> You don't restrict the freedom of individuals to protect them from other individuals that are bad actors. You go hard and strong after the bad actors.

That's fine. But you first up the enforcement and second decrease the qualifications.

I can tell you from personal experience that the SEC has a lousy record of enforcement against even serial bad actors. And the civil system is even worse.

4 of 9 startups that I have been involved with have had criminal levels of malfeasance and have gone to court and lost--however, that didn't win anybody any money. And the SEC was nowhere to be found. Perhaps I'm just bad at picking startups, but anecdata from my friends suggests that I'm batting better than most and that the fact that they got judgments against them is the unusual part and not the 50% having malfeasance.

Story time of the worst: worked for a startup that had the usual friends and family investment structure. A couple dozen people all at $50K-$100K. No big deal.

Came in to do technical work. Okay, once I got there it was clear that everybody was out of their depth and the work was going to be significantly more than expected. Not unusual, and I'm working hourly with some number of hours defrayed by stock options if I think the idea is useful.

Start down the path. CEO is spending money like water on marketing. That's not unheard of and probably not even a bad idea.

The CEO then gets a "lawyer" from Silicon Valley who attempts a maneuver to take control of the company from the investors without buying them out.

And here come the lawyers.

So, of course, at this point, a chunk of us demand both the financial records as well as the documents behind the maneuver. Denied, so we need to compel the request.

And, of course, once we get the documents, we find that the company has been bled of nearly $1.5 million in cash in what were later found to be illegal arrangements.

Off to court we go. So, what are your options?

You can sue individuals, but that means piercing the corporate veil. You can force the company into bankruptcy, but if you're found against, you can wind up with a big penalty on your hands. You can report to the SEC, who basically ignore you because this simply isn't worth their time to bother with ($10 million is the minimum to even get them to call you back).

And through all of this, you will be spending cash to your lawyers while the opposing side is spending investor cash to fight you. Or, in this instance, has cut a special deal with the "lawyers" by giving them a "retainer" of $300K and now is doing work "for free".

Oh, by the way, the clock is ticking. If you don't push the company into bankruptcy soon, that "retainer" can't be clawed back because it will be outside the time window.

Fine. File a suit to force payment due and force them in bankruptcy.

The opposing "lawyer" shows up and his sole job is to delay while doing nothing. The judge even finds in your favor and admits that he has no sufficient way to penalize the company or the lawyer. And likely won't penalize the lawyer anyway because the court system protects its own--even the scumbags.

And, by the way, a significant cohort of the investors are VERY upset with you. They like the con-man, after all. So, you aren't crusaders for justice; you're interlopers who upset the apple cart.

And, if you're vulnerable, you may get a suit launched against you by the company for "reasons". Yes, it's a nuisance and you will win, but it will cost you even more money.

The moral is: We probably would have been better off to simply let him keep stealing money from people, cut a deal for some level of payment and just walk away.

THIS is the reality you are championing for. Just so you know.