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Bad April Fool's Joke: Give Away Millions In Fake Money; Users Start Trading With It

Too Much Free Time

from the how-to-define-a-bad-idea dept

Mon, Apr 6th 2009 4:55am — Mike Masnick
See Update Below. Well here's an idea that must have sounded good at one point. Upstart online brokerage Zecco (already known for pulling attention-grabbing stunts) had the bright idea for April Fool's Day to load up users' balances with much more money than they actually had -- sometimes millions more. Except... it looks like they never bothered to make sure people couldn't use that money. So plenty of users started making trades with the fake money... and when Zecco realized it, the company apparently started to force sell, even at a loss, charging the losses to the customers along with a "$19.99 broker-assisted trading fee." Oops. Update: Consumerist has updated their post with a message from Zecco claiming that it was not an April Fool's joke, but noting "Some clients may experience incorrect display of Buying Power and Account Balances." It's not entirely clear how those "incorrect displays" were apparently off by millions in some cases. Update 2: Zecco is again insisting this was not an April Fool's joke and that it was "a bad feed" from a vendor. It's not entirely clear why it took the firm 5 days to explain that, however...

Filed Under: april fool's, fake money, trading
Companies: zecco

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  • identicon
    Pete Austin, 6 Apr 2009 @ 5:09am

    URL doesn't work

    Nor does searching for Zecco on http://consumerist.com - did they just pull this story?

    [ reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 6 Apr 2009 @ 6:05am

    consumerist won't let you deep link. Try Google, then click through.

    http://news.google.com/news?pz=1&ned=us&hl=en&q=zecco+april

    [ reply to this | link to this | view in chronology ]

  • icon
    Jeffry Houser (profile), 6 Apr 2009 @ 6:47am

    I have to wonder what people were thinking who saw that their balances were off by millions and started spending that money without checking.

    On the other hand, it could be a matter of scale. How much money did these people have? If I have 100 million in a trading account, a fluctuation of a couple million up or down will not have the same impact on me as someone who has 100K (or less) in a trading account.

    [ reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 6 Apr 2009 @ 8:59am

      Re:

      Absolutely. Those people are obviously complete idiots and should have to pay any and all charges.

      [ reply to this | link to this | view in chronology ]

      • identicon
        JT, 6 Apr 2009 @ 11:47am

        Re: Re:

        While I agree they shouldn't have touched the money and I wouldn't have, Zecco needs to take responsibility for faults in their system.

        If I were using them, I'd immediately pull my money, whether I was affected by the story or not. Millions of dollars? Sounds like, complete idiots are running the company, not just behind the buy button.

        The company needs to be fully investigated and individual should be brought up on charges if something is found...Especially if it was a Aprils fool joke gone terribly wrong (whether their dismissing that or not).

        Either way, it's ridiculous to put it all on the customers. I wonder what happens to the person that had $14k and actually made money? Charge people individually for the losses and seize money that people came out ahead with?

        [ reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 6 Apr 2009 @ 7:31am

    It doesn't matter if it wasn't an April Fool's joke

    I would be worried about using Zecco for any reason my balance was wrong, April Fool's joke or not. This is their core business and if they can't keep balances right what is the expectation that they can get trades right. This alone seems like a reason to pass on them.

    Maybe this should be a clue.

    "Smart Money Magazine's 2008 Broker Survey, Smart Money named Zecco as one of the worst in the customer service category"

    [ reply to this | link to this | view in chronology ]

  • identicon
    interval, 6 Apr 2009 @ 8:40am

    I came THIS CLOSE to buying an account with those idiots last year, then life happened and I delayed actually funding the account. They still spam me with deals and news and crap. I thought one of these days I'll actually fund the thing. Good thing I never did, and now I never will.

    [ reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 6 Apr 2009 @ 11:46am

    I could be wrong but the ability for them to "tinker" with accounts that easily is not only stupid but i think against all laws around financial transactions. I hope there is an investigation of this not just an "oops he he our bad"

    [ reply to this | link to this | view in chronology ]

  • identicon
    Matthew Sarro, 6 Apr 2009 @ 11:56am

    SEC Violation?

    I was under the impression that to sell assets required the express permission of the owner. Zecco is an agent, not the owner, and I don't believe has the power to actually liquidate their client's assets. What if this was used for a 401k account? There are tax issues. I wouldn't trust these guys ever, ever again.

    [ reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 6 Apr 2009 @ 9:25pm

      Re: SEC Violation?

      untrue... A broker can force sell assets to cover a negative amount in your account or cover a marin call.

      [ reply to this | link to this | view in chronology ]

  • identicon
    Rusty, 6 Apr 2009 @ 1:02pm

    RE: SEC Violation

    I agree with Matthew, if Zecco began selling (no matter what it was) with out the users permission, this is a violation and the users have a case against Zecco even if it was money that was not in their accounts.
    As far as the account balances, Zecco will be fined by the SEC, several investigations will be launched, and users of the service will have a lawsuit on their hands.
    every one wave by by to Zecco

    [ reply to this | link to this | view in chronology ]

  • identicon
    gigicu, 6 Apr 2009 @ 1:33pm

    can i have some millions, too ? plz ;)) www.download4a.com

    [ reply to this | link to this | view in chronology ]

  • identicon
    James, 6 Apr 2009 @ 1:39pm

    typical client

    It never fails to amaze me the number of clients that look for the "free lunch". If they make money on an error they will demand it should be theirs, but if they lost on a trade, they will demand the loss is not theirs due to the firm's error. Any client who tried to "willingly and fraudulantly" take advantage of the error should be shut down from trading.

    [ reply to this | link to this | view in chronology ]

  • identicon
    Zecco, 6 Apr 2009 @ 1:59pm

    Setting The Record Straight

    We would appreciate higher journalistic standards when reporting on a sensitive issue like this. Insinuations that Zecco Trading pulled a bad April Fool's joke are factually inaccurate and complete misinformation.

    Here's the real story: Setting The Record Straight

    [ reply to this | link to this | view in chronology ]

  • identicon
    bob, 6 Apr 2009 @ 2:16pm

    Zecco

    Anyone who has an account with this firm is nuts. No firm in my 30+ years in the brokerage business has to my knowledge ever had an error like this, for an online firm to screw up like this is amazing. I will bet the SEC is knocking at their door.

    [ reply to this | link to this | view in chronology ]

  • identicon
    Phantom Gremlin, 6 Apr 2009 @ 5:30pm

    margin account

    I was under the impression that to sell assets required the express permission of the owner.

    Not in a margin account.

    Think of it this way (somewhat simplified). You deposit $10K into an account. The broker will lend you another $10K so you can buy stocks or bonds. If your stocks go up, then great. But if they go down, you must either sell the stocks or deposit more money. The broker wants at least a "maintenance" margin, which varies by asset class. But let's say it's 25%. If the value of all assets in your account doesn't exceed what you owe the broker by at least 25%, you get a "margin call". But that's just a courtesy. The broker can sell you out at any time to protect himself.

    In this case, let's say you had $10K in your account. Then Zecco added $100K into your account by mistake, then you bought stock with that new money. Now you have $110K in stock but you owe the broker $100K. Much less than a 25% cushion. So the broker can sell your stock immediately to protect himself.

    It could be interesting if you have a "cash account" and never agreed to the terms and conditions of a "margin account".

    [ reply to this | link to this | view in chronology ]

  • identicon
    Guillaume Cloutier, 6 Apr 2009 @ 6:53pm

    It happens to me last October

    I'm currently building a case against my online broker in Canada (Courtage Direct Banque Nationale) because I had a similar problem with them last October. I had been trading with money I thought was in my account, not validating the individual amount of each positions I owned against the margin, only to find later that I actually had not enough money to cover even the slightest loss, the buying power was all fictitious. I had no marginable position. In the end, they force-sold all my positions and I ended with an account in negative of a few thousands, instead of a real positive balance of a couple of thousands prior to the glitch. But If they had waited just couple of days to start selling, I would have owed them nothing. Instead, I would have make a lot of money. Now I have to build a case against them, because they say I was responsible for all the actions in my account. I'm responsible for what I buy, but I'm also responsible for the losses resulting from the actions they took, without my consent, without my knowledge. The only time I knew something was wrong was when they sold everything, starting with the position that incurred the losses, then everything I owned. Now I have nothing left and I need to take legal actions against a bank. They took everything like if it was theirs. I'm like David against Goliath!!! I have fun!!!

    [ reply to this | link to this | view in chronology ]

  • identicon
    anonymous, 8 Apr 2009 @ 12:00pm

    Based on anecdotes from Zecco users, this error appears to have affected cash (read: non-margin) account customers as well.

    Zecco's default customer service approach seems to be "your account, your fault" ...

    [ reply to this | link to this | view in chronology ]

  • identicon
    test, 9 Apr 2009 @ 1:43pm

    test

    test
    test
    test
    test

    [ reply to this | link to this | view in chronology ]

  • identicon
    FrankC, 12 Apr 2009 @ 2:29pm

    Zecco customer account balances

    Be careful with Zecco. In two separate months they charged me margin interest, though I made no marginable trades. The second month (Feb 2009), there was NO activity at all & they charged my account interest as well as issued a margin call! Only 20 cents worth but still very scary.
    I transfered out to TradeKing. (So far, this was an easy application & quick transfer process. But option trade executions seem to be very slow)

    [ reply to this | link to this | view in chronology ]


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