This was a civil seizure. The standard is just preponderance of the evidence -- which side makes the stronger case.

If I claim you stole my television and you say you bought it from a guy on the street who swears I sold it to him, the court will just decide which side is more likely to be correct. If there was a higher standard, then the case would just hinge on who went to court first or who had physical possession of the television. Neither of those options make any sense.

You kind of just contradicted yourself. First you say that everyone knew what was happening. Then you say the investors knew that it may be a scam. Did the investors know it was a scam?

Are you saying everyone who claimed it wasn't a Ponzi was lying and that everyone really did know that it was a Ponzi scheme all along? If so, the PPT operators who didn't say they knew it was a Ponzi were lying, just like Pirate. Right?

If it's your position that everyone knew it was a Ponzi scheme all along, then the PPT operators were knowingly participating in a Ponzi scheme. They're as deserving of scammer tags as Pirate.

When Apple modifies its EULA to include that, then you argue that Apple "will soon have the right".

Yes, it was.

The scam wasn't that people lost money. The scam was the transfer of money described as "investments" when there was no evidence of any actual investment activity. That was known from the beginning and repeatedly pointed out by many people, including me.

Also, would you accept money from one person to give to another if you know there's a "strong likelihood" that the money pays for a hit?

I agree. But gambling doesn't involve fraud. Fraud and gambling are two different things.

Correct, they chose to invest, but their funds were in fact never invested in anything. They were scammed. They didn't lose on a risky investment -- there was no investment.

Yes, they understood the risk but they didn't lose money because what they were doing was risky, they lost money because what they were doing was a scam.

No, those are risks. This was a scam. That is gambling. This was a scam.

Actually, they all knew or should have known. But as I said, I'm willing to give any PPT operator who is not on record as saying they knew or suspected that this was a scam a free pass this one time. However, after this, everyone should know how to spot an obvious Ponzi scheme or related scam and I for one will no longer accept the "I didn't know for sure" answer.

You're still responding to the argument that PPT operators defrauded their investors. That's not the argument I'm making.

I agree, but that doesn't reduce the middleman's responsibility. Especially in this particular case because it was difficult to invest in Pirate directly. That's why the PPTs started up.

What's sad is that it really is a solid business. Had Bitfloor made it another year, they would have had the money to do security right. Though they still might not have spent the money on security, of course. There's always something sexier that you can spend money on. Unfortunately, in this business everybody seems to think they're a security expert, even if they just took a couple of PHP classes and read a web article on SQL injection attacks. This makes it harder for the real deals to stand out, especially when they suggest things that cost more money and take more time.

I bolded the portion that explains that, which you seem to have quoted without reading. The pass through operation is scamming Pirate's other victims by hiring Pirate to take money from them and give it to the PPT's customers. If I help a woman hire a hitman to kill her husband, I am as responsible for the murder as the hitman is. This is true even if I was completely honest with the woman and got her a trustworthy and reliable hitman.

Really? So if someone wants someone killed and they pay me to hire a hitman for them, I'm not responsible for the actions I paid the hitman to take because I'm just "reselling" his product?

Pirate never claimed he wasn't running a passthrough to Zeek until after payments stopped. And operating a Zeek passthrough is perfectly consistent with the vague claims he made about his business model. Pirate made it very clear that he wasn't revealing the details of what he was really doing.

At the time the bet was first offered, Pirate debt was selling for 35 to 50 cents on the dollar. There were people who believed that Pirate would buy up almost all of his own debt at a discounted rate and pay the rest at full value. I agree that this is impossible, but there were plenty of people at the time the bet was initially made (likely including Matthew) who believed otherwise.

I disagree. Running a PPT was paying Pirate to make you and your investors the recipients of obviously fraudulent transfers of other people's money. If that's not scamming, what is? But as I've said elsewhere, I'm willing to give PPT operators who aren't on record as saying they knew or suspected it was a Ponzi a free pass this one time. But in the future, I will be holding people to a higher standard.

It wasn't supposed to be a PPT though.

"The funds for the deposits will be used for lending out to other borrowers, investing in more mining equipment, bitcoin projects and other investments offered on the forum. ... All my depositers funds are 100% guaranteed and will not lose any funds due to any defaults unless stated otherwise."

The funds that provided this "100% guarantee" were actually "invested" with Pirate. Thus the claim that they will not lose any funds due to default was fraudulent. Pirate defaulted. The depositors lost funds.

Actually, that's relatively easy to do. Try doing it twice.

I don't agree with this analysis. Any debt instrument has some value with the lack of liquidity and risk taken into account. Rational people wouldn't have any reason to prefer that same number of Bitcoins over the debt instrument. In fact, some people will prefer higher risk and some will prefer lower risk, so some people will rationally prefer the debt instrument over its market value in bitcoins.

The best way is to insist on third-party audits. But if you can get even 30% cooperation on something like this, it could make a difference.

You have no idea how much I want to believe that, but I can't. All the evidence suggests that Matthew, at least initially, believed that there was a good chance that Pirate would pay up by acquiring his own debt at a discount or arranging partial settlements. And, unfortunately, I firmly believe that he fully intended to try to collect every penny had he won and aggressively pursue scammer tags for anyone who didn't pay up.

I often criticize people for believing what they want to believe rather than what the evidence shows. Now I know why people want to do that.

Part of it is that the profit margins are very low. A sizable exchange, in its early days, might make $3,000/month. That might hire one part-time security expert so long as you don't spend any money on customer support. Doing this right is very expensive, and exchanges are too uncertain to get the investment capital needed, so they tend to defer security until they can afford it.

We'll do security later.
I couldn't find any breaks in our security.
We'll use shared hosting for now.
We'll use a cold wallet when we have enough funds that we need one.
This works for now, we'll go back and do it right when we have time.

And so on. The rotten core never gets fixed.

Yeah, Patrick seems to be an honest fool. When he wises up, he'll still be trustworthy. Hopefully, it only took one lesson.

There are really only two reasons to do this:

1) You want to make sure that businesses that promise not to keep fractional reserves are keeping their promises.

2) You want to pressure businesses that don't make such promises into not keeping fractional reserves even where that makes business sense.

I fully support 1. But 2 just seems like a way to raise everyone's costs.

Although I guess I could see it in the case of businesses like Mt.Gox that are very vague about whether they are or aren't keeping a fractional reserve. As a way to force transparency, that might be a good thing.

The short answer is that nobody knows. People in an AnCap society are free to pursue and innovate solutions to these problems. Nobody can know in advance what the specific solutions will be. If government operated our food system, you might well ask how private industry would feed millions of people. Nobody could have imagined McDonald's or Walmart -- it took the market to create them.

George Bush said it best... well, he said it anyway:

http://www.youtube.com/watch?v=eKgPY1adc0A