Unfortunately, I reluctantly find that I have to agree. Anyone considering building a similar service needs to understand that they need to make securing deposits a top priority. It can't be a "we'll get around to it when we get a chance" kind of thing. It costs money to do this right, and the people who do it right will lose business to the people who do it wrong unless there are penalties for doing it wrong.

What we really need is independent auditing of exchanges, ewallets, and similar services. We need independent third parties who can affirm, on a regular basis, that these businesses have assets that exceed their obligations.

This is possible. Even if Zhoutong received a fair price, he could still theoretically be held liable for negligently transferring control over the assets of his depositors.

From the facts known to me, this seems like an extremely unlikely way for events to turn. It seems, at least to me, that Zhoutong negotiated in good faith, believed the people he were dealing with were more competent than him to run the business, and had no reason to suspect any of the future problems. I don't know whether his compensation was fair or not, but I understand he was motivated to sell, so it's unlikely he was paid more than the business was worth.

That's all true, but this is not the appropriate context in which to bring that up. When someone gets raped and complains about what a jerk the rapist was, you don't lecture them on how to dress modestly or tell them they should stay home at night.

Okay, say I'm that man. Now I have two choices, I can do that assuming all this debt. Or I can do this without assuming all this debt. You're arguing that I should do the former?

I'm going to go out a limb here and speculate that you've never owned a business. It's difficult and risky under the best conditions. Starting out with large debt makes it almost impossible to succeed. It seems easy because you only see the successes. The failures never get on your radar screen.

Are you serious? There are so many things wrong with this suggestion I don't even know where to start.

Who will fund this new venture? How will it pay employees? Who will be in charge of its security? Who will pay them? Why would anyone trust this? What if their costs exceed their profits?

It is extremely hard, as Bitcoinica itself proves, to do this successfully -- even without a massive pile of debt to start with before you even invest a dime in the business. There is no conceivable way a business could succeed starting with such a massive disadvantage.

And these are just the most obvious problems.

ZhouTong wasn't paid employee compensation. He transferred ownership of the company in exchange for those funds. So the rules for employee compensation or bonus clawbacks wouldn't apply.

In any event, employee compensation clawbacks generally are only available for losses that were incurred prior to the payment of the compensation. The idea is that someone who misrepresents the profitability of a business shouldn't benefit from their misconduct by getting a bonus based on the inflated profits. Nothing like that seems to have happened in this case. In many countries (including the United States) you don't have to prove the employee was at fault. It's sufficient to show that the bonus was paid based on incorrect information.

As far as a non-employee clawback goes, generally you can't clawback funds from someone who gave something of comparable value for the funds received unless you can show wrongdoing on their part or the contract specifically permitted a clawback. It's very unlikely that ZhouTong's contract would have permitted a clawback for anything other than a materially significant misrepresentation or omission on his part. And there's no evidence so far, at least as I know, that ZhouTong did anything like that.

Of course, we probably don't know anything close to the full story yet.

However, anyone who got any money back from Bitcoinica should be aware that this money could be subject to clawbacks. Once Bitcoinica knew that they couldn't make full repayments, they had an obligation to prioritize their debts and protect the interests of other creditors. If they paid some people 100% of the money they held once they knew they couldn't pay back everyone, that could be subject to a clawback.

If I'm holding $100 that is yours and I get robbed, I'm the victim if I pay you back your $100 out of my own money. But if I say to you, "sorry buddy, your $100 is gone, I got robbed", then *you* are the victim.

Unless Bitcoinica repays depositors from their own funds, Bitcoinca is not the victim of the theft. The depositors are. It was their money that was stolen, not Bitcoinica's.

The victim is whoever ultimately suffers the loss.

Because they're demand deposits roughly equivalent to savings accounts. You don't get paid interest and you don't have any control over how they're invested.

I wish that last part were true, but it's just not.

Certainly I agree with that sentiment, but usually people who say that are expecting people to draw false conclusions from it. It is not true that you can operate an eWallet service, put "we are not responsible for anything" in your terms of service, and then you're not responsible if your negligence causes the loss of other people's deposits. Bitcoins are pretty useless if everyone's best advice is basically, "there's nothing safe you can do with them, no safe way to buy them, no safe way to sell them, no safe way to store them", and if you pick the best options that currently exist to the best of your knowledge and following the advice of recognize experts, if anything goes wrong, it's still your fault.

Prepare to be outraged then, because I find it hard to imagine they'd be that stupid. (And that attitude is a big part of the reason nobody is being open about how they manage their finances. People have unrealistic, and frankly silly, expectations.)

The interest covers (actually, it probably doesn't even) their costs and risks associated with holding your money. Otherwise, they'd have to charge you a storage fee, raise commissions, or make up the difference somehow. You have a right to expect near 100% security in your deposits. That requires them to hedge, insure, and take other steps that render the interest it is possible for them to get very, very low. (This will change in the future. Right now, interest rates to begin with are near zero. Add risks due to the volatility of bitcoin value and so on, and it's not much over zero.)

What is important is that their total liquidatable capitalization (such as money in the bank, bitcoins in wallets) plus market value of assets (such as loans) significantly exceed total obligations (such as deposits). Ideally, this would be audited by an independent entity. Of course, audits cost money and someone has to pay for them.

I can predict with near certainty that Mt. Gox won't give any kind of definite answer. It's not their fault -- there is a genuine market failure causing a race to the bottom.

I don't think it's helpful to bundle things that violate the NAP (such as slavery or racist use of force) with things that don't violate the NAP (such as a private firm with racist hiring practices absent any contractual agreement to refrain from such practices) when talking about how a society based on the NAP would work.

The former may, and should be, responded to by force. And the NAP doesn't prohibit anyone from using force against the former.

The latter does not justify forceful retaliation. It's the equivalent of being a jerk. One has a right to be a jerk. However, there can (and should) be non-coercive consequences for being a jerk. And that include social and business ostracism, among other things.

The point of the NAP is not that people who use force will voluntarily stop using force. The point of the NAP is to clarify which uses of force are legitimate and which are not. The use of force in response to illegitimate uses of force is absolutely permitted by the NAP. The whole point of the NAP is to reduce illegitimate use of force by identifying the dividing line between legitimate and illegitimate force as clearly as possible.

The only reason, IMO, that the NAP fails to do that is due to its dependence on an agreed theory of property rights in order to work. If I eat a banana, that's not illegitimate use of force if it's my banana. It is if it's yours.

People who value freedom should no more desire the right to coerce racist restaurant owners to admit blacks than they should desire to force blacks to eat in restaurants owned by racist owners. The freedom to refuse to deal with racists is the flipside of the freedom to be a racist. Of course, one is using a freedom for what people should consider good and one is using it for what people consider evil, but that is the point of freedom.

And I think you'll find you can't really draw a principled dividing line. Say I'm a vegetarian because I think eating meat is cruel. As a result, I don't eat at places like McDonald's and Burger King. Try to come up with a fundamental, principled distinction between this and a restaurant that doesn't hire blacks because the owner thinks they're more likely to steal. I don't think you can do it.

Putting racists in prison wouldn't end racism. They'd be just as racist in prison. Unless you think harsh penalties for racism will discourage it, in which case you'll be ending racists.

Other than groups like the KKK whose primary purpose is racism, they've survived and thrived despite their racism. The United States is poorer today than it would have been had racism ended 50 years ago. And we'd all be richer still if racism had ended 200 years ago.

Say you are white. As far as your personal welfare is concerned, you should be indifferent as to whether some benefit goes to another white person or a black person. In either case, you don't get it. So, let's say there's a job that you're not personally interested in. You personally benefit the most if the job goes to the person who can give the best value for the price in that particular job position, because that enriches all of society. Even if the employer advantages a white person like you over a black person, that is still a net loss to the employer and thus a net loss to you.

Or say you're a man. Think about the companies your retirement funds are invested in. Do you really want them hiring less-qualified men over more-qualified women? Does that somehow benefit you? Does that benefit those companies?

Racism is not just evil, it's a self-destructive evil. The greatest weapon against racism is pointing this out. My grandfather played an important role in ending overtly racist pay scales in the tool and die industry in the South. The main way he did it was by pointing out to labor leaders that if companies could pay a black man less than a white man, they would prefer to hire black men. He pointed out to white people that the victims of racism are equally the group *not* discriminated against.

The only way to end racism is to end racists. If you know of another way, I'd love to hear it.

Exactly. It is possible to profit from racism, but that profit is inefficient profit. It doesn't come from providing any value but from deception that uses resources inefficiently. Society as a whole is poorer for it. Ironically, most of the harm falls on the people *not* discriminated against. (In this case, the non-redheads not hired suffer more than the redheads who are hired.)

By "everyone" I don't mean literally every single person on every single issue at every single time. Other than perhaps someone who hopes to be a leader of a racist organization, there aren't any significant groups that benefit from racism.

There's no magic wand to make these kinds of problems go away. The question is really just what tends to make them better and what tends to make them worse. Any society will largely avoid these problems if the vast majority of people want them solved and no society will avoid these problems if the vast majority don't recognize them or don't want them solved.

Racism costs money though. If you don't hire a Chinese person because you hate Chinese people, even if the best person for the job happens to be Chinese, you suffer some loss. If you don't let black people eat at your diner because you want to cater to racist customers who don't want to eat with black people, that gives you a more limited customer base than if your customers weren't racist. (That's not to say that nobody benefits from it, of course. But overall, we're poorer for it.)

I think the bigger problem to worry about in the Libertarian dream is that people who disagree over issues like this will ostracize each other. For example, people who see racism as a horrible evil may not just refuse to do business with the diner that doesn't let black people eat there but also with people who eat at that diner, people who supply food to that diner, people who repair the roof at that diner, and so on. It wouldn't be a very pleasant society where your roof needs fixing and you have to choose one of two roofers to do it, either of which will get you ostracized with a different, but significant, group.

But, again, everyone has a strong incentive to see that this doesn't happen. I have no problem being confident that they'll find a solution. (It's the same way I don't worry that all the grocery stores near me will close or raise their prices absurdly and I'll starve. That seems silly, but if the government ran all the grocery stores, this is what some people would argue to say the free market can't handle it. That's what they say about roads.)

There is no known solution to this problem, and every system of laws suffers from it. If someone does something that would cause a reasonable person to fear that their life or property was in significant, imminent danger, then they will suffer the consequences. But there is no perfect rule for where to draw the line. But this really has nothing to do with the NAP. You have to work out when using force prior to injury is justified in any system. I suppose the exception would be if you reject pre-emptive force and permit only retaliatory force. But I think that's a recipe for disaster.

I agree it's a problem. I don't think anybody knows the solution. I think it applies to every proposed political system (other than ones that are obviously truly awful).

I don't think I can define it any better than "reasonable". You can read any number of books on what constitutes a "reasonable belief" in law, and I'm hardly an expert on the subject. Law is messy. That's why you need courts. Sure, two people can kill each other over a misunderstanding, but all parties have an incentive to avoid that. But that's really independent of NAP or not -- justifiable homicide laws in pretty much every system on the surface of the planet have these same rules. If you know a better way, write it up in a book and you'll be famous.

That's kind of the basis of modern society and the reason that all property is defended. It's not practical to have armed guards every place you go, so instead we keep the armed guards at police stations and deploy them only when we need them. Essentially, civilized societies recognize that they need private ownership (even if some think it's a fiction, even if you don't think it's a natural right) because you can't have modern society without things like semiconductor plants and nobody will build them if anyone can come along and take them.

If you want to try to make a reasoned case that "all property is theft", I'll be happy to listen to it. But you can't respond to a reasoned argument with "That's what you think".  My opinions are special because I present reasoned arguments to back them up. You are welcome to engage those arguments or ignore them, but if you aren't going to engage them, I request that you not pretend to.

It doesn't really matter what you actually did perceive because only reasonable perceptions justify the pre-emptive use of force. Whether your perception of a threat is reasonable or not would depend on the full context. But if it's not objectively reasonable, it doesn't matter that you actually felt threatened. Someone might actually feel threatened around tall men on dark streets, but that doesn't justify using force against them.

No, they don't have equal standing. A "right to do what you wish with what is yours" does not have the same standing as a "right to tell other people what they can and cannot do with what is theirs". One is justly within one's scope of moral authority and the other makes a mockery of the concept of rights.

It's really hard to give an answer without specifics. The key issues are the mechanism by which it hurts people, the amount of harm it does, and whether the activity is within the scope of the moral authority of the people who engage in it.

That depends on the mechanism of harm. Hypothetically, if the action is something like making a chemical on your own property that can blow up and hurt/kill your neighbors, then they can sue for the damages. Society could require insurance as a pre-condition to engaging in behavior that poses risk to others.

There's no way to know. The information necessary to make this judgment generally doesn't exist.

Then most of society will refrain from activity X and minimize the harm done. Presumably, those who do it deem its benefits to exceed its harms. The key thing is to make sure their calculation includes all the harms.

The beauty of living in a free society is that I don't have to justify my climbing, kayaking, smoking, or not wearing a seat belt. I can do it if I choose to. Those who argue against a free society don't seem to get this. Billy doesn't have to justify his choices to you. The disagreement is entirely over who makes the decision, not what decision is the right one.