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Hello, and welcome to another episode of
Virtual Legality.
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I'm your host, Richard Hogue, managing member
of the Hogue Law Business Law Firm of
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Northville, Michigan.
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And today, we're gonna talk about a video game
that honestly, I don't think we talk about
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enough in this space.
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And that game is Roblox.
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If you aren't familiar with it, it is
essentially a platform of experiences that
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other developers outside of the Roblox company
make to play within Roblox as a platform, which
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makes it a somewhat unique type of game in the
space.
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But it's also become very, very popular.
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A lot of people have made content for this
platform.
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A lot of people have experienced that content,
and a lot of people have made a lot of money,
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Which is one of the reasons why we have talked
about Roblox in virtual reality before because
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when this company went public, when people
started digging into how folks were making
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money through making content for this platform,
the question became, is Roblox exploiting those
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developers?
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Is it exploiting those people that are making
content for it because it's becoming so
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wealthy, it's making so much money from people
gaining access to these various experiences,
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but it isn't paying these people as employees?
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This question became even more prominent for
Roblox when folks started talking about the
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fact that it was so popular with children and
that many of its developers of content and
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experiences on the Roblox platform were in fact
children themselves.
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And I did that episode in virtual reality a
couple of years ago.
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You can check it out now.
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You can see the comments to that where people
were maybe not as thrilled with me as possible
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for not decrying Roblox's corporate structure
incentives and also not decrying capitalism on
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the whole.
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But I'll leave that to you to interpret for
yourself.
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What I wanted to talk about today was a story I
saw reported on in game developer that really
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raised my eyebrows, which says, SEC confirms
that Roblox is part of an active and ongoing
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investigation.
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Now they also sub headline this as the focus of
the investigation remains unclear, but I wanted
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to investigate this article.
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I wanted to see what was happening behind the
scenes of what's reported here, and I wanted to
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talk to you all about it because I don't think
it is as obvious what is happening here as
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these articles would suggest.
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So game developer says, Roblox is part of an
active investigation being conducted by US
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regulator, the Securities and Exchange
Commission, SEC.
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Now importantly here, the Securities and
Exchange Commission is focused, as you might
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expect, on securities.
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Now if that term doesn't mean anything to you,
I don't blame you.
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Securities are in essence the way that people
give money to corporations or other entities to
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do things.
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Now that can often take place in a stock market
through the exchange of money for stock, but it
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can also take place as loans for the lending of
money for bonds or promissory notes or what
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have you.
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So when you think of stocks and bonds, that's
really what we're aimed at with securities.
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It becomes more complicated.
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When we talk about cryptocurrencies and other
things that may or may not be securities,
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there's actually ongoing fights about that
behind the scenes.
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But what's important to note here is that the
Securities and Exchange Commission is focused
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on stocks, bonds, and what investors learn
about companies so that the markets for those
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stocks and bonds are as fair and transparent as
possible.
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As reported by Bloomberg, and we'll get to that
article in just a minute, the SEC confirmed
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Roblox is involved in an active and ongoing
investigation, but refused to elaborate
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further, and that's to be expected.
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If they are involved in an active
investigation, that's one of the areas where if
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you go and you ask for information from a
federal agency, they can say, look.
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We don't have to give you any information about
anything that's ongoing because we don't wanna
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jeopardize what that investigation entails.
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Responding to that Freedom of Information Act
request, the SEC said providing additional
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information could harm our ongoing enforcement
proceeding.
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Bloomberg has been unable to learn more about
the investigation.
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Roblox owner, Roblox Corp, has yet to respond
to a request for comment from Bloomberg, while
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the SEC declined to provide more context.
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Roblox is no stranger to headlines.
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The platform which allows users to build and
play video game experiences has faced heavy
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criticism over a perceived lack of child
protections.
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You say, Rick, you just told me that the SEC is
only interested in securities and transparency
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to investors.
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It is indeed.
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But the more sexy headlines for Roblox, the
ones that really kinda get the clicks that I
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see on my timeline all the time are is Roblox
exploitative?
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Is it allowing things like child predators
access to children through the platform?
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And so this article, and we'll see the
Bloomberg article that is its basis, dovetails
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from SEC is reporting that there's an active
investigation to the platform has a problem
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with child safety pretty quickly.
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And I wanted to talk about that because I don't
think that's actually what's in play here.
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Continuing on with this article, the company
has cut moderation costs in an attempt to
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appease Wall Street while endangering kids with
a platform that exposes them to illicit
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content, etcetera, claims a specific report.
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Once again, Roblox Corp rejected these
allegations and claimed the report was
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inaccurate.
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Now we have more research to do though because
that's obviously just a summary article of
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another article.
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We're already two levels in the playing
telephone on this particular topic.
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Let's go see what Bloomberg had to say itself.
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So they say much the same thing in their
headline.
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SEC says game service Roblox is part of an
active investigation and that the agency
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withholds details.
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That's all to be expected, but let's see what
they say.
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Roblox Corp, the video game service used by
millions of young people is part of an active
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investigation by the US Securities and Exchange
Commission.
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Again, remembering that the SEC, the US
Securities and Exchange Commission, not so
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interested in what's happening with young
people, not interested in enforcing criminal
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laws for protection of young people.
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We'll see that writ large when we get to the
actual federal websites as part of this video,
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but that is kind of the hook for this article.
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It's the hook for why you should be concerned
with Roblox, and I think it's a little bit
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unfair reporting in this context.
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Responding to that Freedom of Information Act
request, the commission said in a letter Friday
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that it couldn't share correspondence between
staffers referencing Roblox, saying it could
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cause harm to the ongoing enforcement
proceeding.
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We have confirmed with division of enforcement
staff that there are responsive emails between
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enforcement staff referencing Roblox and that
these emails are part of that active and
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ongoing investigation, the commission said, but
Bloomberg News couldn't confirm the subject of
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the investigation.
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Hunterbrook Media reported in November that
Roblox was under investigation by the SEC,
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citing their Freedom of Information Act or FOIA
requests.
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And more importantly for our conversation right
now, in October, the now defunct short seller
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Hindenburg Research published a report on child
safety concerns at Roblox and also alleged that
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the company had inflated its metrics, including
the number of users who regularly play Roblox
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games and the amount of time they spend on
average on the platform.
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So we're two articles in.
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We're halfway through the second article, but
here is the first time we see why the SEC might
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be interested in this company.
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And that is to say the SEC is interested in
making sure that if you are a publicly traded
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company that is selling its stocks and having
those stocks sold amongst your investors, that
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you are transparent with all of the metrics
that go into valuing your company.
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And so if somebody accuses you of inflating
your metrics, including your number of users
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and the amount of time they spend on your
service, that's the kind of thing that raises
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the SEC's eyebrows.
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It's the kind of thing that can make an
enforcement action take place.
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We totally reject the claims made in the
report, a Roblox spokesperson said at the time.
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The authors are admittedly short sellers and
have an agenda irrespective of the substance of
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Roblox business model and results.
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And if you aren't familiar with the phrase
short sellers, these are the folks that operate
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in a stock market betting against the company's
value going up.
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That's the most easy way to understand who they
are.
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That's what short selling means.
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Mechanically, it means that they essentially
sign contracts with other parties that say, we
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can sell you 10,000 shares of this company or
whatever other number makes sense at the price
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it is today, and you have to buy them from us,
at some point in the future.
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And if the stock price goes down, we can buy up
those shares when it goes down, and we can sell
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them to you at the higher price, and we make
money, and that's how our business model works.
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Obviously, if the stock price goes up, that's a
problem for us because we then have to buy
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those shares anyway, and we lose money on that
same transaction.
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That's what a short seller does.
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And so what Roblox is saying here in the
context of this statement is, look, it is in
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their best interest to try to drive our stock
price down.
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That's how they make money.
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So we don't have to take this report as coming
from a completely unbiased source, and that
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makes all the sense in the world.
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But again, Bloomberg continues on this track
putting aside the transparency issues and
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starts talking about those children's safety
issues.
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The video game company has faced scrutiny over
children's safety on the platform.
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Since 2018, at least two dozen people have been
arrested by police in The US, accused of
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abusing or abducting victims they've met or
groomed using Roblox, Bloomberg News reported
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in July.
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In 2024, Roblox implemented at least 40 safety
changes to its platform, including barring
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children under age 13 from participating in
social chatting games.
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And if that 13 concept rings a bell to you, you
might have watched some of our COPPA videos
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here in Virtual Reality where we talk about the
COPPA law and the COPPA rule, applying data
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protection privacy considerations to children
under the age of 13, 12 year olds and under.
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Shares of Roblox fell 11% on Thursday after the
company reported slower than expected growth in
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daily users of its service.
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So this is the Bloomberg article that gives
rise to all that, but I want to also talk about
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the Bloomberg article that talks about that
initial report on what Roblox is doing and why
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they should be concerned.
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So here's a market report from Bloomberg last
October that says Roblox tumbles as Hindenburg
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bets against gaming platform.
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You you heard them reference this company as
now defunct.
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The Hindenburg Reports project actually winds
up disbanding earlier this year.
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I don't know that that has anything to do with
Roblox in particular, but it is worth noting
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that this short seller didn't actually survive.
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Hindenburg said in its report that Roblox has
inflated key metrics and alleged that it
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doesn't have sufficient safety screens to
prevent pedophiles from using the platform.
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And then we get that statement where Roblox
says we reject the claims and the authors are
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short sellers.
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Roblox's share price is strongly associated
with user growth and engagement.
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Over the last few years, the platform has seen
massive growth with chief executive officer
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Dave Baszewski now aiming for a goal of
1,000,000,000 daily active users.
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Currently, Roblox reports 80,000,000 users
logging on to the platform every day.
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This is not a minor company.
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This is not a small piece of the video game pie
even if you might not otherwise engage in
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Roblox or Fortnite or any other platforms that
see a lot of success from kind of niche
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audiences in gaming.
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Hindenburg's report accuses the company of
inflating both the number of users who
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regularly play Roblox games and the amount of
time they spend on average on the platform.
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And then we get a little information on the
systems that they use to determine that those
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metrics were in error according to them.
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Further analysis of playtime showed numerous
games in which obvious bot accounts remained in
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game for more than twenty four hours straight,
and we've seen bots and platform metrics being
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confused by bots be an issue in virtual reality
before.
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Here now, also with respect to Twitter when we
were discussing Elon Musk's takeover purchase
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of that company, our representative sample
flagged millions of zombie engagement hours
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that can majorly skew Roblox's reported average
engagement.
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And that's important because if you're a
business and you're selling currency or
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cosmetics to people that are otherwise engaged
on your service, it doesn't help your business
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to have bots doing those things, but it can
help it look like there's more possible sales
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opportunities if you've got those numbers that
you report to investors.
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So that is a problem.
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Right?
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If there are a lot of zombie accounts, if there
are metrics that are not rightfully saying how
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successful your platform actually is, if
investors can't get the right information to
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know what to value your company at, That is
going to be a problem for regulators in The
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United States.
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Over the past four quarters, Roblox bookings,
etcetera, there's a bunch of numbers here.
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It's a Bloomberg report article.
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On user safety, the report cites a recent
Bloomberg Businessweek investigation into
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predatory behavior on Roblox that was based on
interviews with more than 20 current and former
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employees.
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This continues on from what we saw discussed in
that original article saying, hey, they might
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have issues here.
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Most of the safety workers interviewed by
Bloomberg Businessweek said it was harder to
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pursue pedophiles at Roblox than in other
online platforms In part, because the company
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allows users to create an account without
entering any real names, email addresses, or
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phone numbers.
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And I wanted to point this particular paragraph
out to you all because this is kind of the dark
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side of something like a COPPA rule, which says
you can't collect personal information from
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kids.
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One of the ways to try to solve this is you say
we're not gonna collect any information from
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anybody.
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Right?
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If we're gonna get in trouble from knowing that
there are kids on our platform and not doing
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enough to satiate you, we saw this in the
virtual reality video I did on Genshin Impact
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very recently, then maybe we're just gonna say
no information from anybody.
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We're gonna avoid all of that.
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And then the opposite end of that is they
safety workers say we can't track adults doing
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bad things.
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We can't track these issues for our safety
because we're not collecting any of this real
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information.
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Hindenburg's report raised concerns with the
lack of screening upon sign up.
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The researchers created multiple fake accounts
as children and found they were quickly exposed
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to sexual content.
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All this is bad.
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Right?
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This is a short seller.
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They wanna say these are the reasons why this
company could face liability, could face
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exposure, could just face negative public
interest in the very near future if all of this
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is happening behind the scenes.
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Roblox's partnership with big brands including
Walmart, L'Oreal, and Nike alleviate our
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00:13:22,975 --> 00:13:27,220
concerns, says this Bloomberg analysis, about
brand safety, but it may still need to invest
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in parent controls and cleaning up bots.
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And this I thought was interesting because this
is the way the real world works.
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You lean on people that otherwise have a strong
investment, a strong incentive to police for
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bad actors.
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So you look at Nike, you look at Walmart, you
look at these big companies and you say, we are
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disinclined to think this is a major problem
because all of these big companies that have
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all this big money invested in partnerships
with this company would have looked at it
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themselves.
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Obviously, that falls apart at the end state if
everybody says, well, everybody else is looking
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at things.
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We've seen that with big investments.
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We've seen that in in venture capital.
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We've seen that in other places where
essentially everybody assumes that everybody
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else is doing due diligence and you get into a
position where things are very bad.
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But there's no indication just from this
article that that is in fact the case with
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Roblox even if there is this one short seller
report that suggests that it might be a
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problem, which all leads us to understanding
what is happening here today when they say the
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SEC is reviewing things.
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First, I wanna talk about FOIA.
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If you aren't familiar with Freedom of
Information Act concepts, it is a statute in
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The United States that says, look.
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The federal government is only given power and
authority by the people.
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It is a function of the people.
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It's a democracy, and so the people should be
able to go and ask its government that has tens
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of thousands of people doing all these things
across the geography of the country what it is
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that they are doing.
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And so there's a statute that says, you can
send them a letter, you can ask them to give
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00:14:53,549 --> 00:14:55,309
you this information on what it is that they're
doing.
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You generally have to give a search term.
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00:14:56,670 --> 00:14:58,769
Tell me everything that you've ever said about
Roblox.
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00:14:59,070 --> 00:15:00,269
That's how these things look.
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00:15:00,269 --> 00:15:04,485
Mostly they're used by journalists or other
political activists in The United States, but
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that's what a Freedom of Information Act
request means.
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You might also hear FOIA as a term related to
state government or other more local or
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00:15:13,605 --> 00:15:15,539
municipal governments in The United States.
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00:15:15,860 --> 00:15:20,339
Generally speaking, there are laws in each
state and in each location that have something
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like this concept.
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You owe us a certain amount of transparency.
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Some constitutions of various states even have
that included directly therein.
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But they aren't usually FOIA.
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00:15:28,815 --> 00:15:33,375
FOIA is just used as a term that's essentially
shorthand for, I'm gonna send a letter and ask
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for my government to give me this information.
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00:15:35,695 --> 00:15:38,355
That's what FOIA means, but there are
exceptions.
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The most notable of which I have highlighted on
our screen right now that says you can't ask
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00:15:43,309 --> 00:15:46,929
for information that could reasonably be
expected to interfere with enforcement
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proceedings.
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There's other exceptions to FOIA such as
personal data about various people working
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00:15:52,269 --> 00:15:57,294
within the government, other things that could
otherwise jeopardize or endanger people
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individually.
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But the one that we're interested in right now
is if it could reasonably be expected to
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interfere with enforcement proceedings, then we
can reject your FOIA request.
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00:16:05,274 --> 00:16:09,129
Now that's important because the government is
made up of people just like these corporations,
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00:16:09,129 --> 00:16:11,230
just like the journalists that look at these
stories.
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00:16:11,610 --> 00:16:16,490
So when they say at the SEC, we're not gonna
hand over this information because it could
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00:16:16,490 --> 00:16:21,134
harm an ongoing investigation, it's important
to understand that that's one of the categories
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00:16:21,195 --> 00:16:21,835
that they can claim.
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00:16:21,835 --> 00:16:26,154
It's very difficult for us to check because we
can't see the underlying information on the
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00:16:26,154 --> 00:16:31,294
outside, and governments have been known to use
some of these exceptions a little over broadly
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00:16:31,514 --> 00:16:33,754
in order to avoid complying with FOIA requests.
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00:16:33,754 --> 00:16:37,389
Now we have no reason to believe in this
particular story that the SEC would be taking
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00:16:37,389 --> 00:16:42,589
any special steps to try to protect Roblox from
bad press or itself from bad press, but we do
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00:16:42,589 --> 00:16:46,350
also have to acknowledge the political
situation, which is that we are engaged in an
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00:16:46,350 --> 00:16:48,370
administrative transition to a new presidency.
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00:16:48,785 --> 00:16:53,424
There's a lot of noise around a lot of agencies
that probably don't wanna get involved too much
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00:16:53,424 --> 00:16:57,745
in public with anything, especially on a tech
side when you have everything happening on
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00:16:57,745 --> 00:16:58,965
social media right now.
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So we do have to at least note that this is one
of the areas where they can say we can't give
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you that information and really the journalist,
Bloomberg, anybody else doesn't have the
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00:17:08,460 --> 00:17:10,640
ability to tell them that they're wrong right
now.
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00:17:11,579 --> 00:17:16,914
Which is also to say that as the FOIA website
here says, it's important to get the right
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00:17:16,914 --> 00:17:18,775
agency when you're asking for these questions.
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00:17:18,914 --> 00:17:23,235
So Bloomberg knew from November that somebody
was claiming that the SEC was investigating
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00:17:23,235 --> 00:17:25,255
this company, so they knew to ask the SEC.
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00:17:25,475 --> 00:17:29,890
But as the FOIA website itself says, it's
important that you identify the correct agency
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00:17:29,890 --> 00:17:30,710
for your request.
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00:17:30,930 --> 00:17:36,070
There are over 100 federal agencies and each is
responsible for handling its own FOIA requests.
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00:17:36,130 --> 00:17:37,170
You can use our search tool.
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You may search for a specific agency here,
etcetera.
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00:17:39,730 --> 00:17:43,009
But this is where I wanted to talk about the
various agencies that could come into play here
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00:17:43,009 --> 00:17:48,202
just from what we've seen discussed in the
Bloomberg article.
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So first, we start with the SEC.
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00:17:48,235 --> 00:17:53,525
The SEC's mission is to protect investors, not
users, not consumers, not children, the people
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00:17:53,525 --> 00:17:55,525
that are giving money to Roblox Corporation.
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00:17:55,525 --> 00:17:58,105
That's who the SEC is designed to protect.
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00:17:58,359 --> 00:18:02,279
And in that case, they're designed to protect
it through forcing transparency and accuracy in
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00:18:02,279 --> 00:18:03,819
the reports that that company makes.
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00:18:04,119 --> 00:18:08,919
They are to maintain fair, orderly, and
efficient markets and facilitate capital
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00:18:08,919 --> 00:18:09,419
formation.
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00:18:09,559 --> 00:18:12,779
So if you don't like capitalism, these are the
guys you also don't like, the SEC.
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00:18:13,115 --> 00:18:18,154
But in general, they are not interested in half
of what the Bloomberg article and the game
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00:18:18,154 --> 00:18:22,474
developer article say, and that doesn't mean
that they don't care about children being safe
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00:18:22,474 --> 00:18:24,575
or pedophilia or anything else.
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00:18:24,875 --> 00:18:28,529
Every good hearted person wants to keep the
children safe and out of harm's way.
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00:18:28,690 --> 00:18:33,269
But the SEC, like any other federal agency,
only has the authority given to it by Congress.
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00:18:33,410 --> 00:18:37,349
And in this case, the SEC is only investigating
things related to investor protection,
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00:18:37,490 --> 00:18:41,509
transparency, and maintaining fair, orderly,
and efficient markets.
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00:18:41,704 --> 00:18:45,644
If you're interested in children's safety, you
might ask someone like the FTC.
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00:18:45,865 --> 00:18:48,025
We've seen them discussed in virtual legality
before.
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00:18:48,025 --> 00:18:52,845
Here's a copy of the children's online privacy
protection rule as promulgated by the FTC.
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00:18:53,065 --> 00:18:57,730
This is what protects children's data or is
supposed to protect children's data and FTC
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00:18:57,730 --> 00:19:03,750
actions in lawsuit land or otherwise seek to
enforce this rule to protect children's data.
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00:19:03,890 --> 00:19:07,545
Otherwise, you might be interested if you're
interested in the exploitation side of things
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00:19:07,785 --> 00:19:11,144
in checking whether the Department of Labor has
an issue here.
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00:19:11,144 --> 00:19:17,305
The Department of Labor at the federal level is
the one responsible for enforcing wage and hour
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00:19:17,305 --> 00:19:19,384
laws, making sure employees are getting paid
correctly.
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00:19:19,384 --> 00:19:25,049
If you think something is wrong with the way
Roblox is operating its dev system as we saw in
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00:19:25,049 --> 00:19:29,210
various YouTube videos a couple years ago and I
think even continuing now, this is where you
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00:19:29,210 --> 00:19:34,625
might look to see if a complaint was filed or
if you really want to heighten things, you go
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00:19:34,625 --> 00:19:36,225
and you talk to the Department of Justice.
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00:19:36,225 --> 00:19:36,465
Right?
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The Department of Justice enforces the criminal
laws, enforces those laws that protect kids.
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00:19:40,545 --> 00:19:45,605
Here we have a website that is tips on
protecting kids at home and online.
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00:19:46,065 --> 00:19:49,424
And the Department of Justice, if they had an
investigation or they were otherwise interested
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00:19:49,424 --> 00:19:52,480
in Roblox, might be someone that you asked on
this particular question.
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00:19:52,480 --> 00:19:57,359
So in answer to whether Roblox is in trouble or
not, if we look at their stock price, it hasn't
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00:19:57,359 --> 00:19:59,380
really fluctuated based on any of this news.
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00:19:59,440 --> 00:20:04,284
It did fluctuate a little bit on their earnings
report, which came in a little softer than they
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00:20:04,284 --> 00:20:08,544
had indicated that was likely, in this most
recent reporting quarter.
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00:20:08,764 --> 00:20:14,924
But overall, I think this article about the SEC
investigation sounds like a lot, and it's
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00:20:14,924 --> 00:20:18,660
certainly being reported on as a lot with
respect to bringing in all the children's
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00:20:18,660 --> 00:20:23,160
safety complaints and possible issues that
Roblox might have with that in the future.
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00:20:23,299 --> 00:20:29,619
But the fact that there's an SEC investigation
does not, to my mind, mean that any of that is
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00:20:29,619 --> 00:20:32,894
happening behind the scenes at a federal
investigatory level right this second.
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00:20:32,894 --> 00:20:38,174
It would surprise me a lot if the SEC were
investigating any of those public safety
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00:20:38,174 --> 00:20:43,455
concerns except in respect of whether or not
Roblox is properly reporting on what their
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00:20:43,455 --> 00:20:46,815
liabilities might be with respect to those
children's safety concerns.
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00:20:46,815 --> 00:20:50,859
So the SEC is confirming they're in an active
and an ongoing investigation.
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00:20:51,079 --> 00:20:55,019
We've talked about the fact that that benefits
them from not complying with FOIA requests.
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00:20:55,559 --> 00:20:58,279
So they might still be in an active ongoing
investigation.
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00:20:58,279 --> 00:21:00,519
It might be an investigation that is on its
last legs.
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00:21:00,519 --> 00:21:03,400
We don't know what it was about because
Bloomberg can't confirm, which is a little bit
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00:21:03,400 --> 00:21:09,075
of a surprise because Bloomberg News
undoubtedly has sources with access to the SEC
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00:21:09,375 --> 00:21:10,755
and other federal agencies.
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00:21:11,134 --> 00:21:16,654
But overall, if you love Roblox, I don't think
this is the end state right now, but it is a
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00:21:16,654 --> 00:21:20,869
story you are definitely wanna gonna wanna keep
track of in the immediate future.
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00:21:21,649 --> 00:21:25,089
If this was interesting to you, if this was
informative to you, please consider supporting
370
00:21:25,089 --> 00:21:29,250
the channel through Patreon, through
memberships, Super Chats, or just otherwise
371
00:21:29,250 --> 00:21:32,769
giving up votes, down votes, comments, or
otherwise interacting with YouTube and telling
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00:21:32,769 --> 00:21:36,785
folks like your friends that we're having
conversations like this in this space.
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00:21:36,845 --> 00:21:38,765
Thank you so much for being here in Virtual
Legality.
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00:21:38,765 --> 00:21:41,805
Please do leave any other questions or comments
to this video.
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00:21:41,805 --> 00:21:46,845
I try to respond to as many as I can, and I
will see you on the next episode of Virtual
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00:21:46,845 --> 00:21:47,345
Legality.
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00:21:50,130 --> 00:21:55,589
Virtual Legality is a YouTube video series with
audio podcast versions presented as commentary
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00:21:55,730 --> 00:21:58,630
and for education and entertainment purposes
only.
379
00:21:59,009 --> 00:22:02,924
It does not constitute legal advice and does
not create an attorney client relationship.
380
00:22:03,644 --> 00:22:07,884
If you have legal questions about the topics
discussed, please consult your own legal
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00:22:07,884 --> 00:22:08,384
counsel.
00:00:14,464 --> 00:00:17,184
Hello, and welcome to another episode of
Virtual Legality.
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00:00:17,184 --> 00:00:20,704
I'm your host, Richard Hogue, managing member
of the Hogue Law Business Law Firm of
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00:00:20,704 --> 00:00:21,605
Northville, Michigan.
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00:00:21,664 --> 00:00:25,265
And today, we're gonna talk about a video game
that honestly, I don't think we talk about
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00:00:25,265 --> 00:00:26,484
enough in this space.
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00:00:26,780 --> 00:00:28,320
And that game is Roblox.
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00:00:28,539 --> 00:00:33,420
If you aren't familiar with it, it is
essentially a platform of experiences that
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00:00:33,420 --> 00:00:40,314
other developers outside of the Roblox company
make to play within Roblox as a platform, which
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00:00:40,314 --> 00:00:42,975
makes it a somewhat unique type of game in the
space.
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00:00:43,115 --> 00:00:45,054
But it's also become very, very popular.
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00:00:45,274 --> 00:00:48,255
A lot of people have made content for this
platform.
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00:00:48,314 --> 00:00:52,015
A lot of people have experienced that content,
and a lot of people have made a lot of money,
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00:00:52,130 --> 00:00:57,170
Which is one of the reasons why we have talked
about Roblox in virtual reality before because
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00:00:57,170 --> 00:01:01,729
when this company went public, when people
started digging into how folks were making
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00:01:01,729 --> 00:01:06,965
money through making content for this platform,
the question became, is Roblox exploiting those
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00:01:06,965 --> 00:01:07,444
developers?
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00:01:07,444 --> 00:01:11,365
Is it exploiting those people that are making
content for it because it's becoming so
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00:01:11,365 --> 00:01:16,084
wealthy, it's making so much money from people
gaining access to these various experiences,
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00:01:16,084 --> 00:01:18,185
but it isn't paying these people as employees?
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00:01:18,564 --> 00:01:23,019
This question became even more prominent for
Roblox when folks started talking about the
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00:01:23,019 --> 00:01:28,140
fact that it was so popular with children and
that many of its developers of content and
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00:01:28,140 --> 00:01:31,500
experiences on the Roblox platform were in fact
children themselves.
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00:01:31,500 --> 00:01:34,855
And I did that episode in virtual reality a
couple of years ago.
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00:01:34,855 --> 00:01:36,055
You can check it out now.
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00:01:36,055 --> 00:01:41,194
You can see the comments to that where people
were maybe not as thrilled with me as possible
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00:01:41,495 --> 00:01:47,655
for not decrying Roblox's corporate structure
incentives and also not decrying capitalism on
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00:01:47,655 --> 00:01:48,209
the whole.
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00:01:48,290 --> 00:01:51,109
But I'll leave that to you to interpret for
yourself.
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00:01:51,329 --> 00:01:56,609
What I wanted to talk about today was a story I
saw reported on in game developer that really
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00:01:56,609 --> 00:02:02,724
raised my eyebrows, which says, SEC confirms
that Roblox is part of an active and ongoing
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00:02:02,784 --> 00:02:03,284
investigation.
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00:02:03,344 --> 00:02:08,384
Now they also sub headline this as the focus of
the investigation remains unclear, but I wanted
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00:02:08,384 --> 00:02:09,745
to investigate this article.
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00:02:09,745 --> 00:02:13,824
I wanted to see what was happening behind the
scenes of what's reported here, and I wanted to
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00:02:13,824 --> 00:02:19,330
talk to you all about it because I don't think
it is as obvious what is happening here as
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00:02:19,330 --> 00:02:21,030
these articles would suggest.
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00:02:21,409 --> 00:02:27,009
So game developer says, Roblox is part of an
active investigation being conducted by US
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00:02:27,009 --> 00:02:30,335
regulator, the Securities and Exchange
Commission, SEC.
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00:02:30,715 --> 00:02:34,235
Now importantly here, the Securities and
Exchange Commission is focused, as you might
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00:02:34,235 --> 00:02:35,854
expect, on securities.
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00:02:36,074 --> 00:02:38,474
Now if that term doesn't mean anything to you,
I don't blame you.
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00:02:38,474 --> 00:02:45,040
Securities are in essence the way that people
give money to corporations or other entities to
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00:02:45,040 --> 00:02:45,780
do things.
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00:02:45,840 --> 00:02:52,000
Now that can often take place in a stock market
through the exchange of money for stock, but it
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00:02:52,000 --> 00:02:57,439
can also take place as loans for the lending of
money for bonds or promissory notes or what
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00:02:57,439 --> 00:02:57,840
have you.
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00:02:57,840 --> 00:03:00,905
So when you think of stocks and bonds, that's
really what we're aimed at with securities.
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00:03:00,905 --> 00:03:02,045
It becomes more complicated.
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00:03:02,265 --> 00:03:06,185
When we talk about cryptocurrencies and other
things that may or may not be securities,
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00:03:06,185 --> 00:03:09,405
there's actually ongoing fights about that
behind the scenes.
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00:03:09,784 --> 00:03:13,900
But what's important to note here is that the
Securities and Exchange Commission is focused
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00:03:13,960 --> 00:03:19,800
on stocks, bonds, and what investors learn
about companies so that the markets for those
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00:03:19,800 --> 00:03:22,814
stocks and bonds are as fair and transparent as
possible.
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As reported by Bloomberg, and we'll get to that
article in just a minute, the SEC confirmed
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Roblox is involved in an active and ongoing
investigation, but refused to elaborate
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further, and that's to be expected.
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If they are involved in an active
investigation, that's one of the areas where if
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you go and you ask for information from a
federal agency, they can say, look.
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We don't have to give you any information about
anything that's ongoing because we don't wanna
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jeopardize what that investigation entails.
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Responding to that Freedom of Information Act
request, the SEC said providing additional
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00:03:49,800 --> 00:03:53,455
information could harm our ongoing enforcement
proceeding.
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Bloomberg has been unable to learn more about
the investigation.
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Roblox owner, Roblox Corp, has yet to respond
to a request for comment from Bloomberg, while
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the SEC declined to provide more context.
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Roblox is no stranger to headlines.
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The platform which allows users to build and
play video game experiences has faced heavy
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criticism over a perceived lack of child
protections.
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You say, Rick, you just told me that the SEC is
only interested in securities and transparency
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to investors.
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It is indeed.
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But the more sexy headlines for Roblox, the
ones that really kinda get the clicks that I
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see on my timeline all the time are is Roblox
exploitative?
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Is it allowing things like child predators
access to children through the platform?
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00:04:32,670 --> 00:04:37,490
And so this article, and we'll see the
Bloomberg article that is its basis, dovetails
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00:04:37,629 --> 00:04:42,670
from SEC is reporting that there's an active
investigation to the platform has a problem
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with child safety pretty quickly.
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And I wanted to talk about that because I don't
think that's actually what's in play here.
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Continuing on with this article, the company
has cut moderation costs in an attempt to
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appease Wall Street while endangering kids with
a platform that exposes them to illicit
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content, etcetera, claims a specific report.
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Once again, Roblox Corp rejected these
allegations and claimed the report was
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00:05:04,930 --> 00:05:05,430
inaccurate.
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00:05:05,810 --> 00:05:09,970
Now we have more research to do though because
that's obviously just a summary article of
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00:05:09,970 --> 00:05:10,689
another article.
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00:05:10,689 --> 00:05:13,990
We're already two levels in the playing
telephone on this particular topic.
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Let's go see what Bloomberg had to say itself.
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So they say much the same thing in their
headline.
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00:05:18,904 --> 00:05:23,144
SEC says game service Roblox is part of an
active investigation and that the agency
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withholds details.
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00:05:24,185 --> 00:05:26,910
That's all to be expected, but let's see what
they say.
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Roblox Corp, the video game service used by
millions of young people is part of an active
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00:05:31,709 --> 00:05:34,110
investigation by the US Securities and Exchange
Commission.
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00:05:34,110 --> 00:05:38,750
Again, remembering that the SEC, the US
Securities and Exchange Commission, not so
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00:05:38,750 --> 00:05:42,125
interested in what's happening with young
people, not interested in enforcing criminal
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laws for protection of young people.
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00:05:43,964 --> 00:05:47,824
We'll see that writ large when we get to the
actual federal websites as part of this video,
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but that is kind of the hook for this article.
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00:05:51,004 --> 00:05:54,685
It's the hook for why you should be concerned
with Roblox, and I think it's a little bit
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00:05:54,685 --> 00:05:56,704
unfair reporting in this context.
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00:05:57,460 --> 00:06:01,060
Responding to that Freedom of Information Act
request, the commission said in a letter Friday
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that it couldn't share correspondence between
staffers referencing Roblox, saying it could
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cause harm to the ongoing enforcement
proceeding.
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00:06:07,379 --> 00:06:11,300
We have confirmed with division of enforcement
staff that there are responsive emails between
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00:06:11,300 --> 00:06:15,425
enforcement staff referencing Roblox and that
these emails are part of that active and
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00:06:15,425 --> 00:06:19,824
ongoing investigation, the commission said, but
Bloomberg News couldn't confirm the subject of
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the investigation.
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00:06:21,504 --> 00:06:25,285
Hunterbrook Media reported in November that
Roblox was under investigation by the SEC,
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00:06:25,509 --> 00:06:28,490
citing their Freedom of Information Act or FOIA
requests.
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00:06:29,189 --> 00:06:35,029
And more importantly for our conversation right
now, in October, the now defunct short seller
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00:06:35,029 --> 00:06:39,875
Hindenburg Research published a report on child
safety concerns at Roblox and also alleged that
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the company had inflated its metrics, including
the number of users who regularly play Roblox
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games and the amount of time they spend on
average on the platform.
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00:06:46,595 --> 00:06:47,714
So we're two articles in.
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00:06:47,714 --> 00:06:52,514
We're halfway through the second article, but
here is the first time we see why the SEC might
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00:06:52,514 --> 00:06:53,954
be interested in this company.
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00:06:53,954 --> 00:06:58,330
And that is to say the SEC is interested in
making sure that if you are a publicly traded
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company that is selling its stocks and having
those stocks sold amongst your investors, that
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00:07:02,410 --> 00:07:06,750
you are transparent with all of the metrics
that go into valuing your company.
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00:07:06,824 --> 00:07:11,625
And so if somebody accuses you of inflating
your metrics, including your number of users
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and the amount of time they spend on your
service, that's the kind of thing that raises
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the SEC's eyebrows.
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00:07:16,345 --> 00:07:20,399
It's the kind of thing that can make an
enforcement action take place.
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00:07:20,639 --> 00:07:24,660
We totally reject the claims made in the
report, a Roblox spokesperson said at the time.
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The authors are admittedly short sellers and
have an agenda irrespective of the substance of
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00:07:28,720 --> 00:07:30,319
Roblox business model and results.
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00:07:30,319 --> 00:07:34,560
And if you aren't familiar with the phrase
short sellers, these are the folks that operate
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00:07:34,560 --> 00:07:38,745
in a stock market betting against the company's
value going up.
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00:07:38,745 --> 00:07:40,985
That's the most easy way to understand who they
are.
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00:07:40,985 --> 00:07:42,444
That's what short selling means.
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Mechanically, it means that they essentially
sign contracts with other parties that say, we
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can sell you 10,000 shares of this company or
whatever other number makes sense at the price
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it is today, and you have to buy them from us,
at some point in the future.
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00:07:59,459 --> 00:08:03,060
And if the stock price goes down, we can buy up
those shares when it goes down, and we can sell
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00:08:03,060 --> 00:08:06,305
them to you at the higher price, and we make
money, and that's how our business model works.
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00:08:06,605 --> 00:08:10,525
Obviously, if the stock price goes up, that's a
problem for us because we then have to buy
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00:08:10,525 --> 00:08:13,105
those shares anyway, and we lose money on that
same transaction.
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00:08:13,165 --> 00:08:14,785
That's what a short seller does.
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00:08:15,245 --> 00:08:19,620
And so what Roblox is saying here in the
context of this statement is, look, it is in
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00:08:19,620 --> 00:08:21,939
their best interest to try to drive our stock
price down.
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00:08:21,939 --> 00:08:23,160
That's how they make money.
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00:08:23,220 --> 00:08:28,020
So we don't have to take this report as coming
from a completely unbiased source, and that
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00:08:28,020 --> 00:08:29,540
makes all the sense in the world.
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00:08:29,540 --> 00:08:34,534
But again, Bloomberg continues on this track
putting aside the transparency issues and
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starts talking about those children's safety
issues.
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00:08:37,095 --> 00:08:40,394
The video game company has faced scrutiny over
children's safety on the platform.
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00:08:40,695 --> 00:08:45,610
Since 2018, at least two dozen people have been
arrested by police in The US, accused of
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abusing or abducting victims they've met or
groomed using Roblox, Bloomberg News reported
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00:08:50,089 --> 00:08:50,750
in July.
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00:08:50,889 --> 00:08:55,850
In 2024, Roblox implemented at least 40 safety
changes to its platform, including barring
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00:08:55,850 --> 00:08:59,095
children under age 13 from participating in
social chatting games.
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00:08:59,095 --> 00:09:04,315
And if that 13 concept rings a bell to you, you
might have watched some of our COPPA videos
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00:09:04,534 --> 00:09:09,095
here in Virtual Reality where we talk about the
COPPA law and the COPPA rule, applying data
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00:09:09,095 --> 00:09:15,279
protection privacy considerations to children
under the age of 13, 12 year olds and under.
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00:09:15,279 --> 00:09:20,240
Shares of Roblox fell 11% on Thursday after the
company reported slower than expected growth in
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00:09:20,240 --> 00:09:21,940
daily users of its service.
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00:09:22,079 --> 00:09:25,919
So this is the Bloomberg article that gives
rise to all that, but I want to also talk about
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00:09:25,919 --> 00:09:30,375
the Bloomberg article that talks about that
initial report on what Roblox is doing and why
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00:09:30,375 --> 00:09:31,274
they should be concerned.
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00:09:31,575 --> 00:09:37,595
So here's a market report from Bloomberg last
October that says Roblox tumbles as Hindenburg
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00:09:37,735 --> 00:09:39,174
bets against gaming platform.
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00:09:39,174 --> 00:09:41,835
You you heard them reference this company as
now defunct.
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00:09:42,379 --> 00:09:47,440
The Hindenburg Reports project actually winds
up disbanding earlier this year.
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I don't know that that has anything to do with
Roblox in particular, but it is worth noting
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00:09:51,340 --> 00:09:53,360
that this short seller didn't actually survive.
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00:09:53,580 --> 00:09:57,174
Hindenburg said in its report that Roblox has
inflated key metrics and alleged that it
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00:09:57,174 --> 00:10:01,434
doesn't have sufficient safety screens to
prevent pedophiles from using the platform.
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00:10:01,574 --> 00:10:05,414
And then we get that statement where Roblox
says we reject the claims and the authors are
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00:10:05,414 --> 00:10:06,154
short sellers.
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00:10:06,855 --> 00:10:10,235
Roblox's share price is strongly associated
with user growth and engagement.
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00:10:10,500 --> 00:10:14,500
Over the last few years, the platform has seen
massive growth with chief executive officer
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00:10:14,500 --> 00:10:18,759
Dave Baszewski now aiming for a goal of
1,000,000,000 daily active users.
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00:10:18,820 --> 00:10:22,274
Currently, Roblox reports 80,000,000 users
logging on to the platform every day.
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00:10:22,355 --> 00:10:23,715
This is not a minor company.
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00:10:23,715 --> 00:10:29,154
This is not a small piece of the video game pie
even if you might not otherwise engage in
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00:10:29,154 --> 00:10:34,274
Roblox or Fortnite or any other platforms that
see a lot of success from kind of niche
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00:10:34,274 --> 00:10:35,575
audiences in gaming.
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00:10:35,919 --> 00:10:39,360
Hindenburg's report accuses the company of
inflating both the number of users who
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00:10:39,360 --> 00:10:42,960
regularly play Roblox games and the amount of
time they spend on average on the platform.
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00:10:42,960 --> 00:10:47,460
And then we get a little information on the
systems that they use to determine that those
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00:10:47,679 --> 00:10:50,100
metrics were in error according to them.
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00:10:50,434 --> 00:10:54,355
Further analysis of playtime showed numerous
games in which obvious bot accounts remained in
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00:10:54,355 --> 00:10:59,495
game for more than twenty four hours straight,
and we've seen bots and platform metrics being
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00:10:59,875 --> 00:11:02,934
confused by bots be an issue in virtual reality
before.
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00:11:03,019 --> 00:11:07,519
Here now, also with respect to Twitter when we
were discussing Elon Musk's takeover purchase
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00:11:07,899 --> 00:11:12,139
of that company, our representative sample
flagged millions of zombie engagement hours
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00:11:12,139 --> 00:11:14,960
that can majorly skew Roblox's reported average
engagement.
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00:11:15,095 --> 00:11:18,855
And that's important because if you're a
business and you're selling currency or
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00:11:18,855 --> 00:11:23,274
cosmetics to people that are otherwise engaged
on your service, it doesn't help your business
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00:11:23,575 --> 00:11:28,455
to have bots doing those things, but it can
help it look like there's more possible sales
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00:11:28,455 --> 00:11:31,129
opportunities if you've got those numbers that
you report to investors.
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00:11:31,129 --> 00:11:32,269
So that is a problem.
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00:11:32,490 --> 00:11:32,809
Right?
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00:11:32,809 --> 00:11:38,250
If there are a lot of zombie accounts, if there
are metrics that are not rightfully saying how
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00:11:38,250 --> 00:11:42,410
successful your platform actually is, if
investors can't get the right information to
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00:11:42,410 --> 00:11:46,764
know what to value your company at, That is
going to be a problem for regulators in The
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00:11:46,764 --> 00:11:47,504
United States.
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00:11:47,804 --> 00:11:50,924
Over the past four quarters, Roblox bookings,
etcetera, there's a bunch of numbers here.
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00:11:50,924 --> 00:11:52,465
It's a Bloomberg report article.
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00:11:52,764 --> 00:11:56,205
On user safety, the report cites a recent
Bloomberg Businessweek investigation into
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00:11:56,205 --> 00:12:00,850
predatory behavior on Roblox that was based on
interviews with more than 20 current and former
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00:12:00,850 --> 00:12:01,350
employees.
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00:12:01,570 --> 00:12:06,049
This continues on from what we saw discussed in
that original article saying, hey, they might
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00:12:06,049 --> 00:12:07,269
have issues here.
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00:12:07,409 --> 00:12:10,610
Most of the safety workers interviewed by
Bloomberg Businessweek said it was harder to
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00:12:10,610 --> 00:12:14,884
pursue pedophiles at Roblox than in other
online platforms In part, because the company
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00:12:14,884 --> 00:12:19,205
allows users to create an account without
entering any real names, email addresses, or
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00:12:19,205 --> 00:12:19,924
phone numbers.
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00:12:19,924 --> 00:12:23,764
And I wanted to point this particular paragraph
out to you all because this is kind of the dark
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00:12:23,764 --> 00:12:28,164
side of something like a COPPA rule, which says
you can't collect personal information from
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00:12:28,164 --> 00:12:28,559
kids.
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00:12:28,799 --> 00:12:32,639
One of the ways to try to solve this is you say
we're not gonna collect any information from
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00:12:32,639 --> 00:12:33,139
anybody.
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00:12:33,440 --> 00:12:33,679
Right?
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00:12:33,679 --> 00:12:37,200
If we're gonna get in trouble from knowing that
there are kids on our platform and not doing
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00:12:37,200 --> 00:12:41,120
enough to satiate you, we saw this in the
virtual reality video I did on Genshin Impact
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00:12:41,120 --> 00:12:45,044
very recently, then maybe we're just gonna say
no information from anybody.
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00:12:45,044 --> 00:12:46,664
We're gonna avoid all of that.
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00:12:46,804 --> 00:12:51,924
And then the opposite end of that is they
safety workers say we can't track adults doing
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00:12:51,924 --> 00:12:52,325
bad things.
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00:12:52,325 --> 00:12:56,725
We can't track these issues for our safety
because we're not collecting any of this real
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00:12:56,725 --> 00:12:57,225
information.
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00:12:57,649 --> 00:13:01,009
Hindenburg's report raised concerns with the
lack of screening upon sign up.
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00:13:01,009 --> 00:13:04,769
The researchers created multiple fake accounts
as children and found they were quickly exposed
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00:13:04,769 --> 00:13:05,570
to sexual content.
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00:13:05,570 --> 00:13:06,289
All this is bad.
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00:13:06,289 --> 00:13:06,610
Right?
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00:13:06,610 --> 00:13:07,490
This is a short seller.
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00:13:07,490 --> 00:13:11,375
They wanna say these are the reasons why this
company could face liability, could face
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00:13:11,375 --> 00:13:16,894
exposure, could just face negative public
interest in the very near future if all of this
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is happening behind the scenes.
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00:13:18,815 --> 00:13:22,975
Roblox's partnership with big brands including
Walmart, L'Oreal, and Nike alleviate our
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00:13:22,975 --> 00:13:27,220
concerns, says this Bloomberg analysis, about
brand safety, but it may still need to invest
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00:13:27,220 --> 00:13:29,059
in parent controls and cleaning up bots.
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00:13:29,059 --> 00:13:32,360
And this I thought was interesting because this
is the way the real world works.
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You lean on people that otherwise have a strong
investment, a strong incentive to police for
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00:13:38,820 --> 00:13:39,639
bad actors.
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00:13:39,934 --> 00:13:43,954
So you look at Nike, you look at Walmart, you
look at these big companies and you say, we are
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00:13:44,174 --> 00:13:48,975
disinclined to think this is a major problem
because all of these big companies that have
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00:13:48,975 --> 00:13:53,615
all this big money invested in partnerships
with this company would have looked at it
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00:13:53,615 --> 00:13:54,115
themselves.
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00:13:54,174 --> 00:13:58,790
Obviously, that falls apart at the end state if
everybody says, well, everybody else is looking
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00:13:58,790 --> 00:13:59,190
at things.
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00:13:59,190 --> 00:14:00,550
We've seen that with big investments.
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00:14:00,550 --> 00:14:03,269
We've seen that in in venture capital.
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00:14:03,269 --> 00:14:07,750
We've seen that in other places where
essentially everybody assumes that everybody
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00:14:07,750 --> 00:14:11,245
else is doing due diligence and you get into a
position where things are very bad.
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00:14:11,245 --> 00:14:15,084
But there's no indication just from this
article that that is in fact the case with
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00:14:15,084 --> 00:14:19,644
Roblox even if there is this one short seller
report that suggests that it might be a
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00:14:19,644 --> 00:14:24,149
problem, which all leads us to understanding
what is happening here today when they say the
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00:14:24,149 --> 00:14:25,669
SEC is reviewing things.
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00:14:25,669 --> 00:14:27,769
First, I wanna talk about FOIA.
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00:14:27,909 --> 00:14:32,549
If you aren't familiar with Freedom of
Information Act concepts, it is a statute in
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00:14:32,549 --> 00:14:34,389
The United States that says, look.
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00:14:34,389 --> 00:14:37,850
The federal government is only given power and
authority by the people.
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00:14:37,904 --> 00:14:39,185
It is a function of the people.
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00:14:39,185 --> 00:14:44,144
It's a democracy, and so the people should be
able to go and ask its government that has tens
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00:14:44,144 --> 00:14:48,945
of thousands of people doing all these things
across the geography of the country what it is
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00:14:48,945 --> 00:14:49,745
that they are doing.
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00:14:49,745 --> 00:14:53,549
And so there's a statute that says, you can
send them a letter, you can ask them to give
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00:14:53,549 --> 00:14:55,309
you this information on what it is that they're
doing.
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00:14:55,309 --> 00:14:56,670
You generally have to give a search term.
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00:14:56,670 --> 00:14:58,769
Tell me everything that you've ever said about
Roblox.
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That's how these things look.
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00:15:00,269 --> 00:15:04,485
Mostly they're used by journalists or other
political activists in The United States, but
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that's what a Freedom of Information Act
request means.
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00:15:07,605 --> 00:15:13,605
You might also hear FOIA as a term related to
state government or other more local or
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municipal governments in The United States.
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Generally speaking, there are laws in each
state and in each location that have something
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like this concept.
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You owe us a certain amount of transparency.
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Some constitutions of various states even have
that included directly therein.
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But they aren't usually FOIA.
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FOIA is just used as a term that's essentially
shorthand for, I'm gonna send a letter and ask
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for my government to give me this information.
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That's what FOIA means, but there are
exceptions.
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The most notable of which I have highlighted on
our screen right now that says you can't ask
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for information that could reasonably be
expected to interfere with enforcement
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proceedings.
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There's other exceptions to FOIA such as
personal data about various people working
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within the government, other things that could
otherwise jeopardize or endanger people
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individually.
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But the one that we're interested in right now
is if it could reasonably be expected to
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interfere with enforcement proceedings, then we
can reject your FOIA request.
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Now that's important because the government is
made up of people just like these corporations,
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just like the journalists that look at these
stories.
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So when they say at the SEC, we're not gonna
hand over this information because it could
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harm an ongoing investigation, it's important
to understand that that's one of the categories
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that they can claim.
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It's very difficult for us to check because we
can't see the underlying information on the
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outside, and governments have been known to use
some of these exceptions a little over broadly
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in order to avoid complying with FOIA requests.
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Now we have no reason to believe in this
particular story that the SEC would be taking
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any special steps to try to protect Roblox from
bad press or itself from bad press, but we do
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also have to acknowledge the political
situation, which is that we are engaged in an
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administrative transition to a new presidency.
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There's a lot of noise around a lot of agencies
that probably don't wanna get involved too much
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in public with anything, especially on a tech
side when you have everything happening on
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social media right now.
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So we do have to at least note that this is one
of the areas where they can say we can't give
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you that information and really the journalist,
Bloomberg, anybody else doesn't have the
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ability to tell them that they're wrong right
now.
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Which is also to say that as the FOIA website
here says, it's important to get the right
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agency when you're asking for these questions.
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So Bloomberg knew from November that somebody
was claiming that the SEC was investigating
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this company, so they knew to ask the SEC.
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But as the FOIA website itself says, it's
important that you identify the correct agency
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for your request.
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There are over 100 federal agencies and each is
responsible for handling its own FOIA requests.
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You can use our search tool.
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You may search for a specific agency here,
etcetera.
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But this is where I wanted to talk about the
various agencies that could come into play here
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just from what we've seen discussed in the
Bloomberg article.
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So first, we start with the SEC.
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The SEC's mission is to protect investors, not
users, not consumers, not children, the people
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that are giving money to Roblox Corporation.
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That's who the SEC is designed to protect.
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And in that case, they're designed to protect
it through forcing transparency and accuracy in
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the reports that that company makes.
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They are to maintain fair, orderly, and
efficient markets and facilitate capital
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formation.
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So if you don't like capitalism, these are the
guys you also don't like, the SEC.
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But in general, they are not interested in half
of what the Bloomberg article and the game
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developer article say, and that doesn't mean
that they don't care about children being safe
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or pedophilia or anything else.
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Every good hearted person wants to keep the
children safe and out of harm's way.
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But the SEC, like any other federal agency,
only has the authority given to it by Congress.
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And in this case, the SEC is only investigating
things related to investor protection,
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transparency, and maintaining fair, orderly,
and efficient markets.
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If you're interested in children's safety, you
might ask someone like the FTC.
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We've seen them discussed in virtual legality
before.
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Here's a copy of the children's online privacy
protection rule as promulgated by the FTC.
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This is what protects children's data or is
supposed to protect children's data and FTC
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actions in lawsuit land or otherwise seek to
enforce this rule to protect children's data.
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Otherwise, you might be interested if you're
interested in the exploitation side of things
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in checking whether the Department of Labor has
an issue here.
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The Department of Labor at the federal level is
the one responsible for enforcing wage and hour
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laws, making sure employees are getting paid
correctly.
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If you think something is wrong with the way
Roblox is operating its dev system as we saw in
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various YouTube videos a couple years ago and I
think even continuing now, this is where you
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might look to see if a complaint was filed or
if you really want to heighten things, you go
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and you talk to the Department of Justice.
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Right?
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The Department of Justice enforces the criminal
laws, enforces those laws that protect kids.
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Here we have a website that is tips on
protecting kids at home and online.
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And the Department of Justice, if they had an
investigation or they were otherwise interested
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00:19:49,424 --> 00:19:52,480
in Roblox, might be someone that you asked on
this particular question.
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So in answer to whether Roblox is in trouble or
not, if we look at their stock price, it hasn't
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really fluctuated based on any of this news.
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It did fluctuate a little bit on their earnings
report, which came in a little softer than they
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had indicated that was likely, in this most
recent reporting quarter.
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But overall, I think this article about the SEC
investigation sounds like a lot, and it's
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certainly being reported on as a lot with
respect to bringing in all the children's
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safety complaints and possible issues that
Roblox might have with that in the future.
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But the fact that there's an SEC investigation
does not, to my mind, mean that any of that is
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00:20:29,619 --> 00:20:32,894
happening behind the scenes at a federal
investigatory level right this second.
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It would surprise me a lot if the SEC were
investigating any of those public safety
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concerns except in respect of whether or not
Roblox is properly reporting on what their
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liabilities might be with respect to those
children's safety concerns.
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00:20:46,815 --> 00:20:50,859
So the SEC is confirming they're in an active
and an ongoing investigation.
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We've talked about the fact that that benefits
them from not complying with FOIA requests.
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So they might still be in an active ongoing
investigation.
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00:20:58,279 --> 00:21:00,519
It might be an investigation that is on its
last legs.
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00:21:00,519 --> 00:21:03,400
We don't know what it was about because
Bloomberg can't confirm, which is a little bit
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00:21:03,400 --> 00:21:09,075
of a surprise because Bloomberg News
undoubtedly has sources with access to the SEC
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00:21:09,375 --> 00:21:10,755
and other federal agencies.
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00:21:11,134 --> 00:21:16,654
But overall, if you love Roblox, I don't think
this is the end state right now, but it is a
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00:21:16,654 --> 00:21:20,869
story you are definitely wanna gonna wanna keep
track of in the immediate future.
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If this was interesting to you, if this was
informative to you, please consider supporting
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00:21:25,089 --> 00:21:29,250
the channel through Patreon, through
memberships, Super Chats, or just otherwise
371
00:21:29,250 --> 00:21:32,769
giving up votes, down votes, comments, or
otherwise interacting with YouTube and telling
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00:21:32,769 --> 00:21:36,785
folks like your friends that we're having
conversations like this in this space.
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00:21:36,845 --> 00:21:38,765
Thank you so much for being here in Virtual
Legality.
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00:21:38,765 --> 00:21:41,805
Please do leave any other questions or comments
to this video.
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00:21:41,805 --> 00:21:46,845
I try to respond to as many as I can, and I
will see you on the next episode of Virtual
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00:21:46,845 --> 00:21:47,345
Legality.
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00:21:50,130 --> 00:21:55,589
Virtual Legality is a YouTube video series with
audio podcast versions presented as commentary
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00:21:55,730 --> 00:21:58,630
and for education and entertainment purposes
only.
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00:21:59,009 --> 00:22:02,924
It does not constitute legal advice and does
not create an attorney client relationship.
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00:22:03,644 --> 00:22:07,884
If you have legal questions about the topics
discussed, please consult your own legal
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00:22:07,884 --> 00:22:08,384
counsel.
