And I'm challenging that it could be seen as an investment based on how it was defined and promoted. It was deposits and Patrick acted as a bank. Depositors were not investing in the business, just agreeing to use patrick's financial service who's offer was basically working the same way as a bank.

You've now added that people loaned him money and Patrick was the borrower which also points to a depositor/bank situation. That the fact he was wrong when he said he had sufficient funds to cover deposits in the case of a Pirate default is somehow just as much the depositors' fault because they heard that statement and then proceeded to extend funds to Patrick?

In that case, if someone tells you to loan him money for expanding his mining farm and claims to have enough current mining power already to pay it back later, if he ends up being wrong, someone the lender is at fault and should accept that risk was somehow shared because it was some joint venture? It was a loan. Extended money, not an investment in a company. If it was an investment with shared risk, Patrick would not be offering a fixed rate on deposits. The rate would be proportional to profit or loss because you own part of the business. His offer was to take deposits and pay interest on it, just like a bank. The business was his own only and all profit from the deposits/lending difference in rate went to him. Not "investors". The bank now voided deposits without going bankrupt.

You repeat that risks are shared among co-investors with example situations demonstrating it and that profit is shared just as much as loss is. But you bring no argument why it should be considered as a co-venture. I claim that it cannot be considered an investment in Patrick's operation because there's no ownership of Patrick's operation for depositors and profit is not shared either, neither should loss. Patrick acted as a bank, as a financial service provider, offering a fixed rate on funds entrusted to him and requiring an higher rate when then lending said money, keeping 100% of the bank's profit. Had it been a co-venture/investment like in your examples, the margin between deposits rates and loans rates would be shared among the investors.

I agree that profit and loss is shared when we're dealing with an investment. I want to know how you arrive at the conclusion that it was an investment when the operation's profits (the difference between deposits rates vs loans rates) is not shared among the investors. But somehow, losses should? Depositors were not investing in Patrick's operation. They were depositing funds in exchange of interests. Deposit accounts are similar to loaning money to a bank, which has the responsibility to keep the deposits safe and also offers a small percentage interest in exchange for the loan.

You didn't acknowledge or argue against this logic. That unlike your example, deposits did not constitute an investment in Patrick business, but a deposit just as a bank. Your examples always shows:

Investors > Funding of a business > Profit or loss shared among investors

While this situation is:
Patrick creates a business under his own name for accepting deposits and then re-lending at a higher rate for a profit.
Depositor > Patrick (bank) > Lendee > Investment or Personal Purchase

Depositors are actually entrusting the bank for safekeeping of deposits as well as receiving a small interest from the financial service provider (Patrick Harnett). The money is not invested, it is entrusted. The only thing people knew about their deposit is that:
- Patrick would loan the deposits to others.
- Patrick would pay them an interest on deposits.
- Patrick would investigate lendees.
- Patrick was not exposed to a ponzi.

Which are basically the same you'd expect and know when depositing in a bank. You agreed that depositors at a bank are rarely at common fault for the bank's bad investments and everything seems to point that the situation is very similar to deposits at a bank. You know just as much when depositing at a bank yet you do not accept any risk other than the bank declaring bankruptcy. In this case the bank is Patrick Harnett himself and he did not declare bankruptcy. He just voided partially the deposit amounts and said he'd pay deposits if he manage to get something back.

He agreed to that for Kraken Fund and that it well looks like a scam. He's disagreeing for the Starfish deposits that risk was not shared. The statement about the backing by personal funds was made for the Kraken Fund only.

You admitted a bank would rarely be at common fault, yet you know just as much by depositing at a bank that the deposits will be lent afterwards and you're just as much led to believe its loaning behavior is sound. Yet depositors are not sharing the risk. Your analogies/examples always show an example where the investment is disclosed, while Patrick Harnett acted as a bank, being the financial service provider selecting who to loan to. Those benefiting from those loans made the actual investments (and lied to Patrick). The depositor is yet not at fault for the bank mismanagement.

The depositors were not investing in the bank itself such as would be the case if they became shareholders. (In which point they would be equally liable to a loss from the unsound business such as in your example.) They merely deposited with Patrick Harnett providing a financial service:

Depositor > Patrick (bank) > Lendee > Investment or Personal Purchase

I claim your proposed scenario cannot apply on behalf that it was not an investment but a deposit. Patrick was providing a financial service and was not directly making an investment or disclosing the lendees and the specific reason they are taking a loan just like a bank. The wording strongly suggest that he works as a bank and that he takes the responsibility to loaning cash to sound requests and doing proper investigation. Now the bank needs to default, Patrick voided part of the deposits but did not default himself personally, despite that he was acting as the bank entity (which has to default), directly and personally pocketing any profit.

In your example, indeed it's an investment contract with no clause in the case money is lost. It could be seen as a joint venture and the share of the loss could be expected. It was never agreed it was loan, but that he'd use the money for gambling and share the profits.

But in this situation, I disagree that it could be regarded as such. He took deposits, acted as a bank taking deposits and extending loan, stating repeatedly that his business was sound, diversified, and that he could bear defaults. The mere fact people asked about how he operated does not suddenly make it a joint venture or imply that risk will be shared. Otherwise, applying this logic, if I asked a bank about their business practices before depositing into an interest bearing account, the bank could make a bad investment and then default on my deposit without default as a whole because my particular funds went on a bad investment and risk is somehow shared.

By depositing with Patrick Harnett, just like at a bank, you do not assume taking risk in any particular venue or to sharing risk with the various investments & loans the bank will make. They simply entrust their money to a financial service provider who will then make decisions for them. They are not making any specific investment or assuming the risks. One key characteristics is that capital is pooled from all the depositors' funds to be then redistributed to business ventures. The depositors do not take any risk other than the bank defaulting as a whole and Patrick Harnett operated under himself, not a separate entity, but did not default himself.

He acted as if it was a joint investment venture and defaulted only on the capital of depositors, not personally, despite operating as a bank under his own name for his own personal profit, acting as a financial service provider and not directly disclosing how he invested the capital.

If he operated under an independent entity (which earn it's own profit, pays its own taxes, etc.), then defaulting purely as a bank on the deposited capital would have been acceptable, however he was acting as the bank and he was directly and personally receiving any profit yet didn't claim personal bankruptcy.

The wording and claims Patrick Harnett made (at least for the Starfish lending/deposits business) were very misleading as to the nature and how he would manage scenarios regarding his offer.

If you don't agree with the above, well let's agree to disagree on whether to classify Patrick Harnett's business as a joint venture such as your example or as a bank (financial service provider) such as in my example. Because it does not seem we disagree on how to handle the case in either scenario, but on what kind of scenario we are actually dealing with. (Note that I did not deposit anything with Starfish. But I did have a deposit in his other operation (fund), but the mere fact it was a fund would place me under your joint venture example where risk is shared. However he added the claim that "Contributed capital is backed by my personal funds." and defaulted on it without personally going bankrupt. One could have assumed he was borrowing investment capital by backing it with his personal assets, which turns it into a loan more than an actual fund/investment vehicle, but he did not back it as promised when the situation required so. Which you seem to have agreed to already.)

Patrick Harnett's offered loans and taking deposits. He was acting somewhat as a bank often guaranteeing no loss. If he was under a LLC/entity separate from himself, the operation defaulting and paying partial might have the way to go. However, this was not the case. He operated under his own name.

- Not a joint venture.
- Often promising no default would cause any loss.
- Claims of good backings.
- Offering deposits with interest paid on balance.

When someone deposits at a bank, they don't accept to take any risk as to if the bank will or will not make good investments. If the bank cannot pay depositors, it has to default. Same as when the bank loans to businesses. They're not in a joint venture and the bank is not going to accept the business defaulting on the loan without the whole business defaulting on the sole reason the specific investment didn't go as planned and claimed. The person extending money to the other party is not at fault for the receiver's business shortcomings.

You could potentially blame the depositors for for their choice of place to deposit their money I suppose. And you could argue that the default being unavoidable, it's logical that people are partially paid with what is left.

However, in this case, the issue is not the default or partial payment. It's that Patrick Harnett chose to operate as himself, and he took deposits in his name and should not default on deposits if he does not default himself as an individual and keeping his personal wealth. The risks of operating under your own name instead of managing a legally separate entity.

http://www.4shared.com/zip/9Lj1yWKB/krakenreports.html

Archive containing all PDF reports received.

The PDF newsletters he sends.

I don't have the slightest idea either.

Yes it should. But his graph don't add up to 100%. Feel free to interpret it however you want.

The Kraken Fund was about 50% invested in PPT (Patrick Harnett's own passthrough he was insuring and apparently bought himself out of with Kraken Fund).

When he defaulted, he paid 50% of balances. I'll assume it's for the debt he bought himself out with the fund (and took back on default) and that other assets are the one he defaulted on:


He did break a few promises, including that he would cover any loss and misrepresenting where the funds would go. For those asking why would someone borrow to invest and offer 100% coverage on loss? Offering to cover losses to borrow would imply he does not have the liquid funds to operate but that he has assets he can liquidate should the need arise. It allows operation with borrowed capital without the immediate need to depart with other assets such as precious metals, house, stocks, etc. He did not cover the losses.

Excerpt from the latest report sent to shareholder:

He then sent 50%, not leaving an option to stay.

This was not really what I expected from his offer. Anyone could have bought those debts themselves directly (and would have known better than to buy those specific things.)

Since Patrick Harnett was managing the PPT that he insured and paid for personally, that would mean he bought himself out of this debt. It seems those PPT represent 50% of the fund and he paid back 50%. His charts show half PPT after the default and he started to pay insurance. Paying anything less than 50% would have been quite...

In any case, I'll inquire further if that's the reason he defaulted paying back 50% and if the remaining is due to payb.tc debt and mining assets which might be locked or not with GLBSE (I do not currently know where or what those mining assets are.)

Hopefully the mining assets are in GLBSE and locked and we can recover another 25% if GLBSE ever decide to transmit data.

He did break his promise to cover any loss personally. This is already being discussed on this thread about the Kraken Fund default and another default owed to MPEx: https://bitcointalk.org/index.php?topic=121915.240

Patrick defaulted @50% on capital, breaking a few terms of his offer:


265.8065 BTC currently held on wallet. Forfeiting the pass-through's 10% cut on interest.

See KRAKEN SPREADSHEET

Claimed holding (note it adds up to 81%):

Currently no news on GLBSE's part.

As for Amazingrando, I've been in contact with him and he had taken a leave for personal reasons which I shall discuss no further, anything GLBSE related being on hold in any case. This was already proposed and he requested an address to forward payment which I provided.

I will keep everyone updated on that matter when it payments for the previous weeks are received or if I receive any info from GLBSE or something new occurs.

As of now, not a single issuer on GLBSE had any info relayed to them.

The information on the homepage changed, but since you previously entered your address & email, it will only show that the claim is finished when you login. It's normal.

^^^ He gave his email and BTC address. Upon relogin, he noticed the claim finished notice.

That's exactly how it should be once you input your details.

Not yet, other than balance being paid. Asset information will probably be forwarded after GLBSE pays all balance.

Indeed I would expect them to pay, regardless of if some do not send back their doubled payment.

Although I don't believe it's the best and easiest way to proceed, I'm perfectly fine with your way of dealing with the situation, so long as the funds are returned once everyone has been paid.

Payment claims with TaxID:
https://bitcointalk.org/index.php?topic=118354.msg1270908#msg1270908

You might also want to read the GLBSE shareholder meeting regarding the closure: