[blindriver]

> you need to put that money into a separate, third party’s account that shields it from bankruptcy

This is wrong. You don’t need to do any of that. They paid for a service and it becomes a liability, but there’s no duty to segregate those funds. You do not turn into a money transfer agent just because you sell pre-paid credits to your service.

[hn_throwaway_99]

Thank you. As someone who used to work for a health fintech, it was amazing how often you'd hear loads of confidently wrong opinions on stuff like HIPAA (no, saying that Lisa couldn't make the meeting because she's out with the flu doesn't make it a HIPAA violation) and money transferring/KYC/AML/etc. laws. Like you said, selling prepaid credits to your service doesn't mean you're covered by money transmitter service regs.

[andrewmcwatters]

I just ignore anyone who doesn't actually own a business or administrate compliance on HN, because half the people here don't know what they're talking about with basic technologies, let alone law or finance.

[renewiltord]

Did you know it's okay to give bad health information advice if you spell it HIPPA instead?

[kstrauser]

My eye just twitched so hard I might have sprained it.

[bravesoul2]

No. HIPPAs are the most dangerous animals in Africa.

[bravesoul2]

HN is short for hallucination? H11N maybe?

[dylan604]

This reminds me of a company in town that was known for doing the precise thing of putting money into separate accounts, specifically, CDs. It was the type of service where 50% was paid up front, 25% at specified milestone, remaining 25% at completion. So the company would receive the 50% and place a large chunk of that into a CD. There were lots of reasons, but my favorite was the excuse of it covers when someone fails to pay the last 25%. These were the types of jobs that could easily last 6-12 months. Lots of people had mixed feelings about this, but at least it wasn't paying for office renovations or the owner's car payments, etc.

[gpvos]

CD = Certificate of deposit, a bank account in the United States with a fixed maturity date. (I assume.) https://en.wikipedia.org/wiki/Certificate_of_deposit

[cutemonster]

> covers when someone fails to pay the last 25%

Could it have been that they could use that "reserved" money to pay people's salaries, if the client stopped paying? Then in a way it would have covered? although badly phrased maybe