Sorry Vexual, but I have no idea what you're talking about (again)...

(You do get that my previous reply was to MPOE-PR and her plug for MPOE, right? You get that I was saying just because MP has an exchange does not mean he has a credible offer to provide a home for a fund of this type?)

I've already indicated that I am not willing to operate a fund of this type via email transfers, friedcat-style. Even if I were willing to do that, my guess is that very very few participants would want to continue with such severely impaired liquidity.

This has nothing to do with "can't do it without an exchange": I simply won't do it without an exchange. That's not negotiable, and if you or anyone else has a problem with that, then this fund very certainly is not for you.

ADDITION: For the benefit of Vexual, who edited the original post to add "dont most of your investees come to you directly anyway?": no, of course not. The fund is and always has been exchange traded. (Maybe you are confusing it with a prospective private equity fund, which is a different beast altogether.)

Merely having an exchange is quite a few light years away from actually offering a credible plan forward.

This is not the time or place to debate or advertise your own exchange, but if MP has plans for a land-grab in this space -- say, by introducing significant improvements in functionality and value proposition to coincide with the sudden availability of a large number of issuers currently evaluating the merits of potential new homes, then I'm all ears. PM me, and I'd be very happy to hear what he's offering.

Many thanks for your kind words and encouragement, Vycid -- I appreciate it.

I did notice some small/experimental offerings start doing the same within months of introducing the service in 2009. That's not to say I invented it -- I'm sure others had done similar or even exactly the same things before. But it is to say that prior to introducing my service in 2009, there wasn't anything along these lines that I saw personally, while some months later, some had sprouted up.

IIRC, that was set up specifically for GLBSE.

It's a good question. The exchange emails all issuers with a list of current participants in their assets. A new exchange would provide some means of importing that list, such that old numbers would match up with new ones.

Although I've just said in an earlier note that I have no intention to suspend trading in the fund, in the case of a transfer to a new exchange, we would announce a planned suspension of trading -- and not a surprise one coming out of the blue "for your own good" -- so that we could secure a current participant list. With that list in hand, we could then begin a move to a different exchange.

EDIT: Whoops, I should have paid more attention to that notice saying the thread had been updated while I was typing, as it looks like Rannasha has already done a good job of covering this.

I note that Kate has indicated that since she is only committed to looking after the interests of "major shareholders" in her operations, she recommends that "those of you with a small number of shares...take what you can over the next week...ie. [sic] sell them...":

https://forum.litecoin.net/index.php/topic,4582.msg46464.html#msg46464

Two quick updates...

First, following some developments with other securities on both BTC-TC and Litecoin Global, I would like to make two points clear to participants in BTC-GROWTH:

• Whatever the eventual disposition of the fund -- continuing on another exchange or closing up shop -- I will make every effort to treat all participants in our fund equally. I will emphatically not be discriminating on the basis of position size.
• I have no intention of suspending trading in the fund. We're all grown-ups here, and participants do not need me forcibly restricting their liquidity.

Second, I have been in contact with another of the exchange operators, and that operator has indicated they will be in discussion with their legal team shortly regarding the potential listing of the fund. I will post an update on this if and when I have something meaningful to report.

If I were a bettin' man, I'd bet that Deprived has nailed this explanation correctly in almost every detail.

It's exactly the right thing to do at the moment, because that -- and only that -- provides an indication of the fund's liquid net value. When some assets are likely to be wiped out entirely (BTC-TRADING-PT, for example), nobody cares what the 7-day moving average or 30-day moving average might be.

I took the time to release a special interim report immediately so that participants could have quantitative facts in front of them, right now, telling them exactly where we stand. Will things change over the next few hours and days? Of course they will, and hopefully for the better -- but that doesn't make it "a bad way to do things" to have given the specific, quantitative information as quickly as humanly possible.


There's no need to wait and see: of course it "worked" to the extent that the vast majority of the fund's capital is immune to BTC-TC's closure.

Yes, of course they're very different beasts. My point was just that your participants now have their capital back, and they can exercise their own judgement as to how best to allocate it going forward. Participants in BTC-GROWTH do not have their capital back, and therefore they have no discretion over how to allocate their capital.

However, I think the point probably needs to be made again: continuing with the fund is only an option if there is an exchange ready with a plan to take over the management infrastructure hole left behind by BTC-TC. I am not going to run the fund manually, handling share transfers via email, friedcat-style.

The only real question, then, is how long to wait for clarity on the availability of another exchange platform. I don't like to speculate, but if I imagine myself in the shoes of Burnside, Ukyo, Lightbox, etc., I imagine that I would be putting something out within the next couple of days to indicate whether they will be coordinating to provide a path forward for those listed on BTC-TC. If that happens, it will be a very different landscape than if the only alternatives are to close or to run the fund manually.

(The third option you mentioned addresses the question of returning capital, but it leaves that underlying problem of management infrastructure still waiting for an answer.)


And vice versa. I really appreciate the certainty of seeing the capital sent out so quickly.

As several folks have spoken up in favour of not closing the fund, I'd just like to clarify my thinking on currently ranking a fund closure at the top of the list of options.

First, note that I have specifically said that this thinking will change if another exchange steps up to the plate with a credible plan for supporting the continuing operation of assets skewered by BTC-TC. Participants should be asbolutely clear about this: depending on the underlying reasons for the closure of BTC-TC, it is entirely possible that no other exchange will be able to take over BTC-TC assets; nobody yet knows the answer to this question. If no other exchange offers a credible plan, it is not possible to continue with the fund anyway.

In terms of risk to capital, there are only two realistic scenarios to consider:

1) The BTC-TC closure is an isolated event, all listed assets on both BTC-TC and LitecoinGlobal find new homes, and asset values return to something approaching what they were before the closure.

2) The BTC-TC closure is not an isolated event, some listed assets on both BTC-TC and LitecoinGlobal do not find new homes, and asset values do not return to something approaching what they were before the closure.

My own assessment is that number 2 is more likely than number 1: I believe this will have significant knock-on effects across the Bitcoin asset market. To be sure, I don't think the Bitcoin asset market is going to dry up and blow away -- of course not -- but I do think it's going to take some time to digest this event, and in the interim there is significant risk of further capital loss associated with simply waiting it out.

Moreover, suppose for the sake of argument that the fund had already closed (as Deprived has already done with one of his assets, for example). If participants are returned control of their own capital, then they are free to choose exactly what to do with it: if participants would like to dive back into BTC-TC and scoop up some cut-rate assets while waiting for scenario number 1 to materialize, then they can do so. And if other participants do not wish to wait, and they believe that scenario number 2 is more likely, then they can handle their capital appropriately.

The upshot is that by prioritising the option of fund closure -- again, in the absence of a credible plan from another exchange to support the continued operation of BTC-TC assets -- I am aiming to return control to participants, and I am putting a floor on the capital loss which could actually become worse, depending on whether BTC-TC shows any improvement in terms of how it handles the closure. The exchange's handling of the closure so far has not exactly been a paragon of consideration for the interests of market participants.

Executive Summary

In light of the pending closure of the BTC-TC exchange, and the immediate and negative impact which Burnside's announcement has had on listed assets across the board, we are releasing an interim report on the current state of the fund and our options going forward.

Taking a snapshot of our current holdings across all platforms, and estimating values on BTC-TC using bid values current as of this writing, the fund's NAV has fallen to .0812 BTC per share, a decrease of 19.731%.

We are currently evaluating ways forward. As of this moment, closure of the fund -- with the option to re-open it in future on another exchange -- appears to be the leading candidate, but if another exchange should step in very quickly to provide a clear plan for picking up the pieces of BTC-TC, that assessment could change.

Exchange Closure, Options and Risks

I was just on my way to BTCT.co to post a notice that we'd be publishing our next report early, on 1 October, so as to bring our reporting in line with calendar months, when I saw Burnside's notice about shutting down the site. During the brief seconds I have been able to access the site reliably, before it failed again, it has been apparent that assets have been hammered across the board.

The shutdown does not appear to me to have been organised or planned particularly well from the standpoint of an orderly winding down of operations, and it is likely that when the dust has settled, the fund's NAV will take a significant hit.

It is too early to say for certain whether it will make sense for another exchange to step in and pick up the pieces again, but it appears we'll have three options, none of which is especially attractive:

• move the entire fund management infrastructure to another exchange
• close the fund entirely via the exchange's forced buyback procedure, with an option to re-open again on another exchange at a later time
• run the fund manually

The last option -- running the fund manually -- is not something I'm prepared to do for a fund of this size.

The first option -- moving the fund to another exchange -- would likely introduce significant delays and limitations on liquidity until such time as the new structure was up and running, but it would provide the benefit of keeping things running.

Closing the fund entirely and using the exchange's forced buyback procedure would provide participants with the greatest liquidity and flexibility, but at the risk of having to trust BTC-TC long enough to hold all our coins safely and execute the buyback reliably.

Of the three, I believe that as of this moment -- without having yet had any word from other exchanges about efforts to step in and pick up the pieces -- the option of closing the fund entirely for the time being would best serve the interests of participants. If we move forward with this option, I believe it should done relatively swiftly, to guard against the risk of the exchange's problems becoming any worse than they already are and compromising its ability to effect a buyback reliably.

If another exchange should step in very quickly to provide a clear plan to move forward, that assessment could change.

Fund Performance -- Abbreviated -- and NAV

Ukyo.Loan and Related Debt

IMPORTANT: This section ("Ukyo.Loan and Related Debt") was written yesterday in preparation for a report in one week's time, but I include it here in unmodified form because it still applies.

Many participants will have seen that since our last report, the Ukyo.Loan's notice about extra dividends connected with the success of the BitFunder site has been removed.

Nonetheless, it remains among the most credible of such loans. There is at least some indication not only of how the loan can be serviced (e.g., what source of BTC-denominated income is covering the interest) but also of significant assets to offset the loan liability (namely, the exchange itself). This stands in sharp contrast to some loan/debt opportunities offering little or no indication of how income is generated to service the loan or how/whether it will ultimately be repaid. The loan also continues to offer a 110% buyback provision, and in terms of effective interest rate, it is superior to all comparable listed debt except for Graet.Loan, which trades closer to face value and therefore has a higher effective interest rate (despite carrying the same base .05% daily rate).

The CipherMine.B1 bond is not directly comparable, as its effective interest rate fluctuates due to an unhedged peg to fiat; notably, it is also 'secured' on a wasting asset (mining hardware), and unanswered questions remain about the issuer's understanding of the seniority of debt relative to equity and its willingness to honour that seniority. It may ultimately prove to offer great total returns, but it is not directly comparable.

Finally, Just-Dice is among the most talked about opportunities available in the Bitcoin space. Much has been said about the mathematics of the 1% house edge, but generally speaking many market participants still appear to focus most attention on expected return -- with less attention to variance -- and continue to treat Just-Dice as if it were the perfect example of a transparent, low risk, high yield investment. As of 22 September, the site had managed to lose all of its entire profit that had been generated since its inception in June, and it went into the red. That does not necessarily make lending to the bankroll a poor investment, but it does demonstrate the power of variance over expected return, and the potentially overpowering influence of a comparatively few 'whales' in the mix. The fund has lost significant capital due to lending to the Just-Dice bankroll, but we are in that position with eyes wide open and an awareness of inherent weaknesses of the model; we are not at all counting on it to be some sort of fairy godmother of 'safe' returns.

BTC Trading/LTC Global Passthrough

Yes, seriously -- our report next week was going to include a whole section about the fundamentals and risks of the company, together with the bizarre trading dynamics of the passthrough. I've deleted all that.

BTC-TC Assets

As of this writing, our assets held on BTC-TC appear to have been hammered. Going by the current bid values, the BTC-TRADING-PT is now effectively worthless, and our fortunately tiny holdings of the CipherMine.B1 bond are also very close to worthless. (The fund traded profitably in this bond earlier in its history, but our holdings are currently just 111 shares.)

Other assets have taken a hit ranging from a few percentage points to a little over 40%.

Net Asset Value

Taking a snapshot of our current holdings across all platforms, and estimating values on BTC-TC using, again, bid values current as of this writing, the fund's NAV has fallen to .0812 BTC per share, a decrease of 19.731%.

Note that this figure is liable to change, perhaps significantly, as the fallout from the exchange's closure becomes more clear. I am putting a specific number on it right now so that participants in the fund know exactly where they stand in terms of the underlying assets of the fund.

This figure includes at face value 7 BTC of debt which is due to be repaid over a 90-day term. If the fund is closed via buyback prior to that time, I will personally take over this debt from the fund at face value.

On reflection, I think an apology is in order.

When EskimoBob stopped reading after 19 words, I came upon phrases like his admonition not to "strangle it with your greed" and "Bankers...screwing us...including you..." and took them as yet another example of the kinds of insults I've had before on this forum, from people who wrongly suppose I have anything whatsoever to do with the banking world.

Now that I read more carefully, however, I realise what Vexual was trying to clear up: although EskimoBob probably did mean to insinuate that I am greedy for not giving away free consultation time, he was not claiming that I was a banker (or a scammer, or out to screw people, etc., etc.).

So, EskimoBob, I do apologise for misunderstanding you. And Vexual, although I didn't follow anything you said after your initial clarification, I do apologise for getting your clarification and peace-making wrong too!

At a certain point of incoherence, I just have to step back and leave you to it. Now I'm a hypocrite because...what, exactly...because I articulated a particular point of view and subsequently defended it when someone decided to s*** all over me -- you know, the actual person -- rather than engaging in any meaningful way via an actual argument? Or maybe it's because I used the phrase ad hominem? Yeah, that's a good reason to hurl some more insults.

I sure don't know what on Earth I did to invite such self righteousness and holier-than-thou vitriol, but as I say, I leave you to it.

It astonishes me that I make the observation that small businesses/startups should ***EXPECT TO RECEIVE SIGNIFICANT FEEDBACK*** when they approach someone about investment -- or, alternatively, should expect to have the door shut in their face if their proposal is severely lacking in quality -- and now somehow I am the "greedy banker scum" up on a "high horse" and among the community of "you assholes". WTF? 

Anyone who spends as much time actually reading what I've written as they spend vomiting intellectual bile across innocent bystanders might realise that not everyone is out to get them, and some people -- shock, horror -- might actually share a great many of their views.

Because you stopped reading, I'm afraid you completely missed the point, and your subsequent comments as a result are entirely orthogonal to that point.

Had you read the remainder of the sentence, you might have understood the context:

"Unless you're running an already well established business with revenues well into seven figures or more in dollar terms, you should expect every prospective investor you approach either to offer you significant feedback or to politely shut the door in your face."

I get that you have an axe to grind. But if you cannot read more than 19 words before jumping to a laughably erroneous conclusion, you should grind your axe on your own, without trying to make me your straw man.


I wonder whether you imagine that ad hominem attacks and personal insults will boost your credibility in the eyes of someone out there, or whether you just find it satisfying to degrade the quality of discussion by denigrating other people?

Here's another approach, which I've sometimes used in various forms in the past (prior to launching the BTC Growth fund) and which is currently posted on the BTC Growth website:

Are You Seeking Investment?

The gist of it is that rather than asking people to interpret my guidelines in advance and to try and decide how they apply to their own cases -- and thereby inevitably creating debates about interpretations and exceptions -- I simply require an up-front fee to cover my time spent reading, evaluating, and providing meaningful feedback.

Those who have received feedback from me know that I take the process seriously, and I give it to them straight and sometimes in great detail. Those who understand what I'm about, and who understand what their own business proposal is about, tend to value that kind of thing pretty highly. And those who either 1) don't understand what I'm about, 2) don't understand what their own business proposal is about, or 3) for any other reason just don't place a high value on the feedback shouldn't be asking for it in the first place.

Call it a market-inspired approach to allocating the limited resource of time. It works.

Weak or non-existent financial reporting is merely a symptom of a much bigger underlying problem which the exchange has created for itself. Tackling the syptom will do utterly nothing to address the real problem, which is the listing of assets with ludicrously weak, incoherent, factually erroneous, almost embarrassing contracts. (And not to put too fine a point on it, but taking an asset with a ludicrous contract and slapping on some financials is not going to make the asset any better whatsoever.)

First, about tackling the symptom rather than the problem...

It might sound easy just to "demand regular financial reporting from issuers", and on the face of it maybe it even seems "awesome to do an SEC style requirement" and start playing the role of a financial regulator. However, each move toward playing financial regulator on the part of an exchange arguably creates liability for the exchange in the form of shared responsibility when something goes wrong: to be worth anything, the exchange must either accept or reject every submission, indicating that it either satisfies or does not satisfy a thorough and relevant set of clearly delineated requirements.

And if the exchange did sincerely wish to disregard the learning that has occurred during the last century or so regarding how to create an effective exchange system and chose to begin playing at being the SEC in spite of it all, then it would be important to get it right: set the relevant standards for the different asset types (including the clearly distinct requirements for bonds, depositary receipts, loans, managed funds, so-called 'futures', PMBs, revenue share contracts, and real companies), and ensure that you retain sufficient legal and accounting staff to guarantee that when the exchange stands up to be counted and puts its stamp of approval on each submitted document to affirm that it satisfies the requirements which the exchange has set, it doesn't foul it up. (Oh, and be sure to understand why the SEC exempts huge swaths of businesses from this type of regulation in the first place.)

Note that this is never, never, never how it works out in the real world of fiat finance: an exchange never plays the role of the SEC, and for extremely good reasons. (I'll come back to this in a second, with a note on how this does work in the fiat world.)

Back to tackling the real problem rather than putting a Band-Aid over it by playing financial regulator...

The underlying problem which I think grates on so many people is not the absence of robust financial reporting per se; it is the failure of asset issuers to do what they've said they're going to do, the failure of asset issuers to provide the information they've said they're going to provide, and the willingness of asset issuers to start doing other things than what they've said they're going to do. In some cases, it's even the willingness of asset issuers to change the terms of their contracts in the middle of an IPO.

If you get the contracts right, the rest will take care of itself. If a contract does not indicate what financial detail will be reported and when, then it should not be approved in the first place. If a contract does indicate what will be reported, and the issuer does not deliver, then it should be suspended and if necessary delisted.

So if you want financial reporting, great: simply require every asset to set out, in detail, exactly what it's going to report and when. And if it fails to do so, issue a notice that the asset will be suspended. (You could announce this requirement tomorrow if you wanted: everyone has 30 days to add financial reporting plans to their contracts, or they're out.)

That's how it works in the real world: exchanges may suspend listings for failing to submit appropriate financial reports to government bodies such as the SEC, but it is not their job -- and it should never be their job -- to play the role of a financial regulator determining what those reports should look like. (There is a reason for the very clear separation of responsibility between government bodies such as the SEC and commercial bodies such as stock exchanges.)

IMHO, the exchange has come to be where it is now as a result of outsourcing the job of financial and contract review to anyone willing to cough up a few dozen BTC to become an LTC Global moderator. The current junk is listed because LTC Global/BTC Trading shareholders chose to list it. An exchange with an annual run rate of over 1 million BTC in trading volume should consider taking a more serious approach to quality control and put aside forever the populist approach of simply listing whatever its shareholders vote to list.

And don't get me started on the crazy conflicts of interest already baked into that system, let alone all the additional problems the exchange would create for itself if it decided it should play SEC, too...

Whoops! Corrected now in the original. My 'u' key apparently doesn't like to be uused twice in the same word.


It does seem peculiar... Hopefully over time, however, as participants in the fund come and go, the shareholder base will come to be populated primarily with participants whose expectations and whose attitudes toward risk match up with the strategy of the fund. Participants won't be looking to the fund to provide "the next big thing" but will instead look to it as a way of gaining hedged exposure to promising growth stories while avoiding at least some of the risks of going "all in" on a single asset that could wipe them out in one fell swoop.