
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   "claim": "Without a degree of similarity and convergence in bank resolution and contingent capital rules, regulatory arbitrage will work against establishing contingent capital as an integral part of financial markets.",
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   "claim": "Given the European initiatives on contingent capital and the nascent European market in contingent capital securities, the Board of Governors of the United States Federal Reserve would be well advised to consider implementing contingent capital standards.",
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   "claim": "The Basel Committee rejected European Union Member State requests to allow contingent capital to satisfy the new capital buffer requirements under Basel III, deciding instead that systemically important institutions must meet heightened capital requirements with retained earnings and ordinary shares.",
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   "claim": "Early European initiatives to put contingent convertible bonds into executive pay lack governance-improving designs; contingent convertible bonds with an early conversion trigger should be used in executive compensation instead.",
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    "corporate-governance",
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   "claim": "The methodological assumptions of incomplete contract theory improve the analysis of executive compensation arrangements relative to the classical and spot contract models normally used.",
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   "claim": "Contingent convertible bonds placed in executive compensation serve a different purpose than those sold to investors: the point is not capital infusion during a crisis but governance-improving design that optimizes management incentives.",
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    "corporate-governance",
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   "claim": "The conversion feature of contingent convertible bonds affects corporate governance in a SIFI only if issuance volumes are sufficient and design features are adequate, because the governance effect runs through the threat of dilution of existing equity positions.",
   "topics": [
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    "governance-design",
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   "claim": "Market solutions and private ordering alone are unlikely to produce contingent capital designs that improve corporate governance in SIFIs, because privately negotiated sales so far have not produced governance-sensitive designs.",
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    "contingent-capital",
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   "claim": "Analyzing executive compensation as a single contract between an executive agent and a corporate principal fails, because it ignores the informal relational element of the principal agent relationship that often overshadows the legal terms of the agreement.",
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    "corporate-governance"
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   "claim": "Control rights in executive compensation contracts cannot sufficiently constrain ex post opportunism by executives, because of incomplete information, information asymmetry, bounded rationality, limited foresight, and transaction costs.",
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   "claim": "Adding contingent convertible bonds with an early trigger to executive compensation packages creates a corporate governance mechanism that addresses the inability of contractual control rights to constrain executive opportunism.",
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    "corporate-governance"
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   "content_sha256": "fa47c3f4b735801a8a98d3a1b74811d7ea34960301e2b2c40280dc591d29052f",
   "claim": "Barclays's Contingent Capital Plan uses synthetic CoCos that simply lapse when the Group Core Tier 1 capital ratio falls below seven percent, rather than converting into equity.",
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    "corporate-governance"
   ],
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   "claim": "Because the Barclays award falls away rather than converting, it does not create a fixed claim giving managers a stake in the firm's liquidation value, and therefore it does not lower agency cost.",
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   "content_sha256": "9a3c91b60aec3ec065cbdfbb220286596612d4ec89ff94f95b4c8eb582afffae",
   "claim": "A contingent capital award to executives without a conversion feature yields only limited governance improvement and only limited incentive to lower risk-taking; in its current form it operates as a mere compensation supplement.",
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    "risk-and-incentives",
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   "claim": "Contingent convertible bonds issued to executives are typically too small in volume to dilute investors' equity holdings or to supply a meaningful equity infusion during a crisis, so copying investor CoCo designs for executive pay produces suboptimal outcomes.",
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   "claim": "The early trigger converts only the executives' portion of debt into equity, ahead of investors' contingent convertible bonds and while the entity is still sound on a micro-prudential basis, which is what makes it an early warning system rather than a recapitalization device.",
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   "claim": "Regulatory triggers generate the highest level of uncertainty and can produce ad hoc regulatory decisions and adverse market responses, so they are not the best option for contingent convertible bonds in executive compensation.",
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    "economics"
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   "claim": "Regulatory triggers insufficiently incentivize executives to lower risk, because executives would not have to self-monitor and adjust their own risk-taking preferences in order to avoid the trigger.",
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   "claim": "Market-based trigger measures are vulnerable to market manipulation and bank runs, while accounting-based measures are updated too infrequently to respond adequately in a financial crisis.",
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    "economics",
    "systemic-risk"
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   "claim": "Institution-specific automatic triggers are the preferred basis for early trigger designs because they are flexible and independent of regulatory discretion.",
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    "institutional-design",
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   "claim": "To be effective, early triggers must be set well above the Basel III capital requirement threshold, and capital-ratio early triggers should be independent of regulatory demands about capitalization levels.",
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   "claim": "Because conversion damages both the debt portion and the surviving equity portion of an executive's package at the moment equity matters most for total pay, the combined effect is a strong incentive for executives to lower risk in order to avoid the triggering event.",
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   "claim": "Ordinary SIFI creditors have suboptimal incentives to monitor management because they implicitly expect that the government will provide bailout funding given the nature of the entity.",
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    "systemic-risk"
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   "claim": "The impending threat of dilution from a possible conversion of investor-held contingent convertible bonds can motivate existing shareholders to become actively involved in the governance of the entity.",
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   "claim": "Early triggers in executive compensation improve the signaling of default risk by producing the signal while default risk is present but still somewhat remote.",
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    "contingent-capital",
    "systemic-risk"
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   "claim": "Existing default risk signals were inadequate: CAMEL ratings and credit default swap pricing did not suffice to signal default risk at Lehman Brothers, Bear Stearns, or Merrill Lynch.",
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   ],
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   "claim": "Before conversion, executives holding securities with long-term maturities and coupon payments have incentives to manage the company with debt-holders' interests in mind.",
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   "content_sha256": "21eb56a2461a7abc5e7616d6c9690019984373ab50a8230d6d9c4be539252b3f",
   "claim": "Replacing stock options with contingent convertible bonds both lowers total executive compensation and disincentivizes short-termism and the executive focus on quarterly stock price performance.",
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   "claim": "Path dependencies in United States executive compensation culture could make it difficult to lower overall executive pay or to add new design elements such as contingent convertible bonds.",
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   "claim": "Executives paid in contingent convertible bonds have an opportunistic reason to manipulate the triggering event, because conversion at a depressed price before or during a crisis hands them cheap stock.",
   "topics": [
    "contingent-capital",
    "corporate-governance"
   ],
   "is_failure_mode": true
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  {
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   "claim": "Where rules and regulatory guidance are absent, fiduciary duties are the only constraint on executives, and existing fiduciary duties could prove insufficient to limit opportunism and abuse when the payoff is substantial.",
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   "content_sha256": "6cb1dceecd9c6c4355075969ef171a8ba40fd28bc90d6db953cdc0ab11f669bd",
   "claim": "A mandatory holding period covering all equity securities executives hold in the entity they manage, applied after their contingent convertible bonds convert, would limit abuse of the trigger.",
   "topics": [
    "corporate-governance"
   ],
   "is_failure_mode": false
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  {
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   "claim": "If executives influence the drafting of their own trigger, opportunism within the bounds of fiduciary duty will produce suboptimal early triggers and increase the potential for abuse, because executives can use the trigger to obtain cheap stock during a crisis.",
   "topics": [
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   ],
   "is_failure_mode": true
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  {
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   "content_sha256": "81487bfd17675700abbf356731341dec6b6756cfaee7744f1420e7eecd6f58f3",
   "claim": "Regulatory guidance on contingent capital design and issuance may be needed to curtail executive involvement in designing these instruments and to produce socially optimal designs.",
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   "claim": "The governance benefits of traditional inside debt, incentive optimization and reduced agency costs, all depend on the entity remaining solvent, and inside debt supplies no mechanism of its own to ensure that solvency.",
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   "content_sha256": "e1358c1da931a9218586cbed8b853b0b6589d7fb8c06de0321d2cbe78cce0c42",
   "claim": "Contingent convertible bonds with a conversion feature add what plain inside debt lacks: an early warning system and a buffer before insolvency that can help the entity avoid default.",
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   "claim": "Unlike the liquidation value backing traditional inside debt, equity received by executives on early conversion can still appreciate, because the early trigger creates a substantial buffer before insolvency.",
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   "claim": "Before conversion, contingent convertible bonds incentivize executives to lower risk-taking because their prices are sensitive to the downside risks of SIFIs, including default risk.",
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    "risk-and-incentives"
   ],
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   "claim": "Against the critique that long-term debt in pay does not deter short-run risky bets because expected short-term gains exceed the discounted value of the debt, adding early-trigger contingent convertible bonds changes managers' incentives by forcing them to weigh the effects of triggering events rather than only the debt to equity mix of their portfolio.",
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    "contingent-capital"
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   "content_sha256": "686bb46555fe447e67d95bf8b5b449eddf79cf58f26ade6c5c320c06c6fcdc4f",
   "claim": "Contrary to Gordon's view that contingent convertible bonds do not address the Fuld Problem, if executive packages do not include a large equity portion, managers have no incentive to block an equity infusion in order to preserve the value of their own equity.",
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    "institutional-design"
   ],
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   "content_sha256": "8bcf68d3c6c91262cbfd1efc8eb2a30f49d450a55e018246cea5435e41db8ba6",
   "claim": "Trigger designs that work well in institutions with the traditional mix of debt-holders and shareholders may be suboptimal once executives themselves hold contingent convertible bonds.",
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    "governance-design",
    "corporate-governance"
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   "content_sha256": "d03d97fe587de30959a1a32d254b79127746fbf5d1f9d843da0d59f45dc8b1c3",
   "claim": "Who owns the contingent convertible bonds affects the efficiency, effectiveness, and corporate governance results of a trigger design, so ownership characteristics belong in the design analysis.",
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    "economics"
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   "is_failure_mode": false
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   "claim": "An early trigger design for contingent convertible bonds in executive compensation enables earlier signaling of default risk, increases incentives for creditors and shareholders to monitor, and increases executives' incentives to lower risk-taking.",
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    "risk-and-incentives",
    "compliance",
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    "corporate-governance"
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   "content_sha256": "0db1c3462800145922a78a87970e3c735570f9a957d16179df9b0317bbd1bcad",
   "claim": "After Morrison, parties to securities transactions can be confident that U.S. law will not apply in private suits so long as their transactions are definitively located outside the United States, a certainty that did not exist under the prior conduct and effects tests.",
   "topics": [
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    "law-and-legal-systems"
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   "content_sha256": "19ef2ae9e58601e04c76aca9dc9f0a3f44bab0dc59323ab22a65fd8bf0eaf9fa",
   "claim": "The authors stipulate that Choice of Law Competition is a subcategory of jurisdictional competition in which jurisdictions compete on substantive legal rules to attract contracting parties ex ante, with adjudication of disputes a secondary consideration.",
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    "law-and-legal-systems",
    "securities-law"
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   "content_sha256": "bfe977cf683347aef7d6081497efdd340f4c4652c76168d6a09914db80912930",
   "claim": "The authors stipulate that jurisdictions which take steps only to expand the jurisdiction of their courts as venues for litigation, rather than to attract transactions, engage in Forum Competition.",
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    "law-and-legal-systems",
    "securities-law"
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   "claim": "Most Forum Competition turns on a jurisdiction's attractiveness to lawyers ex post: such jurisdictions ignore the preferences of transacting parties at the time of contracting and appeal only to the preferences of some parties and their lawyers after a dispute has arisen.",
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   "content_sha256": "c61326bf048e4f2da599abd4247f5f907d0efbc4890693136a504f6955b1c537",
   "claim": "Because Morrison limits U.S. securities law to transactions inside the United States, plaintiffs' attorneys are predicted to look increasingly to European countries and other venues in which to file securities class actions and similar suits.",
   "topics": [
    "securities-law"
   ],
   "is_failure_mode": false
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   "content_sha256": "9e799ba89b4e28e50dad5e073a84dbd5d3c42275414fcb892f96d7388362a5f4",
   "claim": "Jurisdictional competition adapts legal rules to changed economic circumstances faster than harmonization does, because a single jurisdiction can change its rule unilaterally whereas harmonized regimes require all jurisdictions to agree on a rule before it can change.",
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    "law-and-legal-systems",
    "institutional-design"
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   "content_sha256": "555647550c1d9102060a0577c3e87331770f746fcb576bbd77f918b7763b6e08",
   "claim": "Harmonization can fail on the merits: the harmonious rule may be the wrong rule for the problem it addresses, or it may become the wrong rule later as circumstances change.",
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    "law-and-legal-systems"
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   "claim": "Harmonization is politically unattainable absent either a central authority able to preempt the law of many jurisdictions or a single jurisdiction with enough economic clout to impose its rules on others, which makes harmonization especially difficult beyond national borders.",
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   "claim": "Harmonization invites its own defeat by creating an incentive for rogue jurisdictions to attract, into their legal systems, the private actors who do not agree with the harmonized rule.",
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   "content_sha256": "ca313ee4bcb8f0331031753693caec5cb915064b5290de530d6ffc810ac56977",
   "claim": "Defined geographic borders for securities transactions, the overarching assumption behind Morrison, are an unstable basis for limiting the extraterritorial reach of either private litigation or government regulation.",
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    "institutional-design"
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   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:2029983-011",
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   "content_sha256": "d589ac25381ae0f637646cfd6dde4999783a29193ff4f291bef19bcc2d4271e5",
   "claim": "Jurisdictional competition in global securities litigation after Morrison will be bifurcated, because some jurisdictions recognize private rights of action while others do not, and some, including the United States, extend government enforcement extraterritorially where private suits are barred.",
   "topics": [
    "compliance",
    "economics",
    "law-and-legal-systems"
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   "content_sha256": "07a085dfe67cfa31de626f4f49853a8e1a97a916141dd32bd4a5c00eb7661bb8",
   "claim": "Bifurcation lets a party to a disputed offshore transaction reintroduce U.S. law into the civil liability regime by threatening to involve the SEC or DOJ unless the other party offers an attractive settlement.",
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   "is_failure_mode": true
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   "content_sha256": "044c1487584a0b06711c726f8291fc6f2a0207bd7b64a1221c5ead2683936a5a",
   "claim": "Because Section 929P did not restore private rights of action, the most powerful weapon in plaintiffs' arsenal, the fraud-on-the-market theory in class actions, is thwarted wherever the transaction took place outside the United States.",
   "topics": [
    "economics"
   ],
   "is_failure_mode": true
  },
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   "claim": "Government enforcement acts as a backstop that makes the case for choice of law freedom stronger: allowing parties to choose their legal regime is more defensible when bad choices, such as moving transactions to regimes with little regulation, do not thwart government enforcement.",
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    "compliance"
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   "content_sha256": "53f22fa4e1c42cb9ee7e35dbd75b1286523758badfa0708932d8f2f09b7a54b2",
   "claim": "Geographic tests create the risk of a no man's land transaction: defendants may persuade the courts of every jurisdiction that the transaction took place outside their borders, leaving the transaction governed by no law and with no available forum.",
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   ],
   "is_failure_mode": true
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   "content_sha256": "d9be494234a5f1521b538339a5a7bc7c041eb5e544d6a89237d3b6f3dc01a197",
   "claim": "Without an opt-out mechanism, European class sizes will likely be substantially smaller than their U.S. counterparts, which in turn depresses settlement amounts and damages awards.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": true
  },
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   "content_sha256": "9f9b6f27667fc7490e01807acd73b62a38005886f4d7478d7649bdc77622719a",
   "claim": "The requirement that each plaintiff show individual reliance, followed in most jurisdictions outside the United States, is not merely a substantive difference: it undermines collective litigation because class procedures work only when plaintiffs share common questions of law and fact.",
   "topics": [
    "economics"
   ],
   "is_failure_mode": false
  },
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   "claim": "Despite signs of movement in that direction, there is as yet no genuine European substitute for the U.S. securities class action brought under the fraud-on-the-market theory.",
   "topics": [
    "economics"
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   "is_failure_mode": true
  },
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   "id": "kaal:claim:2029983-019",
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   "content_sha256": "8318c6f08bd5b2671c063d607e40470cd383f945b497ece4fc5fc41283989685",
   "claim": "The German KapMuG does not relieve trial judges of deciding the legal issues in every individual case, so it remains administratively burdensome even though its model case judgment binds the trial courts.",
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    "institutional-design"
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   "is_failure_mode": true
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   "content_sha256": "51dd13f23e4dcb8d351e6d025c73c52352e21e5982d0092df32cc83759b30977",
   "claim": "The WCAM's requirement that a court evaluate procedural and substantive fairness and the efficiency of the settlement lets the Dutch system avoid blackmail settlements, where a defendant pays simply to escape endless proceedings and reputational loss.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
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   "claim": "The Dutch unfair trade practice and misrepresentation provisions invoked in Fortis, taken together, approximate the legal protections available in the United States under Section 10(b) and Rule 10b-5, which makes the Dutch legal system a possible avenue for circumventing the restrictions imposed by Morrison.",
   "topics": [
    "economics"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:2029983-022",
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   "content_sha256": "1424a0f5f78cde421978978063c06f7539f5410951a2e76e42c8027e76137cc7",
   "claim": "In Converium the Amsterdam Court of Appeal declared an international collective settlement binding on the parties even though the class members had only tenuous connections to the Netherlands.",
   "topics": [
    "law-and-legal-systems"
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   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:2029983-023",
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   "content_sha256": "0b6bbe443fa71298f866ffbc234566778fedad57da2a8af0cb9cbe58d07be7a5",
   "claim": "By approving U.S.-style fee arrangements, the Converium decision adds an important incentive for plaintiffs' attorneys to bring claims in the Netherlands.",
   "topics": [
    "risk-and-incentives"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:2029983-024",
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   "content_sha256": "ef731cdd43a13784c866fca6f18018b0ae7ae7d09403b4f05be9f2d1081e08b2",
   "claim": "The Converium fee holding is a weak predictor of Dutch practice because lead counsel's work in that case was performed largely within the American legal system and by U.S. law firms, so it remains to be seen whether a case litigated in Dutch courts without U.S. exposure would yield a comparable fee structure.",
   "topics": [
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   ],
   "is_failure_mode": true
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   "content_sha256": "02bf850d1227411d51eea26d8e3dd49825c517ba8ac6bccebb0ed93c313a567f",
   "claim": "The Netherlands is already Europe's most attractive venue for collective settlements because it is the only European country that allows a collective settlement in mass litigation to bind all class members who do not opt out.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
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   "claim": "Given the Fortis and Converium decisions, it is conceivable that Dutch courts will expand their extraterritorial reach beyond the enforcement of settlements to cases litigated as class actions.",
   "topics": [
    "economics"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:2029983-027",
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   "content_sha256": "004fa4dfe73b7e807630f2c5c2695f624ebeef86023c251b0c8c6a5b850fb7c4",
   "claim": "Because the Dutch Supreme Court's World Online presumption of reliance can be extended to ad hoc disclosure violations and misleading periodic reports, the Dutch legal system could compete effectively with the United States by lowering the crucial reliance threshold in securities actions.",
   "topics": [
    "economics"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:2029983-028",
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   "claim": "The WCAM requirement that a court approved foundation pursue the action makes the Dutch regime more burdensome than the U.S. system, which requires only a lead plaintiff and class approval.",
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   "is_failure_mode": true
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   "claim": "The WCAM's structural limits could reduce the number of successful settlements: while the largest cases such as Shell and Fortis give plaintiffs enough leverage to force large settlements, smaller cases may not be successfully settled in Dutch courts.",
   "topics": [
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   ],
   "is_failure_mode": true
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   "claim": "Of the respondents reporting an effect on management company profits, 87.50% attributed it specifically to increased costs and decreased profits caused by the registration and reporting requirements.",
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   "claim": "Registration and disclosure did not push advisers to change what they invest in: only 2.44% of respondents said they would have to change strategy significantly over five years, while 4.88% expressly reported no strategy change.",
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   "claim": "Prior surveys of hedge fund manager expectations left the central questions unanswered because they were fielded before the registration effective date and used substantially smaller samples, so they measured anticipation rather than experience.",
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   "claim": "Despite documented cost concerns, the hedge fund industry appears to be only modestly affected by the Dodd-Frank reporting and disclosure requirements and is adapting well to the new regulatory environment.",
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   "claim": "Strategic adjustment to registration is a function of firm size: firms that planned a strategic response to Dodd-Frank were smaller than firms that did not.",
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   "claim": "Quick absorption of registration costs does not settle the policy question: even if advisers absorb the reported cost implications relatively quickly after registration, the long-term cost implications of registration and reporting obligations could still affect the private fund industry.",
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   "claim": "Mandatory reporting does not guarantee informative reporting: anecdotal evidence indicates that advisers can present the information required in Forms ADV and PF in ways that in effect flatten out and sanitize the disclosures.",
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   "claim": "If advisers sanitize their Form ADV and Form PF filings, the disclosures become less useful for FSOC and SEC evaluation and undermine the very determination of systemic risk posed by private funds that the reporting regime was built to enable.",
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   "claim": "The study's findings are bounded in time: because the data was collected within three months of the registration effective date, the study shows trends and perceptions but does not provide insights on the long-term implications of the registration and disclosure requirements.",
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   "claim": "Government bailouts of systemically important financial institutions create strong incentives for those institutions to externalize the cost of their risk taking onto taxpayers.",
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   "claim": "The implicit guarantees contained in a bailout multiply the incentives for systemically important financial institutions to increase leverage, because those guarantees make debt cheaper than equity.",
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   "claim": "Because governments prioritize the rescue of systemically important financial institutions over other entities, those institutions are incentivized to adopt similar risk profiles and to correlate their risks.",
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   "claim": "Because both European regulatory initiatives and the United States academic debate concentrate on the technical design features of contingent capital securities, the possible corporate governance applications of those securities are mostly ignored.",
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   "claim": "Combined with other corporate governance mechanisms, contingent capital securities function as an internal, institution specific mechanism that could fill the void left by regulators' apparent inability to supervise financial institutions effectively.",
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   "claim": "The anecdotal record of ethically questionable conduct by leaders of systemically important financial institutions is not dispositive and does not establish an underlying trend, but it does show that some of the most pervasive cases of unethical conduct involved such institutions.",
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   "claim": "For purposes of this Article contingent capital is stipulated to be the predefined conversion of a certain percentage of a financial institution's debt securities into equity securities.",
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   "claim": "Contingent capital contributes to minimizing moral hazard by internalizing bank failure costs, that is, by placing those costs on the institution's own security holders rather than on the public.",
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   "claim": "Installing contingent capital can be more efficient than raising capital requirements, because the capital injection becomes available only when it is needed and only enough securities convert to recapitalize the firm.",
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   "claim": "The threat of dilution of stock holdings, combined with the threat of loss on conversion, reduces the pressure shareholders place on the management of systemically important financial institutions to take higher risks.",
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   "claim": "Trigger designs can be ranked by the certainty they give market participants: institution specific triggers presumably grant the most certainty, while regulatory trigger designs provide lower levels of certainty.",
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   "claim": "Converting contingent capital securities prematurely, while the institution can still operate without an equity injection, dissipates the benefit: the injection is no longer available at the later moment when the institution cannot obtain other funding.",
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   "claim": "Converting contingent capital securities too late makes the capital injection superfluous, because by that stage the institution may face unresolvable difficulties that a capital injection can only marginally soften, and conversion may not suffice once the institution has entered resolution.",
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   "claim": "Contingent capital by itself, without additional measures and supplemental corporate governance improvements, may not prevent firm failure; its real potential unfolds only when it supplements other corporate governance improvements.",
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   "claim": "Divergent national definitions of Tier 1 capital produce a distortion: financial institutions in countries with stricter definitions that exclude contingent capital appear to hold less capital and thinner capital cushions than institutions in countries with broader definitions, and investors may read that appearance as a negative attribute.",
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   "claim": "If a market evolves in which contingent capital designs appear to provide sufficient protection against systemic risk and contagion, decision makers may come to rely on the design of those securities and neglect their own role as monitors.",
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   "claim": "Contingent capital rules could contribute to overriding the moral reasoning of decision makers, in which case contingent capital would actually increase, not reduce, risk incentives for institutions that are too big to fail.",
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   "claim": "Regular corporate governance controls may not work in systemically important financial institutions, because those institutions are considered too big to fail and their leaders, anticipating a bailout commitment, are incentivized to shift their risk preferences upwards.",
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   "claim": "Switching to contingent capital financing could reinforce rather than dampen risk incentives, and these distorted risk incentives are a drawback of contingent capital issuances.",
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   "claim": "A mandatory contingent capital issuance regime induces institutions to buy their competitors' securities to satisfy regulatory obligations rather than for economic reasons, and the resulting cross holdings among systemically important institutions undermine the ability of contingent capital to limit systemic risk and contagion.",
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   "claim": "Where institutions hold each other's contingent capital and share similar risk profiles, they will be hesitant after conversion to vote for necessary organizational changes at a competitor or otherwise exercise their voting rights, because they are similarly exposed and may face reciprocal voting power.",
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   "claim": "Absent cross holdings, the opposite conflict arises: institutions holding a competitor's converted contingent capital could be tempted to exercise their voting rights against the interests of that competitor.",
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   "claim": "Coupon rates between seven and nine and a half percent attracted sufficient investor interest in European contingent capital securities to establish what appears to be a sustainable market in those securities.",
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   "claim": "The combination of demonstrated investor interest and an underdeveloped regulatory structure in the United States presents a unique opportunity to experiment with contingent capital designs and with their application to the corporate governance of systemically important financial institutions.",
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   "claim": "The political economy of financial regulation ensures that the expansion of regulatory oversight induced by Dodd-Frank will be followed by a phase of relaxation, since historically the introduction of regulatory regimes after a crisis is followed by a gradual easing of regulatory strictures.",
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   "claim": "Harmonization and coordination can facilitate experimentation and learning, but experimentation is most effective when several different approaches are tried simultaneously in different jurisdictions.",
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   "claim": "Where jurisdictions are not compelled to agree on the same rule, some jurisdiction will try a different rule, and will do so more quickly, when changed economic circumstances make a different rule optimal.",
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   "claim": "Contingent capital securities approximate the characteristics of a quasi-public good: just as ships cannot readily be excluded from a lighthouse, systemically important institutions benefit from the issuance of contingent capital by other such institutions whenever the design minimizes systemic risk and contagion.",
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   "claim": "The social welfare maximization potential of contingent capital securities is lower if their design features are left entirely to private ordering, because private parties do not necessarily structure those features with a view toward the common good, the avoidance of future bailouts, or the limitation of systemic risk and contagion.",
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   "claim": "Under strong institutional and cultural forces, decision makers in financial institutions tend to compartmentalize their lives and disconnect their moral reasoning from their conduct in the workplace, so that even a leader with strong personal values can engage in questionable conduct.",
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   "id": "kaal:claim:1998455-031",
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   "content_sha256": "f63587693a0d9c28a3da222cfd06dc7d2db51e90e45f05dd399b9f26edb27faa",
   "claim": "Issuing contingent capital securities with a conversion feature is a way for a banking entity to signal to its market that it will adhere to stricter standards, ethical or otherwise.",
   "topics": [
    "contingent-capital"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1998455-032",
   "canonical_url": "https://wulfkaal.github.io/claims/1998455-032",
   "content_sha256": "886fdec9baf7e8bd60f620f82accaa3a955d205dd540cffe01442eb4716a790e",
   "claim": "A contingent capital design that increases voting rights on conversion allows systemically important institutions to lower risk taking implicitly and to achieve an indirect, institution specific form of corporate governance reform through increased checks and balances.",
   "topics": [
    "governance-design",
    "contingent-capital",
    "corporate-governance",
    "risk-and-incentives"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1998455-033",
   "canonical_url": "https://wulfkaal.github.io/claims/1998455-033",
   "content_sha256": "9aa3465afed93236685a45f04ee5fcd0427004daf1dd2963a5bf4f745ee8748c",
   "claim": "Because the threat of a change of control leads leaders to take fewer risks in order to avoid triggering conversion, a contingent capital design with increased voting rights allows those leaders to act more in accordance with their moral convictions and conscience.",
   "topics": [
    "governance-design",
    "risk-and-incentives"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1998455-034",
   "canonical_url": "https://wulfkaal.github.io/claims/1998455-034",
   "content_sha256": "318ed6959f940e7f15ac8a9be41e04e6fa87058e1cf9c0dd4ea8b037bfc9f790",
   "claim": "Management incentives for risk control are heightened upon conversion, especially where management knows that holders of converted contingent capital would command a majority vote, with or without institutional shareholders.",
   "topics": [
    "risk-and-incentives",
    "governance-design",
    "contingent-capital",
    "corporate-governance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1998455-035",
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   "content_sha256": "2f93c6e62c904f5fe618b4d3212e0fe10c4b86592936a51db1712cc95bf44023",
   "claim": "Treating the price of contingent capital securities as an indicator of how much people care about market integrity and moral hazard would require altruistic motives on the part of purchasers, and the author doubts this: the nascent market appears to have been built on investors' expectation of above average returns.",
   "topics": [
    "economics",
    "risk-and-incentives"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1998455-036",
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   "content_sha256": "213b3f44e7b4c2e67e5f64bb7e4f39570d4f167ca08e97297efb3f8cd4630d70",
   "claim": "If central banks were to purchase contingent capital securities issued by systemically important institutions in the primary or secondary market as part of monetary policy, the prospect of internalizing bank failure costs would be undermined, and primary market purchases could also undermine market participants' confidence in these instruments.",
   "topics": [
    "systemic-risk",
    "contingent-capital",
    "tokenomics"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1998455-037",
   "canonical_url": "https://wulfkaal.github.io/claims/1998455-037",
   "content_sha256": "8070641755e96ddcad47e14e576c3c641473e5bcb6a9a9a6363c853e478cd1c7",
   "claim": "Combining the existing prioritization of bailouts for systemically important institutions with central bank purchases of their contingent capital in a given jurisdiction would further incentivize those institutions to adopt similar risk profiles and correlate their risks.",
   "topics": [
    "systemic-risk",
    "risk-and-incentives"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1998455-038",
   "canonical_url": "https://wulfkaal.github.io/claims/1998455-038",
   "content_sha256": "e65086a5a4b7c4b0938d3919b650224f1c450f93cab74446181532b410273d5d",
   "claim": "Rather than banning purchases by systemically important institutions of each other's contingent capital, which could be detrimental to market evolution, the design should require disclosure of the purchaser's identity and approval by the issuer.",
   "topics": [
    "disclosure",
    "economics",
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:1998455-039",
   "canonical_url": "https://wulfkaal.github.io/claims/1998455-039",
   "content_sha256": "6f93bf4d54af03eefe719412370c935e8da1f1a42224ad357bc6fa3a789267f5",
   "claim": "An outright retroactive charge for government subsidies or for actions taken by regulators could backfire, because it would legitimize the bailout and perpetuate its socially suboptimal consequences.",
   "topics": [
    "systemic-risk"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:1998455-040",
   "canonical_url": "https://wulfkaal.github.io/claims/1998455-040",
   "content_sha256": "267a5cf52ed1359c42cf53abcd70c1e7fe355733b78927d689183a962ad74bbb",
   "claim": "Contingent capital can facilitate an incentive structure that lets regulators rely partially on private party contracting for the design of these securities while still accounting for systemic risk.",
   "topics": [
    "risk-and-incentives",
    "dynamic-regulation",
    "systemic-risk",
    "contingent-capital"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-001",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-001",
   "content_sha256": "ee3ea166fbb9bd010be2bc0f7830091d0f7e8ab8bd414f57a1954d43a25fc5a6",
   "claim": "The nearly insurmountable standard for liability in oversight cases in the United States undermines the signalling of the expected standard of conduct, and this could have long-term implications for American corporate law.",
   "topics": [
    "corporate-governance",
    "law-and-legal-systems",
    "governance-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-002",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-002",
   "content_sha256": "d8ce5696f600151778f0cda8926d310c3c6925d0e9032ce14f753e2178e24f99",
   "claim": "Stable rules may not suffice to make directors' oversight role more robust, so contractual and quasi law forms of dynamic governance are a promising supplement for improving the duty of oversight.",
   "topics": [
    "dynamic-regulation",
    "corporate-governance",
    "governance-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-003",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-003",
   "content_sha256": "4ef49f8d25d7c02ef5e650115599a9fd0cbc7b66e764cb161b19a928e9824068",
   "claim": "Without a workable duty of oversight, corporate directors who seek to comply with the oversight duty lack meaningful guidance about the conduct expected of them.",
   "topics": [
    "corporate-governance",
    "law-and-legal-systems",
    "governance-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-004",
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   "content_sha256": "76364aeb099f13317aea0819240a6df8a3ce815b58856ba7ac616c1a9a4550e0",
   "claim": "Because directors serve part-time as outsiders, it is unreasonable to expect them to have the knowledge, capacity, and expertise needed to monitor effectively the business affairs of large and increasingly complex corporations.",
   "topics": [
    "corporate-governance"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-005",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-005",
   "content_sha256": "c7ac16f55f15b00635e595d561066abc216d4ec35c6ae40ddb13a7ebdef2eb60",
   "claim": "Under Delaware law as applied in In re Citigroup, directors' incorrect evaluation of business risk and their inability to predict the future do not violate the duty of oversight, so the Caremark duty to monitor is not extended to business risk.",
   "topics": [
    "risk-and-incentives",
    "corporate-governance",
    "law-and-legal-systems"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-006",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-006",
   "content_sha256": "cd9a581c84d15e98ac8e004b41c591e12379e56037f1d19ab174e487a1a201ad",
   "claim": "Losses alone are not sufficient to hold directors personally liable for taking risks that lead to those losses, because risk is inherent in maximizing shareholder value.",
   "topics": [
    "corporate-governance",
    "law-and-legal-systems",
    "risk-and-incentives"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-007",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-007",
   "content_sha256": "9f50d8b469cbfe2653269508d73945459816aa144adcef788915f0dd41e54583",
   "claim": "Oversight liability in Delaware can be established only on a showing that the directors knew they were not discharging their fiduciary duties or consciously disregarded their responsibilities.",
   "topics": [
    "law-and-legal-systems",
    "corporate-governance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-008",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-008",
   "content_sha256": "91da964bc7d9d8e8b059697cd422ba1330f47c7eabfb8dad02b6054280555eb8",
   "claim": "Delaware's signalling of expected conduct is undermined when the state simultaneously imposes a near insurmountable standard for liability in cases involving breaches of the duty of oversight.",
   "topics": [
    "corporate-governance",
    "law-and-legal-systems"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-009",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-009",
   "content_sha256": "0a34ce988b4d30fecb31cccff593e8f9080e9387605e682ac2ce7b9dfb70bbfd",
   "claim": "Courts often provide very specific language about the standard of conduct expected of directors, but lawyers do not sufficiently communicate that expected conduct to directors.",
   "topics": [
    "corporate-governance",
    "law-and-legal-systems",
    "empirical-evidence"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-010",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-010",
   "content_sha256": "2ab7f6fecfd2a525b272c9ba18842296bed1478a7c1100bae491299abad26b21",
   "claim": "Directors who are inadequately informed about the expected standard of conduct will underestimate their personal liability exposure and engage in riskier behavior than is desirable for the company itself.",
   "topics": [
    "risk-and-incentives",
    "corporate-governance",
    "law-and-legal-systems",
    "disclosure",
    "governance-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-011",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-011",
   "content_sha256": "9a77090a8e807ddcb8e175312b174ffbf7d51ba67c721086f431f7e9bce54124",
   "claim": "Germany has taken a much stricter approach than the United States to cases involving a breach of the duty of oversight, even though the German business judgment rule formally requires a showing of the same elements as the American one.",
   "topics": [
    "corporate-governance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-012",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-012",
   "content_sha256": "e570dca30344fdd7928bef5a143a4294a1da6d2f937747cde0d04f3b6dcf016c",
   "claim": "Under German law, directors' business decisions lose the protection of the business judgment rule where the business risk taken was inappropriately excessive, a standard German courts announced in ARAG/Garmenbeck.",
   "topics": [
    "risk-and-incentives",
    "corporate-governance",
    "law-and-legal-systems"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-013",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-013",
   "content_sha256": "c7a01c4d38a3f5980c813f6f8c9e6dd9cb798f711aa282b00ffac3bd2f38ae73",
   "claim": "German commentators, whose expertise German courts rely on heavily, concluded after the financial crisis that managers do not act reasonably under the German business judgment rule if the risks they take on behalf of the corporation result in the demise of the corporation.",
   "topics": [
    "systemic-risk",
    "risk-and-incentives",
    "corporate-governance",
    "law-and-legal-systems"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-014",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-014",
   "content_sha256": "c14e865ba2854a6dacf206e1b269e06dd59f7a05f2d2c0290bfb13539d00f076",
   "claim": "The German ARAG/Garmenbeck holding is diametrically opposed to In re Citigroup, where the Delaware Chancery Court declared that directors' incorrect evaluation of business risk did not violate the duty of oversight.",
   "topics": [
    "risk-and-incentives",
    "corporate-governance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-015",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-015",
   "content_sha256": "85d91c51157690d7c060587bfecd52effa0b8fa35ea85bf2e564e3d40dcf67d5",
   "claim": "The German Federal Court of Justice held in Mannesmann that directors breached their fiduciary duty by awarding a bonus of roughly seventeen million dollars to a chief executive whose tenure had substantially increased shareholder value, whereas Delaware courts imposed no liability for the far larger Ovitz payout in Disney.",
   "topics": [
    "corporate-governance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-016",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-016",
   "content_sha256": "8d549ab48b0a50333620bd9f5dd3047a01255d60c5340508299f11e98dd01e71",
   "claim": "Comparative corporate law research is challenging and may include inaccuracies because countries differ in legal history, legal origins, and legal cultures.",
   "topics": [
    "research-methods",
    "law-and-legal-systems"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-017",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-017",
   "content_sha256": "14fd1fd8299ccfe56705b86fe50ef1af62fc7c750066144e50615f589f3d8f7b",
   "claim": "Despite the limits of the comparison, had In re Citigroup and Disney been decided in Germany the allocation of liability would have been different, because German courts are generally more willing than Delaware courts to second-guess directors' decisions.",
   "topics": [
    "corporate-governance",
    "law-and-legal-systems"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-018",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-018",
   "content_sha256": "079d6ce68bfbac10587cebc416d6eb94885886ec626a8849a758c857f3fdae8c",
   "claim": "The different legal standards for allocating liability in Germany and the United States illustrate rather different legal and societal attitudes toward managers' risk-taking.",
   "topics": [
    "risk-and-incentives",
    "law-and-legal-systems"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-019",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-019",
   "content_sha256": "0bae5a120bf90eeabc91bea03c68d1a000ed7c126246814f65be2c0fbe513ad4",
   "claim": "Delaware's signalling of expected conduct could be dramatically improved by adopting a moderate rather than near insurmountable standard for liability in cases involving breaches of the duty of oversight.",
   "topics": [
    "law-and-legal-systems",
    "corporate-governance",
    "governance-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-020",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-020",
   "content_sha256": "4d3823f71530633a681e549308f42908adb945a3bb6e4f3931d9fd9fc8a02fd7",
   "claim": "If the liability standard were lowered, directors and officers would take their increased personal liability exposure into account and could be incentivized to engage in less risky behavior.",
   "topics": [
    "risk-and-incentives",
    "corporate-governance",
    "law-and-legal-systems"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-021",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-021",
   "content_sha256": "cace84854c61ba6930f6d620c6c778d6ae78ccaf0d89ebd2a7a781fa3384547e",
   "claim": "Increasing oversight liability would give courts an opportunity to clarify the oversight doctrine, so that it could evolve into a mature and coherent doctrine rather than remaining immature and incoherent.",
   "topics": [
    "law-and-legal-systems",
    "corporate-governance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-022",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-022",
   "content_sha256": "ed339c4d8249dea4909377a7c8c78a80aa1b941e93e25e42769f5ec19a5ba7e3",
   "claim": "Increased liability is no panacea and cannot alone adequately address the central shortcomings of the duty of oversight and of corporate governance in the United States, because heightened liability does not give part-time outside directors the capacity to monitor complex corporations.",
   "topics": [
    "law-and-legal-systems",
    "corporate-governance",
    "governance-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-023",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-023",
   "content_sha256": "910a213759bb671dedd5aa03647c9dbdbb94c92e162a88b24ef58524c399af44",
   "claim": "Cost increases and path dependencies may make it nearly impossible to relax the close to insurmountable standard for liability in oversight cases.",
   "topics": [
    "law-and-legal-systems",
    "corporate-governance"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-024",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-024",
   "content_sha256": "c1dcff57d192e67101d5d315785aa96ed0ff8e387535361ba0b9f8f6d14a215b",
   "claim": "The author endorses the conclusion that attempts to enhance oversight in the United States may fail and that emphasizing improved oversight as a means of enhancing corporate governance could be ill-advised.",
   "topics": [
    "corporate-governance",
    "governance-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-025",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-025",
   "content_sha256": "ceb5e40bc6b7982eb2027aa40010843253e9856d6205de9d20ea54a0e04f66da",
   "claim": "The common denominator between the Sarbanes-Oxley Act, the Dodd-Frank Act, and other reform proposals is a top down regulatory approach of direct regulatory intervention with stable and supposedly optimal rules.",
   "topics": [
    "governance-design",
    "corporate-governance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-026",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-026",
   "content_sha256": "4b6a6faabe44ed6234b67b1bd1b3af33390942be906f70cb62c4a80ce3d1bb90",
   "claim": "Governance adjustments made through stable rules in reaction to a systemic shock can result in suboptimal governance outcomes, market volatility, and economic loss.",
   "topics": [
    "regulatory-failure",
    "economics"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-027",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-027",
   "content_sha256": "74c8084bd7d417f6c17505824bd37bd0cb6ffa58b62cca202415e38a9c3a6a2f",
   "claim": "Governance adjustments are often enacted merely to address the problem perceived in the given market environment and the then existing economic conditions, without regard to possible future developments.",
   "topics": [
    "governance-design",
    "corporate-governance"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-028",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-028",
   "content_sha256": "f5a3daa9116a5900e007de29114edff6c60dd8ba2d88ae92219707587596aa17",
   "claim": "Following enactment, governance adjustments are often later repealed or diluted, and anticipation of future developments plays no significant role in the top down approach to regulation.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:kaal-2013-acomparativeperspectiveo-029",
   "canonical_url": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-029",
   "content_sha256": "e570963b366f82c5e3e9102ea750f64df6423ff043ac416a9487205cbfcf9892",
   "claim": "The economic conditions and the corresponding requirements for optimal and stable rules are constantly evolving, so rules fixed at one moment lose their fit over time.",
   "topics": [
    "governance-design",
    "corporate-governance"
   ],
   "is_failure_mode": true
  },
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   "claim": "Under Revised Rule 2019, parties acting in concert must disclose not only equity holdings and claims but also derivative instruments such as swaps, options, and short positions.",
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   "claim": "The threat of systemic risk disclosure, combined with rising competition in the distressed-debt market, could further incentivize hedge fund managers to cooperate in the bankruptcy process.",
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   "claim": "The SEC has not standardized the disclosures required in Form PF, and there is evidence that Form PF requirements rest on an inconsistent use of industry terms, which can in turn produce inconsistent and contradictory data reporting.",
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   "claim": "Creditors and shareholders in bankruptcy, unlike debtors, are typically not required to disclose their interests until they participate in the case by filing a proof of interest or claim and seeking to be heard by a judge.",
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   "claim": "Old Bankruptcy Rule 2019 was applied inconsistently in practice, with courts interpreting it with a high degree of variability both across and within jurisdictions.",
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   "claim": "The growing number of conflicting decisions under old Rule 2019, and the confusion and uncertainty they produced, is what precipitated the concerted effort by bankruptcy practitioners and the federal bankruptcy bench to revise the rule.",
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   "claim": "Revised Rule 2019 clarifies some of the ambiguities of the old rule, but uncertainty and confusion about its application remain inevitable.",
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   "claim": "The scope of Revised Rule 2019 is broader than that of the old rule because it triggers disclosure for committees, entities, and groups that are acting in concert to advance common interests and that are not composed entirely of affiliates or insiders of one another.",
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   "claim": "The definition of representation in Revised Rule 2019 leaves it unclear whether attorneys who merely monitor a bankruptcy case for a client, without soliciting or advocating a position before the court, represent those clients for disclosure purposes.",
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   "claim": "The central compromise in Revised Rule 2019 is that parties need not disclose the price or the date of acquisition of disclosable economic interests, which is precisely the outcome the hedge fund industry lobbied for.",
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   "claim": "Systemic risk reports filed by registered investment advisers are confidential and are not publicly available, so any effect of these filings on bankruptcy practice depends on the prospect of disclosure rather than on actual public access.",
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   "claim": "Mandatory quarterly Form PF reporting for large hedge fund advisers is designed to give the Financial Stability Oversight Council timely data for identifying emerging systemic risk trends and to align United States practice with international trends.",
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   "claim": "Bankruptcy and systemic risk disclosure obligations for hedge funds have different origins and serve different purposes: bankruptcy disclosure is meant to level the playing field in the restructuring process, while systemic risk disclosure is meant to help regulators detect and prevent systemic consequences.",
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   "claim": "Under both the bankruptcy and the systemic risk disclosure regimes, filed data carries a serious risk of being out of date and less accurate at the time it is analyzed than when it was disclosed, partly because of the lag needed to collect data before filing.",
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   "claim": "Data staleness degrades systemic risk evaluation more than it degrades evaluation of bankruptcy disclosures, because many distressed investment strategies depend on the outcome of the restructuring process and creditors are therefore incentivized to hold their positions until it completes.",
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   "claim": "Form PF's required disclosure of a reporting fund's strategies includes a separate subcategory for event driven, distressed and restructuring strategies, which is what makes the form potentially relevant to bankruptcy proceedings.",
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   "claim": "Because the SEC is still working out the appropriate use of Form PF and still improving the form and its instructions, its enforcement division is unlikely to open investigations into alleged misreporting or failures to report.",
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   "claim": "Form PF's systemic risk disclosure obligations were created, in a non-bankruptcy context, precisely to counteract the kind of shadow activity that is now resurfacing in bankruptcy under Revised Rule 2019.",
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   "claim": "Revised Rule 2019 may in effect produce less overall disclosure of creditor activities in the bankruptcy process and push bankruptcy creditors into the shadows, the opposite of the transparency the revision sought.",
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   "claim": "Hedge fund adviser registration and disclosure requirements under Title IV and the SEC implementation rules were instituted for the opposite reason: to stop hedge funds from operating in the shadows of financial markets.",
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   "claim": "The overlap between hedge fund adviser disclosures under Revised Rule 2019 and systemic risk disclosures under Form PF, combined with the uncertainties Revised Rule 2019 created, points to a possible future role for systemic risk disclosures in bankruptcy.",
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   "claim": "Form PF disclosures in their existing format are too generic to be appropriately applied in bankruptcy, but accumulated experience with the form and standardization of its items could yield less generic disclosures that become increasingly relevant to bankruptcy over time.",
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   "claim": "If Form PF systemic risk data became publicly available, or even only available to the presiding bankruptcy judge in a chapter 9 or chapter 11 case, the hedge fund industry's strong preference for secrecy could itself precipitate a change in distressed investment practices.",
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   "claim": "The threat that hedge fund managers' systemic risk filings could be publicly disclosed could help incentivize hedge fund investors to abstain from trading while serving on a creditors' committee and to avoid holding multiple offsetting positions in distressed entities.",
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   "claim": "Disclosing otherwise private and proprietary Form PF systemic risk data exclusively to bankruptcy judges could alleviate the hedge fund industry's concerns about privacy and about the reverse engineering of its strategies and positions.",
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   "claim": "Restricting Form PF data to the eyes of the bankruptcy judge alone would create problems in the litigation process, because opposing parties may demand access to the same information.",
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   "claim": "Because systemic risk disclosures are far more generic and are not tailored to any specific distressed investment, importing them into bankruptcy would improve only marginally the information available about the motives of distressed securities investors.",
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   "claim": "Systemic risk disclosures in the bankruptcy process would also not significantly change or limit hedge funds' influence in that process, nor would they protect against the misuse of confidential information.",
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   "claim": "Increased disclosure obligations let so-called pilot fish emulate hedge funds' investment strategies and positions, which makes those positions more expensive to build and strips systematic bargaining strength from the negotiation process.",
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   "claim": "There is a real risk that increased disclosure through Form PF would destroy the balance of power in the restructuring process.",
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   "claim": "Bankruptcy judges and the parties to a bankruptcy case may be unable to adequately evaluate Form PF data pertaining to a creditor, which limits the usefulness of that data in bankruptcy.",
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   "claim": "Using generic and possibly outdated systemic risk data in the bankruptcy process would not improve hedge funds' bankruptcy practices in the near term.",
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   "claim": "The Investment Advisers Act prohibits contingent fee arrangements between investment advisers and their clients because such arrangements could induce inappropriate risk taking by the adviser.",
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   "claim": "The IAA restricts the assignment of advisory contracts without client consent in order to protect investors against changes in the character or quality of the advisory services they contracted for.",
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   "claim": "Providing investment advice without compensation makes a person less likely to fall within the IAA definition of investment adviser, but the SEC construes compensation for advisory services broadly, which narrows the practical value of that limit.",
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   "claim": "The frequency of advice helps determine adviser status: advice rendered occasionally, rarely, and in a non-periodic fashion makes classification as an investment adviser less likely.",
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   "claim": "Proof of special compensation is a necessary condition for classifying a broker dealer as an investment adviser, and the burden of proving both special compensation and that the advice exceeded the incidental is on the plaintiff.",
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   "claim": "Congress created distinct hedge fund adviser categories in Title IV of the Dodd-Frank Act because it recognized that not all hedge fund advisers pose the same systemic risks and therefore do not all require the same level of oversight.",
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   "claim": "Mid-sized investment advisers, those with between $25 and $100 million AUM, fall to state authorities rather than the SEC, though they may still have to register with the state agency where their principal place of business is located.",
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   "claim": "Advisers with more than $150 million in regulatory assets under management are defined as large private fund advisers and must register with the SEC.",
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   "claim": "Registering large private fund advisers works by increasing the volume of data available to regulators, which in turn may help protect against systemic risk.",
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   "claim": "The foreign private adviser exemption that replaced the fewer than fifteen clients exemption is conjunctive: it requires fewer than fifteen U.S. clients and investors, no U.S. place of business, no holding out to the U.S. public, and less than $25 million AUM attributable to U.S. clients and investors.",
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   "claim": "The Title IV threshold registration requirement pulls a majority of the hedge fund advisers who had previously relied on the fewer than fifteen clients exemption into SEC registration.",
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   "claim": "Registration is the gateway that makes data collection and enhanced disclosure by hedge fund managers possible, and the Dodd-Frank Act raised disclosure requirements for registered advisers specifically to address systemic risk concerns.",
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   "claim": "Part 2 of Form ADV requires a plain English narrative brochure for prospective advisory customers, making the brochure the primary disclosure document delivered to an adviser's clients.",
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   "claim": "Mandatory disclosure of referral compensation, related person status of brokers and dealers, and soft dollar benefits is designed to defuse conflicts of interest arising when an adviser runs several types of business and services.",
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   "claim": "Form PF was created to improve SEC and CFTC investigations and examinations and to enable the Financial Stability Oversight Council to monitor systemic risk in U.S. financial markets.",
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   "claim": "The frequency of Form PF reporting is keyed to size: advisers with at least $1.5 billion RAUM attributable to hedge funds must update quarterly, while advisers below that level file only annually.",
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   "claim": "An adviser that would otherwise have to register in fifteen or more states because of the $100 million AUM threshold may register directly with the SEC instead, so multi-state registration burden operates as an escape hatch to federal oversight.",
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   "claim": "The SEC excludes the value of a primary residence and related debts from the qualified client net-worth test because persons who clear the threshold only by counting their home are less able to bear the risk of performance fee arrangements.",
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   "claim": "Excluding the primary residence from the net-worth test removed a large population from qualified client status: SEC estimates suggest roughly 1.3 million households no longer qualify under the revised test.",
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   "claim": "The Dodd-Frank Act tightened custodial practice by requiring safeguards for client assets and verification by independent accountants, a response to concerns over theft and client exposure to Ponzi schemes.",
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   "claim": "A person who provides investment advice over the Internet escapes registration only if the advice is impersonal; personalized advice delivered through chat rooms and websites can trigger the registration requirement.",
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   "claim": "Because directors contractually agree to increase compliance through an open door policy for the government, CIAs substantially raise the liability risk for companies whose directors did not act in accordance with their fiduciary responsibilities.",
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   "claim": "The near identity between respondents who reported completing Sections 2 through 5 of Form PF and respondents who reported quarterly filing shows the answers are internally consistent, which the author treats as evidence that the survey responses carry above average reliability.",
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   "claim": "Measured against this study's survey data, the SEC marginally overestimated the cost of the initial Form PF filing for both annually filing smaller advisers and quarterly filing larger advisers.",
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   "claim": "Recurring Form PF cost is also size dependent: quarterly filing large fund advisers pay on average $72,143 for subsequent filings while smaller advisers spend on average $5,262.",
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   "claim": "For quarterly filing larger private fund advisers, the SEC substantially overestimated the cost of subsequent Form PF filings; the survey's estimate is roughly half of what the SEC projected.",
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   "claim": "The SEC's error runs in the opposite direction for small advisers on recurring filings: the agency marginally underestimated the cost of subsequent Form PF filings for annually filing smaller private fund advisers.",
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   "claim": "The SEC's time burden estimates for Form PF are miscalibrated in the same direction as its cost estimates for large filers: the study's data suggest the agency overestimates the hours larger private fund advisers need.",
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   "claim": "Form PF compliance is not staff intensive for most filers: 67.35 percent of respondents used only one to three individuals and 69.39 percent reported the work took staff less than 50 hours.",
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   "claim": "The Form PF burden is concentrated in a few identifiable items: respondents ranked Question 16 on types of investors as the most time consuming, followed by Question 17 on performance and Question 7 on related persons.",
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   "claim": "The dominant driver of Form PF time consumption is data gathering rather than form completion: 36 percent of respondents named data gathering as the task consuming most of their time, followed by delta options and ambiguous questions or unclear instructions.",
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   "claim": "Asked what the SEC should fix first, respondents named the burdensome nature and the ambiguity of Form PF as the most pressing issues, not the substance of what is disclosed.",
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   "claim": "Complaints about Form PF's ambiguity coexist with acceptance of its substance: the same majority that flagged ambiguity as the most pressing issue also considered their existing reporting systems adequate and agreed with the SEC's definitions and instructions.",
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   "claim": "Form PF's definition of leverage is overinclusive: respondents reported that it is inappropriately constructed and sweeps in funds that use neither leverage nor derivative securities.",
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   "claim": "Regulatory assets under management is an unstable reporting concept: commenters split evenly on whether Form PF's RAUM questions required them to interpret the term in order to answer.",
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   "claim": "Most private fund advisers did not need new infrastructure to comply: 65.22 percent reported that their existing internal reporting systems adequately capture the information Form PF requires.",
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   "claim": "Form PF's counterparty disclosure proved far less burdensome in practice than anticipated: 93.75 percent of respondents encountered no difficulty identifying counterparties for the counterparty credit exposure questions.",
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   "claim": "Because only 27.08 percent of respondents used a service provider to complete Form PF, the widespread concern that outside service providers would overinterpret required Form PF data on filers' behalf appears unjustified.",
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   "claim": "Investor demand for Form PF filings is limited: 74.47 percent of respondents had never been asked by an investor for a copy of their Form PF filing.",
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   "claim": "Form PF fund performance metrics are not accurate or comparable across filers, because reporting entities employ different calculation methodologies to produce them.",
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   "claim": "Respondents argued that the SEC's systemic risk objective would have been advanced more directly by asking a smaller set of targeted questions, emphasizing open derivatives positions, the entity's total market exposure, and its total underlying capital.",
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   "claim": "The measured effect of Form PF data reporting on the private fund industry is milder than the pre-adoption debate predicted.",
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   "claim": "On the cost evidence collected here for both smaller and larger advisers, the industry's long standing objection that mandatory registration and disclosure would inappropriately burden investment advisers is mostly unfounded.",
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   "claim": "Most of the identified problems with Form PF are self correcting over time, as the SEC issues additional and improved guidance or revises the core questions and definitions that filers flagged as problematic.",
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   "claim": "Standardizing private fund adviser reporting obligations is the author's proposed remedy for the shortcomings advisers identified, because standardization attacks the ambiguity and inefficiency in the reporting requirements at their source and simplifies the disclosure regime.",
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   "claim": "A single standardized reporting model will not suffice: because different types of private fund advisers have competing needs, policy makers should evaluate several different models for standardizing Form PF reporting.",
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   "claim": "The study's cost findings are bounded to the short run: the data cannot establish what it will cost the private fund industry to keep completing and filing Form PF annually or quarterly over time.",
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   "claim": "The increasing use of non prosecution and deferred prosecution agreements has allowed federal prosecutors to expand their traditional role incrementally, marking a shift in prosecutorial culture away from an ex post focus on punishment toward an ex ante emphasis on compliance.",
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   "claim": "Prior scholarship on the corporate governance effects of non and deferred prosecution agreements rests largely on anecdotal evidence and individual case studies rather than on systematic evidence, which is why its conclusions about those effects are unreliable.",
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   "claim": "Once prosecutors have investigated and identified corporate wrongdoing, non and deferred prosecution agreements let them avoid an expensive trial against a sophisticated and well funded corporate defendant, which is one reason both sides have strong incentives to settle.",
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   "claim": "Prosecutors favor non and deferred prosecution agreements because those agreements avoid the uncertainty of potentially catastrophic collateral consequences for the company, unlike an indictment.",
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   "claim": "Existing corporate criminal liability combined with the absence of clear Department of Justice standards for charging businesses can push organizations to adopt unproven compliance programs and generate other inefficiencies.",
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   "claim": "The authors contest the conventional wisdom that a corporate criminal indictment amounts to a corporate death penalty, pointing to recent guilty pleas in which BNP Paribas paid a record fine and Credit Suisse kept its investment banking license.",
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   "claim": "At the pre charging stage the government typically holds extraordinary bargaining power, which lets it extract fines and sanctions comparable to those following a criminal conviction while avoiding the risk and cost of trial.",
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   "claim": "The McCallum Memorandum failed as a corrective because it only supplemented rather than replaced the Thompson Memorandum and did little if anything to curb the widespread use of attorney client and work product privilege waivers in deferred prosecution agreements.",
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   "claim": "The McNulty Memorandum did not resolve the privilege waiver problem because it still left prosecutors ample opportunity to treat a corporate defendant's unwillingness to waive attorney client privilege as bearing on cooperation, and its attorney's fees provision had similar shortcomings.",
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   "claim": "Coding of all publicly available non and deferred prosecution agreements executed between 1993 and 2013 shows that 97.41 percent of them, or 264 of 271 agreements, contained relevant corporate governance changes.",
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   "claim": "Commonly managed investment funds holding $50 billion or more in aggregate total consolidated assets can be designated systemically important, and following a similar investment strategy across those funds makes designation more likely.",
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   "claim": "Stage one of the FSOC's designation process is a mechanical screen: six quantitative thresholds filter out nonbank financial institutions unlikely to pose significant systemic risk before any institution specific or qualitative analysis begins.",
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   "claim": "SIFI designation changes the nature of regulation for a nonbank financial institution, subjecting it to substantial additional regulation and forcing it to change how it does business, which can in turn constrain its growth.",
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   "claim": "The FSOC's three stage SIFI review process depends heavily on information that private fund investment advisers supply through Form PF.",
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   "claim": "Form PF information addresses most of the FSOC's stage one thresholds either directly or indirectly, so the mechanical screen runs largely on adviser reported data.",
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   "claim": "The SEC itself reports that the consistency of investment advisers' responses on Form PF is not ensured and may be questionable.",
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   "claim": "Advisers take different approaches and make different assumptions when completing Form PF, which the SEC identifies as a further challenge to the usability of the data.",
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   "claim": "Expanding the uses of Form PF data remains difficult so long as there is insufficient confidence in the accuracy of what advisers report, notwithstanding SEC efforts to improve quality through interpretive FAQs and curative amendments.",
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   "claim": "More than forty percent of respondents in a prior study disagreed with the definitions or instructions in Form PF.",
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   "claim": "The Form PF definition of Regulatory Assets under Management is the leading example of a definition that forced filers to interpret what they were required to report.",
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   "claim": "The interpretation Form PF demands generated particular concern among filers about the definition of counterparties and about counterparty performance measures.",
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   "claim": "Because several core Form PF questions feeding the FSOC's stage one threshold screen are themselves defective, the FSOC's systemic risk assessment process could be compromised.",
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   "claim": "The Form PF counterparty questions most affected by filer interpretation, Questions 22 and 23, are the very ones the FSOC uses in stage two to determine the interconnectedness of private funds.",
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   "claim": "Widespread filer disagreement with Form PF definitions implies that a large share of filers are uncertain how to answer, which raises the possibility that they complete the form with estimates and varied assumptions.",
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   "claim": "If the FSOC relies on inaccurate Form PF data in its systemic risk assessment, its work on private funds may itself be erroneous.",
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   "claim": "Private fund advisers reporting under Form PF encountered issues that could affect the FSOC's systemic risk assessment, but the author does not claim that the FSOC is unable to fulfill its congressional mandate.",
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   "claim": "Matching the identified Form PF defects against the FSOC's specific uses of that data suggests possible inaccuracies in the FSOC's systemic risk assessment process, although the author disclaims scientific or empirical precision for the analysis.",
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   "claim": "Fixing the identified problems with Form PF data would help optimize the FSOC's systemic risk assessment of private funds.",
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   "claim": "Stock prices respond significantly and predictably in a positive direction to the DOJ press release announcing execution of a non- or deferred prosecution agreement and to the start of the N/DPA term.",
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   "claim": "Investor response to N/DPAs is not uniform: it varies with the firm's industry, the severity of the financial fine, and the extent of the governance improvements the N/DPA mandates.",
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   "claim": "There is no systematic price momentum beyond the three core N/DPA event dates, which the authors read as evidence that the market is reasonably efficient with respect to N/DPA information.",
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   "claim": "Investors react negatively to impending N/DPA driven changes in the period before the agreement is executed, but once the N/DPA is executed they generally treat it as a positive event for the firm.",
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   "claim": "Investors treat the expiration of an N/DPA term as a negative event for the firm.",
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   "claim": "The combination of a positive market reaction at the start of the N/DPA term and a negative reaction at its end is evidence that the governance changes N/DPAs mandate actually matter to firm value.",
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   "claim": "Because N/DPAs are contractual arrangements between corporations and the Department of Justice that remedy identified governance shortcomings, it is the DOJ, rather than Congress or the courts, that is changing U.S. corporate governance practice.",
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   "claim": "The study's hand-selected dataset covers all institutions that executed N/DPAs from 1993 to 2015, a population of 330 agreements, of which 94 involved publicly traded firms usable for stock price tests.",
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   "claim": "The U.S. financial corporations subject to N/DPAs collectively exceed $690 billion in market capitalization and more than $20 trillion in assets under management, making N/DPA governance intervention economically consequential.",
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   "claim": "This is the first study to examine stock price reactions to non- and deferred prosecution agreements, using all publicly available N/DPAs across several industries from 1993 to 2015 (N=330).",
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   "claim": "The event study design is appropriate for N/DPAs because the wrongdoing event is identifiable through the execution of a reasonably standardized agreement and because information about the firm's wrongdoing can change the distribution of stock returns.",
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   "claim": "The date of the DOJ press release announcing execution is the only reliable announcement date for an N/DPA, so it is the defensible event date for measuring market reaction.",
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   "claim": "The DOJ announcement is the only ascertainable point at which the market can assess the impact of the governance changes an N/DPA mandates, because the announcement typically accompanies release of the agreement document itself.",
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   "claim": "Pre-announcement leaks about a pending N/DPA, including leaks by prosecutors, should not move markets significantly because leaked details carry no certainty or finality as to final terms or fine amount.",
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   "claim": "The positive post-announcement reaction is best read as the market rewarding both the end of a costly DOJ investigation and the governance terms the N/DPA is expected to impose.",
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   "claim": "The sign of the market reaction reverses at the end of the N/DPA term: where the announcement and the start of the term produce positive CARs, the end of the term produces negative CARs at day zero and from day one through day fifteen.",
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   "claim": "Negative returns after the end of the N/DPA term are evidence that investors regard the expiration of the term, and the consequent unenforceability of the associated governance improvements, as bad news for the firm.",
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   "claim": "The authors reject Hypothesis 1: they find no evidence that the market reacts negatively to the N/DPA announcement and the start of the term and positively to the end of the term, contrary to the cost-imposition view of N/DPAs.",
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   "claim": "The data support Hypothesis 2: the market reacts positively at the DOJ announcement and at the start of the N/DPA term and negatively at the end of the term.",
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   "claim": "The data support Hypothesis 3: the market reacts positively when N/DPA governance changes become mandatory at the start of the term and negatively when they cease to be mandatory at its end.",
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   "claim": "The market values N/DPA governance changes during the term because those changes effectively address the underlying corporate wrongdoing and its damage to goodwill and reputation while reducing the likelihood of continuing fines and litigation.",
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   "claim": "Because the market reacts positively both to N/DPA announcements and to the governance improvements taking effect, the DOJ's escalation of N/DPA executions beginning in 2002 could be justified on market value grounds.",
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   "claim": "The study's results may be biased toward low impact N/DPAs, because firms that were acquired, merged, or went bankrupt as a result of an N/DPA had to be dropped for lack of public trading data, and those are precisely the highest impact cases.",
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   "claim": "The author stipulates that retail alternative funds are funds regulated under the Investment Company Act that attempt to replicate private fund strategies, including leverage, derivatives, short selling, and nontraditional asset classes; this definition carries the chapter's confluence analysis.",
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   "claim": "Private party litigation against hedge fund managers stays minimal because well counseled managers make extensive disclosures to investors who are presumed sophisticated, unlike mutual fund advisers who face ongoing high value investor suits.",
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   "claim": "Hedge fund investors have almost no statutory remedy: the regime establishing a hedge fund investor's rights is severely limited, nearly to the point of nonexistence, in the United States and in the offshore jurisdictions where many hedge funds are chartered.",
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   "claim": "Identical rules diverge in practice because the two vehicle types are structured, operated, and run as businesses differently; the Investment Advisers Act applies to both, yet its obligations are far more onerous for mutual fund managers.",
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   "claim": "Best execution is a leading instance of nominal confluence: the obligation is nominally the same, but it is far more complicated and burdensome for the mutual fund manager than for the hedge fund adviser.",
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   "claim": "Freedom from significant regulatory oversight is what historically enabled hedge funds to run more exotic, more leveraged strategies aimed at absolute returns.",
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   "claim": "Alternative mutual funds generally cannot deliver the same absolute returns as hedge funds, a shortfall some attribute to the lighter touch regulation and better incentives available to hedge funds.",
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   "claim": "Alternative funds gave retail investors access to hedge fund strategies and higher returns than traditional mutual funds while charging mutual fund fees, and that combination is what increased retail demand.",
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   "claim": "The traditional mutual fund governance model, in which one board serves multiple discrete funds within a sponsor's group, is subject to significant oversight challenges.",
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   "claim": "In a multimanager series trust the board is largely independent of any adviser in the fund group, because the structure is centered on an unaffiliated administrator rather than on the sponsoring investment adviser.",
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   "claim": "Despite open issues and possible shortcomings, the multimanager series trust structure appears to offer lasting substantive governance improvements for mutual funds.",
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   "claim": "FSOC's SIFI designation framework does not distinguish between mutual and hedge funds, even though evidence indicates designation would have disparate effects on the two asset classes.",
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   "claim": "The confluence trends identified are correlational, not causal: the author expressly disclaims any claim of cause and effect and presents the peripheral effects as long term possibilities warranting monitoring.",
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   "claim": "The Volcker Rule cuts banks off from direct hedge fund investment and thereby pushes them toward accessing hedge fund strategies through retail alternative funds, a shift that could be substantial given banks' prior role as major hedge fund investors.",
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   "claim": "Amendments to Regulation SHO may deny mutual fund advisers certain hedging techniques, making it less likely that mutual funds can attract retail investors who are looking for alternative investment exposure.",
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   "claim": "The quarterly Form PF reporting obligation imposed on advisers with more than $1.5 billion in regulatory assets under management attributable to private funds exists to give the FSOC timely data for identifying trends in systemic risk.",
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   "claim": "The study identifies the causal effect of Title IV by treating the March 30, 2012 registration effective date combined with the $150 million AUM threshold as an exogenous regulatory shock, so that any discontinuity in returns at the cutoff is evidence of a causal treatment effect.",
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   "claim": "A single point in time RD design anchored to March 30, 2012 is inadequate on its own because advisers could and did register before the deadline, funds near the $150 million threshold could choose between registered adviser and exempt reporting adviser status, and self-reported Morningstar AUM is not calculated the same way as the SEC's RAUM.",
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   "claim": "Venture capitalists' finance allocation and their implicit assessment of innovative products, businesses, and initiatives generate highly relevant institution-specific and industry-specific decentralized information on innovation trends.",
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   "claim": "Regulation is mostly reactive and follows business cycles rather than being proactive; data on venture capital investments lets regulators see where innovation trends are heading and what risks they entail before the disruptive innovation actually materializes.",
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   "claim": "The decline in later stage robotics and drone investment rounds in the United States does not indicate stalled technological development; companies relocate later stage development to other countries because of the regulatory disconnect that exists in the United States.",
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   "claim": "The authors concede that the trend for venture-capital-financed technology companies to stay private and the market undervaluation of formerly venture-capital-financed companies mean the innovation potential identified by venture capital finance allocation may not always be shared by the market at large.",
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   "claim": "Existing regulatory processes are suboptimally equipped to address the challenges of exponential disruptive innovation, and the notice and comment procedures of the Administrative Procedure Act and the SEC illustrate the resulting suboptimal regulatory response rates.",
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   "claim": "Venture capital investment allocation data can help facilitate anticipatory regulation of disruptive innovation, but it is only one of several emerging data sources usable for signaling in regulatory process optimization.",
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   "claim": "The study rests on two datasets: SEC Form ADV Part II filings by private investment fund advisers from 2007 to 2014 (N=100392) and the publicly available litigation record on private fund investor due diligence from 1995 to 2015 (N=572).",
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   "claim": "Because a material omission or misstatement in Form ADV Part 2A can support a serious securities law charge, private fund managers have an incentive to keep the narrative language of that required disclosure as high level, summary, and non committal as possible.",
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   "claim": "From 2007 to 2014 an increasing number of Form ADV Part II filers deemed investor due diligence worth mentioning, and an increasing number of filers qualitatively increased their due diligence disclosures in the brochure filings.",
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   "claim": "Since 2010 an increasing number of SEC Form ADV Part II brochure filers included investor due diligence disclosures, but the number of filers including such disclosures remained relatively even between 2012 and 2014.",
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   "claim": "The intensity of due diligence mentioning relative to total Form ADV Part II brochure filings increased substantially, and the due diligence count exceeded the total number of ADV II filings for the first time in 2014.",
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   "claim": "Form ADV Part II filings jumped from 3,024 in 2010 to 21,685 in 2011, and that jump was accompanied by a corresponding increase both in the number of filings mentioning investor due diligence and in the due diligence counts within those filings.",
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   "claim": "Although overall Form ADV Part II filings fell between 2012 and 2013, due diligence counts fell only marginally, from 20,828 to 20,031, and filings mentioning due diligence fell from 7,862 to 7,198, less than proportionally to the drop in total filings.",
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   "claim": "The Form ADV analysis is limited because the term due diligence carries multiple possible meanings, so counts of the term cannot by themselves distinguish among those meanings.",
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   "claim": "Litigation research on private fund due diligence requires in depth evaluation of case dockets rather than only published judicial decisions, because opinions are snapshots that do not tell the whole story of a case.",
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   "claim": "Legal decisions involving private fund due diligence increased substantially after 2005 and especially after 2008, and the broad, narrow, and hand selected case categories all increased consistently with a slight lapse in 2014.",
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   "claim": "In the hand selected sample of cases, the ranking of causes of action differs from the full search results: fiduciary duty leads, followed by negligent misrepresentation and breach of contract.",
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   "claim": "While some courts found that a complete lack of investor due diligence can amount to securities fraud or breach of contract, and that lacking due diligence can breach fiduciary duties, the majority of courts evaluate private fund due diligence issues in the context of misrepresentation.",
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   "claim": "Successful claims based on lacking investor due diligence typically require a complete failure to perform due diligence despite explicit promises to perform it; promising due diligence and then conducting none except in isolated incidents is actionable misrepresentation.",
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   "claim": "Relying solely on a representation by the investment or the fund, without actually performing due diligence, is sufficient to present a fact issue on fraud to a jury.",
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   "claim": "Deficient due diligence does not create securities fraud liability unless it is intentional or highly reckless; conduct that is merely negligent or professionally incompetent falls short of the scienter requirement.",
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   "claim": "Failing to check publicly available documentation on an investment is irresponsible but insufficient to plead fraudulent intent, and failing to perform due diligence commensurate with industry standards is inadequate to plead scienter.",
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   "claim": "Defendants owe a duty to use reasonable care in conducting financial due diligence consistent with the standards of care in the profession.",
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   "claim": "Fund managers were incentivized to route capital to Madoff because he charged notoriously low fees for the hedge fund business, taking only transaction fees rather than fees based on assets under management.",
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   "claim": "Funds of funds claimed to select the best managers through skilled due diligence and charged standard 2 and 20 fee structures for that service, while in reality depositing the vast majority of their capital into Madoff's opaque fund.",
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   "claim": "Claims in which investors use hindsight to second guess due diligence practices often fail, even when the manager was clearly incompetent.",
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   "claim": "Funds that promise due diligence with no intention of actually carrying it out violate federal securities laws rather than merely breaching a contract.",
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   "claim": "Advertising an elaborate multi limb due diligence process is no evidence that it was applied: Madoff's asset management advisers FIM Limited and FIM Advisers touted what sounded like above industry standards yet applied none of them to Madoff's firm and admitted as much.",
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   "claim": "Expert testimony identifies recurring failures in private fund due diligence, including the absence of any written policy or process to ensure compliance and reliance on individuals with little or no experience, particularly with the particulars of hedge funds.",
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   "claim": "The principle based approach has a shortcoming the authors concede: it is usually impossible to comply with principles that could change after the fact, and the approach may let regulators promulgate fact based laws and rules through the backdoor.",
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   "claim": "The regulatory sandbox provides a safe space in which innovative products and services can be tested without being forced to comply with the otherwise applicable set of rules and regulations.",
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   "claim": "The most interesting feature of the sandbox is that ideas, products, and services are tested in a live environment, made possible by a set of default parameters the FCA defined that can be altered case by case.",
   "topics": [
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   "is_failure_mode": false
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   "claim": "The sandbox generates legitimacy as well as information: because the tested technology remains open to discussion and democratic supervision, public entitlement to participate in regulatory debates creates a renewed sense of legitimacy that justifies the regulation.",
   "topics": [
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   ],
   "is_failure_mode": false
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  {
   "id": "kaal:claim:2834531-044",
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   "content_sha256": "5027d2563dda1de10708e20500f41676fea2673c7b8bc856843b251e308dbc35",
   "claim": "A data based regulatory environment requires measures built on flexible and inclusive processes that involve startups and established companies, regulators, experts, and the public.",
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   "is_failure_mode": false
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   "claim": "The flexible, data based, sandbox style regulatory approach already adopted in the financial industry is expected to expand into other areas of innovation and technology.",
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   "is_failure_mode": false
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  {
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   "content_sha256": "40e1cf862bb4cd9007222e3e582c456b1fa1d80df61832f3c1d1a441c75b8c0e",
   "claim": "The 1991 passage of Section 7.32 of the Model Business Corporation Act triggered a wave of state authorization of shareholder control agreements, adopted specifically to secure the validity of such agreements rather than leaving validity to uncertain judicial development.",
   "topics": [
    "corporate-governance"
   ],
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  {
   "id": "kaal:claim:3017612-002",
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   "content_sha256": "6c1c34793b2d04dbce21b7ab26d1fac5e33fa8929bf027c2337dcc19541c9a3d",
   "claim": "US corporate codes function as enabling statutes that give enterprises wide flexibility, but that flexibility stops at mandatory provisions, which the parties cannot contract around.",
   "topics": [
    "governance-design"
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   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3017612-003",
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   "content_sha256": "cbca08a4b5bb873d310ff1fb799236ff0f00354612dba7a12c0e26b9e9a7c8ac",
   "claim": "Although shareholder agreements are authorized and shaped by corporation code provisions, their construction is governed by ordinary contract interpretation rules, so statutory authorization does not displace contract doctrine.",
   "topics": [
    "corporate-governance"
   ],
   "is_failure_mode": false
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  {
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   "content_sha256": "fef6875ec4a1d35df71089673b18e44829d80f8a395cbeb246c5303f3db8ada0",
   "claim": "Shareholder agreement terms that limit board authority are vulnerable to invalidation, and the dominant judicial rationale is that such agreements tie the hands of directors and make it impossible for them to exercise discretion over the matters the agreement settles.",
   "topics": [
    "corporate-governance"
   ],
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   "content_sha256": "ae43e1b0f231f5a4ac6eb596e504e2c976916d06119ff76b2d6fdbac6eac3cb9",
   "claim": "Under MBCA Section 7.32 the ten year duration limit is only a default rule, unlike the corresponding limit for voting trusts, so parties who specify a longer term are permitted to have it.",
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    "governance-design"
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  {
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   "content_sha256": "1b1872d4af56141c7e43e7b9f2b50cdce0f2feb5b3d42fd27148228ee0710daf",
   "claim": "Duration ceilings contained in voting trust statutes do not carry over to other types of shareholder agreements, and courts have repeatedly sustained shareholder agreements intended to run indefinitely.",
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    "governance-design",
    "compliance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3017612-007",
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   "content_sha256": "92aae44fbb4e96654b7d93d40fe807cedf82cef40b1a515f5da1c51803ff4321",
   "claim": "Because public and close corporation shareholders differ materially in bargaining power, close corporation shareholders should be granted greater flexibility to order their affairs by agreement.",
   "topics": [
    "risk-and-incentives",
    "corporate-governance"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3017612-008",
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   "content_sha256": "1a1ac4ba1564894a90454961cee06d9c13b6973844199a4adf8aa2cc6ef03030",
   "claim": "A shareholder agreement authorized under MBCA Section 7.32 ceases to be effective once the corporation's stock is listed on a national securities exchange or regularly traded in a dealer maintained market, so the going public event terminates the arrangement.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": true
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  {
   "id": "kaal:claim:3017612-009",
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   "claim": "MBCA Section 7.32 requires unanimity, so agreements that bind only a block of shareholders rather than all of them cannot rely on that section and must find authorization elsewhere.",
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    "institutional-design"
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   "is_failure_mode": true
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  {
   "id": "kaal:claim:3017612-010",
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   "content_sha256": "1c8a794cc85c0d351b56a18f16b87c34efeba0286c845ba036701baeaf17c591",
   "claim": "MBCA Section 7.32 requires a writing but, departing from earlier statutes, does not require the agreement to sit in the articles or bylaws, so stand alone written shareholder agreements are expressly valid.",
   "topics": [
    "governance-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3017612-011",
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   "content_sha256": "0b4d201fe845b098ad05824288640dbb70b940cd492253a9c15d7cdc44947a31",
   "claim": "The Model Act conditions the arrangement on notice to the market for shares by requiring a legend on the stock certificates that flags the agreement to purchasers of covered shares.",
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    "institutional-design"
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   "is_failure_mode": false
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  {
   "id": "kaal:claim:3017612-012",
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   "content_sha256": "bae82f14c36b1744cae068a96061435f9c2cc5f0712d6fcd0e72c190addf59f1",
   "claim": "Shareholder agreements matter more in closely held corporations because minority holders have sunk substantial time or capital into the enterprise yet cannot exit through sale, since their shares lack a ready market.",
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    "defi"
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  {
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   "content_sha256": "ca11a21646761f8a9dd33a65720afe5251196196b22561b8f9ad9dbb2727d63a",
   "claim": "Voting arrangements are not self executing: their existence does not relieve the corporation of observing the legal formalities of director and shareholder action.",
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    "risk-and-incentives"
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   "content_sha256": "52e3e3ccea04faa088633fc4ead759cfc90e64cffa9c36be65138df1c93fd446",
   "claim": "Courts are split on whether a corporation is bound by a shareholder agreement it did not sign: some hold the corporation bound where all shareholders are parties to a valid agreement, while others refuse to bind it.",
   "topics": [
    "corporate-governance"
   ],
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   "claim": "Corporate claims frequently go unpursued because the decision to sue rests with directors who are often the wrongdoers themselves, which is why shareholders resort to derivative actions.",
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    "compliance",
    "corporate-governance"
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   "is_failure_mode": true
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   "content_sha256": "30c5b319fa132bf50a6eb6a873f0e1e738421f8ad89db394644bb23cc851d980",
   "claim": "A shareholder suing derivatively sues on the corporation's behalf and cannot convert the action into a personal one, even where the corporate injury has impaired the value of that shareholder's own stock.",
   "topics": [
    "reputation",
    "corporate-governance"
   ],
   "is_failure_mode": false
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  {
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   "claim": "To escape the procedural hurdles of derivative litigation and recover directly, a shareholder must persuade the court that those abusing control of the corporation harmed the shareholder directly rather than the entity.",
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    "corporate-governance"
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   "content_sha256": "a9a9d22e2779033725a7f4a90cb80867470be91bed9544365825f540136e66bc",
   "claim": "Under the MBCA a purchaser of shares who bought without knowledge of an existing shareholder control agreement may obtain rescission of the purchase.",
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   "content_sha256": "055d21367d2da98f4f94264a8160e5b273a4f8508ce687b6ac4eaedcf19dfcfb",
   "claim": "Veto rights are the price minority shareholders extract for capital: minority holders may withhold capital contributions unless they receive veto powers over major corporate decisions.",
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    "corporate-governance"
   ],
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   "content_sha256": "531d107d5928e0f5db41d8b3654d4bcfef6c62a5b7602c7f79da762727e3ea94",
   "claim": "Courts have recognized an enhanced fiduciary duty among participants in closely held corporations, holding that majority shareholders owe fiduciary duties not only to the corporation but to minority shareholders as a class.",
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    "corporate-governance"
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   "id": "kaal:claim:3017612-021",
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   "content_sha256": "6a7801bed21bc2c4a3afca401d4c67c17f537c403013b2a5c94090276e429f6a",
   "claim": "Fiduciary responsibility follows actual control rather than formal office: a shareholder exercising absolute de facto control over a corporation owes fiduciary duties regardless of whether that shareholder holds de jure title.",
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    "corporate-governance"
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   "is_failure_mode": false
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  {
   "id": "kaal:claim:3017612-022",
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   "content_sha256": "7e221669b737a396553c751076866187b98a07b13e511abf68b879eb11b3c174",
   "claim": "Contractual consent to a cash out does not extinguish fiduciary claims: a minority shareholder who agreed to receive cash for shares may still challenge the merger as a breach of fiduciary duty.",
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  {
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   "content_sha256": "01dcab310af3485c946f0e041434cb9d32b4f1c34c326f49a1db966c4744d97d",
   "claim": "US law gives corporate participants wide latitude to restrict share transfers, and such restrictions are usually upheld unless their terms are unreasonable in the circumstances.",
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  {
   "id": "kaal:claim:3017612-024",
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   "content_sha256": "03cecd3c98e4813f4bfcbe33adac219c576d3e0144d9950f71531848b7c3fd40",
   "claim": "Transfer restrictions cannot be imposed on shareholders who did not consent: Delaware refuses to allow them unless the holders are parties to the agreement or voted for the restriction, and courts have refused to apply restrictions retroactively to nonconsenting shares.",
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    "institutional-design"
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   "is_failure_mode": true
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   "content_sha256": "ca5eaf2afeb5806d3f4d2386962feb8eb13c6fd7912f7c5c593a4754178176df",
   "claim": "Drag-along rights raise the price the majority can obtain because a buyer facing the prospect of continuing with remaining minority shareholders would otherwise discount its offer for the majority stake.",
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  {
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   "content_sha256": "f6b8cd25edb5cd988ec036a3f60ad8b47879a42f427bb60e36b9b8534941cc6e",
   "claim": "Drag-along rights are likely enforceable in Delaware absent fraud or duress, because Delaware rejects the de facto merger doctrine and therefore does not trigger statutory formalities such as appraisal rights.",
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    "institutional-design"
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   "is_failure_mode": false
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   "content_sha256": "22db50d00f768cf5bb06859ba173464d42b13131f1044e2737a2dee51861b2c9",
   "claim": "A buy-sell agreement survives bankruptcy more reliably when it is not merely executory: because bankruptcy trustees may void executory agreements, an agreement that obliges both the shareholders and the entity to buy and sell is more likely to be enforced.",
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  {
   "id": "kaal:claim:3017612-028",
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   "content_sha256": "fff0cfe8e235c38af80c366dbbfb61672a9bf3df36c5412a88cf24ac371986fa",
   "claim": "Standstill agreements defraud shareholders who are not parties to them in two distinct ways: by violating the shareholder's right to the best available merger or transaction and by discouraging unsolicited tender offers in which a significant control premium could be realized.",
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    "institutional-design"
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   "content_sha256": "bbebea19bc6b7887bb138b97e0c771aa284452f7adc60211b8bca82011fb610c",
   "claim": "Standstill agreements entrench management and can lead a company into stagnation, so they may operate prejudicially on shareholders' property rights.",
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   "content_sha256": "1bda9e49fcfcc1ccf16e662aabb2183416f26166cf3be760a66d78d6547315d5",
   "claim": "The articles function as the corporation's constitution and are deliberately hard to change, requiring action by both directors and shareholders unlike most corporate decisions.",
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  {
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   "content_sha256": "ad6a090d246deff25552f7f0a47900ae1eba55d46a8c41807522533ca011fef0",
   "claim": "Where a shareholder agreement is folded into the charter or bylaws, it thereby becomes subject to whatever amendment procedure those documents or the statute provide, so charter integration exposes the arrangement to later modification.",
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    "reputation",
    "risk-and-incentives"
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   "content_sha256": "f472330506c8b4125bc268c42b3e81071789dbbb85c98aad10a50f11a742404a",
   "claim": "Because shareholder agreements are designed to displace corporate formalities such as majority rule, it is reasonable to require that the intended degree of deviation be set out explicitly in the agreement.",
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   "content_sha256": "63cf1dc6854905bea5191e03fb4dbe0a96aec2ab130b8ece9f657cb4d6c66faf",
   "claim": "Shareholders frequently fail to place their agreements in the charter or bylaws, sometimes through ignorance or inadvertence and sometimes deliberately, because charters are public records and the parties prefer not to expose their arrangement to outsiders.",
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   "content_sha256": "b777ae5f030c3ba6d638e1d598aa9ab5f83168c1616666ad0601a5f986d7438d",
   "claim": "Absent explicit statutory authorization, many courts have refused to enforce veto provisions contained in shareholder agreements, which is why such provisions should be implemented through charter or bylaw amendment.",
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   "id": "kaal:claim:3017612-035",
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   "content_sha256": "e2124d58e5a1819d96016a64bfd1699c5b337bd8a42ca49c77b7fb2e748430ba",
   "claim": "States lacking specific authorization for shareholder control agreements generally still permit departure from the default rule of director control if the departure is set forth in the corporation's charter or bylaws.",
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    "governance-design"
   ],
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   "content_sha256": "0c2053944a512f2e4f075c56f476477da81740ab3ef4215a5db4d82cc0077b4d",
   "claim": "Even though New York decisions such as Adler v. Svingos suggest veto arrangements outside the charter will be specifically enforced, the better practice remains to amend the charter to insert them.",
   "topics": [
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   "content_sha256": "69299999df6cf82055b0e5657b95a339c6e3b87610ccac394e5f84b505db7d85",
   "claim": "Damages are usually an inadequate remedy for breach of a shareholder agreement because they are too speculative, even where the aggrieved shareholder holds a direct cause of action.",
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   "content_sha256": "6a48536c47a9235c235d982de234e111a3057345f7abef4dca4872493ac33e3b",
   "claim": "Because damages rarely provide an adequate remedy for breach of a shareholder agreement, refusing specific enforcement amounts in substance to declaring the agreement invalid.",
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   "claim": "The extent to which a company uses data and algorithms will separate the winning companies of the future from the rest, because algorithmically driven firms gather consumer behavior data and instantaneously feed it back into an improved consumer experience.",
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   "claim": "When a fee bearing evidence of work post enters the platform, half the newly minted sem tokens are staked in the poster's name as an upvote bet and the other half are staked against the post and left unassigned, so the poster's only direct reward for off-platform work is a contested stake.",
   "topics": [
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    "tokenomics"
   ],
   "is_failure_mode": false
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   "content_sha256": "bf8595e873ed7c4af8ff948c3a2ac53acdc06a0170c0d7a10da3197e0043ca1c",
   "claim": "Every validation request opens a betting pool in which experts stake expertise specific sem tokens for or against the post, the winning side splits the losing side's stakes, and upvotes win ties.",
   "topics": [
    "tokenomics"
   ],
   "is_failure_mode": false
  },
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   "content_sha256": "70f28376503ac79b3a0d76655441da1f48fb65e5859ad3ff47280d35dcc6a3b2",
   "claim": "The hidden voting scheme depends on the choice of symmetric encryption protocol: a poorly chosen protocol exposes the platform to a birthday problem attack in which malicious voters submit an encrypted key that can be decrypted in two different ways, letting them retroactively choose their vote.",
   "topics": [
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    "citation-and-knowledge"
   ],
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  {
   "id": "kaal:claim:3125822-008",
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   "content_sha256": "357b9bb5899857960602ba53dbc7b7116599077975d44b1ffad7a058a5a1e552",
   "claim": "A newcomer cannot buy reputation with money because the 50/50 staking of newly minted tokens leaves incumbent experts with complete power to decide whether the newcomer's contribution was positive; a losing applicant forfeits all reputation in the expertise.",
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   ],
   "is_failure_mode": false
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   "content_sha256": "9536c6b87247c9f121fa28152d17690d626dc8509d0fd4883338271355edacf4",
   "claim": "The platform's ability to function among anonymous and potentially hostile users is conditional: it holds only if smart contracts that engage experts for off-platform work voluntarily include the recommended protocol choices, which the minimal core itself does not require.",
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   ],
   "is_failure_mode": false
  },
  {
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   "content_sha256": "41dfed8c4f5722c1ebf6a2d1d1100fcee302ac99f9a6b85b2a879a7bb4c15a60",
   "claim": "The chosen expert is deliberately not paid directly out of the fee but only indirectly in newly minted tokens, because the architecture secures itself by making reputation more valuable than any one time payment.",
   "topics": [
    "reputation",
    "risk-and-incentives",
    "consensus-and-security"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3125822-011",
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   "claim": "Enforcing a protocol in which all work fees are shared with the expertise produces a positive feedback loop: more fees raise the worth of reputation, which makes sem tokens more desirable than one time fees, which makes vested experts police the system carefully, which makes the system more secure.",
   "topics": [
    "consensus-and-security"
   ],
   "is_failure_mode": false
  },
  {
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   "content_sha256": "0a1fbb1bfa0dce10667564bc89e4f493ae61ac59511fa5c2358d3e5c7bd9f848",
   "claim": "The platform is Sybil attack resistant because all power is weighted by reputation rather than by account: an owner of a single account holding 1000 tokens has the same or more power than an owner of 1000 accounts holding one token each.",
   "topics": [
    "consensus-and-security",
    "reputation"
   ],
   "is_failure_mode": false
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  {
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   "content_sha256": "4f034c662eac777fd19ac12db82a6b41f041475d9664063739c68b1d8fbb3354",
   "claim": "The tragedy of the commons arises in any system lacking a well designed incentive structure; in blockchain proof of stake design this is the nothing at stake problem, where unregulated systems lead pseudonymous users to abuse the system.",
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    "institutional-design",
    "consensus-and-security",
    "risk-and-incentives"
   ],
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  },
  {
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   "content_sha256": "9b06bf16acf73617ff8f66399f01689cdf3467ddb08e61c20168945c703447db",
   "claim": "Reddit's upvote system imposes insignificant punishment for voting randomly, and this lack of cost compromises the informational value of an upvote, which is the failure mode a staked validation pool is designed to avoid.",
   "topics": [
    "governance-design",
    "risk-and-incentives",
    "reputation"
   ],
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  },
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   "content_sha256": "c3b05a8fb81c75375ae6d63c0d5d4603502e807ac743d2cea0360fce680f8b7a",
   "claim": "Tyranny of the majority is countered by a time delay in announcing upvote results, so that experts cannot see the majority position before they commit their own stake.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
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   "content_sha256": "8d5609188d90a0ab3e914d034799beef5ae84f32aa6c8414631991ddf9dd5f66",
   "claim": "A 51 percent collusion that votes against common sense is visible in an open system, which erodes trust, reduces use and fees, and lowers the value of the attackers' own reputational salary, so the tactic can destroy an expertise tag but cannot enrich the attackers.",
   "topics": [
    "consensus-and-security",
    "reputation"
   ],
   "is_failure_mode": false
  },
  {
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   "content_sha256": "80f784a5124e125fd12ca23037a2e474578478833b95b6e5bba1a741c709a3a8",
   "claim": "The author concedes an arbitrage attack is feasible when experts fail to police their expertise and a significant share of the technically fungible tokens is offered on an exchange, since a malicious actor can then buy 51 percent of the tokens, vote against common sense, and sell before the tokens lose value.",
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    "tokenomics"
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   "content_sha256": "a2f9291774c3063290fad8016afd5fdb3208a259454ebcc79590ef3cef566fe3",
   "claim": "Healthy expertise tags are secure not because attack is impossible but because it is easier to profit from them by improving them than by harming them.",
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    "economics",
    "ai-and-agents",
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   "claim": "In the absolute worst case, with no safeguards at all, the price of corrupting the platform from within is a minimum of twice the total historical fees added to the system, and instituting any obvious protection raises that price steeply.",
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   "claim": "Even a successful takeover yields the attacker only a fraction of one transaction's fee before the expertise tag topples, so as long as any single fee is smaller than the total reputation there is no incentive to game the system for fees.",
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    "consensus-and-security",
    "economics",
    "risk-and-incentives"
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   "claim": "Acquiring 51 percent of the tokens by paying fees and winning betting pools costs roughly six times the value of the entire quantity of sem tokens in a healthy expertise, even when the bench makes no effort at all to police the incoming fees.",
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    "consensus-and-security",
    "tokenomics"
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   "claim": "If good faith experts counter invest at least as fast as the malicious group, that is at a constant fraction c greater than or equal to one of the malicious investment, the malicious group can never gain more than 50 percent of the power.",
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   "claim": "The platform's feedback loop is closed in the sense that there are no rent seeking owners: the system is entirely supported by its users and the users reap the entire profit.",
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    "economics"
   ],
   "is_failure_mode": false
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   "claim": "The platform becomes fully autonomous almost immediately after deployment, because once the Ethereum DApp is posted its authors have no more control over the evolution of the expertise tags than any other Ethereum user.",
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    "decentralization",
    "governance-design"
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   "content_sha256": "78c69022850884e7a8a02e9a7d1d71a6371816ef27b55082af51962c42d22320",
   "claim": "A healthy expertise tag requires that fees from new commenters buying in remain smaller in the long term than fees from outside business; otherwise the expertise tag is simply a pyramid scheme.",
   "topics": [
    "economics"
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   "is_failure_mode": true
  },
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   "content_sha256": "b0267a08b8b2f27b1c50bc5c15efd344bb8e95b1cd3afea2e304f998917c21a6",
   "claim": "The token economy is inflationary at equilibrium, and this inflation is a feature rather than a defect because it improves security and discourages rent seeking holding of reputation.",
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    "tokenomics",
    "consensus-and-security"
   ],
   "is_failure_mode": false
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   "content_sha256": "65e5924afaefdcfb06e440d360bba14e46ee7b23a859540596943d9249edd867",
   "claim": "Because earlier minted tokens pay out more than later ones at a steady fee rate, later experts have less motivation to join, and the remedy available to the bench is to change the exchange rate between fees and sem tokens to attract new recruits.",
   "topics": [
    "risk-and-incentives",
    "tokenomics",
    "defi"
   ],
   "is_failure_mode": true
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   "content_sha256": "a7668fcd9fd90ba817aaf64d230a6bd820bf8152aa8b75bd0bb686fc788a8379",
   "claim": "For decentralized dispute resolution to deliver certainty of outcomes, the arbiter's power to disburse the assets of a contract, once triggered, must be preeminent over the parties.",
   "topics": [
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    "law-and-legal-systems",
    "smart-contracts"
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   "content_sha256": "5377f4ae21b690f43f56c44349c26d312faa04b6c3c6247cf2efde1a6335006d",
   "claim": "Arbitration on the platform fails at either end of the fee range: if the parties set fees too low the selected arbiter refuses the work and the arbitration fails, and if arbiters demand fees higher than the public will pay they fail to attract cases.",
   "topics": [
    "law-and-legal-systems",
    "economics",
    "systemic-risk"
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   "claim": "When the bench of arbiters is small, a powerful private user can capture it in advance by spending heavily to engage the bench through separate contracts, mirroring the way powerful firms pay retainers to judges in the United States legal system.",
   "topics": [
    "regulatory-failure"
   ],
   "is_failure_mode": true
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   "id": "kaal:claim:3125822-031",
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   "content_sha256": "6ea0478e5cab42879ae07b9051fed948ab6f7b62493d96883fde99380a33271a",
   "claim": "Smart contracts give insurance against an unfair settlement only under stated conditions, among them that anonymous arbiters are chosen randomly with weight given by their availability stakes and that arbiters must post evidence of work for evaluation by the forum.",
   "topics": [
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   ],
   "is_failure_mode": false
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   "content_sha256": "62752b12b3a446b84bafd5c498ba6a80bf372263ea642cdd537c5b73d55915a9",
   "claim": "Parties to a smart contract must avoid asymmetric encumbrance of assets, because in an anonymous blockchain environment where assets cannot be recovered from parties further down the transaction tree, an asymmetrically bound party can unfairly exert power by triggering a dispute.",
   "topics": [
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    "law-and-legal-systems"
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   "claim": "In the proof of stake application, a block is accepted by the network only if it carries proof of success in a betting pool, and that stamp constitutes the entire cryptographic security of the chain at far lower energy cost than proof of work mining.",
   "topics": [
    "consensus-and-security"
   ],
   "is_failure_mode": false
  },
  {
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   "content_sha256": "8a02854176833af777f8ab316edecd796d4dbe657b7ee4a2a54c1db302565f55",
   "claim": "A proof of stake lottery on this architecture is vulnerable because the seed of the pseudorandom generator that names the next block author is partly controlled by the current block author, which lets an attacker capture all block creation by routing authorship to their own Sybil accounts; the proposed remedy is to derive the seed from a hash of the previous block's validation information.",
   "topics": [
    "consensus-and-security"
   ],
   "is_failure_mode": true
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   "content_sha256": "581a3c9092b4c887819778760932b4913ab5f5eeb00ca86f2fe82c709bd2fc2e",
   "claim": "The author contests Houy's claim that killing a proof of stake currency costs nothing: on this platform the token's value is calculably predictable rather than merely a function of public opinion, and signaling an intention to buy tokens usually raises the price rather than triggering a race to the bottom.",
   "topics": [
    "consensus-and-security",
    "tokenomics",
    "economics"
   ],
   "is_failure_mode": false
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   "content_sha256": "9df3d80d6c9f6bff90bb6670a4e5426faaba32a0434d01158c7d50da103676ab",
   "claim": "Under certain restrictive assumptions it has been proven that no protocol can guarantee fair exchange with decentralized arbiters, so no design on this architecture can promise absolute certainty of fair machine arbitration.",
   "topics": [
    "defi",
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    "law-and-legal-systems"
   ],
   "is_failure_mode": true
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   "content_sha256": "13c098e866e8df15f4c26d1eadc487c0ab7e9faf65d7c498a8ad367ba59bdfc2",
   "claim": "Because absolute certainty is unavailable, the architecture substitutes a calculable probability of confidence built on verified reputation, which is enough for business to proceed even though no provably certain algorithm exists.",
   "topics": [
    "reputation",
    "defi"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3125822-038",
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   "content_sha256": "87fc00960e8b737a041ef4fbfaea9efb70260467d087d4dd50744cdc0dc0f3b8",
   "claim": "There is no absolute certainty that using an expertise tag yields a fair resolution, because malicious experts can always choose an unfair algorithm to distribute the disputed assets.",
   "topics": [
    "risk-and-incentives",
    "systemic-risk",
    "law-and-legal-systems"
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   "is_failure_mode": true
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   "claim": "The authors state plainly that in an open, decentralized and anonymous environment they provide no mechanism to stop the formation of sham expertise tags that copy a successful tag's record under a new name.",
   "topics": [
    "reputation"
   ],
   "is_failure_mode": true
  },
  {
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   "content_sha256": "dd55469694f833b53cab9c15f72240113c56fdecda7628114260a95a130143bc",
   "claim": "Faking a reputable expertise tag is nearly costless: a successful tag's open record can be copied and reposted under a new name for the price of the anti denial of service fees, and the capital used to mimic fees paid into the sham tag is mostly recovered by the sham owners through the salaries they control.",
   "topics": [
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    "consensus-and-security"
   ],
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  },
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   "claim": "If 51 percent of users collude to enrich themselves maliciously, nothing in the design can prevent them; the only check is the openness of the system, which would quickly detect such an attack.",
   "topics": [
    "consensus-and-security",
    "disclosure"
   ],
   "is_failure_mode": true
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   "claim": "Reputation on the platform is not truly non transferable: accumulated sem tokens can be sold along with the anonymous identities that hold them, and the only check on this is the continued existence of a good faith majority that votes fairly in validation pools.",
   "topics": [
    "reputation"
   ],
   "is_failure_mode": true
  },
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   "content_sha256": "00d76cde88640cbd75e36515c17a4e0b6b7949ab9d98a09f5215a02519a1ac2a",
   "claim": "As the system matures the power of experienced experts far outstrips that of new experts, which creates an entry problem in a platform where adjudicating disputes requires staking reputation one does not yet have.",
   "topics": [
    "reputation"
   ],
   "is_failure_mode": true
  },
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   "claim": "If tokens minted for each post carry equal weight, then uncontroversial comments are not rewarded at all, because a universally upvoted improvement leaves no contrarian reputation staked and lost for the poster to win.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": true
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   "content_sha256": "8878b18bf0ce221a92a3f9a5c58f07eddf21f6308732d6f7f7526828491ea5af",
   "claim": "Under equal token weighting a successful poster receives no greater reward than the upvoters who merely read and vote, so the system pays the same for crafting a comment as for voting on it, which encourages voting over commenting.",
   "topics": [
    "governance-design",
    "risk-and-incentives"
   ],
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   "content_sha256": "f85f9bdfadcec647b583f8a141a806a9a295b4467fa2b65037b20ef566ea60dd",
   "claim": "No single, fixed, entirely algorithmic policing solution can completely prevent independent nodes in a distributed system from gaming block production to advantage some parties over others. Any consensus protocol that relies on a permanently fixed rule set will therefore be gamed as conditions change.",
   "topics": [
    "consensus-and-security",
    "regulatory-failure",
    "blockchain",
    "governance-design"
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   "content_sha256": "9b254b4fb8ef9d0f2339e9af3b95e752fbbca723faf2b8e9ddb5b2c1198079f6",
   "claim": "A successful proof of stake protocol must be flexible enough to continually police new attack strategies, because changing market forces and network performance keep creating new opportunities to profit at the expense of the majority.",
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    "institutional-design"
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   "claim": "A secure proof of stake protocol requires an incentive structure that perpetually motivates users to do three things at once: produce valuable blocks, police blocks that violate protocol, and improve the production protocols in response to gaming. Incentivizing only block production is insufficient.",
   "topics": [
    "risk-and-incentives",
    "consensus-and-security",
    "institutional-design"
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   "claim": "Because all block creation fees are shared with the whole group as a reputation weighted salary, SPoS removes the direct monetary reward for forming mining pools or block production cartels, which the authors identify as a decentralization threat that raises the likelihood of 51% attacks.",
   "topics": [
    "reputation",
    "consensus-and-security",
    "decentralization",
    "risk-and-incentives"
   ],
   "is_failure_mode": false
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   "claim": "Because the stakes in SPoS are reputation tokens that are far less fungible than cryptocurrency stakes, long term probity is incentivized and many short term arbitrage opportunities are eliminated. Fungibility of the staked asset is what makes short horizon attacks profitable in other proof of stake systems.",
   "topics": [
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   "claim": "Staking tokens with the potential for slashing is necessary to avoid the tragedy of the commons in a validation pool. Voting without something at risk does not produce honest evaluation of contributions.",
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    "reputation"
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   "is_failure_mode": false
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   "claim": "Because at least half of the sem tokens minted when a user buys in with a fee are shared with the community that polices the application, the ability to purchase tokens does not open a profitable 51% attack; the authors claim a mathematical proof that this feature alone eliminates the incentive.",
   "topics": [
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    "tokenomics"
   ],
   "is_failure_mode": false
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  {
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   "claim": "Given that Byzantine faults are inevitable in a distributed system, the known impossibility results force any consensus protocol to hedge: it can promise only a probability of finality and security, and that probability is inversely proportional to liveness and speed.",
   "topics": [
    "consensus-and-security"
   ],
   "is_failure_mode": false
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   "content_sha256": "eaa50f8a8b6a4e6fe65d677bf73f9311085496cc61df8552b8382d185e366069",
   "claim": "Even though proof of stake mitigates the economy of scale advantage, block production cartels can still arise in PoS systems through lotteries, through built in voting delegations, or because the stakes required to be a block producer can simply be bought.",
   "topics": [
    "consensus-and-security",
    "governance-design",
    "decentralization"
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   "claim": "If a blockchain cannot restart or regenerate autonomously after going offline or losing most active nodes, it needs social coordination between nodes; that requirement threatens anonymity and forces reliance on famous nodes.",
   "topics": [
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    "institutional-design"
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   "is_failure_mode": true
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   "content_sha256": "9a320ec522f07ad5d45c55cc0aafa7e75294cf77fb4d2027cdf971a5e063cf85",
   "claim": "If block producers' identities are revealed, the supranational independence and security of the blockchain are threatened, because local jurisdictions can then exert legal power over block production. This threat is most acute in delegated proof of stake, where delegates must win popularity contests.",
   "topics": [
    "consensus-and-security",
    "governance-design",
    "law-and-legal-systems"
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   "is_failure_mode": true
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   "id": "kaal:claim:3125827-012",
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   "content_sha256": "b4b0d37f00e49ce59bf7747770df3f540850b6eaa4cc6478de61ca1076b11c91",
   "claim": "No consensus protocol can guard against Byzantine faults when a single transaction is worth more than the promise of all future fees for the entire platform, because in that case a party can profitably bribe the whole node set to destroy the chain's own integrity.",
   "topics": [
    "consensus-and-security"
   ],
   "is_failure_mode": true
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   "id": "kaal:claim:3125827-013",
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   "content_sha256": "ee19a7a614147c9ec4a624904cc34d3f9950501bcf1f06cbef56787a2c7a506e",
   "claim": "Altruism cannot be relied on in a decentralized anonymous system, so fees are ultimately crucial; the authors conclude that several blockchains with different fee structures must exist so that different transaction values can be given correspondingly different security.",
   "topics": [
    "consensus-and-security"
   ],
   "is_failure_mode": false
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   "content_sha256": "a0edfe93f35d2047690149ac3fbc9858ca76fdd1d6e0f6577c2bc2a9f0bfbe0a",
   "claim": "Because almost all other blockchains distribute perfectly fungible currency tokens through initial sales or mining, there is a clear, computable answer to how much it would cost to corrupt or destroy a chain running a proof of stake protocol on cryptocurrency stakes.",
   "topics": [
    "consensus-and-security",
    "securities-law",
    "tokenomics"
   ],
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   "content_sha256": "e3cff9600d94dec14319e167ea82ba9b671653d87817c443d26eaa824b88aebc",
   "claim": "The long range attack is a fundamental problem every proof of stake protocol must address: because no energetic outlay is required to build blocks, a malicious producer can fabricate a long chain forked from an earlier valid block, and a newly joining node lacking proof of work hashes cannot objectively tell which chain is genuine.",
   "topics": [
    "consensus-and-security"
   ],
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   "content_sha256": "a912fbcf1815b2e9823502f2250ec26cdbc7025d080d276095b3639860e497c6",
   "claim": "SPoS prevents the long range attack without token locking, because a false chain cannot be manufactured with more total validation than the real chain: votes are transactions moving validators' sem tokens under their public keys, so upvotes cannot be forged from existing tokens.",
   "topics": [
    "consensus-and-security",
    "tokenomics"
   ],
   "is_failure_mode": false
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  {
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   "content_sha256": "bf362247def21b4acbe415e9591eabfe952114a0e66fcf48ade83ccd086021ae",
   "claim": "SPoS makes stake grinding impossible by deriving the pseudo random seed from a hash of the alphabetized join of the symmetric keys all validators submit during vote revealing; the protocol holds even if only a single validator is not colluding.",
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    "institutional-design"
   ],
   "is_failure_mode": false
  },
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   "claim": "In a distributed system, which cannot achieve constant perfect communication between nodes, it is never possible to determine with certainty that a block producer was censoring particular transactions rather than simply being unaware of them.",
   "topics": [
    "institutional-design"
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   "is_failure_mode": true
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   "content_sha256": "651af6cbb071886999bb1df3be6a83de795ab7146115dd4ffee4061d1675683b",
   "claim": "Any blockchain whose soft forks are decided through private communication between famous token holding whales is ultimately less secure than legacy centralized systems, which at least address centralized security risks deliberately.",
   "topics": [
    "blockchain",
    "governance-design",
    "consensus-and-security",
    "decentralization"
   ],
   "is_failure_mode": true
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   "content_sha256": "78ab0a87270d33226efffaf95ad6b23baed9a3fea877bff2771748ec645a90a9",
   "claim": "The current dominance of altruists in the crypto space will not persist: once the crypto economy matures, an influx of hedgers and rent seekers can be anticipated with certainty, and they will exploit any weakness in the system for profit.",
   "topics": [
    "risk-and-incentives",
    "consensus-and-security",
    "economics"
   ],
   "is_failure_mode": true
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   "id": "kaal:claim:3125827-021",
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   "content_sha256": "ef2f2d2d16449e1082c332d1891dbafed2479a6ddc055d55a1ab209c7c8270ac",
   "claim": "Successful proof of stake experiments running today cannot be used to infer that their protocols are truly secure, because the current participant population is atypically altruistic; confidence must instead come from sound reasoning about incentives.",
   "topics": [
    "empirical-evidence",
    "consensus-and-security",
    "research-methods",
    "risk-and-incentives"
   ],
   "is_failure_mode": true
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   "content_sha256": "afb6d0e8f79a175a4e196dc8529ae6c7ed33a534bd2fc1587047fde997541b19",
   "claim": "Experts who fail to participate in the validation pool are punished stably rather than abruptly: because the system is inflationary and they gain none of the newly minted sem tokens, their holdings become a smaller percentage of the total and earn a smaller share of future reputation weighted salaries.",
   "topics": [
    "tokenomics",
    "reputation"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3125827-023",
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   "content_sha256": "18e13a85ce5bbdd4cfa657e9d7bc1f6b73ecb8c841c015746edc689f9d47d959",
   "claim": "The reference system lets each validated new post change the relative value of sem tokens created in the graph of connected earlier posts, so the value of a past contribution depends on how important later users judge it to be. This gives the forum the structure of a weighted directed acyclic citation graph.",
   "topics": [
    "citation-and-knowledge",
    "tokenomics"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3125827-024",
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   "content_sha256": "2dc8d27807295e196035f6f8e456ffe628b74fbfcd892e6877358190f9a8b4ea",
   "claim": "A healthy expertise will have near unanimous consensus on every evidence of work validation pool, and that very unanimity creates an impediment to development, because honest members risk their stakes by voting for untested changes.",
   "topics": [
    "consensus-and-security",
    "institutional-design",
    "governance-design",
    "risk-and-incentives"
   ],
   "is_failure_mode": true
  },
  {
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   "content_sha256": "72cbc2dad79cecc0c398862c50ef0f84d686a0cb8ebb8fd9b966d75b80794f46",
   "claim": "In SPoS, validators download the most recently upvoted validation algorithm and faithfully running it unedited automatically produces the winning vote, so honest validators are rewarded; this holds on the assumption that users controlling 51% of sem token power act honestly.",
   "topics": [
    "consensus-and-security"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3125827-026",
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   "content_sha256": "5256ee8dc7298a429674a9550950177f36e39f970b101b0f755e14d42d264c6c",
   "claim": "Forcing validation pools to close in finite time, which practical demand for swift resolution requires, opens the possibility of network partition and of a lack of genuine consensus, and therefore of forks. Complete finality would require unbounded validation time.",
   "topics": [
    "consensus-and-security"
   ],
   "is_failure_mode": true
  },
  {
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   "content_sha256": "e21454fad064382d0bfeccb0da3c3016267ba8313f612f8e2f1d9d22ee5f9f93",
   "claim": "Because producer selection falls back to the seed from the last block whose validation pool concluded, any network outage shorter than the history of the blockchain will not permanently disrupt chain production, and block production continues even if the network loses all but one node.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3125827-028",
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   "content_sha256": "beebb23ca5895330b561f5ed1685039e852a9ac8eda4a42c199f4394abcbc36f",
   "claim": "When a fork skips valid blocks, fees previously distributed to the bench from those blocks lose their valid histories and ownership reverts to the transaction authors, which creates a direct disincentive for validators to endorse such forks.",
   "topics": [
    "consensus-and-security",
    "risk-and-incentives"
   ],
   "is_failure_mode": false
  },
  {
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   "content_sha256": "64ef05197c6986e1d4aa22e0a2cc808b62d8a9f4f401beb5acf400c583a6296a",
   "claim": "If a Byzantine producer equivocates during a network partition and wins validation pools in separate subnets, the fork is not permanent: once connectivity is restored the next honest producer points to a previous block, and with 51% honest producers the Byzantine fork is eventually orphaned because honest producers outproduce it.",
   "topics": [
    "consensus-and-security"
   ],
   "is_failure_mode": false
  },
  {
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   "content_sha256": "df4db180df016eae5a3337cc5a7b5044e81748e08b76e932f6565fe58711c00d",
   "claim": "A 67% active validator requirement would improve finality but is excluded from the initial SPoS implementation because, by the CAP theorem, it limits the availability of the system and arbitrarily punishes randomly selected producers when the network is partitioned.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": true
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   "content_sha256": "ebefc20e4f9a322ce8988255500a627f1dc4072f18dbef9c51f293e985956ac3",
   "claim": "Running the reputation platform on the very blockchain it validates destabilizes the system because it increases the likelihood of forks: every validation pool result is itself a transaction that must be included in a future block requiring its own validation, without end. The authors judge this destabilization non catastrophic for most imagined uses.",
   "topics": [
    "consensus-and-security"
   ],
   "is_failure_mode": true
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  {
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   "content_sha256": "65992de35ad539d2e6d90bbf33c52a503aeb174800aa283f6051338e20fd969b",
   "claim": "SPoS is far more computationally efficient than proof of work implementations because nodes no longer hash mine; the only computation added beyond the block validity checking every blockchain performs is one validation pool per block, in which each node sends a single up or down vote transaction.",
   "topics": [
    "economics",
    "consensus-and-security"
   ],
   "is_failure_mode": false
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  {
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   "content_sha256": "85767b8103cbd603a7c582bfc3d63022af3c32fdba7bdc8760649e2370fd6682",
   "claim": "If the bench institutes protocols for rejecting applicants through the validation pool, it gains both the incentive and the opportunity to block all new users entirely, so that existing bench members keep sharing all the fees among themselves.",
   "topics": [
    "regulatory-failure",
    "decentralization"
   ],
   "is_failure_mode": true
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  {
   "id": "kaal:claim:3125827-034",
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   "content_sha256": "e48551d89e8d8673f70f57998dbf8b9507d47864420c0a22bd7cbd27def9cab7",
   "claim": "Finality in SPoS is measurable because forking away from a given block would cost the community all sem tokens created on the chain after it, and that quantity equals half of all fees sent since the block was produced.",
   "topics": [
    "consensus-and-security",
    "tokenomics",
    "reputation"
   ],
   "is_failure_mode": false
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  {
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   "content_sha256": "a31569690b85f74d82c180921e973cbc59b19280a100a2dac6c614365852894a",
   "claim": "Because each sem token carries a different value depending on the post that minted it and on its position in the reference graph, the total value is difficult to determine, which makes it almost impossible to execute a 51% attack by purchasing tokens on an exchange.",
   "topics": [
    "consensus-and-security",
    "tokenomics",
    "economics"
   ],
   "is_failure_mode": false
  },
  {
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   "content_sha256": "7ea3c1426b581ca2e85a2be08c3da0129da7fbdff37912618b9500601f797a3e",
   "claim": "An attacker who buys sem tokens directly from the platform by sending fees must spend at least twice, and more likely six times, the entire historical value of the platform, so the griefing factor is a minimum of 2 with an average of 6.",
   "topics": [
    "consensus-and-security",
    "tokenomics"
   ],
   "is_failure_mode": false
  },
  {
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   "claim": "Under the worst case model with no admission safeguards and no other users paying fees, a malicious group must invest at minimum twice the total sem tokens of the system to reach 50% voting power in the validation pool, because half of every fee it pays mints tokens for the existing good faith experts.",
   "topics": [
    "consensus-and-security",
    "tokenomics"
   ],
   "is_failure_mode": false
  },
  {
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   "claim": "The sem token economy is inflationary at equilibrium, and the authors argue this is a feature: inflation improves security and discourages rent seeking by penalizing holders who do not use their tokens to evaluate posts.",
   "topics": [
    "tokenomics",
    "consensus-and-security",
    "economics"
   ],
   "is_failure_mode": false
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   "claim": "Because earlier sem tokens represent a larger percentage of the total and therefore pay out more, later experts have less motivation to join when fees are at a steady state; the authors propose that the bench may need to change the fee to token exchange rate to recruit new members.",
   "topics": [
    "tokenomics",
    "governance-design"
   ],
   "is_failure_mode": true
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  {
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   "claim": "A malicious party using Sybil accounts cannot be prevented from cloning the structure of a successful proof of stake blockchain at far lower cost than cloning a proof of work chain, leaving a new user unable to distinguish the truly decentralized chain from a clone that has manufactured even more tokens. The authors answer that this is resolved off chain, by a trusted user interface, as with cloned web pages.",
   "topics": [
    "blockchain",
    "consensus-and-security",
    "reputation"
   ],
   "is_failure_mode": true
  },
  {
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   "claim": "Reputation based staking removes the corruptive elements of fungible tokens from voting because third parties are less likely to be able to take over a non fungible asset that is organically grown and maintained through actual expertise in the DAO subject matter.",
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   "claim": "Reputation based metrics were ineffective in centralized governance systems because before blockchain, reputation could not be stored autonomously, anonymously, and transparently, so it was not a reliable predictor of actors' future actions.",
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   "claim": "Reputation based DAO governance turns a zero sum game into a positive sum game, because members are given incentives to build lasting non fungible value through a long term record of productive cooperation that improves the DAO.",
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   "claim": "The authors propose that insurance underwriting be operated by a Decentralized Autonomous Organization in which cryptocurrency tokens function as claims on the future cash flows of the underwriting business.",
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   "claim": "If underwriters decline to reclaim their encumbered tokens, that breach is resolved by selling the encumbered tokens, plus additional freshly minted tokens as needed, in an auction open to current DAO participants and to outsiders wishing to join.",
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   "claim": "The authors qualify their own case: stable cryptocurrencies can experiment with monetary policy on an unprecedented scale only because they are insulated from real world complexities and political positioning, and that advantage shrinks once real world market factors actually apply to them.",
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   "claim": "The interoperability deficit in cryptocurrency markets is partly intrinsic to blockchain technology itself, because the consensus mechanism that allows block propagation on one chain in some ways negates interoperability with other chains and their consensus.",
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   "claim": "Currency stability should be used as the consumer facing proxy for interoperability, because teaching the public to value stability is easier than educating it about the blockchain technology that produces technical interoperability.",
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   "claim": "The low transaction throughput of public blockchains is a core limitation holding back more advanced distributed applications and, with them, decentralized commerce.",
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   "claim": "Decentralization technology is unlikely to proliferate without a core use case beyond store of value; banking, money transmission, and triple entry accounting are natural use cases but fall short of being universal use cases for public blockchains.",
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   "claim": "A decentralized crypto economy requires a stable coin because no rational party will risk wealth on a long term contract denominated in a volatile currency: neither renter nor landlord will sign a lease whose rent may halve or double in any given week.",
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   "claim": "Because stable cryptocurrencies are free of the real world pressures that constrain emerging market currencies, they may be able to experiment with solutions that overcome the currency trilemma, attaining a fixed exchange rate, free capital movement, and an independent monetary policy at once.",
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   "claim": "Mass adoption fails at the user level: the average user will not identify, research, and purchase diverse sets of tokens even where those tokens would create value, because the existing cryptocurrency market structure is simply too cumbersome.",
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   "claim": "Non speculator lay people will not use cryptocurrencies for daily consumption, groceries, or banking transactions unless the value of the currency is stable; stability is a precondition of ordinary consumer use, not merely a convenience.",
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   "claim": "Merchant adoption of stable cryptocurrencies turns on a concrete threshold: merchants pay 2.9 percent to credit card companies on non cash transactions, so any medium of exchange costing less than 2.9 percent benefits merchants, who can pass the saving to consumers as a discount.",
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   "claim": "Near instant settlement with stable cryptocurrencies removes counterparty risk, and the resulting reduction in counterparty risk boosts consumer confidence and increases transactional certainty relative to systems like Visa that take five to seven business days to pay merchants.",
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   "claim": "The authors adopt Schilling and Uhlig's result that official money and cryptocurrencies can co-exist in a manner consistent with stability, rejecting the framing that private currency and central bank money are necessarily mutually exclusive.",
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   "claim": "A currency that does not hold a stable store of value forces continual recalculation and renegotiation of contracts, so any future decentralized economy will require stable cryptocurrencies.",
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   "claim": "Fiat currency collateralization is expensive and inefficient because the entire backing value must be held liquid; anything less opens arbitrage attacks of the kind Soros used against the Bank of England.",
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   "claim": "The minimum cost of a fiat-backed token equals the interest rate of the pegged fiat currency, because the backing capital must sit idle and liquid.",
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   "claim": "Transacting in cash imposes large measurable costs: roughly 200 billion dollars annually in the United States, about 637 dollars per person, driven by counting, managing, storing, transporting, guarding and accounting for bank notes.",
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   "claim": "Under the quantity theory of money, minting twice as much currency halves its price and burning half of the existing currency doubles it, which is the mechanism by which a supply rule can theoretically stabilize price.",
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   "claim": "The quantity theory calculations behind minting and burning hold only in the ideal case; in practice the success of a stabilization scheme depends on how the money is actually printed, distributed or burned.",
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   "claim": "Distributing newly minted coins to shareholders, as Basis planned, is exploitable: shareholders can collude to hold their new money and drive the price up, which triggers further minting that benefits the colluders.",
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   "claim": "The Folk Theorems of game theory imply that no matter how complicated a stable coin protocol becomes, a powerful and patient player has strategies to subvert the system and profit at the expense of the group.",
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   "claim": "Because no fixed rule set can resist a patient adversary, any stable coin scheme requires a nimble and responsive governance process whose rules can always be adjusted to changing market conditions.",
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   "claim": "Bonds are the appropriate burning mechanism for a temporary drop in currency price caused by larger economic instability such as an act of God or war, since bonds can be redeemed above their sale price once the economy rebounds.",
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   "claim": "A Basis-style bond scheme succeeds only while demand for the currency grows at a sufficient rate; the authors' simulations show it fails when demand is stagnant at equilibrium.",
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   "claim": "Because bonds sell below their redemption value, an open-ended bond queue grows without bound, depressing bond prices and creating a positive feedback loop that ends in a death spiral and failure of the peg.",
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   "claim": "Stable cryptocurrency bonds should be minted with a fixed expiration, following the practice of historical central banks, because fixed expiration makes price discovery more efficient.",
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   "claim": "Reserves, not bonds, are the necessary mechanism for currency instability caused by hot money, that is money frequently moved between institutions or currencies to maximize gain.",
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   "claim": "Because most of the value of contemporary cryptocurrencies comes from speculation on future uses that do not yet exist, the vast majority of cryptocurrency is technically hot money, and reserves are the best defense against the resulting price fluctuations.",
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   "claim": "Selling currency into a reserve when price is above the peg and buying it back with the reserve when price is below the peg yields an arbitrage profit, so a reserve can fund its own defense of the peg.",
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   "claim": "The reserve argument depends on two requirements, and failing either one grounds a criticism of an existing protocol: the stable-value requirement criticizes MakerDAO and the maintenance-cost requirement criticizes the Reserve protocol.",
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   "claim": "Contesting the common assumption that a 100 percent reserve is required to guarantee a peg, the authors argue full reserves are not always necessary for any currency that has intrinsic worth.",
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   "claim": "Contesting the standard reading, the authors argue Soros broke the Bank of England not because the pound lacked full foreign reserve backing but because the pound was pegged at an inauthentic value.",
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   "claim": "Determining what fraction of a currency is hot money is necessary for efficient defense of its stability, because the reserve requirement follows from that ratio rather than from a blanket full-backing rule.",
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   "content_sha256": "1da1d7f9760d971400ea67c77e0cb5cf6081e15c2e7981346579d5ab22acc95d",
   "claim": "Misestimating the hot money ratio fails in both directions: overestimation makes the currency more costly to use, and underestimation leaves it insecure, so efficiency and security are in direct tension.",
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    "economics",
    "tokenomics"
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   "claim": "Defining the energy of money as the product of economic momentum and velocity gives a basis for discussing economic frictions and for distinguishing genuine from artificial network energy, which is what guards against hot money instability.",
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   "claim": "In a blockchain cryptocurrency, transaction taxes should be set to match the cost of running the network, meaning the cost of incentivizing enough nodes for the desired level of decentralization plus the cost of maintaining the coin's stability.",
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    "decentralization",
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   "claim": "Holding taxes are the implicit result of inflation borne by coin holders, and they should be set to account for the inefficiencies of the economy rather than the inefficiencies of maintaining the currency.",
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    "economics"
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   "claim": "In the contemporary climate these taxes and fees are unlikely to be implemented appropriately, because internet culture has trained users to expect free service from nodes and to hide the costs of running them.",
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   "claim": "Blockchain users are likely to demand zero transaction fees while failing to notice holding fees below about 3 percent annually, which a USD peg institutes implicitly through a comparable inflation target.",
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   "claim": "For any long-lived currency, a major shift in perceived value is eventually inevitable, and such a shift is not covered by reserves defending against hot money or by bonds defending against temporary economic instability.",
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   "claim": "Because a Swiss Association is a legal entity, a DAA must have a seed in Switzerland and be run in Switzerland even though its members can be located anywhere in the world.",
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   "claim": "Where a DAO's internal voting mechanism is centralized and burdened with legacy voting problems, any higher degree of decentralization achieved in its external legal design will typically be cancelled out over the long run.",
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   "claim": "A DAO permitting anonymous membership is exposed to a sockpuppet attack in which one account behaves honestly while another cheats, and if the cheating account can funnel its gains to the honest account without detection or punishment the system is set up for failure.",
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   "claim": "Because the Folk Theorems rule out a perfect reward system, the design goal for a DAO should be reduced to making it easier for members to help the group than to hurt it, with members themselves incentivized to police bad actors to protect their own profits.",
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   "claim": "Social media platform owners do not know and cannot choose which content will matter; the answers are held in the behavior of the network of users, and the companies merely monitor network transactions and analyze them statistically with automated algorithms.",
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   "claim": "Decentralized insurance requires networks of policy writers carrying individual reputations, since efficient underwriting of every type of transaction depends on those reputations.",
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   "claim": "Tokenization is meaningless unless the token is underwritten by someone who puts their reputation and ultimately their money on the line to attest that the token validly represents the asset.",
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   "claim": "Applying Web3 technology to chit funds replaces the foremen and their commission with smart contracts, which eliminates the risk that a foreman absconds with the fund.",
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   "claim": "Member default on premia is a major inefficiency in chit funds, with estimates that a large share of subscribers have defaulted at least once recently and a substantial share have defaulted after winning an auction.",
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   "claim": "A decentralized chit fund can let people bootstrap financial security with no initial reserve backing, but only if the reputation system is strong enough to hold defaults to a low percentage.",
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   "claim": "Reputation must be grounded to be meaningful, so reputation tokens should be minted only when policy premia enter the group, reputation should dictate power, and fees should be shared through reputation weighted salaries.",
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   "claim": "Because underwriting mints new reputation tokens, passive holders see their proportional ownership in the DAO fall over time, which is designed to incentivize agents to underwrite actively while still allowing passive investors to earn income.",
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   "claim": "Underwriters encumber reputation tokens against each policy under a preset formula, and if the insured event occurs they lose control of those tokens, which are auctioned to meet the claim, with new tokens minted and sold if the auction falls short.",
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   "claim": "In the Underwriting DAO a breach occurs only when the market values the encumbered reputation tokens at less than the payout, which requires minting additional tokens to meet the claim.",
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   "claim": "Decentralization empowers knowledge at the edge: individuals with fine grained information about their neighbors and community can make better underwriting decisions than a centralized hierarchy can.",
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   "claim": "The code that constitutes a decentralized exchange can create new risks to market integrity, because automation removes the human backstop in compliance, back office and settlement.",
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   "claim": "The lesson of the Soros attack is that when a cryptocurrency is pegged above its true market value, the difference must be fully backed by a foreign reserve of collateral, or financiers can profit by breaking the peg.",
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   "claim": "Maintaining a full reserve is too expensive to be efficient, because every unit of reserve value backing the currency must be held liquid or arbitrage attacks become possible, and liquidity forgoes investment returns.",
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   "claim": "Cryptocurrency backed stablecoins are even more expensive than fiat backed ones, because stability is being sought with far more unstable collateral.",
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   "claim": "Contrary to the industry practice of full backing, a full reserve is not always necessary, because a currency also has intrinsic worth derived from the authentic economic activity it represents.",
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   "claim": "Determining what fraction of a currency is hot money is necessary for efficiently defending its stability: overestimating the hot money ratio makes the currency costlier to use, and underestimating it makes the currency insecure.",
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   "claim": "Because the tension between efficiency and security demands a careful estimate of the hot money ratio, a sophisticated decentralized governance system is crucial for any efficient stablecoin.",
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   "claim": "Trying to hold a peg at an artificial level deters new adopters and punishes existing members, and is the most likely way to induce a death spiral that collapses a currency; after a fundamental change in the economy the currency should be repegged instead.",
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   "claim": "Banning is the only control a centralized nation has over a decentralized network within its borders, and such bans pose no threat to the network's existence.",
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   "claim": "DeFi will take off only when cryptocurrency is used in authentic transactions such as insurance and equities across broad segments of industry and tokenization of commodities and properties is instituted.",
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   "claim": "Declining to adopt explicit or formal rules is itself a governance choice, and it defaults to rule by might; since might in these systems is defined by wealth, the resulting order is oligarchy.",
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   "claim": "Fundamental rule changes in a large decentralized organization are typically demanded when a large minority is treated unfairly, which means the advantaged majority has no incentive to make the change; the resulting deadlock leaves revolution or a network split as the only route to foundational change.",
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   "claim": "Because no major peer to peer organization has anything resembling effective decentralized governance, none of them are viable in the long term and all will eventually be displaced by superior clones, though the timing of that displacement cannot be predicted.",
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   "claim": "Designing a single consensus algorithm is vastly easier than designing a consensus algorithm that can incorporate all future updates to itself, which explains why immature decentralized systems lack sophisticated governance mechanisms.",
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   "claim": "The authors stipulate corruption in an organization as any action that benefits a minority at the greater expense of the group, and locate its source in power that is distributed inappropriately as measured by efficiency.",
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   "claim": "The engineering assumption that such problems can be entirely avoided through perfect system design is naive: exceptions will always exist because business competition always seeks optimal solutions that sit at the limits of the rules.",
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   "claim": "The very explicit rules that unify a diverse group destabilize it over the longer term, because internal corruption and external change render a fixed rule structure ineffective or inefficient.",
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   "claim": "A for profit, open, diverse valued organization run under rigid Rule of Law is maximally unstable, so powerful stabilizing forces must be added to its governance rather than assumed.",
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   "claim": "The main problem with all current peer to peer governance structures is the lack of proper incentivization: participants are not motivated to improve the whole organization over the long term, so they game the system for short term personal profit.",
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   "claim": "A reputational system formally linked to profits makes members forward thinking and cooperative, counteracting the tendency of competition to separate them, and it also motivates members to self police their own past investments.",
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   "claim": "Reputation can be objectively valued by estimating the probability of future business deals, taking the expected value of that probability, and computing the present value of those deals, which is what makes reputation function as a promise of future rewards.",
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   "claim": "The alternatives to a reputational system for countering profit driven instability, namely external stabilizing forces such as governmental fiat and rapidly expanding profit opportunities, are inadequate because expansion driven stability lasts only as long as the expansion does.",
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   "claim": "The two sources of instability require different remedies and must not be swapped: dynamic rules are a mismatch for instability caused by the profit motive, and a reputational system is not an efficient method for attenuating instability caused by a group's diverse values.",
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   "claim": "Instability generated by the rigidity of rules is solved by making the rules dynamic, with an appeals process stabilizing short term cooperation at the level of the single contract and legislation handling longer term amendment.",
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   "claim": "If unanimous consensus is strongly incentivized in every validation pool, a DAO will degenerate quickly, because members holding minority opinions will not raise alternatives for fear of losing all their reputation tokens; this is why loosely coupled votes are needed.",
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   "claim": "Code is law smart contracts deliver a genuine leap in efficiency and clarity through digital self execution, but their supposed self regulation will always ultimately fall short, which is why an appeals capacity is necessary in any business deal.",
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   "claim": "Legitimacy requires members to believe the governance process is binding and will persist, which puts legitimacy directly at odds with a dynamic structure whose rules members know will change; in the presence of that tension stability requires the system to be balanced.",
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   "claim": "Without the ability to hold representatives to account, representatives are not incentivized to vote for outcomes reflecting their constituency's wishes and needs, but instead promote agendas that serve their personal interests and preserve their own power.",
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   "claim": "Direct democracy failed to reflect the will of the group once villages grew into cities, because the information technology of the spoken word imposes a hard limit on how many people can speak and on the patience and endurance of listeners.",
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   "claim": "Because major social media platforms are privately and centrally owned, their governance processes and reputation distribution algorithms are necessarily opaque, since their users' incentives are not aligned to police reputation against gaming.",
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   "claim": "Against Eric Raymond's argument that love does not scale, the authors hold that reputation does: weighted democracy, properly measured and aggregated, can scale from valuing local expertise to valuing expertise on global issues.",
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   "claim": "The eight institutions are necessary conditions for business, which grinds to a halt without them, yet when they run well they consume only a tiny fraction of the economy's resources.",
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   "claim": "Core institutions are perceived as leaching from the economy only because of corruption, and well designed systems eliminate those economic frictions.",
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   "claim": "The governance architecture designed for one decentralized institution can be ported to many other DAOs with only superficial changes, so institutional design effort is reusable across the ecosystem.",
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   "claim": "Digital information storage makes decentralization newly viable because every participant can hold the authoritative record of the organization's entire history, removing the need for a central authority over the record.",
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   "claim": "Networked communication makes complete bureaucratic transparency possible, because every member of an organization can connect immediately with every other member worldwide at speed and low cost.",
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   "claim": "Historically, whenever a healthy decentralized organization began to earn money it quickly devolved into a centralized institution, because its uniting ideals shifted from transcendental value to a desire for money.",
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   "claim": "Aragon's refusal to use its own protocol to arbitrate an internal dispute is testimony to the lack of trust its own system designers place in their system's capabilities, and its reputation and legislative and judicial governance protocols remain trivial.",
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   "claim": "Because more powerful members of a hierarchy are better positioned to capture whatever power becomes available, power distribution in an entrenched hierarchy becomes exponential, leaving the majority with minimal power and wealth. That discontent of the majority is the first destabilizing force acting on a centralized organization.",
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   "claim": "Imperial China invented the printing press and applied it to centralize power through uniform edicts and the first printed money; the resulting bureaucratic rigidity left the hierarchy unable to respond to internal corruption and to external invaders.",
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   "claim": "No set of written rules can be made complete: the Folk Theorems demonstrate that however rules are written, strategies exist that follow those rules yet profit the individual at the expense of the group, so a perfect secular constitution is impossible.",
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   "claim": "When a law is written down rigorously, specifying precisely what is acceptable and unacceptable, competition obliges people to find the most efficient behavior available inside those rules, which is typically behavior located right at the boundary of what is permissible.",
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   "claim": "Because a transcendental value is by definition not rigorously formalizable, people organizing around an eternally unobtainable ideal without clear boundaries are less likely to probe the boundaries of acceptable behavior.",
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   "claim": "The centralized hierarchy built by the Chinese Communist Revolution was extremely successful at the military goal it was designed for, but once the military threat was gone it failed completely at solving other important problems, producing catastrophic reforms such as the Cultural Revolution and the Great Leap Forward.",
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   "claim": "The lesson the authors draw from Imperial China and Pharaonic Egypt is that decentralization of power and individual autonomy give long-term stability when the society also has unifying ideals it can believe in.",
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   "claim": "Without a transcendental spiritual or philosophical principle to unify a society, its rules erode as exceptions to the routine are discovered that improve function temporarily yet violate the founding principles of the culture, and such violations split the population.",
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   "claim": "Decentralized organizations naturally respond to information at the edge and are energized rather than weakened when their leaders are attacked, because decentralized rebellions are strengthened by the loss of leaders who become martyrs.",
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   "claim": "Replacing capital with reputation gives DAOIC members a permanent option and a right of first refusal on deals, because a member can stake reputation non fungible tokens on a deal without joining the purchase commitment.",
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   "claim": "The delayed voting outcomes and feedback effects created by the transition from loosely coupled to tightly coupled voting let DAOIC members triangulate their own internal liquidity position against deal feasibility.",
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   "claim": "Exit by selling reputation tokens is more problematic for reputation than for other cryptocurrency tokens, because reputation is less fungible: a token's value is tied to the specific post in which the reputation was created and is subject to separate review.",
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   "claim": "Shifting policy so that all returns on purchases are minted into fungible reputation tokens paid proportional to reputation holdings instantiates the shift from capital to reputation and functions as a form of best efforts underwriting on a token opportunity.",
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   "claim": "Once its market position is solidified, the DAOIC could mandate that each token opportunity adopt decentralized governance mechanisms before the DAOIC begins reputation staking on it, using its market power to force governance reform.",
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   "claim": "The novelty of reputation as capital lies in the decentralized and democratized capital allocation functionality enabled by the DAO design.",
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   "claim": "A VC's proportional holdings of reputation tokens are likely to increase over time if the VC follows sound and successful practices by staking reputation tokens on investment proposals and succeeding in the selection of portfolio companies.",
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   "claim": "If reputation whales stake reputation on a project and the market commits the capital for that stake, the whales should still receive part of the ROI because it is their reputation that is at stake, and they are not required to commit capital or to support capital calls with liquidity.",
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   "claim": "Through the decentralized governance precedent system, projects upvoted by the whale validation pool that have the highest comparative ROI get more citations in the reputation system and continually enhance the reputation of the whale who sourced and proposed them.",
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   "claim": "The hybrid smart contracting model is defective because VCs are partially incentivized to fund and stake only the best deals while staking on less optimal deals that the market mostly funds, which undermines their long term reputation accumulation.",
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   "claim": "The incentives that undermine long term success of the hybrid model can be mitigated by mandating that staking on deals requires capital commitments, while allowing VCs to lower their capital commitments and increase their staking over time.",
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   "claim": "In the non custodial DAO investment club model all of the return on purchase is minted into fungible reputation tokens that get paid as reputation salaries following decentralized governance, which provides the best incentive alignment for members and the highest potential return for all involved.",
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   "claim": "Because the public co purchases alongside DAO investment club members and expects to pay for the right to benefit from the collective wisdom of those members and the deal pipeline they generate, the public should expect to pay the usual two and twenty fees.",
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   "claim": "The industry is still experimenting with different forms of DeFi capital replacement schemes, and it will take time to filter out those designs that have unanticipated side effects.",
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   "claim": "Market liquidity depends on trustworthiness, and trustworthiness depends on observed momentum: isolated instances of motion are insufficient, because the observations must be collected into a history before they carry weight and meaning.",
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   "claim": "Governance in a decentralized organization depends on meaningful reputation, and the meaning of any reputation is determined by its history and by how that history is analyzed and presented, which makes historiography a governance variable rather than a neutral record.",
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   "claim": "The choice of historiography is a design choice about the architecture of higher order information storage, and because deciding what is true is the judicial function, historiography is effectively the architecture of judicial governance.",
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   "claim": "Any reliance by a DAO on a centralized feature creates a centralized point of failure that threatens the survival of the organization and renders the system technically centralized despite its decentralized appearance.",
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   "claim": "Where a DAO is automated around a single centralized point of failure, the work of decentralizing and giving members redundant power is wasted, because the point of failure functions as a supreme leader and full centralization would be more efficient.",
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   "claim": "A DAO that relies on a centralized oracle will eventually be exploited, because the people controlling the oracle will become aware of their power over automated contract triggers and, given the competitive nature of capitalism, are right to take advantage of it.",
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   "claim": "Legislation is the wrong remedy for oracle exploitation, because the existence of an arbitrage opportunity means systems will evolve around whatever rules exist in order to exploit the advantage; the proper response is to engineer a better system.",
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   "claim": "A robust decentralized oracle finds better information because averaging across a crowd is typically better for complex situations, being less subject to the prejudices of individuals who hold more limited information, so overestimates and underestimates offset each other.",
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   "claim": "Condorcet's Jury Theorem cuts both ways: larger groups of slightly stupid people, defined as being wrong slightly more than half the time, are worse than smaller groups of stupid people, so the idiocy of the mob is the counterbalance to the wisdom of the crowd.",
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   "claim": "An oracle DAO must filter its network so that the average member is correct at least slightly more often than incorrect; once that filter holds, larger and more decentralized networks converge on the truth more quickly and more certainly.",
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    "dao"
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   "claim": "In the SchellingCoin approach to oracle design, members stake reputation tokens on their answer to the question a DApp is asking and are rewarded according to how close they came to the resulting median value, which functions as the game theoretic Schelling point.",
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    "smart-contracts",
    "reputation"
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   "claim": "The protocols governing how a particular oracle question is answered should be set by the subject matter experts themselves rather than by a static centralized hierarchy, because the experts know best how their own system can be gamed and how to prevent that gaming to protect their hard earned reputation.",
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    "governance-design",
    "smart-contracts",
    "regulatory-failure",
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   "claim": "Robust decentralized oracles do not yet exist despite well funded proposals, because decentralized oracles are themselves DAOs and therefore inherit the same missing incentive structure, governance processes, and history that all DAOs suffer from.",
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    "dao",
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    "governance-design"
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   "claim": "A decentralized oracle is not secure until it has significant momentum and history, and it is not even truly decentralized until it has a large network of active members.",
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    "consensus-and-security"
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   "claim": "Until decentralized oracle protocols are secure and robustly enacted, projects should rely on centralized oracles while keeping the network's monetary value below the level at which the centralized newsfeed would gain an incentive to manipulate the data.",
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    "smart-contracts",
    "risk-and-incentives",
    "decentralization"
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   "claim": "Oracle DAOs and decentralized finance DAOs face a bootstrapping deadlock because each relies on the other for its very existence, a chicken and egg problem the authors address by having participants prove their worth in a development period before they can charge other DAOs fees.",
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   "claim": "Centralized civic institutions always become corrupt over time, and that corruption becomes obvious only once a new technology disrupts their operation and reveals their weaknesses.",
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   "claim": "Institutional corruption follows a repeating cycle: people surrender their power of information transmission to institutions that are initially more effective and efficient, those institutions centralize and ossify into corruption, and new technology then allows people to bypass them.",
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    "systemic-risk",
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   "claim": "If transparent democratic institutions are not built to replace the corrupt ones, new opaque centralized institutions will take their place, as Facebook, YouTube, and Twitter already do with secret algorithms that control what stories spread with no democratic oversight.",
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    "decentralization"
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   "claim": "Truth discovery in the marketplace of ideas is more effective and efficient when news aggregators are more decentralized: ten newspapers reporting on a story produce a more accurate historical picture than one newspaper reporting on the story ten times.",
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   "claim": "By 2012, ninety percent of the United States media and entertainment industry was controlled by the top six media conglomerations.",
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   "claim": "American faith in media has fallen in direct correlation with the consolidation of broadcasting power for as long as active statistics have been studied.",
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   "claim": "The most obvious harm from news consolidation is that national and international centralized corporations do not devote the same degree of focus to the interests of the local communities they serve, because love does not scale.",
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   "claim": "Contrary to the common fear, wide scale decentralization of media power will not collapse centralized corporations, just as Napster and BitTorrent did not collapse the centralized music companies; decentralization does not take power from centralized actors, it increases everyone's power.",
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   "claim": "Popularity based ranking cannot substitute for editorial control, because people end up relying on unconscious algorithms to determine what is authoritative and the Folk Theorems establish that such algorithms can always be gamed.",
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   "claim": "A central authority is perfectly well incentivized to ignore minor problems that only partially eat into its profits, so long as it maintains ultimate control of those profits, which is why platform level abuses persist under centralized ownership.",
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    "decentralization"
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   "content_sha256": "9f2e7ea1fc6aa84a343ea5b02c38f87e54ac4cc05fdc16291c6a725368ba5d48",
   "claim": "Existing decentralized news efforts including WikiNews, the Decentralized News Network, and Steemit failed to gain wide adoption because they lacked ambition; the goal should instead be to empower individuals with greater ability to communicate and cooperate.",
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   "claim": "Reputation in a news DAO must be anchored in fungible currency: new reputation should be minted only when articles connect to profitable endeavors such as advertising, paid analyses, or protocols relied upon for decentralized business contracts.",
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    "reputation",
    "dao"
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   "is_failure_mode": false
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   "claim": "Reviewers in a news review DAO will give honest reviews despite being paid fees, because the reputational system rewards members mostly on the basis of future fees rather than present ones.",
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    "risk-and-incentives",
    "reputation"
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   "claim": "Tracking and aggregating reputations across DAOs can build a more accurate picture of a person's expertise and experiential gaps than traditional educational institutions provide, which would quickly reveal meaningless certification and licensure programs as worthless.",
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    "reputation"
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   "claim": "Transparency in a decentralized network is not optional: every function needs to be publicly auditable for people to trust it, because without a central authority to approve code, unexpected malicious behavior can be built into any opaque code.",
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   "claim": "From a game theory perspective the open source culture advocated in the Web3 movement is not sustainable in the long term unless it is married with a culture of respect for history.",
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    "economics"
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   "claim": "The solution to the game theory problem of getting a player to freely give up intellectual property at one stage of a repeated game is to guarantee a reward at a future stage by fostering a culture that acknowledges past contributions, so players seek future fame by distributing their work in the present.",
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    "open-source-and-code",
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   "claim": "A culture of respect for history is unnatural and must be consciously policed, which makes it another of the essential catalyst institutions that has to be deliberately built into the decentralized economy.",
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    "decentralization",
    "economics"
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   "claim": "Weighting references so that more value is shared with older posts promotes long term contributions and innovation and increases stability, while less value sharing encourages new contributions and immediate work, so the weighting parameters encode whether the DAO values long term or short term contribution.",
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   "claim": "Reviewing through references enables punishment and reward in DAOs, which shifts members' motivation away from immediate rewards toward the future and encourages delayed gratification and sacrifice for the good of the group.",
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   "claim": "Review changes the game theoretical perspective from a single stage game to a repeated game, which produces more efficient cooperation instead of internal competition and is what makes the open source environment sustainable in the long run.",
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    "economics"
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   "claim": "Review creates a decentralized history for a DAO, and that history gives the organization momentum, gives meaning and focus to perception, and is the basis for making governance, understood as steering, more effective.",
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   "claim": "Long run stability of a decentralized organization requires the momentum gained from a clear history, but momentum is not sufficient: if the system is not moving toward a healthy and productive goal it will not last long.",
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   "claim": "The most important aspect of a decentralized organization, and the feature that ultimately determines its long term success, is the group's set of transcendental values.",
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   "claim": "Reputation, not money, is the proper incentive for motivating the most efficient cooperation and long-term stability in business.",
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   "claim": "Markets collapse when opportunistic behavior saps the efficiency of cooperation: once the environment becomes too adversarial and trust is diminished, collaboration is no longer profitable.",
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    "reputation",
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   "claim": "Strict legal enforcement is an inefficient remedy for opportunism because every unit of energy devoted to policing is energy that could instead have been used to cooperate productively.",
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    "economics"
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   "claim": "Strict legal enforcement becomes impossible once a market is sufficiently complex and dynamic, because law cannot keep pace with the creative contracts that leading experts continually invent.",
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   "claim": "Reputation converts a transaction from a single-stage zero-sum game into a repeated positive-sum game by holding out the promise of future business opportunities, so the value created is the improved reputation of both parties.",
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    "risk-and-incentives"
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  },
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   "claim": "The failure of many DAOs to date is traceable to their reliance on the good will of network members rather than on engineered incentives.",
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    "governance-design"
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   "claim": "As a network grows its members become more anonymous and individually less important, which makes cheating more locally enticing and less globally noticeable, so the system eventually collapses once cheating is obviously the best individual strategy.",
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    "dao"
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   "is_failure_mode": true
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   "claim": "A Web of Trust style reputation ledger, in which each party rates each transaction and reputation is summed with weightings by rater reputation, will have all of its value drained by the sockpuppet attack, because an attacker can build reputation through transactions between their own fake accounts and then use it to cheat.",
   "topics": [
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    "reputation",
    "regulatory-failure"
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  {
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   "content_sha256": "e00b1fbd5cfdf890bc8714250483ef545b781b30fdc2f764913a2c781b4aab15",
   "claim": "Charging transaction fees or imposing KYC identity protocols does not solve the sockpuppet problem: such defenses push the cost of defending the network onto users, and the defense cost equals what it is worth to break the defense while being multiplied across every transaction with every member.",
   "topics": [
    "compliance",
    "consensus-and-security"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-010",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-010",
   "content_sha256": "a95c494a023d1279d76476d6f844eac02b2528cf5ceca358a5164b1489567f99",
   "claim": "Reducing member anonymity weakens rather than strengthens a decentralized network, because personal privacy protects members and lets them be more transparent in their dealings without fear of victimization.",
   "topics": [
    "consensus-and-security",
    "decentralization"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-011",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-011",
   "content_sha256": "367cfd060086a4f98a57aa43685f1d4789b5c6f4f2597b113c27e41c39eccba8",
   "claim": "The Web of Trust works acceptably for low-value information transmission but should not be used for transactions involving larger wealth in the general economy, which is part of why the scheme it originated in is called pretty good privacy rather than good privacy.",
   "topics": [
    "reputation",
    "consensus-and-security"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-012",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-012",
   "content_sha256": "c3bb6ed52b909a6b79c95637e9c6184112123c8b4f22d012e7ef38f0320f5155",
   "claim": "The proper solution to reputation security is to give members themselves the power to police their own reputation, because the leading experts in a field are best equipped to invent the regulations for policing their own industry and are best incentivized to defend their own reputation and future profits.",
   "topics": [
    "reputation",
    "decentralization"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-013",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-013",
   "content_sha256": "5c4007627e3ca86c65176bc2cb3ee9c0a159ccdf00edd5db803b3ee4062e5b74",
   "claim": "Because members of a decentralized network are assumed relatively equal, evidence of all bureaucratic work must be posted in a universally accessible location for eternal review, and every reputation token needs an openly verifiable history just as digital currency creation does without a central verifying authority.",
   "topics": [
    "disclosure",
    "compliance",
    "reputation"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-014",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-014",
   "content_sha256": "b8ea8ad045d96939c8ab976643ab29d606e2c376096058c683480b61cdae8a60",
   "claim": "Reputation must be staked and risked on votes over work evidence, because otherwise the system suffers the Tragedy of the Commons nothing-at-stake problem; staking ensures every expert is motivated to police every reputation-staked action in order to protect the value of their own investment.",
   "topics": [
    "institutional-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-015",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-015",
   "content_sha256": "925c58639d6eb636ec012f1ea9c971dfd43afafc6b0913d1c514c267e63f9736",
   "claim": "Reputation tokens are meaningful only if grounded in something real, so in a profit-seeking DAO all new reputation tokens must be minted in proportion to the fees the DAO earns.",
   "topics": [
    "tokenomics",
    "reputation"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-016",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-016",
   "content_sha256": "b4a3f92eecbc4063bd00f5156b29a709e869593a0b3eeb92635b4f0779c3c567",
   "claim": "Newly minted reputation tokens should enter the system neutral, staked half in favor and half against the post that generated the fee, so that existing token holders can judge the action fairly and are not swayed by an unbalanced validation pool created by a large new fee.",
   "topics": [
    "tokenomics",
    "consensus-and-security"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-017",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-017",
   "content_sha256": "243f0013c9354a4e623a13af79d6daeb5524532f1b6e1432a5354c5a2beb81a0",
   "claim": "All fees should be shared with the entire network of reputation holders in proportion to their holdings, because this reputational salary is what makes reputation tokens valuable and future-oriented.",
   "topics": [
    "reputation",
    "tokenomics"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-018",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-018",
   "content_sha256": "dc787f6a6ae0036dcecc95c121593883ab8bcfaf004ef17bd1703bb726125aa5",
   "claim": "Distributing salary equitably, for example equally to all members, is self-defeating: the obvious gaming strategy becomes creating multiple accounts and distributing one's work between them, which is why the salary must be reputation-weighted.",
   "topics": [
    "consensus-and-security",
    "reputation",
    "regulatory-failure"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-019",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-019",
   "content_sha256": "6805bcb054f4cfa9cba742103af71aa2a0e6c251e197e13753cee33c24439030",
   "claim": "Each new post should be able to reference older posts, so that when a new post is validated it can raise or lower the reputational value of past posts depending on how users come to perceive the precedent.",
   "topics": [
    "law-and-legal-systems",
    "economics"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-020",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-020",
   "content_sha256": "86c32173b90e6570227d412128559170a9a2caa29c36be5e3f102a9a8c93748a",
   "claim": "Reputation tokens must have their power limited to their proper domain: for each different expertise there must be a separate type of non-interchangeable reputation token, so that a token carries power only within the DAO whose members hold that specific skill.",
   "topics": [
    "reputation",
    "tokenomics"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-021",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-021",
   "content_sha256": "dd1ed7dcbdc73a59b096523c8fde586fd46badac5c3e8ba8d5f65ae9d464fa54",
   "claim": "DAOs are free to organize as they choose, and those that fail to find the right incentives for productive behavior will certainly go extinct, because the feedback loop that includes customers outside the DAO punishes unproductive DAOs by loss of fees.",
   "topics": [
    "institutional-design",
    "dao",
    "risk-and-incentives"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-022",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-022",
   "content_sha256": "952b8d840246e60f691a0bbf257c37763c356d9487b7f7dd7606ad8d26f23084",
   "claim": "Because eternally perfect protocols are impossible, as illustrated by Arrow's Impossibility Theorem and the Folk Theorems of Game Theory, the remedy is not a better static ruleset but a system that continually improves its protocols and smart contracts in reaction to market change.",
   "topics": [
    "institutional-design",
    "governance-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-023",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-023",
   "content_sha256": "86974439ab99adccfb58c8b3087979d1d2fff2154f61ede97acc1fc3301dd9ab",
   "claim": "Reputation dilates time: it slows immediate transfers of wealth so that past and future enter present decisions, with future-oriented incentives supplied by reputation-based salaries and past-oriented incentives supplied by the editability of reputation.",
   "topics": [
    "reputation"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-024",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-024",
   "content_sha256": "f0dc1f6fc2b712cbc4afe78bd55abf47984526d7d7255450783f2f10e112dc53",
   "claim": "In hierarchical structures where members are siloed and have few formal connections across tiers, letting service providers create the regulations produces moral hazard, because the provider has an incentive to weaken standards and regulations.",
   "topics": [
    "risk-and-incentives",
    "institutional-design",
    "regulatory-failure"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-025",
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   "content_sha256": "b173570ee737a55b3a5ccaefec6ded00ab4a903b6684b6d81d1d15c1f3559446",
   "claim": "Sockpuppet attacks are inevitable in any organization that wants open membership and anonymous members, and since those properties are essential to the autonomy that makes a global decentralized organization efficient, reputation must be weighted every time it is used.",
   "topics": [
    "consensus-and-security",
    "reputation"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-026",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-026",
   "content_sha256": "674c3d2923849bb296908521ea2e7b4943a9e697210839a27c1b34cdb19ca7ea",
   "claim": "Every single reputational implementation the authors have audited in the blockchain DAO space carries the flaw of vulnerability to the sockpuppet attack on the Web of Trust model.",
   "topics": [
    "consensus-and-security",
    "compliance",
    "dao",
    "blockchain",
    "reputation"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-027",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-027",
   "content_sha256": "beaebffeebfab969611e587f807adc1dd9919b5c506aad01707f294a5fc7367f",
   "claim": "SingularityNet's reputation system, which tracks self-reported transaction quality, transaction value, duration of satisfaction, and prior reputation weights, will have its value eroded by the sockpuppet attack once the system becomes valuable enough to merit attack, because it does not implement the other necessities.",
   "topics": [
    "consensus-and-security",
    "reputation",
    "compliance"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-028",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-028",
   "content_sha256": "89d8456f0caa97917a3c4533fa0f886823a31a751f2ad7ba817a206350fb43a5",
   "claim": "With the balanced staking and fee-sharing necessities implemented, the cost of faking reputation is at an absolute minimum double the value of that reputation, which is how reputation is made more valuable than money.",
   "topics": [
    "consensus-and-security",
    "reputation"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-029",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-029",
   "content_sha256": "2d27cb2cf53ef0666237f942228a5478353dedefc7565a7f6b49b3f76b963d28",
   "claim": "Concentration of power is the greatest threat to any decentralized organization, because a single member or sub-coalition that gains a majority of power in an inherently democratic organization will eventually control it no matter what safeguards are in place, at which point the organization is no longer decentralized.",
   "topics": [
    "consensus-and-security",
    "decentralization",
    "governance-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-030",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-030",
   "content_sha256": "2f90625e67791c3b727c80afa98a31a1a7d07eafdb575900ee15e1942fd666b4",
   "claim": "Fair accounting and transparency in reputation promote decentralization, because customers who can reliably compare reputation harness the available talent rather than waiting for the most talented provider to become free, which keeps reputation differences from accumulating.",
   "topics": [
    "disclosure",
    "decentralization",
    "reputation"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-031",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-031",
   "content_sha256": "5dd47a22a371930d2722b0251a7e928f6177f6a7a7c302454bdace31afd88c12",
   "claim": "A reputation token is inherently worth more to the person who earned it than to someone who merely bought it, because of its secondary use in making future earnings, so reputation is harder to accumulate than cash and economies of scale are weakened.",
   "topics": [
    "tokenomics",
    "defi",
    "economics",
    "reputation"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-032",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-032",
   "content_sha256": "255e84472a0d2b97b7eeabbacb5f01aa02348baaf4fdb02ebb6bac33c29fb0c0",
   "claim": "Because reputation tokens are constantly created, the reputation economy is inflationary, and a member with very high reputation must do proportionally more work merely to maintain the disparity, which makes reputation less likely to concentrate and acts as a natural counterbalance to accumulation of individual power.",
   "topics": [
    "tokenomics",
    "decentralization",
    "economics"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-033",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-033",
   "content_sha256": "a346543359bac80017ffb868752552f0c83fa73ce7e8e1ae1b529e49aefa6f05",
   "claim": "One-person-one-vote governance fails on technical questions because half the members have less than average expertise yet equal power, which incentivizes experts to gain power by catering to less expert prejudices instead of pursuing the most effective decisions.",
   "topics": [
    "governance-design"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-034",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-034",
   "content_sha256": "456da078d08b26ce21ecb21d9659cdf4ed80b4aeef5b30aa2be2d07948f1a54c",
   "claim": "Contemporary blockchains cannot support the proposed architecture because the technology is too slow and expensive to poll members on every transaction, and the messages required for all nodes to register all votes on every action multiply into an unmanageable number.",
   "topics": [
    "blockchain",
    "governance-design",
    "consensus-and-security"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-035",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-035",
   "content_sha256": "4ae58f535bb98aa680924f33bf0f3e87dffac1f30bdd28634c805da6bb1e00be",
   "claim": "Reputation-based governance faces a chicken and egg problem: voting becomes more efficient once reputation is valuable, but reputation cannot become valuable without meaningful voting.",
   "topics": [
    "governance-design",
    "economics",
    "reputation"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-036",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-036",
   "content_sha256": "115dd838e35eadd731e0432a58a3521a8fbc180c67124fc3e33caa2edc5ca841",
   "claim": "A meaningful reputational system with the potential for retrospective review would let a network rely on fewer nodes, since randomly selected nodes staking their reputation can do the polling work and be reviewed and punished later, which is one reason proof of stake is more efficient than proof of work.",
   "topics": [
    "consensus-and-security",
    "governance-design",
    "economics"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-037",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-037",
   "content_sha256": "a3bbcf44607357ee2b8b88ec652fe941782e1bab6f37a833acd42065ce1b02ed",
   "claim": "Members should not stake reputation tokens to register an opinion on a contentious topic; strict validation pools should be used only after debate has settled, to verify consensus.",
   "topics": [
    "governance-design",
    "open-source-and-code"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-038",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-038",
   "content_sha256": "fee0713cbb7060106bcd7acc9803baac376a13c2c1e4e03606da128c40127e84",
   "claim": "Reputation has lost much of its meaning during the current institutional disruption: people in dying fields cash in on reputations built over previous generations in a fire sale mentality, and reputation itself is becoming a suspect concept.",
   "topics": [
    "reputation",
    "institutional-design",
    "risk-and-incentives"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-039",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-039",
   "content_sha256": "6c1a0da505fba38ce0d7c891115f1d2bbb94f8650eb050d74d2377f2dc6118ba",
   "claim": "Reputation is not merely an option for a DAO that holds power or value; it is absolutely essential, and for DAOs built to make money ideology alone is not enough to maintain long-term stability.",
   "topics": [
    "dao",
    "reputation"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-040",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-040",
   "content_sha256": "67c6e21d47aa58100f12a5461b0cb9f6ebfed3a4e7ca3e63eb0bb4ef29fdcf48",
   "claim": "The Maghribi traders show that reputation alone can sustain a decentralized network under extreme information asymmetry: using only handwritten letters, Jewish merchants built a reputational system spanning the Silk Road in which nothing but the promise of better reputation deterred agents from cheating.",
   "topics": [
    "empirical-evidence",
    "ai-and-agents",
    "corporate-governance",
    "reputation"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-041",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-041",
   "content_sha256": "78b146f71cf939378ca2ca345eac7d6daba3435dfb106991ef0cd03edb822608",
   "claim": "Without the promise of improving reputation, a zero-sum mentality dominates a contractual arrangement and each party's best strategy becomes exerting the absolute minimum effort while still technically fulfilling the contract, which destroys the business atmosphere.",
   "topics": [
    "risk-and-incentives"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-042",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-042",
   "content_sha256": "a7e0840677d802b0fd7df1d5124dcb0656a8d0953f3f6e59bedb27ddf0793bad",
   "claim": "Self-executing, self-regulating smart contracts between anonymous parties in an open system create a near perfect zero-sum situation unless the DAO also includes reputation.",
   "topics": [
    "smart-contracts",
    "reputation",
    "dao"
   ],
   "is_failure_mode": true
  },
  {
   "id": "kaal:claim:3782210-043",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-043",
   "content_sha256": "11499d4f44f1c208278dafa7ed10e607714dde2535302384697c5fd55567b668",
   "claim": "Giving all people more power produces a liquid meritocracy in which leaders are continually rediscovered immediately where and when they are needed, and secure meaningful reputation gives that meritocracy momentum and history.",
   "topics": [
    "decentralization",
    "reputation"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782210-044",
   "canonical_url": "https://wulfkaal.github.io/claims/3782210-044",
   "content_sha256": "2e14c2d65d452f43b385a401a74dd9c52ffd32c8fdb5b4a82dcb821efe71c8b4",
   "claim": "A revolutionary new system of decentralized governance is a precondition for the Web3 vision succeeding, and because efficiency requires stability, the steering mechanisms must be subtle.",
   "topics": [
    "decentralization",
    "governance-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782220-001",
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   "content_sha256": "e5a69799f9eac6e58b58c39c75ea6254d1691d3ce4ce4a0cc9c100f882f4fe84",
   "claim": "Strong unifying values are the institution most essential to the long-term stability of a decentralized organization, and they demand continual reevaluation rather than one-time specification.",
   "topics": [
    "decentralization",
    "institutional-design",
    "dao",
    "governance-design"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782220-002",
   "canonical_url": "https://wulfkaal.github.io/claims/3782220-002",
   "content_sha256": "75d6a1791968870edc3d8d690b1aa88fcffb1278c9b80874a30631e3e77c693f",
   "claim": "Because a single global society is emerging in which everyone is densely interconnected, the more efficient and stable arrangement is power decentralization giving individuals and subgroup DAOs autonomous power, not a single power-centralized hierarchy controlling the whole.",
   "topics": [
    "decentralization",
    "governance-design",
    "ai-and-agents",
    "dao"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782220-003",
   "canonical_url": "https://wulfkaal.github.io/claims/3782220-003",
   "content_sha256": "d78dc090bed4f9a78344e635e2585c3476c3a4a67da9447103e87ad7e463ba9a",
   "claim": "Efficiency is only meaningful relative to goals, and understanding goals is the same as understanding values, so maintaining a system's efficiency requires adherence to its values.",
   "topics": [
    "economics",
    "ai-and-agents"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782220-004",
   "canonical_url": "https://wulfkaal.github.io/claims/3782220-004",
   "content_sha256": "b8685f2310e2d4f71bfafc7d79dac28af1304764a223b99496a0265f83a561b7",
   "claim": "Transcendental values are necessary for long-term stability because every formal, explicitly specified protocol is permanently exposed to strategies that subvert it, a result the authors draw from the Folk Theorems of game theory.",
   "topics": [
    "economics"
   ],
   "is_failure_mode": false
  },
  {
   "id": "kaal:claim:3782220-005",
   "canonical_url": "https://wulfkaal.github.io/claims/3782220-005",
   "content_sha256": "e8f867d040cb8a283543d01584935bf62a1c6aa0587fed452a20ee2e849d897c",
   "claim": "A maximally effective set of unifying values integrates opposing values rather than choosing between them, because the purpose of unification is to bring together individuals holding different perspectives.",
   "topics": [
    "dao"
   ],
   "is_failure_mode": false
  },
  {
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   "claim": "Building secure walls with well-designed doors is the proper way to embody conservative and liberal values together in an economic system: walls protect the group from the Tragedy of the Commons and malicious threats, while doors admit fresh input from anyone willing and able to help.",
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   "claim": "History reveals three polar opposite sets of fundamental values that any society must integrate in order to stay stable and healthy.",
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   "claim": "The intuition that strengthening one pole of a value pair necessarily diminishes its opposite is plainly false in any complex situation.",
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   "claim": "A society that levels material outcomes completely undermines its own equity: eliminating all individual reward crushes the meritocratic instinct, power is allocated inefficiently to those who cannot use it well, and the next generation cannot produce as much to share.",
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   "claim": "A society that relies only on meritocratic rewards destroys its own meritocracy: Price's Law differentiates rewards exponentially, the bottom tier cannot afford the training to compete, and the separation widens until the society destabilizes and collapses.",
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   "claim": "Where a person draws the line between necessities and nonessentials is itself a declaration of values: treating nothing as essential strongly favors meritocracy and treating everything as essential strongly favors equity.",
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   "claim": "Automating insurance away with smart contracts risks a race to the bottom, because foregoing insurance is more efficient in the short term for an individual, yet the resulting rare unprotected tragedies can chill the entire system.",
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    "systemic-risk",
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   "claim": "The efficient arrangement is that all of society shares the essentials while individuals remain free to pursue nonessentials, which puts government business in charge of essentials and leaves private business free to pursue nonessentials.",
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   "claim": "Overhead institutions such as insurance and policing act as catalysts supplying the activation energy that guarantees liquidity in both government and private business.",
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   "claim": "Overhead institutions that protect or promote essentials should be governed and borne by the group, while those protecting nonessentials should be governed and borne privately, with each DAO deciding for itself what is essential to its function.",
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   "claim": "Because what counts as essential shifts with the market, a network must not only identify its values but also maintain a dynamic governance process for constantly reinterpreting those values as circumstances change.",
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   "claim": "Demand for insurance and reputation policing runs counter to prosperity: when the system runs well and everyone profits there is less need for insurance, and when profits fall and competition intensifies cheating becomes more attractive and more policing is needed.",
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    "economics"
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   "claim": "A perfectly democratic society would require complete transparency even though most societies draw the line well short of it, so a DAO should specify explicitly where it places the boundary between bureaucratic transparency and secrecy.",
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   "claim": "Where the line between public and private information falls is a function of a society's values, as the divergence between American, German, and Chinese practice shows.",
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   "claim": "Failing to maintain a healthy balance among the polar value pairs, one that faithfully reflects the people's own values, is what topples empires and leads to social catastrophe.",
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   "claim": "Transcendental values must remain transcendental, because once formalized too rigorously they become more manipulable: a clearly specified definition becomes a focal point for competition instead of a unifying principle.",
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   "claim": "Drawing a clear formal line between where individual rights stop and social responsibilities start makes the system brittle and unstable by turning that line into a focal point for competition, so the line between the two values must remain vague.",
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   "claim": "Beyond any Folk Theorem justification for stability, the ultimate reason not to impose a clear distinction between the individual and the social is that no such clear distinction exists in nature, and a network's values must reflect that vagueness.",
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   "claim": "Individual autonomy and group cohesion reinforce rather than substitute for each other: the network effect is achieved only when individuals subsume their freedom to act in concert with the group, and diminishing one quality diminishes the other.",
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    "ai-and-agents",
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   "claim": "Identifying a network's values is not an academic exercise: values determine goals, goals determine how rewards and punishments are set up, and that reward structure determines the network's future and whether it survives.",
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    "governance-design"
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   "claim": "Governance design choices must be matched to the network's values, because otherwise the reward structure will dictate the true goals and thereby determine what the network actually values.",
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   "claim": "A long-term successful network requires a dynamic and responsive governance system that keeps the organization in the decentralized democratic realm and prevents it from moving to the next natural stage of centralized governance with a static hierarchy.",
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   "claim": "The drift into static power relationships is a universal temptation because centralization is efficient, yet centralized governance is provably flawed.",
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   "claim": "Committing too completely to a global centralized manmade hierarchy, and letting its bureaucracy become too rigid and impersonal, risks a predictable fall that could be the final collapse, because for the first time the structure encompasses the entire planet.",
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   "claim": "A centralized hierarchy becomes too rigid when those policing the rules gain more power than the members who honor the transcendental value that originally founded the organization, and the spirit of the law should always reign above the letter of the law.",
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   "claim": "As an organization loses touch with its transcendental values, members use the rules to jockey for position in the hierarchy and corruption erodes the organization's effectiveness.",
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   "claim": "The same ability to learn from others' behavior that unleashes the efficiency of cooperation also gives people untold power to trick others, imagining how to manipulate them and corrupt the organization for individual benefit at the group's expense.",
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   "claim": "Science is politically decentralized because no person, university, institution, or nation controls whether a theory becomes established fact, yet this global Science DAO is highly protocol centralized around objective universal truth.",
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   "claim": "Scientists do not deserve and can never earn the authority to rule on whether we should ask what meaning or values lie behind the rules guiding the universe; on that subject they have less authority than those who study spirituality, theology, morality, or poetry.",
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   "claim": "Unlike scientific laws, transcendental values cannot be stated formally and explicitly, so they must be authored by people in touch with transcendental beauty, true poets, who are nevertheless grounded in concrete understanding of the universe and its laws.",
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   "claim": "Decentralization requires every member to participate in constructing the organization's values, since a decentralized network is only as strong as its members and the environment it exists in.",
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   "claim": "Because a decentralized organization does not coerce its members as centralized organizations do, its power is determined by how devoted its members are to its values, and its power is its power to unite in service to the goal of shared values.",
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   "claim": "The strength of a decentralized organization is measured by summing the power of each member in their individual autonomy, modified by the group's ability to organize and effect its goals in the larger society.",
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   "claim": "Decentralized organizations demand more from their members and return more autonomous power and profit, whereas centralized organizations shelter members in a niche and limit and stultify their power in exchange for security.",
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   "claim": "Decentralized organizations are only as stable as their autonomous members' adherence to their ideals, and that same autonomy makes members individually responsible for constructing, nourishing, and revitalizing those unifying ideals continually.",
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   "claim": "At their worst, DAOs produce ponzi schemes and rug pulls, and these failures damage the credibility and future of web3 as a whole, not just the individual project.",
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   "claim": "Poorly executed DAOs exhibit a recognizable cluster of pathologies, including siphoned coins, distracted and robo voters, centralization, DAO washing by founders, and absent decentralized governance, and these pathologies drive mid-term and long-term DAO failure.",
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   "claim": "Rug pulls grew sharply as a share of crypto crime: of the $7.7 billion in total illicit crypto revenue in 2021, 37 percent came from rug pulls, up from 1 percent of illicit revenue in 2020.",
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   "claim": "Fundraiser DAOs are structurally fragile because they typically lack incentives for meaningful community engagement, so they dissipate once the hype that created them fades.",
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   "claim": "Governance by fungible tokens lets whales control a fundraiser DAO, which is antithetical to decentralized governance, and selling purchasable voting power via fungible tokens creates the risk of hostile takeover or looting.",
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   "claim": "The author contests the myth that DAOs are generally run by scammers: many DAOs and users have indeed fallen victim to rug pulls, but most of those rug pulls trace to the absence of decentralized governance in fundraiser DAOs rather than to DAOs as such.",
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   "claim": "DAO projects accounted for a material share of the largest crypto frauds of the year: two of the top six crypto rug pulls in 2021 were DAO projects.",
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   "claim": "A DAO token sale can be drained at the moment of closing: in the Anubis DAO sale 13597 ETH was removed from the token sale pool and sent to another address as the sale was about to close, and because the launch platform had not been compromised the loss was attributed to an inside rug pull.",
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   "claim": "VitaDAO's one token one vote structure leaves it susceptible to the 51 percent or whale attack, a vulnerability made worse because the VITA token is primarily purchasable.",
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   "claim": "Allocating twenty percent of total token supply to the four person founding team, as Angel Protocol does, means the organization can never become fully decentralized.",
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   "claim": "A reputation system that rewards voting with the majority, as Bridge Mutual uses, can be manipulated by users who create multiple wallets and always vote with the majority.",
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   "claim": "Locking voted tokens for a period after a vote, as Nexus Mutual does for three days, prevents an attacker from using a flashloan to borrow a large amount of wrapped tokens and swing a vote with significant voting weight.",
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   "claim": "Short-term incentives in a decentralized insurance mutual would motivate decision-makers never to pay a claim in order to maximize current profit; incentivizing long-term alignment instead motivates them to pay genuine claims because of the value of the resulting reputation.",
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   "claim": "Chainlink's white-list response to the 2020 gas fee attack was only a temporary fix: had the attack impacted 50 percent of Chainlink node operators, the price feed would not have updated until enough nodes returned.",
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   "claim": "Requiring governance tokens to be earned through contribution rather than purchased, as GDN DAO does, leaves only minimal risk of 51 percent and sock puppet attacks even under a one token one vote structure.",
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   "claim": "A DAO built on reputation rather than a fungible token, as CRDAO is, makes the 51 percent attack nearly impossible and renders sock puppet attacks technically possible but of little influence.",
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   "claim": "Kleros has weak attack resistance because juror selection is proportional to staked fungible tokens; staking reputation rather than tokens to select jurors would remedy this.",
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   "claim": "Big Green DAO's committee unanimity and closed membership make attacks unlikely, but these same protections come at the expense of the decentralized organization the founders were trying to create.",
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   "claim": "When only a minority of members, such as Audius node operators, can stake or earn weighted votes, the majority of token holders occupy the same powerless position as an ordinary shareholder in a corporation.",
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   "claim": "Technology has historically outpaced regulation, and the exponential trends in AI development will continue to widen the mismatch between regulation and AI development.",
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   "claim": "Web3 data attestation supports a governance model that assigns liability for AI misuse to identifiable individuals rather than distributing the burden across the whole community, which is what makes it a workable answer to AI related ethical dilemmas.",
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   "claim": "The black box character of deep learning models is a governance failure and not merely a technical inconvenience: opacity obstructs debugging, obscures bias detection and mitigation, and prevents comprehension of how inputs become outputs.",
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   "claim": "Strict privacy and transparency regulation produces a perverse result: because only large technology companies hold the data resources and infrastructure needed to comply and still build effective AI, such regulation consolidates rather than disperses their power.",
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   "claim": "Federated learning does not eliminate privacy risk, because although the data stays decentralized the exchange of model parameters can still expose sensitive information if those parameters are intercepted or improperly handled.",
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   "claim": "Bias in AI systems arises when algorithms incorporate discriminatory practices carried in their training data, and the resulting outputs reveal a profound misalignment between AI operations and societal values, ethics, and norms.",
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   "claim": "Recentralization is the central obstacle to using blockchain and distributed ledger technology to govern AI: the recentralizing tendency of these networks interferes with their capacity to deliver effective AI governance.",
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   "claim": "Blockchain can only deliver decentralized AI governance if the blockchain trilemma is first overcome, since decentralization, security, and scalability cannot readily be achieved simultaneously within one network.",
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   "claim": "Proof of Stake consensus centralizes control in proportion to the quantity of tokens held, so governance built on such chains is skewed in favor of the wealthy rather than distributed.",
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   "claim": "When decentralization at the Layer 1 level is compromised, the autonomy of the smart contracts deployed on that chain is compromised by affiliation, so smart contracts are corruptible in the current design and cannot reliably serve as neutral instruments of ethical AI governance.",
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   "claim": "Decentralized governance structures impose their own costs: with no central authority to coordinate diverse stakeholders, consensus is difficult to reach, negotiations are prolonged, and enforcement of agreements is weak because no single entity is responsible for compliance.",
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   "claim": "Using human judgment to uncover unconscious bias in AI can perpetuate the very biases it is meant to remove, because human reviewers carry their own implicit biases and may lack the expertise to identify bias in complex AI systems.",
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   "claim": "Sector specific AI regulation, though responsive to the distinctive features of each field, produces a patchwork of complex rules that is difficult for developers to navigate and creates barriers to entry for smaller companies lacking compliance resources.",
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   "claim": "Mandatory AI use reporting fails as a transparency mechanism because it assumes accurate and complete disclosure, while regulated entities have incentives to underreport or misreport in order to avoid scrutiny and regulatory burdens.",
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   "claim": "Until the known attack vectors on decentralized autonomous organizations are solved, DAO based AI governance solutions remain suboptimal; these include Sybil attacks, tyranny of the majority, Arrow's impossibility theorem, sockpuppet attacks, and tragedy of the commons.",
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   "claim": "AI powered DAOs that autonomously generate revenue are especially hard to regulate or dismantle, because the same blockchain security features that protect the organization also make it difficult to intervene once it is operational.",
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   "claim": "Purely preemptive regulation cannot succeed on its own, because it is not possible to anticipate every issue or bias an AI system will exhibit before it is operational and interacting with real world variables.",
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   "claim": "Ex-ante regulation is preferable in principle but is neither practical nor sufficient inside legacy systems, precisely because legacy systems, unlike the web3 system proposed here, are not equipped to create dynamic feedback effects.",
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   "claim": "Strict legacy regulation built on stable and presumptively optimal rules and enforced at the AI development stage can inadvertently stifle innovation by imposing rigid constraints before a model is fully developed or deployed.",
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   "claim": "Legacy ex-ante regulatory attempts fail because they assume a static technological landscape, while AI development is dynamic and requires rules that are adaptable and responsive.",
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   "claim": "Post-deployment monitoring, the standard fallback when ex-ante rules prove inadequate, is typically woefully outdated by the time it is applied because the AI models continue to evolve.",
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    "ai-and-agents"
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   "claim": "Privacy preserving frameworks such as federated learning do not fully remove centralization, because they still typically depend on a central client to collect and distribute model information, which reintroduces high communication loads and centralized vulnerabilities.",
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   "claim": "A unified governance framework is hard to establish in the federated model because each participating entity maintains its own AI systems and datasets, producing variation in standards, protocols, and formats.",
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   "claim": "Transparency and accountability cannot be assured across all participants in a federated governance model because there is no centralized control, and the author declines to advocate centralized control as the remedy; the consequences are biased or unfair AI systems, inadequate privacy protection, and unequal access to AI benefits.",
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   "claim": "Decentralized Federated Learning reaches the global minimum with zero performance gap and matches the convergence rate of centralized methods when the loss function is smooth and strongly convex.",
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   "claim": "Requiring users to purchase governance tokens in order to vote both centralizes power in majority token holders and leaves the DAO highly vulnerable to 51 percent and sock puppet attacks, as illustrated by Gelato DAO which scored 1 on both decentralization and attack resistance.",
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   "claim": "Procedural governance safeguards such as two step voting with temperature checks do not produce genuine decentralization when the governance token remains purchasable; in MakerDAO's case the purchasable token renders true decentralization nominal.",
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   "claim": "Subjecting every community vote to review by a council that is not democratically elected defeats the governance value of community voting, as scored for Goldfinch DAO with a governance score of 2.",
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   "claim": "Some DAOs substitute anonymity for legal structure: without any legal registration, Olympus DAO relies on anonymity to avoid legal action, which the author scores as the weakest possible regulatory compliance posture.",
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   "claim": "A DAO registered in a jurisdiction without DAO legislation risks default treatment as a partnership under existing law, as recorded for Klima DAO in California.",
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   "claim": "A governance design aimed at democratic balance can still centralize power over time when the token supply is fixed, as recorded for MoonDAO.",
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   "content_sha256": "34280b48a441e7cf4b75c802a6c1514b7f216e9367beeaa08a11ea13b9f0c59e",
   "claim": "LER can be engineered outside the Howey test by keeping reward units consumptive as discounts or credits, non-yielding, unmarketed for appreciation, and by disabling secondary trading.",
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    "economics"
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   "content_sha256": "e0bc425074f6ec05e61c5e12adfd96ec9ef3ff3b5f7b004cb2bdb70a99f624cb",
   "claim": "Because LER vouchers are closed-loop and non-convertible, they reduce the risk of triggering FinCEN money services business registration and Bank Secrecy Act obligations that attach to convertible or transmissible digital value.",
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   "claim": "In the EU, MiCA exemptions for non-transferable utility tokens spare LER airdrops from white paper and issuer authorization requirements, but only so long as the rewards remain non-redeemable for fiat and confined to closed-loop merchant ecosystems.",
   "topics": [
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   "is_failure_mode": false
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  {
   "id": "kaal:claim:5454054-026",
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   "content_sha256": "20f86cb29e9fb86746793d32ef0aa0caf8e4001123b95dde2c1c11b219439fb1",
   "claim": "Any drift toward transferability, voucher redemption at par, yield, or marketplace functionality would push LER into MiCA compliance obligations and, equivalently, into the UK EMR and PSR regimes and U.S. securities, money transmission, and market-structure perimeters.",
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   "claim": "A disciplined, jurisdiction-specific controls framework should be treated as a condition precedent to launching LER, not as a matter to be resolved after deployment.",
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   "claim": "A favorable legal assessment of LER depends on four design features holding simultaneously: non-transferability, absence of a secondary market, absence of fiat redemption, and consumptive utility.",
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   "claim": "BaFin applies substance over form, so transferable, tradable, or profit-oriented reward units risk classification as crypto-assets or financial instruments in Germany, potentially triggering licensing obligations such as crypto custody or proprietary trading.",
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   "claim": "In the UK, e-money and payment services obligations attach if voucher rewards are fiat-redeemable or open-loop; otherwise LER should fall outside the Electronic Money Regulations 2011 and the Payment Services Regulations 2017 under limited-network concepts.",
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   "claim": "LER must maintain a visible separation between equity tenure verification and reward attribution, so that vouchers operate as loyalty entitlements and do not represent equities, dividends, or profit shares.",
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   "claim": "Because Landreth holds that instruments carrying equity attributes such as dividends or voting rights are securities, LER rewards cannot include any such features and must function as independent loyalty perks.",
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   "claim": "AML obligations for LER should be right-sized: zero-knowledge proofs or anonymized attestations should minimize identity collection for non-transferable rewards, with VASP-grade measures applied only where transferability exists.",
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   "claim": "Non-transferable LER rewards designed for consumption can qualify as multi-purpose vouchers under the EU Voucher Directive, which defers VAT until redemption and postpones the tax liability.",
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   "claim": "U.S. escheat obligations under the Revised Uniform Unclaimed Property Act require issuers to report dormant rewards to states after specified periods, so LER needs dormancy mechanisms such as automatic expiration or reversion.",
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   "claim": "Before launch, an LER program requires a defined governance package: classification memoranda, financial promotions review, data protection impact assessments, an MSB or EMI evaluation, and consumer terms and conditions.",
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   "claim": "Regulatory uncertainty, in particular the timeline for SEC approval of the NASDAQ and Dinari tokenization frameworks, could delay LER implementation.",
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   "claim": "The retention uplifts claimed for LER remain unvalidated: empirical pilots are needed to confirm them and to refine the smart contract designs, particularly for AI-personalized airdrops.",
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   "claim": "Traditional board defenses such as staggered boards and poison pills protect incumbent boards at the cost of value creation and reduce board accountability to shareholders, even when they succeed in defeating an activist campaign.",
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   "claim": "Firms carrying fewer defensive mechanisms display higher market valuations and better operating performance, which supports dismantling entrenchment devices rather than adding to them.",
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   "claim": "Liquid Equity Rewards is defined as a blockchain enabled system that grants verified holders of stock or tokenized equity time-weighted, utility-only rewards rather than financial yield.",
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   "claim": "LER produces shareholder loyalty by using smart contracts to distribute consumptive utilities such as merchant vouchers or platform credits, so retention is encouraged without imposing any lock-up on the shareholder's liquidity.",
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   "claim": "Negotiated settlements that hand activists board seats risk entrenching incumbents, whereas LER's consumptive utilities are designed to produce consensus and alignment without ceding board representation.",
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   "claim": "LER is a two-tiered architecture: registered off-chain shareholders receive redeemable vouchers, while on-chain holders receive programmable, non-transferable reward units such as soulbound tokens anchored to specific wallet addresses.",
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   "claim": "Traditional corporate loyalty programs fail because they saddle issuers with delayed obligations and cannot hold participants without pushing them toward speculation; LER is designed to avoid both defects.",
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   "claim": "Reward accrual scales with holding duration, for example thirty to ninety day windows, which encourages prolonged ownership in the same way DeFi liquid staking yields encourage retention, but without locking up the shareholder's ability to sell.",
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   "claim": "Because LER rewards are funded out of marketing budgets at roughly one to five cents per holder-day and expensed immediately under U.S. GAAP, the program avoids the balance sheet drag that conventional loyalty liabilities create.",
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   "claim": "LER's central comparative advantage is a projected fifteen to thirty percent reduction in shareholder turnover, benchmarked against established loyalty programs, which stabilizes the ownership base during activist-driven price swings.",
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   "claim": "Retail investors, who hold roughly forty percent of U.S. equities and form a decisive voting bloc, are the channel through which LER strengthens incumbent board support in contested proxy battles.",
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   "claim": "LER survives Delaware scrutiny only if it is deployed non-discriminatorily and proportionately with the welfare of the whole shareholder body in view, responding to a genuine threat rather than entrenching management.",
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   "claim": "If LER rewards are set so generously that they effectively purchase shareholder votes, the program becomes disproportionate or coercive and courts will invalidate it.",
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   "claim": "Issuing LER selectively to management-aligned shareholders while excluding others breaches the duty of loyalty by creating an uneven playing field, so rewards must be allocated uniformly on objective criteria such as ownership tenure.",
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   "claim": "In a change of control setting, LER issuance that favors long-term holders over other shareholders is impermissible under Revlon because it can undermine the highest bid or fragment shareholder support.",
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   "claim": "Under Blasius, LER should function as a last-resort tool justified by evidence of severe harm to the corporation, such as an activist's documented history of value destruction, so that courts can test whether less restrictive alternatives existed.",
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   "claim": "LER airdrops fall outside SEC proxy solicitation rules because a neutral pro rata distribution to all verified long-term holders, not conditioned on voting conduct, is not an inducement to vote.",
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   "claim": "Activists currently prevail in about forty percent of proxy contests, and by rallying passive retail and institutional voters LER could cut that success rate by fifteen to thirty percentage points.",
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   "claim": "LER units are not securities because they fail the third and fourth Howey prongs: they carry no expectation of speculative profit and their accrual does not depend on the entrepreneurial efforts of others.",
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   "claim": "Non-transferability is what defeats the expectation of profits prong: because LER vouchers cannot be listed, traded, or resold, no capital appreciation is possible and their value comes from merchant redemption rather than issuer performance.",
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   "claim": "The fourth Howey prong fails because LER accrual is automated by smart contract and driven by the shareholder's own decision to keep holding, leaving the issuer's role ministerial rather than entrepreneurial.",
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    "securities-law"
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   "claim": "The common enterprise prong is the unresolved part of the analysis: vertical commonality may well be present through the merchant network, and inconsistent district court precedent leaves LER's status under this prong uncertain.",
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    "securities-law"
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   "claim": "MiCA exempts non-transferable utility tokens like LER vouchers from white paper and issuer authorization requirements, but only while they lack investment characteristics and stay inside a closed-loop ecosystem.",
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   "claim": "Activist tactics including short selling, public media campaigns, and strategic leaks amplify stock price volatility between annual meetings, exploiting market sentiment and pushing retail holders into selling that deepens the price decline.",
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   "claim": "Smart contract delivered, time-based vouchers counter activist-induced price dips by giving shareholders a reason to hold through the trough, and they do so without the trading lock-ups that restrict liquidity.",
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}