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1  Economy / Marketplace / luke-jr is a scammer - he renegged on a bitcoin futures contract on: May 18, 2011, 12:16:16 AM
Don't do any deals with luke-jr, especially ones that depend on him living up to his word.

On March 14, 2011, we made history by entering into the first Bitcoin futures contract that I know of. The value at the time was $0.92. He thought that the value would exceed $1.15 in a month's time and I took the other side. A month later, the price closed at $0.86 and his position lost. I came to him to settle up, but he responded with a long-winded obfuscation and refused to pay.

At the time the deal was made, luke-jr specified that if either side failed to live up to the deal, he would be "publically shamed."

The contract was documented in the #bitcoin-dev IRC channel (starting with http://bitcoinstats.com/irc/bitcoin-dev/logs/2011/03/14/1).

A contract to buy at a future date (a futures contract) is settled based on the difference between the strike price ($1.15) and the last price before the expiration time (the price at 4/12 23:59:59 which was $0.86 according to bitcoincharts mtgoxUSD).

Since the size of the contract was 25 btc, the value of the deal is therefore:

    (25 * $1.15) - (25 * 0.86)  =  $7.25

In my favor.

I'll quote the main text:

The conversation began with a discussion of bitcoin futures (my nick is blarzong):

00:11    luke-jr    blarzong: I will sell him 1 BTC, for a contract to purchase more at a specific rate.
00:12    blarzong    luke-jr: what rate?
00:12    luke-jr    blarzong: I will pay him 1 BTC, in exchange for an agreement that he will buy 50 BTC from me within the next month at $1.25 USD each
00:12    blarzong    luke-jr: that would be a losing proposition
00:13    luke-jr    blarzong: if you know the future, it might be
00:13    luke-jr    I'm obviously betting that it won't go over $1.25 in the next month
00:14    blarzong    luke-jr: the market doesn't expect it to go anywhere near 1.25.. so your proposal wouldn't be favorable to anybody's risk asessment
00:14    luke-jr    blarzong: where is that market analysis?
00:15    luke-jr    I certainly expect that it will go near $1.25
00:15    luke-jr    just not over
00:15    blarzong    luke-jr: i will take that bet
[...]
00:17    luke-jr    blarzong: make it $1.15 and I might bite
[...]
00:17    blarzong    ok $1.15
00:18    luke-jr    blarzong: this is contract to buy, not option, right?
00:19    blarzong    yeah
[...]
00:19    luke-jr    25 BTC so $28.75
00:19    blarzong    ok
00:20    luke-jr    blarzong: please deposit to clearcoin and send the link to the email I PM you
[...]
00:25    blarzong    how can he ensure i will pay up if im the loser
00:25    blarzong    or he will pay up if hes the loser
00:26    blarzong    in the end, one party will give the other the difference in btc
00:27    blarzong    i think someone on the forum said they were developing a market with ricardian contracts you could transact
[...]
00:29    molecular    are you doing a trade or a bet?
00:29    Necr0s    A contract to trade at a later time, yes?
00:29    luke-jr    molecular: kindof a bet
00:30    molecular    your basically making contract to make a trade @1.15 at a certain point in the future?
00:30    blarzong    this is the first btc futures contract
[...]
00:38    blarzong    luke-jr: until we have ricardian contracts in place it will have to be a gentlemans bet..
[...]
01:01    luke-jr    blarzong: I assert that I should be trusted on my word. Tongue
01:02    blarzong    luke-jr: youre a trustworthy guy, so thats fine w/me
[...]
01:16    blarzong    luke-jr is a smart guy.. i think i will probably lose a few btc on this trade
[...]
02:04    luke-jr    blarzong: as of right now, we have no contract. While I assert my word as being trustworthy, that does not extend to taking you at your word. :p
[...]
02:19    luke-jr    Netsniper: why don't we just say max stakes 20 BTC, calculated on the market price in a month?
[...]
02:30    luke-jr    maybe we need a trusted 3rd party to hold the escrows and evaluate the market
[...]
02:44    luke-jr    blarzong: why don't I just plan to buy 25 BTC from you at $1.15 on Apr 13, and if one of us fails to follow through we are publicly shamed? Tongue
02:45    blarzong    luke-jr: fine w/me.. thats exactly what you said before, but im for it
02:45    luke-jr    nah, before I was insisting on clearcoin from you :p
02:45    blarzong    aye..
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