Pirate accomplices

[payb.tc]

Pirate's debt is denominated in BTC and his interest obligations are denominated in BTC.  I don't see how an "unstable currency" is a problem, as long as you make certain assumptions.

Say the price of BTC doubles. Now, Pirate's customers need half as much BTC as they did before.

why?

that assumes their investment was denominated in USD.

as with my 1800 BTC shakaru debt, the value of the coins in USD was irrelevant. To me the debt was always 1800 BTC.

whether USD/BTC triples or halves... i just want the coins.

[cablepair]

[teflone]

Pirate's debt is denominated in BTC and his interest obligations are denominated in BTC.  I don't see how an "unstable currency" is a problem, as long as you make certain assumptions.

Say the price of BTC doubles. Now, Pirate's customers need half as much BTC as they did before.

why?

that assumes their investment was denominated in USD.

as with my 1800 BTC shakaru debt, the value of the coins in USD was irrelevant. To me the debt was always 1800 BTC.

whether USD/BTC triples or halves... i just want the coins.

https://bitcointalk.org/index.php?topic=98684.msg1130274#msg1130274

Close to Washington ? 

[JoelKatz]

Pirate's debt is denominated in BTC and his interest obligations are denominated in BTC.  I don't see how an "unstable currency" is a problem, as long as you make certain assumptions.

Say the price of BTC doubles. Now, Pirate's customers need half as much BTC as they did before.

why?

Because half as many coins do whatever it is they need to do. Whether they're buying drugs or laundering money, they now need half as much BTC to do it.

that assumes their investment was denominated in USD.

No, it doesn't. It's independent of what denomination is used to measure the value of investments.

as with my 1800 BTC shakaru debt, the value of the coins in USD was irrelevant. To me the debt was always 1800 BTC.

whether USD/BTC triples or halves... i just want the coins.

You may think it doesn't affect you because you loan to someone a number of bitcoins and just expect a number of bitcoins back. And they may think it doesn't affect them because they deal with others in bitcoin amounts. But somewhere at the bottom there will be someone who cares what bitcoins are worth. There just isn't any enterprise that can operate in terms not connected to an amount of value either directly or indirectly other than by pure hoarding. And there's nothing you can hoard that will give you a significant net positive return over bitcoins. Value fluctuations ripple through the chain with bitcoins just as they do with dollars. And right now, bitcoin is much more volatile.

[payb.tc]

Pirate's debt is denominated in BTC and his interest obligations are denominated in BTC.  I don't see how an "unstable currency" is a problem, as long as you make certain assumptions.

Say the price of BTC doubles. Now, Pirate's customers need half as much BTC as they did before.

why?

Because half as many coins do whatever it is they need to do. Whether they're buying drugs or laundering money, they now need half as much BTC to do it.

that assumes their investment was denominated in USD.

No, it doesn't. It's independent of what denomination is used to measure the value of investments.

as with my 1800 BTC shakaru debt, the value of the coins in USD was irrelevant. To me the debt was always 1800 BTC.

whether USD/BTC triples or halves... i just want the coins.

You may think it doesn't affect you because you loan to someone a number of bitcoins and just expect a number of bitcoins back. And they may think it doesn't affect them because they deal with others in bitcoin amounts. But somewhere at the bottom there will be someone who cares what bitcoins are worth. There just isn't any enterprise that can operate in terms not connected to an amount of value either directly or indirectly other than by pure hoarding. And there's nothing you can hoard that will give you a significant net positive return over bitcoins. Value fluctuations ripple through the chain with bitcoins just as they do with dollars. And right now, bitcoin is much more volatile.

bitcoins are worth 1 BTC each.

[makomk]

1. Some guys on BTC-e stated they earned good money using Pirate scheme and withdrew money just in time.
2. Noone here said "I'm an idiot coz didn't withdraw my coins before the closure of Pirate's scam".

In a Ponzi, every cent of profit the "clever" people make is money that other investors lose. The people that invest in the scheme are guaranteed to lose money on average no matter how clever they all are, because it's a Red Queen's Race - the sooner everyone pulls out, the sooner the scheme collapses and the sooner they'd have had to have pulled out in order to avoid losing their shirts in the collapse.

That's why - if you're an utterly unethical, greedy scammer - it's to your benefit to convice as many of the other investors as possible that it's not a ponzi, that they're idiots who just don't understand the scheme if they think that it is, that anyone who claims otherwise is an evil troll slandering the good name of the scheme's operator, and so on and so forth. Sound familiar?

[SMTB1963]

Pirate's debt is denominated in BTC and his interest obligations are denominated in BTC.  I don't see how an "unstable currency" is a problem, as long as you make certain assumptions.

Say the price of BTC doubles. Now, Pirate's customers need half as much BTC as they did before. Yet Pirate still has to pay the same amount of interest. Does he now double his customer base?

In my hypothetical model, pirate has two sets of customers: The whale(s) who give him money to be cleaned, and his BTC depositors who expect 7%/week on their BTC balance.  The former don't want ANY bitcoins, they simply want to turn their dirty $ into clean $ as quickly as possible.  The latter only want their interest credited to their account weekly (and many never make any withdrawals).

If the price of BTC doubles, his whale customers care not.  Pirate's obligation to them is in dollars - and at 70 cents on their dollar.  He just buys/sells half the amount of coin with their money.  He still earns 30% USD in the process.

On the depositor side, pirate's 7% BTC interest obligation simply costs him 2X the USD it would if the BTC/USD price remained stable.  His 30% cut of the whale money easily covers this exposure.  If pirate's depositors make no withdrawals after the price doubling, his cash flow is unaffected.  He simply records a liability on his books...a liability that disappears if BTC prices drop to their previous level.

But guess what?  BTC/USD price never doubles in the near term, because pirate controls BTC/USD price!

[Frankie]

Pirate's debt is denominated in BTC and his interest obligations are denominated in BTC.  I don't see how an "unstable currency" is a problem, as long as you make certain assumptions.

Say the price of BTC doubles. Now, Pirate's customers need half as much BTC as they did before. Yet Pirate still has to pay the same amount of interest. Does he now double his customer base?

In my hypothetical model, pirate has two sets of customers: The whale(s) who give him money to be cleaned, and his BTC depositors who expect 7%/week on their BTC balance.  The former don't want ANY bitcoins, they simply want to turn their dirty $ into clean $ as quickly as possible.  The latter only want their interest credited to their account weekly (and many never make any withdrawals).

If the price of BTC doubles, his whale customers care not.  Pirate's obligation to them is in dollars - and at 70 cents on their dollar.  He just buys/sells half the amount of coin with their money.  He still earns 30% USD in the process.

On the depositor side, pirate's 7% BTC interest obligation simply costs him 2X the USD it would if the BTC/USD price remained stable.  His 30% cut of the whale money easily covers this exposure.  If pirate's depositors make no withdrawals after the price doubling, his cash flow is unaffected.  He simply records a liability on his books...a liability that disappears if BTC prices drop to their previous level.

But guess what?  BTC/USD price never doubles in the near term, because pirate controls BTC/USD price!

I would have thought posts like this are out of fashion.

Please explain why someone making 30% would need to borrow any money at all after the first few weeks.

[imsaguy]

I would have thought posts like this are out of fashion.

Please explain why someone making 30% would need to borrow any money at all after the first few weeks.

I loathe that it got brought up, but basically, the price wasn't dropping, so his liability wasn't magically dropping.  He never claimed to be making 30%, instead only confessing to something like 10%. When you factor in the 7% on the btc side, that leaves 3%.  Perhaps he thought growing was worth the continued debt load.

Even I will admit 30% is just stupid/crazy.

[JoelKatz]

If the price of BTC doubles, his whale customers care not.  Pirate's obligation to them is in dollars - and at 70 cents on their dollar.  He just buys/sells half the amount of coin with their money.  He still earns 30% USD in the process.

On the depositor side, pirate's 7% BTC interest obligation simply costs him 2X the USD it would if the BTC/USD price remained stable.  His 30% cut of the whale money easily covers this exposure.  If pirate's depositors make no withdrawals after the price doubling, his cash flow is unaffected.  He simply records a liability on his books...a liability that disappears if BTC prices drop to their previous level.

This model for Pirate has already been refuted. If this was his model, his number one priority would be getting rid of his high-interest debt. Since he was actually acquiring such debt as quickly as he could, this translates into another version of, "Pirate has some secret business strategy that makes so much money, he can afford to give tons of it away, and he just happens to like giving money away to people whose investment strategy is picking things that look exactly like Ponzi schemes."

[2112]

Please explain why someone making 30% would need to borrow any money at all after the first few weeks.

Dilution. You would want to dilute both the dirty money with cleaner money as well as dilute the investigative resources of whoever is after you.

Bernie Madoff unfortunately stole the spotlight from Bernie Ebbers.

And studying the scams of Bernie Ebbers is way more educational.

[malevolent]

I wonder why didn't Pirate offer, say, 2 or 3% a week (which is still a lot) would still warrant him a lot of ''investors'' and maybe he wouldn't run into these troubles... not to mention he would look a bit more credible and could keep more for himself. But maybe there is something more to this.

[P4man]

Please explain why someone making 30% would need to borrow any money at all after the first few weeks.

Dilution. You would want to dilute both the dirty money with cleaner money as well as dilute the investigative resources of whoever is after you.

If you want to dilute you have to rotate the money. Sitting on the same funds for 6 months (and thus owing 10x the principal) doesnt really help

[SMTB1963]

I would have thought posts like this are out of fashion.

Heh, I've never been very fashionable...except for a small period of time during the early 80s.

Please explain why someone making 30% would need to borrow any money at all after the first few weeks.

This model for Pirate has already been refuted. If this was his model, his number one priority would be getting rid of his high-interest debt.

OK.  If you need to stabilize the BTC/USD exchange rate, and you don't want to spend your own money buying enough BTC to control the market, you borrow the BTC.  In order to attract enough BTC investment, you have to offer a significantly higher ROR than other borrowers in the market, so you offer 7% (but only actually pay ~6%).  Sure, paying off your lenders with all the money you make is an option in the future, but doing so puts you long in BTC, and maybe you don't want that.  Remember, you're a money launderer.  You never risk your own money for anything.

As I stated earlier, I'm playing devil's advocate with these little theories I've been posting.  Just trying to hammer at the ponzi argument a little to see how well it stands up.  My best guess at this point is that while BTCST may not have started as a ponzi, it eventually became one.  Of course it's all academic at this point.

Anyways, thanks for all your replies to my unfashionable posts!  

[notme]

So you're saying unethical is preferable to stupid.  Thanks for admitting you feel this way.  I will be sure to avoid doing business with you in the future.

Oh noes you got me notme; I am shady.   That is why you won't find a single person with an unresolved complaint.   Feel free to take it that way and not do business with us.  

Then again we don't offer pie in the sky 3400% APR so I doubt you would be interested anyways.

Still why so grumpy?  Since I wrote that last post you "investors" have locked in another $300,000 or so in profits!  
What are you going to buy with your share?  

I'm not grumpy.  I broke even, my pass through customers made a handsome profit, and I got kudos for paying my customers out from my own pocket.  On top of that Matthew will owe me 200 BTC and Pirate may yet do a partial payout.  I've got nothing to complain about, just thought your reasoning was odd and decided to point it out.

[mila]

the Moon is made of Cheese.

true that. little kids know that.

e: typo

[ab8989]

Purely hypothetical...but it seems to me that if one runs in certain circles, one would know plenty of people willing to pay 90, 80, or even 70 cents on the dollar to clean/hide their money.  Maybe I'm missing something, but a steady stream of dirty funds wanting to be cleaned would certainly allow pirate someone to pay his 7%/week by running a BTC laundromat - no ponzi necessary.  Further, I think running a laundering scheme via BTC would be pretty durn complex...i.e., it couldn't be unwound quickly/easily/without significant loss if something unexpected occurs.

Others have already debunked this business plan based on the plain unnecessary costs of choosing to lend money at 3400%/year interest when something like 10%/year interest is much better choise.

However that is not the only argument to debunk this business plan.

The problem is that maybe you looked at the 30% profit of selling the coins and thought that when it is bigger number than the 7%/week interest, then the business is making money. Well it is not. The 30% profit is a one-time profit of selling the coins, but the 7%/week interest keeps on running till infinity until the debt is cleared. The coins that pirate has sold still remain as coins that pirate has lended and he needs to pay 7% for them on this week, another 7% the next week and 7% the week after that and pretty soon the whole 30% one-time profit is eaten and pirate has massive problems keeping paying the interest with no new profit in sight with those coins he has long sold. If you think that pirate solves the problem with new customers for more coins and pirate then lends new money to sell them that means running the traditional "running a massive loss but making it up in the volume" business plan.

I cannot think any other solution to the problem but pirate needs to start rotating his entire capital. Not just new money, but everything also from the beginning. Use the obtained cash to buy massive amounts of coins and sell them at profit again. This might work if pirate would rotate his entire lended capital every 2 weeks raking in new profits every 2 weeks.

However there are big problems in this sceme as well. The primary motivation to all this is money laundering, right? Typically money laundering works in an trivially normal established business which does not raise any eyebrows if somebody is caught involved in that. Additionally the volume of the global business must be so huge that the laundered money does not blip on the radar.

Now imagine that pirate needs to rotate his entire capital of 500k BTC ( or whatever ) in every 2 weeks. Annually it means that pirate would need to buy at annual level about 12500k BTC and sell them to the buyer which needs then to sell them in some place so that the fiat money coming from the end looks like it is plain normal vanilla money with nothing suspicious ( Where could he do that? ). 12500k BTC means USD125M money flow for pirate to buy coins with and then somebody to cash out. Sounds slightly nontrivial and if IRS gets hold of the wind, mr. pirate might be in trouble explaining where is he getting money to buy USD125M worth of bitcoin every year.

Somebody could think this whole business plan sounds ludicrous.

The exactly same argument can be said about any other business plan which involves a one-time profit. The massive profits need to rake in every couple of weeks. Using the lended capital to controlling the BTC price is another business plan where I don't see the frequency of the massive profits to be high enough and also needs to rotate huge amounts of capital very fast to obtain enough profits in this scheme as in here the profits can not be expected to be 30% per every rotation of the whole capital. Somebody could have seen this massive flow of capital if it really happened.

On the other hand unwinding the operation is trivially simple. Just use the same methods you use every 2 weeks to buy the coins and give them back to lenders and the massive debt and interest costs vanish instantly.

[RaggedMonk]

https://bitcointalk.org/index.php?topic=82560
Relevant?  Has anyone heard from OP since?

[sadpandatech]

https://bitcointalk.org/index.php?topic=82560
Relevant?  Has anyone heard from OP since?

hmm

"we know that even people who don't have a relationship with us are using it to launder."

"Pirate is a nice guy at heart, but he does business with some ugly people who I don't want coming back to me."

My bet is that it is Nakaska

Sounds like some dangerous territory...

[bitlane]

https://bitcointalk.org/index.php?topic=82560
Relevant?  Has anyone heard from OP since?

hmm

"we know that even people who don't have a relationship with us are using it to launder."

"Pirate is a nice guy at heart, but he does business with some ugly people who I don't want coming back to me."

My bet is that it is Nakaska

Sounds like some dangerous territory...

That was the first thing that popped into my head when I saw it as well - ZACH