By the way, everyone I know of who has asked this question to lawyers (and that is more than two but fewer than ten) has gotten the same response. The FinCEN definition of money transmitter is: "A person that provides money transmission services", which is defined as "the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means."

Since it's in partial default and has no reasonable business model that would permit it to pay you interest, you probably don't want to deposit.

If you and I were stranded on a desert island, with no laws enforced by no government, I would still have the right to take back my food by force if you stole it from me. If there is no law to enforce and no government to enforce it, then there is no loss of one's natural right to self-defense. It is only when there is a functional justice system that we are willing to give up our right to non-emergency self-defense of our lives and property.

Where do you think a government gets the right to make and enforce laws?

If both sides have a mutual misunderstanding that causes the contract to misallocate costs or risks, fairness requires that the misallocation be corrected unless the contract shows an intent to allocate the risk. Not all legal systems recognize a concept of "equitable mistake", but I don't think there's any serious disagreement that it's equitable.

A classic example would be two parties who each believe that a ship sunk in a particular place and negotiate a fixed-cost contract to retrieve the ship for a specified fee. If it turns out the ship was elsewhere and is therefore much more expensive to recover, fairness requires the fee be adjusted appropriately. This, of course, only applies if the party seeking the re-adjustment is not comparatively more at fault for the incorrect information. It also only applies if the contract doesn't show an intent to allocate the risk that the information was incorrect to the party being paid to recover the ship.

This situation is analogous. Both parties incorrectly (arguably, equally negligently) believed Starfish's high-interest loan model was sound. There's no evidence in the contract that the risk that the business model was fundamentally unsound was intended to be allocated to Patrick. So the contract cannot equitably be enforced as drafted because a situation not foreseen by the contract came to be. The risk of the unsound business model has to be allocated among the parties somehow, the contract doesn't specify how to allocate it, equity demands it be split.

Again, not all legal systems recognize a doctrine of equitable mistake. Some will insist a contract be enforced as written even if a risk that contract fails to allocate (due to a common mistake of fact shared by both partied to the contract and forming part of the basis of the actual "mental" agreement) materializes unless that makes complying with the contract impossible. But there are very few people who think this is actually fair.

You forgot to mention that this post was addressed only to pool hoppers. Honest folks might get the wrong idea.

It doesn't matter whose effort it is. If I buy a car, so long as I pay fair market value for the car, why does it matter whose effort made the car valuable? Sure, someone mined the steel, someone invented the automobile, someone manufactured the engine, and so on. But if I acquired it at market value, it's all my car. Once you realize that this argument applies to *everything*, not just land, it quickly falls apart.

And only land ownership will make it possible for people to capture the value of improvements to land. Say I want to build something that will go on one piece of land but increase the value of a number of surrounding pieces of land. In the absence of full private ownership, there's no way I can capture the value this project will add. However, if all that land is privately owned, I can go to each owner and get them to agree to share with me some of the increased value. I may not get them all to agree, but at least I have a chance. Without private land ownership, there's no way at all I can get a share of the value I'm creating.

The solution is simple -- if you buy land at fair market value, it's yours. All of the land on Earth has an owner right now, though admittedly some have acquired it unfairly. But we're not going to give America back to the Indians. So we have now what we have. Pretty much everyone who owns land today has acquired it at fair market value anyway. And it would be truly bizarre to treat some present-day landowners different from others.

If you want to talk about what the rules should be for the Moon or if we build underwater cities, we can. But most land is already owned by people who, by and large, paid fair market value for it. So unless you want to try to right ancient injustices (which is basically impossible since the victims are dead) people own what they own.

Your definition obsessively focuses on an irrelevant detail while ignoring the things that are actually important. While humans don't make land, the value of land comes from human effort. The difference in value between an acre in the middle of Los Angeles and an acre in the middle of Australia was all the result of human effort.

This same argument about land would apply to everything. Why should anyone be entitled to anything since all the raw materials it is made out of weren't made by anyone? Copper isn't made by man any more than land is. But just the same, all the value *does* come from the actions of humans.

It's not "free money", it's fair payment for the useful work you did.

I agree, but it's Pirate who is in the wrong in that loop. Pirate's agreement is with payb.tc and it's none of his business how BitcoinMax got the funds deposited or what it would do with funds returned. However, I do believe that BitcoinMax depositors could sue Pirate directly, under an intended third party beneficiary theory. This is required in equity because BitcoinMax has no sufficient incentive to go after Pirate, especially since there's no way to pass the costs of doing so on to its depositors.


He can't do that without breaching his agreement with his depositors. Pirate is in default. payb.tc is not.

It can't work that way. If two people jointly own a house, one person can sell his right to half the house, but he can't actually sell half the house. The depositors jointly own the deposit with Pirate and have joint rights over it. Since payb.tc is not in default, I see no grounds to break the agreement.

First, as a factual claim, I don't believe his lawyer insisted on any such thing. If there's evidence of that, I'd like to see it. But assuming it's true, I don't think it makes any sense. Pirate's agreement is with payb.tc -- nothing stops him from treating payb.tc as a single entity.

I agree with this logic if, and only if, the depositors sue Pirate and gain standing as intended third party beneficiaries. I don't believe the PPT operators can disintermediate themselves on their own authority. They would be initiating a breach of the undefaulted agreement between themselves and their depositors. If they did that, any depositor disadvantaged by the payouts that eventually result from Pirate over what the contract with the PPT operator specified could sue the PPT operator and win.

I agree, but the default was on Pirate's agreement with the PPT operators. There's no breach of the PPT operators' agreements with thier depositors.

I'm not the one claiming this would "change the face of government". If you think it won't make any difference, then you agree with my criticism.

I never said we did.

Why wouldn't they be there to increase their wallet size? I think a lot of wealthy people join government for just that reason, expecting that they'll have much more lucrative careers when they leave government. (That doesn't always make them bad people or bad politicians, of course.)

All reducing politician's salaries will do is make it harder for people who have more financial obligations and less personal wealth to enter politics. If you think that's a good thing, then you're welcome to advocate for lower salaries for politicians. But it won't make politicians more honest and could do the reverse.

Umm, no. The only people who would be there would be wealthy people who can afford to work without pay, perhaps mixed with a few conniving people who expect to make a killing in the future by brokering their contacts and influence after they leave government. The only people would wouldn't be there are the smart, honest, normal family folks just trying to make the country a better place. They couldn't afford to be there.

I agree that complying with Pirate's terms as they stood at the time he took deposits is one of his obligations. But he absolutely does not have to go along with a unilateral change Pirate may try to impose on him in the terms. If there's a reasonable case that Pirate made a reasonable change in the terms and a PPT operator didn't go along and that harmed their customers, I might agree with you. But I know of no case where that happened.

If you're talking about Pirate's request for information on the PPT's depositors, the PPT operators could not have gone along with that arrangement if they had wished to. It would have made it impossible for them to ensure that any payments from Pirate on their deposits go to those depositors the contract specified it would go to. I advised PPT operators not to go along with this unless every singe one of their depositors agreed.

Say you and I are the sole depositors in a PPT and we each have 1 BTC invested. Say I'm next in line for a payout and so I'm contractually entitled to the next 1 BTC paid by Pirate on the 2 BTC we have deposited. What purpose could providing that information to Pirate possibly serve other than to allow him to pay you directly? And how does that not defraud me of my contractual right to that first payment? How can a PPT operator go along with a scheme whole sole purpose seems to be to enable Pirate to defraud his customers out of their contractually guaranteed rights to payments on the collective deposits?

You can certainly just take out a personal loan then rather than a student loan. You lose the benefit of the Federal guarantee but you also don't get lumped in with all the other student loans.

The unfortunate reality is that student's ability to pay is one of the biggest factors holding down the cost of higher education. A college simply cannot charge more than their students can pay or they won't have many students. Any attempt to get people more student loans or lower rates will be significantly undone by increase in the cost of higher education. That will either mean students have to pay more or the government will have to pay more, and they won't necessarily get anything additional for their money.

Fair enough. I think that's a slightly harder case to make, but certainly not completely unreasonable. The counter-argument would be that PPT operators did everything they promised their depositors that they would do and there's no good argument that the operators had information superior to what their depositors had. In some cases, I think there's a good argument that PPT operators should have known that BS&T was a scam even we don't expect the same of all their depositors.

As I've said, I'm willing to give a one time exception on the grounds that there was a lot of disinformation and a lot of naive people in the community. I don't see a benefit to excommunicating everyone who has learned a valuable lesson. But I fully expect people to learn from this fiasco and I hope the community has no intention of being lenient next time. There will be a next time.

Since always. Criminal courts are a special exception where there's a presumption of innocence. Elsewhere, the evidence alone rules, there are no presumptions.

The only possibility I can think of is that he's imagining that the plan will create enormous additional economic growth and that will lead to increased tax revenue over the next ten years or so. If that's what he's thinking, his numbers are probably wildly unrealistic. But we can't really know since he won't share them.

On an unrelated note, I was thinking about more about Kokojie's "Why he hasn't disclosed which loopholes he want to close on the Federal level? because that would be too easy for Obama to steal, Obama has already stolen his idea of "closing loopholes" shown by yesterday's debate." That sounds almost treasonous to me. Is winning the election really more important to him than balancing the budget? If Obama will commit to the key elements of Romney's super-awesome tax plan, that means the country probably gets it no matter which candidate wins. Putting winning the election ahead of the country's best interests would totally disqualify him, IMO. I hope that's not what he's thinking.

The issue is not whether payb.tc ripped off the users investing through him. You are responding to an argument that nobody is making.

Did you read the message you are responding to. I explained why people are going after him.
(You are welcome to disagree with this argument. I disagree with it. But you are not welcome to ignore it or misrepresent it, which is what it seems you are doing here.)

Why is it not a loophole? Other loan interests aren't deductible but home mortgage interest is. Why isn't the special treatment for this one type of interest a loophole? But the point is that there is no objective test for whether something is a loophole. Roughly speaking, it's something that is given a special break relative to other things that are similar and objectively should have similar treatment perhaps as a social engineering way to encourage things, perhaps as a special gift to a privileged group. Objectively, home mortgage interest is essentially no different from credit card interest and there's no reason taxes should treat them differently.

I'm not sure why it's a loophole that you pay Massachusetts tax for a purchase made in a store in Massachusetts but not for a purchase not made in a store in Massachusetts. If that's a "loophole" then so is mortgage interest being deductible if it's for a home but not for a car. At least in the sales tax case, it's the absence of a State nexus that controls taxability, not the product purchased.

Okay, fine. So what *Federal* loopholes would he close?

If Romney is going to keep his plan a secret, there is no way I can evaluate whether it's a good plan or not. Bluntly, it seems *impossible* -- they're just aren't the kinds of loopholes that would create enough revenue, other than loopholes that would hit the middle class and small businesses heavily.

Is the earned income tax credit a "loophole"? I don't know if Romney considers it one. Is the home mortgage interest deduction a loophole in Romney's eyes? What about the self-employed health insurance deduction? Frankly, I have no idea what his plan is, and I can't reliably assess who it will help and who it will hurt. This is a huge *negative* against Romney to me.

Awesome, actually. I really wish I could give details. I'll find out if I can at least disclose the name of the project.

The talk of giving him a scammer tag is not because he didn't do what he said he would do. The talk of giving him a scammer tag is because he paid Pirate to make his customers the recipient of fraudulent transfers. Essentially, the argument is that he knowingly (or in reckless disregard for the near certainty) paid Pirate to operate a scam.