Details of Pirate's Investment Strategy

[EuSouBitcoin]

Anybody have any details on what Pirate was doing? Was it just a simple ponzi scheme or something else?

[kwukduck]

LOL you're kidding right?

He was doing;

Receive coins from idiot -> party hard
receive coins from another idiot -> party harder
receive more coins from more idiots -> buy sports car
receive some more -> get some hot escort girl
receive some more, tell people they got trolled -> party hard and go to Hawaii

[freeAgent]

This is my theory: https://bitcointalk.org/index.php?topic=104261.msg1143773#msg1143773

[dlasher]

so much... stuff.. being said.

If you believe what pirate himself posted back in November:

https://bitcointalk.org/index.php?topic=103623.msg1137230#msg1137230

then here was his business:

The Business:
Over the last few months I have been selling BTC to a group of local people.  Now this is a don't ask don't tell group of people so I can't tell you exactly where and to whom the coins ultimately end up with but so far its been pretty painless.   During this last week I maxed out my available coins both personally and "leased" from other members and they needed a lot more.  Up until now, I have dealt with my core group of friends and been able to handle the requests, but they seem to be getting larger and more frequent.  So now I'm looking into other methods for keeping a consistent storage or on-demand availability of coins.  I have two plans available for those sitting on coins.

On-Demand
When an order comes in that is over what I have available I'll send out a request to users in this plan requesting the total needed.  The first to respond gets the deal and the transfer is made.  These coins will be tide up for 1 business day to give me enough time to settle the transaction and acquire the coins to return. This plan pays a flat 3.5%.

Storage
This plan works as an ongoing commitment.  You would send coins anytime to the address provided and you would earn interest on a daily basis.  You can withdraw your balance at anytime, but I do request that you give me a couple hours to insure I have coverage for the next order.  Interest payments are paid out ever 3 days until either you withdraw the funds or my local dealings dry up and I can no longer be profitable. This plan pays 1% per day.

Now I would hope to have enough people on the storage plan that I wouldn't have a need for the on-demand but I'll see how it goes.  I ultimately want the ability to provide coins at anytime and any amount for these guys and we can all share in the profits.

I've created my own custom management software that I've built to monitor deposits, withdraws and interest payments.  As this gets bigger I'll build a front end for it so users can view and manage there account and maybe putting that domain btclending.com to good use.   

For more information send me a PM or just ask below.  You can check out my OTC ratings in my signature.

Edit: I forgot to mention that dealing with anything less than 50BTC is more work than its worth so I've made that the minimum on both plans.

Thanks

That's consistent with conversations I've had with him, sidebar, about potential $USD investors.

My 'theory' at the moment is poor planning combined with what was essentially a 'run' on his bank. http://en.wikipedia.org/wiki/Bank_run

Together, down goes the house.

Not that hard to figure out, and given the same circumstances, could happen to your local "community" bank.

[freeAgent]

so much... stuff.. being said.

If you believe what pirate himself posted back in November:

https://bitcointalk.org/index.php?topic=103623.msg1137230#msg1137230

then here was his business:

The Business:
Over the last few months I have been selling BTC to a group of local people.  Now this is a don't ask don't tell group of people so I can't tell you exactly where and to whom the coins ultimately end up with but so far its been pretty painless.   During this last week I maxed out my available coins both personally and "leased" from other members and they needed a lot more.  Up until now, I have dealt with my core group of friends and been able to handle the requests, but they seem to be getting larger and more frequent.  So now I'm looking into other methods for keeping a consistent storage or on-demand availability of coins.  I have two plans available for those sitting on coins.

On-Demand
When an order comes in that is over what I have available I'll send out a request to users in this plan requesting the total needed.  The first to respond gets the deal and the transfer is made.  These coins will be tide up for 1 business day to give me enough time to settle the transaction and acquire the coins to return. This plan pays a flat 3.5%.

Storage
This plan works as an ongoing commitment.  You would send coins anytime to the address provided and you would earn interest on a daily basis.  You can withdraw your balance at anytime, but I do request that you give me a couple hours to insure I have coverage for the next order.  Interest payments are paid out ever 3 days until either you withdraw the funds or my local dealings dry up and I can no longer be profitable. This plan pays 1% per day.

Now I would hope to have enough people on the storage plan that I wouldn't have a need for the on-demand but I'll see how it goes.  I ultimately want the ability to provide coins at anytime and any amount for these guys and we can all share in the profits.

I've created my own custom management software that I've built to monitor deposits, withdraws and interest payments.  As this gets bigger I'll build a front end for it so users can view and manage there account and maybe putting that domain btclending.com to good use.   

For more information send me a PM or just ask below.  You can check out my OTC ratings in my signature.

Edit: I forgot to mention that dealing with anything less than 50BTC is more work than its worth so I've made that the minimum on both plans.

Thanks

That's consistent with conversations I've had with him, sidebar, about potential $USD investors.

My 'theory' at the moment is poor planning combined with what was essentially a 'run' on his bank. http://en.wikipedia.org/wiki/Bank_run

Together, down goes the house.

Not that hard to figure out, and given the same circumstances, could happen to your local "community" bank.

That explains exactly nothing about how he made positive returns, much less in the amounts he was supposedly getting, for victims investors.  Could you summarize in your own words how Pirate made 7% returns (in BTC) weekly by taking your Bitcoin, selling it for cash, and then...purchasing Bitcoin back?  He would have to have been doing MASSIVE volume, and there is no way his local "friends" could have supported this sort of scheme based only on their desire for purchasing Bitcoin.  They could have gotten their Bitcoin anonymously from BitInstant or even through an exchange (as long as they aren't withdrawing, you can purchase Bitcoin anonymously easily online).  This makes zero sense as a business unless there is something I'm missing.  Maybe you could explain it.

[dlasher]

That explains exactly nothing about how he made positive returns, much less in the amounts he was supposedly getting, for victims investors.  Could you summarize in your own words how Pirate made 7% returns (in BTC) weekly by taking your Bitcoin, selling it for cash, and then...purchasing Bitcoin back?  He would have to have been doing MASSIVE volume, and there is no way his local "friends" could have supported this sort of scheme based only on their desire for purchasing Bitcoin.  They could have gotten their Bitcoin anonymously from BitInstant or even through an exchange (as long as they aren't withdrawing, you can purchase Bitcoin anonymously easily online).  This makes zero sense as a business unless there is something I'm missing.  Maybe you could explain it.

Time is money. Money is time. Clients pay %markups for instant availability, for anonymity.

Let me give you two possible examples:

First example:
Let's assume you wanted to try to play the market, say $50k a month. (Pocket change for any real market wizards.)  You didn't want to keep large amounts of cash or btc tied up, but to be able to jump in/out of the market at will, without leaving IRS-related ripples.

Today, that's impossible.
-- Sell BTC today, and tell me how long it is till you have $real-money$ in your hand? 3 days? 5 days?
-- Have cash in your hand? How long till you get BTC? 48 hours? more?
-- every > $10k transaction is entitled to fairly high levels of visibility.

What kind of percentages would someone be willing to pay to reduce that to 4 hours? 2hours? Is it worth a 10% markup?

In the financial trading world, a company called "Spread Networks" spent $millions$ of $usd$ to build a new fiber route between Chicago and New York, just to shave a few MS off that path... and the financial houses paid happily just for a few milliseconds of advantage. (http://www.forbes.com/forbes/2010/0927/outfront-netscape-jim-barksdale-daniel-spivey-wall-street-speed-war.html)

Second example:
Let's assume you are moving "product X" from one part of the world to another. You don't want to leave a money trail. You need someone on each end willing to move $$$/BTC in large amounts. you don't care at ALL about the 10% ding. You don't care what the market price is, because you're moving in/out of btc.

I'm not sure why these concepts are either so hard to understand or so difficult to believe. I'm not saying it's impossible that bts&t was a scam. I'm not saying it's impossible that it was a ponzi. I'm not saying Pirateat40 is a standup guy who will return all the money.

I'm saying, just because you don't understand it, doesn't make it impossible.

[labestiol]

This is my theory: https://bitcointalk.org/index.php?topic=104261.msg1143773#msg1143773

My theory is close to yours, except that he was running a ponzi from day one (WhyTF would he borrow at 7%/week ?). GPUMax always have been used to get clean coins (who else use it anyway ?).
And now he's going to default on his debt, declare bankruptcy, and run with his clean coins.

We'll see if he indeed declare bankruptcy, and if indeed GPUMax rates go down to a more realistic level.

[bitlane]

he was running a ponzi from day one.

I still don't believe this. He simply got in over his head, after it grew exponentially with PPT offerings.

GPUMax always have has been used to get clean coins.

This is more plausible.

[labestiol]

he was running a ponzi from day one.

I still don't believe this. He simply got in over his head, after it grew exponentially with PPT offerings.

The thing which makes me think that is his interest rates. Either he's stupid, and thought we would find a way to make it profitable, either he's smart and it was a ponzi. Maybe i'm overestimating him

[Raoul Duke]

he was running a ponzi from day one.

I still don't believe this. He simply got in over his head, after it grew exponentially with PPT offerings.

I have to agree with bitlane. bitcoinmax was his downfall, the GLBSE PPT's not so much, as they kept his BTC supply fairly stable/predictable.

[bitlane]

I have to agree with bitlane. bitcoinmax was his downfall, the GLBSE PPT's not so much, as they kept his BTC supply fairly stable/predictable.

Sorry....I shouldn't have been so vague. I used 'PPT' as I was lazy....clarification below.

he was running a ponzi from day one.

I still don't believe this. He simply got in over his head, after it grew exponentially with LARGE PUBLIC PASSTHROUGH offerings.

GPUMax always have has been used to get clean coins.

This is more plausible.

[Vladimir]

LOL you're kidding right?

He was doing;

Receive coins from idiot -> party hard
receive coins from another idiot -> party harder
receive more coins from more idiots -> buy sports car
receive some more -> get some hot escort girl
receive some more, tell people they got trolled -> party hard and go to Hawaii

This one is the most plausible theory, among those mentioned above anyway.

[BIGMERVE]

>ask for some coins
>recieve some coins
>realize people trust you with money
>ask for more money
>get more money
>realize the potential for extreme wealth
>people trust you
>ask for way more money promising sweet returns
>get way more money
>realize you can get enough money to retire
>keeping asking for money
>get enough money to retire
>run

[bitlane]

>ask for some coins
>recieve some coins
>realize people trust you with money
>ask for more money
>get more money
>realize the potential for extreme wealth
>people trust you
>ask for way more money promising sweet returns
>get way more money
>realize you can get enough money to retire
>keeping asking for money
>get enough money to retire
>run

How much do you have invested ?

[BIGMERVE]

>ask for some coins
>recieve some coins
>realize people trust you with money
>ask for more money
>get more money
>realize the potential for extreme wealth
>people trust you
>ask for way more money promising sweet returns
>get way more money
>realize you can get enough money to retire
>keeping asking for money
>get enough money to retire
>run

How much do you have invested ?

I've got zero invested. But I'm not goin to say I'm smarter than everyone in spotting it as a Ponzi. If I had more disposable income I probably would've invested into him.

Everyone had at least some hunch in him being a ponzi, but it seemed like there were so many people vouching for him that it was hard not to invest.

[Phinnaeus Gage]

The Business:
Over the last few months I have been selling BTC to a group of local people.  Now this is a don't ask don't tell group of people so I can't tell you exactly where and to whom the coins ultimately end up with but so far its been pretty painless.   During this last week I maxed out my available coins both personally and "leased" from other members and they needed a lot more.  Up until now, I have dealt with my core group of friends and been able to handle the requests, but they seem to be getting larger and more frequent.  So now I'm looking into other methods for keeping a consistent storage or on-demand availability of coins.  I have two plans available for those sitting on coins.

On-Demand
When an order comes in that is over what I have available I'll send out a request to users in this plan requesting the total needed.  The first to respond gets the deal and the transfer is made.  These coins will be tide up for 1 business day to give me enough time to settle the transaction and acquire the coins to return. This plan pays a flat 3.5%.

Storage
This plan works as an ongoing commitment.  You would send coins anytime to the address provided and you would earn interest on a daily basis.  You can withdraw your balance at anytime, but I do request that you give me a couple hours to insure I have coverage for the next order.  Interest payments are paid out ever 3 days until either you withdraw the funds or my local dealings dry up and I can no longer be profitable. This plan pays 1% per day.

Now I would hope to have enough people on the storage plan that I wouldn't have a need for the on-demand but I'll see how it goes.  I ultimately want the ability to provide coins at anytime and any amount for these guys and we can all share in the profits.

I've created my own custom management software that I've built to monitor deposits, withdraws and interest payments.  As this gets bigger I'll build a front end for it so users can view and manage there account and maybe putting that domain btclending.com to good use.   

For more information send me a PM or just ask below.  You can check out my OTC ratings in my signature.

Edit: I forgot to mention that dealing with anything less than 50BTC is more work than its worth so I've made that the minimum on both plans.

Thanks

Pretend for a second that there is/was no small group of people that Pirate dealt with from the get-go, but virtually everything else was part of his business plan. What would such a business plan be called? Does is start with a P?

Although I have a certain empathy for those who've lost money in Pirate's venture I, for the life of me, can't believe the score of brainiacs on this forum who invested in such a scheme, for lack of a better word, after doing their due diligence and made aware by Pirate--a fairly new kid on the block at the time--how the operation makes money: selling bitcoins to his local group of don't ask don't tell people. This, in and of itself, is a red flag, and I'm not just saying that in the hindsight-is-20/20 sense. It's commonsense! If said brainiacs were approached prior to being Bitcoiners, or today, by some slick-talking guy on the street offering up 5, 10, 14, 17, or whatever percent weekly return in dollars (or other fiat), I'm sure as hell they wouldn't have, or will, touch such a venture with a ten-foot pool, yet there they were, sailing away with a Bitcoin Pirate.

That said, this is what I firmly believe. Either the main investors were in on this scammmmmmmmmmm or they lack commonsense business sense. Either way I, for one, would not feel comfortable conducting business with them. Either something nefarious is afoot, or idiot label applies.

If by some chance the above hits you below the belt, feel free to comment, stating your case on how you're a bright business man, but had alpaca socks pulled over your eyes on this one. Perhaps I'll learn something from any forthcoming exchange(s).

~Bruno~

[evolve]

Anybody have any details on what Pirate was doing?

Cocaine and hookers.

[Bitcoin Oz]

The Business:
Over the last few months I have been selling BTC to a group of local people.  Now this is a don't ask don't tell group of people so I can't tell you exactly where and to whom the coins ultimately end up with but so far its been pretty painless.   During this last week I maxed out my available coins both personally and "leased" from other members and they needed a lot more.  Up until now, I have dealt with my core group of friends and been able to handle the requests, but they seem to be getting larger and more frequent.  So now I'm looking into other methods for keeping a consistent storage or on-demand availability of coins.  I have two plans available for those sitting on coins.

On-Demand
When an order comes in that is over what I have available I'll send out a request to users in this plan requesting the total needed.  The first to respond gets the deal and the transfer is made.  These coins will be tide up for 1 business day to give me enough time to settle the transaction and acquire the coins to return. This plan pays a flat 3.5%.

Storage
This plan works as an ongoing commitment.  You would send coins anytime to the address provided and you would earn interest on a daily basis.  You can withdraw your balance at anytime, but I do request that you give me a couple hours to insure I have coverage for the next order.  Interest payments are paid out ever 3 days until either you withdraw the funds or my local dealings dry up and I can no longer be profitable. This plan pays 1% per day.

Now I would hope to have enough people on the storage plan that I wouldn't have a need for the on-demand but I'll see how it goes.  I ultimately want the ability to provide coins at anytime and any amount for these guys and we can all share in the profits.

I've created my own custom management software that I've built to monitor deposits, withdraws and interest payments.  As this gets bigger I'll build a front end for it so users can view and manage there account and maybe putting that domain btclending.com to good use.   

For more information send me a PM or just ask below.  You can check out my OTC ratings in my signature.

Edit: I forgot to mention that dealing with anything less than 50BTC is more work than its worth so I've made that the minimum on both plans.

Thanks

Pretend for a second that there is/was no small group of people that Pirate dealt with from the get-go, but virtually everything else was part of his business plan. What would such a business plan be called? Does is start with a P?

Although I have a certain empathy for those who've lost money in Pirate's venture I, for the life of me, can't believe the score of brainiacs on this forum who invested in such a scheme, for lack of a better word, after doing their due diligence and made aware by Pirate--a fairly new kid on the block at the time--how the operation makes money: selling bitcoins to his local group of don't ask don't tell people. This, in and of itself, is a red flag, and I'm not just saying that in the hindsight-is-20/20 sense. It's commonsense! If said brainiacs were approached prior to being Bitcoiners, or today, by some slick-talking guy on the street offering up 5, 10, 14, 17, or whatever percent weekly return in dollars (or other fiat), I'm sure as hell they wouldn't have, or will, touch such a venture with a ten-foot pool, yet there they were, sailing away with a Bitcoin Pirate.

That said, this is what I firmly believe. Either the main investors were in on this scammmmmmmmmmm or they lack commonsense business sense. Either way I, for one, would not feel comfortable conducting business with them. Either something nefarious is afoot, or idiot label applies.

If by some chance the above hits you below the belt, feel free to comment, stating your case on how you're a bright business man, but had alpaca socks pulled over your eyes on this one. Perhaps I'll learn something from any forthcoming exchange(s).

~Bruno~

Look at those who rated pirate highly on bitcoin-otc a bit more closely 

[bit-joker]

Funny to see people trying to rationalize Pirate's scheme. For him to pay 1% a day, he's supposed to be doing more than that. So...do you guys really think a +1%/day (please, read aloud) investment is sustainable?

It doesn't matter if he was laundering money or participating in something illegal (high risk/high reward) activity. There is no way he could sustain such returns in the long term.

It was clearly a Ponzi scheme. As for being a bank run, yeah, the same happened to Bernie Madoff. When people had to withdraw money from his fund, the scheme that worked for decades, fell.

[freeAgent]

That explains exactly nothing about how he made positive returns, much less in the amounts he was supposedly getting, for victims investors.  Could you summarize in your own words how Pirate made 7% returns (in BTC) weekly by taking your Bitcoin, selling it for cash, and then...purchasing Bitcoin back?  He would have to have been doing MASSIVE volume, and there is no way his local "friends" could have supported this sort of scheme based only on their desire for purchasing Bitcoin.  They could have gotten their Bitcoin anonymously from BitInstant or even through an exchange (as long as they aren't withdrawing, you can purchase Bitcoin anonymously easily online).  This makes zero sense as a business unless there is something I'm missing.  Maybe you could explain it.

Time is money. Money is time. Clients pay %markups for instant availability, for anonymity.

Let me give you two possible examples:

First example:
Let's assume you wanted to try to play the market, say $50k a month. (Pocket change for any real market wizards.)  You didn't want to keep large amounts of cash or btc tied up, but to be able to jump in/out of the market at will, without leaving IRS-related ripples.

Today, that's impossible.
-- Sell BTC today, and tell me how long it is till you have $real-money$ in your hand? 3 days? 5 days?
-- Have cash in your hand? How long till you get BTC? 48 hours? more?
-- every > $10k transaction is entitled to fairly high levels of visibility.

What kind of percentages would someone be willing to pay to reduce that to 4 hours? 2hours? Is it worth a 10% markup?

In the financial trading world, a company called "Spread Networks" spent $millions$ of $usd$ to build a new fiber route between Chicago and New York, just to shave a few MS off that path... and the financial houses paid happily just for a few milliseconds of advantage. (http://www.forbes.com/forbes/2010/0927/outfront-netscape-jim-barksdale-daniel-spivey-wall-street-speed-war.html)

Second example:
Let's assume you are moving "product X" from one part of the world to another. You don't want to leave a money trail. You need someone on each end willing to move $$$/BTC in large amounts. you don't care at ALL about the 10% ding. You don't care what the market price is, because you're moving in/out of btc.

I'm not sure why these concepts are either so hard to understand or so difficult to believe. I'm not saying it's impossible that bts&t was a scam. I'm not saying it's impossible that it was a ponzi. I'm not saying Pirateat40 is a standup guy who will return all the money.

I'm saying, just because you don't understand it, doesn't make it impossible.

I do think that me not being able to understand why or how this strategy would make money for Pirate (at the levels he claimed) is meaningful.  I have a degree in economics from a top university and studied finance.  I'm familiar with the trading arms race that's been going on for years, but I fail to see how that applies to Pirate in any way given the business model you quoted.  I can imagine Pirate's customers, if he was actually doing what that quote says he was doing, were major drug and/or gun smugglers.  It would have been something illegal and very lucrative in any case.  However, as I said before, people with that much money to spend (and people who enjoy the benefits of lucrative jobs in the black market) are probably going to find a cheaper pass-through.  If you're a "financial wizard", you'll certainly find a cheaper pass-through, as many exist.  To answer your questions:

-- Sell BTC today, and tell me how long it is till you have $real-money$ in your hand? 3 days? 5 days?

Why do you need so much cash on hand if you're a "financial wizard" where Pirate's volume is small potatoes?  You can convert money to/from USD/BTC all inside a brokerage account (or multiple brokerage accounts on multiple exchanges.  If you want to keep the IRS' eyes off whatever you're doing, you just have to manage your withdrawals intelligently.  This is, again, not a problem for a smart person.  Also, Pirate only had Bitcoin income from BTCST, not cash income.  He would not be very helpful in turning BTC into cash without getting IRS attention unless he was covering his tracks, which is again something that whoever would have bought Pirate's Bitcoin to trade could have easily done themselves.

-- Have cash in your hand? How long till you get BTC? 48 hours? more?

Actually, with a service like BitInstant you can have BTC in less than an hour.  I've heard it's even less than half that, and I'd expect they're faster than Pirate could have been.  They also charge lower fees.

-- every > $10k transaction is entitled to fairly high levels of visibility.

Do you think Pirate has some magic that prevents him from being highly visible which is unavailable to other people?