Pirate accomplices

[DeathAndTaxes]

The respect of someone that clueless, lost doesn't mean a whole lot.

I had more respect for you when I thought you believed it was a ponzi and were just looking to time it for max profit.  Unethical but not stupid.  This theory is just stupid.   On par with ideas like "a rich person could destroy Bitcoin by buying all the coins" but nobody was ever foolish enough to invest on that idea.

In related news Mr-10%-OTC-Trader no longer only owes his creditors ~$5 mil USD.  
It is now more than $6 mil USD and increasing at a rate of $0.75 per second.  

500K BTC * 1.07 * 1.04 * $11.00 = ~$6.1 mil USD.
So congrats are in order I guess.  All you "investors" just made another cool million (on paper)!

[Hexadecibel]

I think if any one were to go through D&T's posts they would find plenty of substance.

Smart people get fed up with idiots on forums just like they do in real life.

If nothing else, I think D&T has held himself in check quite admirably.

[finkleshnorts]

I do think it's a viable business idea on some level. I believed it at one point, mostly because I wanted to believe.

But it's the volume of BTCST plus the extraordinary interest rates (over such a long time) that make me unable to believe it.

Possible, maybe. I just don't think that is what is actually taking place. If it weren't for my new bet, I would like to be wrong.

It's also very easy for a legitimate investment scheme to slip over into the realm of ponzi. I do tend to think it was a scam from the start, and that this business idea is the only one Pirate could propagate to justify borrowing so many coins. It was only a matter of time before someone realized how simple a bitcoin ponzi scheme would be to pull off. Inevitable.

[dust]

One:
No rich idiots exist that buy 10% over price.  Period.  Certainly not enough to move 500K BTC a week every week into perpetuity.

I disagree.  Look at the spread that coinabul charges.  It is closer to 20%.

BTW when I get tired of a thread I remove my posts so I don't have to see the stupid thing in my active thread list.  So don't be surprised when I get tired of this thead and do that.

By your logic, Coinabul could pay out 10% interest a week because they charge a 20% premium.

[bitcoinBull]

But yeah that is only 1 key part of what pirate was doing IMO.

No I do not have a copy of his books but I still do not think he is running a ponzi.

Even if he takes the money and runs I think he did it cuz he wanted the money not cuz ponzi...

Now what if he manipulated or stabilized the Gox price while making trades. Like Lower when buying and higher when selling...

No way he could make a profit here... Must be a ponzi...

..[snip]..
Pirate never really told me what he was doing but I felt I had a good grasp of what was going on.  The dip in and out of two transactions could make 10% pretty easy (5% on both sides, sometimes much more than that) so 7% actually seemed fair.

There is a small bit more, but pretty much my understanding.

Also, you can see how hard it would be to unwind this.

Keep dreaming!

[bitcoinBull]

By the way Zhou, JRO, Bitscalper all did the same as the above and no one is calling them ponzi's. Just scammers...

No, they didn't. For starters, none of the above promised a consistent x% per week.

[repentance]

and to further expand..

When I first joined #bitcoin-otc, I did a crapton of trading.  I did a bunch of moneypaks to btc and back.  Basically, playing market maker for whomever needed to move.  Pirate joined around the same time as me, a few days earlier if I'm not mistaken.  He was doing much the same thing.  As a result, it was inevitable for us to end up trading.  At various times, we each would come up with some big fish (or so it seemed at the time) and would help each other out with sourcing coins or finding coins good homes.  All of these trades were always online, with random people that would join #bitcoin-otc.  Eventually, pirate had some 'IRL' customers and it seemed they were larger than your typical moneypak transactions.  Eventually, I got into mining rather than trading because of a few bad moneypaks that someone screwed me with.  It seemed safer and less time intensive.  Meanwhile, pirate seemed to be branching out his trading and there were times where he needed to borrow coins.  When trading, you'd try to line up the incoming with the outgoing to minimize exchange risk and maximize profit, but then sometimes things go weird with one side or whatever and a person would end up needing to borrow.  It happened to me at times in the past so I didn't think anything of it to loan out.  Time went on, the lending became more regular and one thing leads to another and we end up here.  Pirate never really told me what he was doing but I felt I had a good grasp of what was going on.  The dip in and out of two transactions could make 10% pretty easy (5% on both sides, sometimes much more than that) so 7% actually seemed fair.

Thanks for the non-defensive answer.  I honestly have no idea whether pirate is a confidence trickster who planned to take the money and run all along, a ponzi operator, someone who thought he had the perfect business model but was operating out of his depth and now doesn't know how to deal with the collapse of his scheme, or something else entirely.  Maybe he's the predator some people are making him out to be, maybe he's just a guy who isn't as smart as he thought he was when it comes to making money (and both the Bitcoin world and the conventional business world are filled with such people).

What I can't do is blame pass-through operators for whatever pirate's scheme turns out to be.  People were virtually begging to be given a piece of the pirate action which was not directly available to small investors.  That the scheme went sour is not the fault of the pass-through offerers.  That some people got back more than they invested before the scheme collapsed and others didn't is also not the fault of the pass-through operators.  Nobody would be complaining about the role of the pass-through operators right now if the scheme was still profitable.  The pass-through operators didn't take people's money under false pretences - people knew it was being invested with pirate and that his venture was high risk.  You can't blame your stock-broker if the stock you chose tanks.

Nobody thought it strange he never capped deposits?
Nobody thought it strange he never paid down the principal?
Nobody throght it strainge his funding requirements never changed?

1 and 3 are the big warning signs for me.  Why a single, uncapped fund?  Unless he could place the ever-increasing amount of BTC in his fund at 10% every single week and the interest he was receiving was being compounded, his scheme couldn't be sustained.  But if the demand was predictable, then why weren't the loans fixed term (even if that term was short)? How was he protecting himself against a sudden decrease in demand or against someone else offering his clients a similar service for less?  How was he hedging his risk?  Were his clients repaying interest only?  If so, when was the principal due to be returned?  What allowance had he made for his clients defaulting?  Why wasn't he trying to entice the hoarders who are still sitting on large amount of BTC which barely ever move?

These are all questions to be asked the next time a similar scheme comes along - and it will.

I do think there are circumstances under which people will both buy and borrow at a premium, but when that appears to be happening on a large scale I think it's probably wise to curb one's enthusiasm and ask some difficult questions before assuming you've discovered the goose which lays the golden egg.

[imsaguy]

Nobody thought it strange he never capped deposits?
Nobody thought it strange he never paid down the principal?
Nobody throght it strainge his funding requirements never changed?

1 and 3 are the big warning signs for me.  Why a single, uncapped fund?  Unless he could place the ever-increasing amount of BTC in his fund at 10% every single week and the interest he was receiving was being compounded, his scheme couldn't be sustained.  But if the demand was predictable, then why weren't the loans fixed term (even if that term was short)? How was he protecting himself against a sudden decrease in demand or against someone else offering his clients a similar service for less?  How was he hedging his risk?  Were his clients repaying interest only?  If so, when was the principal due to be returned?  What allowance had he made for his clients defaulting?  Why wasn't he trying to entice the hoarders who are still sitting on large amount of BTC which barely ever move?

These are all questions to be asked the next time a similar scheme comes along - and it will.

I do think there are circumstances under which people will both buy and borrow at a premium, but when that appears to be happening on a large scale I think it's probably wise to curb one's enthusiasm and ask some difficult questions before assuming you've discovered the goose which lays the golden egg.

The theory that I've always thought for this is:

There are 50*6*24=7200 new btc per day.  If pirate wanted to control the market price, he'd need to control a certain percentage of the market.  The open deposit policy was a way to suck up those new btc.  Obviously he had to continue to expand things to cover for that, but that is probably part of the reason 1) he was lowering rates a bit (even if people argue he really wasn't) and 2) he said he didn't know how long it would go on.  Anyone that thought that 7% would continue for years is sadly mistaken. When I see the exponential formulas that people want to throw around and they're extrapolated to anything more than 18 months, I just write them off as trolling.

[MrTeal]

Out of curiosity imsaguy...
1) How do you pronounce your name? I keep pronouncing it like I'ms (or Iams, like the dog food) A Guy
2) At this point, given the long delay and minimal communication do you think Pirate will be able to pay out the rapidly increasing debt he owes as per the terms of his post (principle + interest to the hour)?

[Bitcoin Oz]

Nobody thought it strange he never capped deposits?
Nobody thought it strange he never paid down the principal?
Nobody throght it strainge his funding requirements never changed?

1 and 3 are the big warning signs for me.  Why a single, uncapped fund?  Unless he could place the ever-increasing amount of BTC in his fund at 10% every single week and the interest he was receiving was being compounded, his scheme couldn't be sustained.  But if the demand was predictable, then why weren't the loans fixed term (even if that term was short)? How was he protecting himself against a sudden decrease in demand or against someone else offering his clients a similar service for less?  How was he hedging his risk?  Were his clients repaying interest only?  If so, when was the principal due to be returned?  What allowance had he made for his clients defaulting?  Why wasn't he trying to entice the hoarders who are still sitting on large amount of BTC which barely ever move?

These are all questions to be asked the next time a similar scheme comes along - and it will.

I do think there are circumstances under which people will both buy and borrow at a premium, but when that appears to be happening on a large scale I think it's probably wise to curb one's enthusiasm and ask some difficult questions before assuming you've discovered the goose which lays the golden egg.

The theory that I've always thought for this is:

There are 50*6*24=7200 new btc per day.  If pirate wanted to control the market price, he'd need to control a certain percentage of the market.  The open deposit policy was a way to suck up those new btc.  Obviously he had to continue to expand things to cover for that, but that is probably part of the reason 1) he was lowering rates a bit (even if people argue he really wasn't) and 2) he said he didn't know how long it would go on.  Anyone that thought that 7% would continue for years is sadly mistaken. When I see the exponential formulas that people want to throw around and they're extrapolated to anything more than 18 months, I just write them off as trolling.

Do you really think there is a never ending line of rich fools out there lining up to buy bitcoins at over inflated prices week after week? Further,by compounding the interest they would need to increase their appetite for btc or he would need to find increasingly more and more rich fools.

[Coinoisseur]

I do think it's a viable business idea on some level. I believed it at one point, mostly because I wanted to believe.

But it's the volume of BTCST plus the extraordinary interest rates (over such a long time) that make me unable to believe it.

Possible, maybe. I just don't think that is what is actually taking place. If it weren't for my new bet, I would like to be wrong.

It's also very easy for a legitimate investment scheme to slip over into the realm of ponzi. I do tend to think it was a scam from the start, and that this business idea is the only one Pirate could propagate to justify borrowing so many coins. It was only a matter of time before someone realized how simple a bitcoin ponzi scheme would be to pull off. Inevitable.

Yes, saying D&T is "missing it" is pretty flippant. If that was his model:

1. Why was Pirate's appetite for more BTC seemingly insatiable, until he closed?

2. How was he able to promise consistent returns for such a long period of time?

3. Why has he not publicly stated interest compounding has ceased?

4. What is it about this claimed trading model that has left him seemingly short of quite a bit of BTC a week after closing?

[imsaguy]

Out of curiosity imsaguy...
1) How do you pronounce your name? I keep pronouncing it like I'ms (or Iams, like the dog food) A Guy
2) At this point, given the long delay and minimal communication do you think Pirate will be able to pay out the rapidly increasing debt he owes as per the terms of his post (principle + interest to the hour)?

1) Illinois Math and Science Academy (IMSA)

2) I've said and continue to say that I am going by the terms of the Vandroy bet which has a deadline of Wednesday if I'm not mitaken.  When the bet was made, it seemed no one had issues with the terms, so if both sides signed off on it, I should be ok with it as well.  It is frustrating to not have any information, but outside of filing legal action, there's not a lot I can do.  Most lawyers (hell, even the credit bureaus) won't touch any sort of default until at least 30 days  have passed, so it seems prudent to wait and see.  So to answer your question directly, the longer things go, the lower my expectations.

[imsaguy]

I do think it's a viable business idea on some level. I believed it at one point, mostly because I wanted to believe.

But it's the volume of BTCST plus the extraordinary interest rates (over such a long time) that make me unable to believe it.

Possible, maybe. I just don't think that is what is actually taking place. If it weren't for my new bet, I would like to be wrong.

It's also very easy for a legitimate investment scheme to slip over into the realm of ponzi. I do tend to think it was a scam from the start, and that this business idea is the only one Pirate could propagate to justify borrowing so many coins. It was only a matter of time before someone realized how simple a bitcoin ponzi scheme would be to pull off. Inevitable.

Yes, saying D&T is "missing it" is pretty flippant. If that was his model:

1. Why was Pirate's appetite for more BTC seemingly insatiable, until he closed?

2. How was he able to promise consistent returns for such a long period of time?

3. Why has he not publicly stated interest compounding has ceased?

4. What is it about this claimed trading model that has left him seemingly short of quite a bit of BTC a week after closing?

I see being 'dense' goes both ways, because I already answered 1) a few posts up.

2) I expect business growth.

3) I can just imagine the additional stink people would make if he didn't pay total the interest due on things. I know its a drop in the bucket compared to the principal. It may have also just been an oversight.  I really don't know, he hasn't told me.

4) If he sells coins to investor Y at say $10, coins that weren't really his, but coins that he borrowed off you and I, he must return the coins to us.  In the past, the coins were slowly appreciating, so once they hit $11, investor Y would sell.  Well, he announced the closure and the price tanked.  So now investor Y doesn't want to sell.  Sure, pirate's got cash he could buy coins.  We all know trying to buying a bunch of coins on gox is going ot make the price jump like a SOB so that's a terrible option.  Meanwhile, investor Y's pissed that he's taking a loss.  Perhaps the contract from pirate guaranteed a certain minimum price for X amount of days.  A whole slew of scenarios could be there.  Regardless, the sudden closure has thrown a wrench in things.  Probably an overreaction on pirate's part, but Monday morning quarterbacks always pick the right play.

[imsaguy]

Do you really think there is a never ending line of rich fools out there lining up to buy bitcoins at over inflated prices week after week?

I think there are more than you're willing to give credit.

Further,by compounding the interest they would need to increase their appetite for btc or he would need to find increasingly more and more rich fools.

Please point me to a solid number that was verified by Maged or someone else reputable that indicates just how much was actually reinvested, because AFAIK, nobody really knows that answer.

[imsaguy]

And since as of late the questions seem to be directly posed at me, I'd like to say I don't speak for Pirate, nor have I talked to Pirate in the last day.  The last time I talked with Pirate was in his IRC channel for the Q&A with everyone.

[MrTeal]

And since as of late the questions seem to be directly posed at me, I'd like to say I don't speak for Pirate, nor have I talked to Pirate in the last day.  The last time I talked with Pirate was in his IRC channel for the Q&A with everyone.

I think it's more just that you were one of the people involved with the first pass through and profess to have a basic understanding of his system. Since Pirate has seen fit to grace us with an average of 1 or 2 lines a day in IRC, you fill in in his steed.

[thebaron]

One:
No rich idiots exist that buy 10% over price.  Period.  Certainly not enough to move 500K BTC a week every week into perpetuity.

I disagree.  Look at the spread that coinabul charges.  It is closer to 20%.

Um that is why coinabul isn't moving $5M in gold a week.  Hell they probably aren't moving $5M in gold this year.

Poor execution.  Does the owner even leave mommy's basement?

Actually I think whoever started it is smart. Even though the premiums are high, it's pretty much the only option out there if you want to convert BTC to hard currency almost completely anonymously and avoiding the prying eyes of the tax man. It's great if... say you are a SR vendor and need some way to get tens of thousands of dollars a week without the money passing through though a bank on your end. Sell the bullion to a local dealer or oraigslist for cash money...

[Coinoisseur]

I see being 'dense' goes both ways, because I already answered 1) a few posts up.

2) I expect business growth.

3) I can just imagine the additional stink people would make if he didn't pay total the interest due on things. I know its a drop in the bucket compared to the principal. It may have also just been an oversight.  I really don't know, he hasn't told me.

4) If he sells coins to investor Y at say $10, coins that weren't really his, but coins that he borrowed off you and I, he must return the coins to us.  In the past, the coins were slowly appreciating, so once they hit $11, investor Y would sell.  Well, he announced the closure and the price tanked.  So now investor Y doesn't want to sell.  Sure, pirate's got cash he could buy coins.  We all know trying to buying a bunch of coins on gox is going ot make the price jump like a SOB so that's a terrible option.  Meanwhile, investor Y's pissed that he's taking a loss.  Perhaps the contract from pirate guaranteed a certain minimum price for X amount of days.  A whole slew of scenarios could be there.  Regardless, the sudden closure has thrown a wrench in things.  Probably an overreaction on pirate's part, but Monday morning quarterbacks always pick the right play.

2) So much growth he doesn't seem to have a need to control how much inflow of investors there are? Opening up to the public with seemingly no limits or buy in rounds? I know this is an "internet" business but I thought the dotcom bubble and now facebook would have killed the idea of such growth.

3) An oversight he has never corrected, riiiiiiiight.

4) It's not sideline quarterbacking when he's the one who set out his payout rules. If anything it's amateur refereeing, heh.

[imsaguy]

2) So much growth he doesn't seem to have a need to control how much inflow of investors there are? Opening up to the public with seemingly no limits or buy in rounds? I know this is an "internet" business but I thought the dotcom bubble and now facebook would have killed the idea of such growth.

There wasn't unbounded growth.  There were people that weren't ever going to invest with Pirate.  There were people that were only going to invest X with Pirate.  Still others couldn't afford to buy more coins because they ran out of funds and/or the price was goin gup past their preferred purchase point.  That only leaves the new coins from mining and obviously, that's limited as well too. 

[Coinoisseur]

But when he started opening up to public BTC, did he ever say no? Even something growing by leaps and bounds would need to setup some controls such as investment rounds. Perhaps he is a wizard who can plan for a completely uncapped investment flow. So far I haven't seen anything past speculation at his business model, far from the confident proclamations of "I've figured it out and you might be able to as well if you are resourceful" from some Pirate backers a while ago.

2) So much growth he doesn't seem to have a need to control how much inflow of investors there are? Opening up to the public with seemingly no limits or buy in rounds? I know this is an "internet" business but I thought the dotcom bubble and now facebook would have killed the idea of such growth.

There wasn't unbounded growth.  There were people that weren't ever going to invest with Pirate.  There were people that were only going to invest X with Pirate.  Still others couldn't afford to buy more coins because they ran out of funds and/or the price was goin gup past their preferred purchase point.  That only leaves the new coins from mining and obviously, that's limited as well too.