An informational notice from the US Securities and Exchange Commission is available here, summarising the definition of the term 'accredited investor' from Rule 501 of Regulation D. Prospective participants in the prospective fund who are US persons are asked to self-certify their status as accredited investors prior to participating.

Not to worry -- the subscription fee occurs only once, in connection with the manual account setup, and without any additional fees for rollovers.

You realise the PIF is much safer, of course? 

We'll see...

The question has even been raised as to whether someone could participate in the fund and operate a pass-through to an exchange, and of course they could do so. However, I think the recent shenanigans with Havelock and their "investment fund" have left many people even more skeptical about becoming involved with exchanges.

The only surprise here is that it took almost two weeks before you were proven correct.

Sometimes it's hard to tell the difference between an outright attempt to scam and mere gross incompetence.

I can't tell you which one of these two alternatives applies in this particular case, but I don't believe it's worth my time -- or anybody's time -- even to bother analysing which alternative it might be.

The claimed financials are so transparently ludicrous it's not even funny.

And incidentally, it would be very easy to come up with those "50 Funds in the Pipeline for FY2014", each of which will be coughing up 12 BTC per annum in fees. All that takes is 600 BTC, which is easily covered by the initial tranche from running the HIF IPRO^* itself -- presto, instantly visible revenues to reassure those "loyal users" and visionary early adopters. And naturally, if each of those 50 funds runs its own IPRO^* to secure even just a fraction of the amount sucked up by first IPRO^*, the whole thing could keep itself running long enough to generate quite the handsome payoff before collapsing.

^*IPRO = Initial Public Rip-Off

Yep, received with thanks -- and no problem at all. 

Gosh, there's a warm and inclusive welcome. 

Ah, bingo -- there is value being added here, because you're providing trading between PT shares. And I hadn't quite twigged that Kate's reactions to the whole situation had gone so far as to include forced lock-in by freezing the shareholder register altogether.

Surely folks have to wonder: why on Earth didn't CM convert the entire shareholder base to your PT -- or, alternatively, hand over management of their shareholder register to you while dropping the PT altogether -- since you're apparently offering their shareholders something that they themselves refuse to offer?

(I'm not looking for an answer -- just marvelling at this latest reminder of the eccentricities of CM management.)


PT shares which are not redeemable for the underlying...only in CM-land...

Yep, I get that. I even referred to it in my original question.

What I don't get is why there is still a pass-through that isn't adding any passing through.

Generally speaking, for a pass-through to offer some value, one needs two exchanges: a primary exchange, where an asset itself is listed, and a secondary exchange where the pass-through is listed. The secondary exchange is, for whatever reason, more valuable to some segment of the population than the primary exchange where an asset is listed. For example, the secondary exchange might be denominated in a different currency, it might offer a different interface, or it might provide better liquidity. (There are other scenarios where a PT might be appropriate, but bridging two exchanges is the main one.) So, once you take away the secondary exchange, a PT loses its reason for being.

Suppose I said to you "hey, I'm going to run a new 'direct' pass-through for ASICMiner, so you can now get shares of ASICMiner directly from Friedcat, or you can get pass-through shares directly from me". Why on Earth would you buy them from me? Suppose someone now said "hey, did you know ASICMiner is finally going to be listed on an exchange again?" Then the question becomes even more pressing: why on Earth would you buy them from me instead?

That was actually the point: the original purpose of the PT is not and cannot be the purpose now. There is no second exchange on the horizon; there is not even a first exchange. Since the whole point of a PT is typically to provide a bridge from what is available on one exchange to what is available on another, when you take away not just one exchange but both, it's hard to understand why there's still a bridge.

(Suppose, for the sake of argument, that a "first exchange" were to appear. Would there be some reason to keep holding and paying for an illiquid "direct pass-through" while waiting for a mysterious "second exchange" to appear somewhere, just so you could avoid using the first exchange? We're not talking about LTC versus BTC, of course, since there is no exchange at all, whether denominated in LTC, BTC, or Fruit Roll-Ups...)

I took it that the "bridge going nowhere" aspect would be fairly uncontroversial and had assumed there must be some other compelling rationale behind it that I just couldn't figure out. From dexX7's original reply, however (before all the "he said, she said"), I take it that actually, no, there isn't any other additional rationale.

Huh?


On the contrary, I have no interest at all in rehashing selectively quoted snippets of your discussion with TAT, Mircea Popescu and others. If I was entirely mistaken, and you weren't really talking with them at all but were merely contemporaneously poring through low-grade information sources to try and verify my identity, then clearly I had the wrong impression, and I certainly do apologise.

(Remember I only mentioned this at all because I hesitated even to raise a question in your thread, given the flavour of those previous discussions and my preference not to experience a "shoot the messenger" reaction.)

The main point here is not a "he said, she said". The main point is the oddity of an ongoing "direct pass-through". That's far more worth the time to discuss, don't you think?

Many thanks for your kind words and encouragement.

Judging by the BTC prospective participants have been talking about placing in the prospective new fund -- just going by emails and the occasional PM -- it's not clear yet whether there will be sufficient interest to go ahead with it, but we'll see.

(I know many people are still struggling to get their capital back from Ukyo, Graet, TF's fund and others, not to mention the aftermath of TF's claimed "hack"; meanwhile, many people are still smarting from losses when the broader market tanked. I think folks in general are pretty fed up with the Bitcoin asset markets as a whole -- and I can understand that.)

Yes, that was exactly the puzzle, since a "direct" pass-through is something of an oxymoron. As far as I can tell, holders of the pass-through get all the disadvantages of holding a pass-through (expense, counterparty risk, etc.) and none of the advantages of the sort of structure that would usually be dubbed a pass-through (namely, the feature of actually passing through from somewhere, such as another exchange).


Maybe it was a different user named 'dexX7' who was hobnobbing with TAT, Mircea Popescu and others on IRC in the midst of the BTC Growth IPO? (If so, I do apologise for assuming you were that dexX7.) The comically ill-informed condescension from the hobnobbers so thick you could cut it with a knife. I seem to remember the 'dexX7' user ridiculing those participating in the BTC Growth fund -- oh, and even unearthing a deliberately obscure (and obscured) Facebook page and thinking it was somehow relevant. (Gaaawwwwd I despise Facebook.) In retrospect, it's quite funny how some of the folks laughed at those selling ASICMiner to buy into BTC Growth, given that at the end of the day, those who adopted exactly that strategy wound up with roughly 275% as much money in their accounts than those who stuck with the former darling of the mining world.


I can assure you I didn't need to ask how to establish a short position. You were responding to someone else's question in the thread.


Okey dokey -- must have been a different 'dexX7', so I must apologise again for assuming the handle in two completely different contexts was owned by the same user. (Heck, for all I know there could be someone posing as me on IRC, since I have about as much interest in spending time on IRC as I have in Facebook -- there ya go, scammers, there's your opportunity to pretend to be me...) And in fact my original parenthetical comment for context risks hijacking your thread, so sorry about that too!

Actually, dexX7, that brings up a question that's been floating around behind the scenes for quite awhile now: is there some reason you're still running a pass-through at all, rather than converting these all to direct shares?

After all, the purpose of a pass-through is to add some sort of value, usually in the form of access via a different exchange, or occasionally to provide fractional shares, etc. However, in this case, the pass-through is not providing additional value via a presence on a different exchange, and I'm guessing that holders of the pass-through aren't holding it just to have someone else convert LTC to BTC for them. Is there some other raison d'etre that I've just plain missed along the way?

If Kate is as successful in sorting out the morass of legal issues as she says she will be, and manages to list her security on her own exchange, there would obviously be little point in a pass-through -- unless you actually have plans to pass-through to somewhere else relevant... Is that the rationale for keeping it going?

(For context, I mention all this as someone who wound up his own 2000 BTC fund swiftly in the aftermath of the exchange closures, specifically because I felt that was the right thing to do for participants. Now I get that you've been very public in bizarrely ridiculing me, my competence, and the very fact I ran a fund at all -- without the courtesy of ever speaking with me directly, or making any actual arguments, or even levelling your ridicule while I happened to be present. If that's your thing, that's your thing -- but I hope you will take this specific question about the pass-through as a critical but constructive one, and answer it directly, rather than merely taking another opportunity to dump on me personally.)

Golden. 

Why not hedge the naked short BTC position with a simultaneous long in futures? The naked short left you at risk of a clobbering, had BTC risen. Buying futures while shorting BTC offers at least some protection against that outcome, while the leverage of futures provides a relatively straightforward way of limiting the corresponding loss on that side should BTC fall really nicely.

(Alternatively, rather than risking a big chunk of capital, a short future could offer a similar level of gain without so much initial commitment, again due to their leverage.)

I've just said something very similar as an update on the BTC Growth forex thread in response to several message from folks asking me about plans for another fund involving equities:

https://bitcointalk.org/index.php?topic=333851.msg3589530#msg3589530

I wouldn't go quite as far as "garbage", but the opportunities specifically in listed equities and listed debt are pretty sparse right now...

Several folks have been in touch to ask variations on the same underlying question -- namely, whether I'll be offering another fund similar to the original BTC Growth, one providing exposure to listed equities, derivatives, listed debt, and so forth.

I'm observing carefully, but at the moment, the space of opportunities in equities or debt offering what I would consider an attractive balance between risk and reward is fairly sparsely populated. In addition, the lack of equity options on exchanges like Havelock makes it all but impossible to hedge individual position risk effectively. Thus, if I were to offer a similar fund, in practice it would currently be heavily skewed toward forex derivatives anyway, given the relative paucity of attractive alternatives elsewhere.

The recent movements in the value of BTC against other currencies have opened up trading opportunities which, in my view, far exceed what is available from individual equities and debt -- at least for the time being.

Notably, exposure to forex derivatives was a central part of the original BTC Growth fund almost from day one, and that exposure provided an effective counterbalance to offset the fund's exposure to listed equities and listed debt.

I've just posted the draft version of a document outlining a forex-focused fund which we're considering offering:

https://bitcointalk.org/index.php?topic=333851.0

Questions, comments, etc. are very welcome!

28 November 2013

The document Risk Factors - General was updated to include a section on rule changes on exchange platforms.

26 November 2013

The documents Risk Factors - General and Risk Factors - Funds Involving Derivatives, Including Forex Futures have been updated with a section on risk tolerance and diversification (for the former) and sections on distinguishing forex futures activities from forex arbitrage and on diversification and the risk of derivatives (for the latter).

25 November 2013

The original full document has now moved to the BTC Growth site itself, along with the full terms and conditions and risk factors.