Details of Pirate's Investment Strategy

[Lethos]

I haven't given it that much though (Being honest here), but it would not surprise me, if it was a simple case of just buying Bitcoins really low from private trades (sometimes the exchange market) and selling higher later in private trades (sometimes the exchange market). Manipulating the market alone would of been too hard, but manipulating individuals would of been a lot easier. Especially if someone was eager to buy or sell and pirate gave them a means to get it done quickly. Most exchange are still pretty slow when it comes moving fiat currency to bitcoins, that premium of speed might of been his way of bridging the gap to earn that 10% or what ever a week. Maybe after almost a year of doing this, people got smarter and it became harder to get those bargain deals.

His own OTC rating shows he has feedback of people trading with him in various forms privately, like via paypal, dwolla etc. I'm sure on a small scale it's easy to see if someone didn't know the market price that well you could low ball them and buy at 9 when they could get 10 or 11. With the inverse being true as well. This could be pretty profitable if he swooped up enough of the lending market regularly at a good price.

How he managed to scale this up I don't know but the lending forum is filled with trades which occur suddenly and quickly but no public info is posted about the trade that actually occurred, or if it did they individual preferred to be anom.

Lets face it, very few real life business' could manage the profits he promise, the few that offer 5000+% annual returns are payday loans here in the uk. They get away with it, for the risk they take, the ease and speed in which clients get the loan done. Stands to reason it's possible the same vaguely similar thing was being done. He took advantage of those who needed a cash out now and did his best to make huge profits. While I don't think he got involved in high interest loans, he did below market value trading to have the exchange happen in a matter of minutes instead of days.

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[BIGMERVE]

If this was true more people would be coming forward saying they traded privately with Pirate.

[Lethos]

If this was true more people would be coming forward saying they traded privately with Pirate.

I'm sure their is a multitude of reasons why they have not, it is more of a guess, just like everyone else's.
Most likely they were not high profile members of any community, thus aren't going to be noticed if they say anything concerning pirate they might not even be here any more. A calculation I'm sure he factored in when he choose those trades.
Meh, doesn't bother me what he was doing or pretending to do. All that matters now to the investors is they get what they feel was owed, back.

[mp420]

No matter what we suppose Pirate was doing, with growing debt at 3300% APR he had effectively crippled himself and invited everyone else to drive him out of the market. This is why I'm sure it was a ponzi scheme, or if it wasn't that initially, it was a ponzi from very early on, after the first competitors emerged in his market niche, with much more agility and freedom than someone who owes a fortune and has extremely high capital expenses.

If he had actually succeeded initially, he'd have paid out all of his high-interest debts very early and sought cheaper debt from fiat lenders.

[bitlane]

Is this the Bitcoin Savings & Trust C.S.I. thread ?

Should I assume that other than myself, all other users that have posted in this thread have a grand total of 3.762 BTC 'invested' combined ?

Way to go ! Save us....this is a PERFECT time for an in depth study and breakdown of the situation. NEW news is always comforting.

[Cluster2k]

It seems to me whatever Pirate's strategy was it was going to fail sooner or later.  It's not a case of 20/20 hindsight.  It was stated by myself and many other people before the collapse.

- I remember reading an IRC log where Pirate was openly threatening people to stop pushing the price of bitcoins up.  He even ended his IRC session with a comment along the lines of 'okay, I'm pulling the plug.  Watch out everyone'.  If his strategy required the market moving in a particular direction of his liking then it was doomed to fail.  Anyone who has ever invested in currencies/precious metals/shares/etc knows the market moves against you very often, and at completely unexpected moments.

- There is a lot of current speculation that Pirate may have been buying bitcoins on behalf of actors who most in civil society would consider 'unsavoury', to put it mildly.  If so, Pirate has more to fear from his clients than anyone chasing him for bitcoin payouts if the deals go sour.

[BIGMERVE]

He might have started off BTCST with good intentions, but got power hungry and greedy. He might have realized that he could easily run with the money. It will be easier for him than if he had run with the equivalent in USD. Much easier.

[bitlane]

He might have started off BTCST with good intentions, but got power hungry and greedy. He might have realized that he could easily run with the money. It will be easier for him than if he had run with the equivalent in USD. Much easier.

Not exactly.

When I spoke to him on the telephone, he explained to me that he was initially using the funds to feed starving children in 3rd world countries, but due to Donation problems and UN Sanctions, he was unable to replenish his 'working wallet' bitcoins that were an integral part of the operation. He recognized everything beginning to go 'down hill' following the assassination of Osama Bin Laden.

[Lethos]

It probably went all pear shaped when he got his paypal account shutdown. 
They'll probably release his funds in 3-6months.

[BIGMERVE]

It probably went all pear shaped when he got his paypal account shutdown. 
They'll probably release his funds in 3-6months.

Why would he be using PayPal?

[Micon]

1)  its 7% per week.  you can stop right there.

2) https://docs.google.com/spreadsheet/ccc?key=0Ah0rJ1eK8mwpdEs2MFRfbGQybGhNamo1aGhDSURaT1E#gid=0

here is a spreadsheet that shows if u invest $100 at 7%/wk compounding u have $130 trillion in 8 yrs

[bitlane]

here is a spreadsheet that shows if u invest $100 at 7%/wk compounding u have $130 trillion in 8 yrs

Since I seem to be a bit 'short' after this latest debacle, is there any way I can invest with you for 7% and still become a millionaire ?


I can start with 50 BTC....so long as you can 'hold' the investment for a few years...LOL

[moni3z]

Seems the strategy is pretty obvious:

https://bitcointalk.org/index.php?topic=90327.msg1048502#msg1048502
https://bitcointalk.org/index.php?topic=50822.msg1048498#msg1048498

Starting today, I've lifted the referral only requirement to open a Savings account.
Any account that holds more than 5k BTC will automatically be upgraded to a Trust account on that day.

Translation: everything going to hell, need fast injection of new ponzi cash to cover the withdrawal run

[makomk]

Why would he be using PayPal?

Funnily enough, IIRC we know he was actually using Paypal to trade bitcoins for USD and vice-versa in #bitcoin-otc. It's quite likely that was just an attempt to gain the trust of the community though.

[hannesnaude]

I am baffled by all the posters who still don't believe it was a ponzi. Could any / all of you please expand on why you still don't believe this?
Stated another way: How would YOU identify a ponzi? Forget about pirate. Let's say a new opportunity arises in the lending market: call it Buccaneer Investments offering x% return. Under which circumstances would you consider Buccaneer to most likely be a ponzi scheme (which does not necessarily imply that you won't invest in it?)
-Is it a function of x?
-Of the reputation of the person running it?
-Of the amount of detail that is revealed about the underlying business? 

What would have to change relative to what we currently know about the BTCST situation before you would consider "ponzi scheme" the most likely situation?

[BadBear]

I think most have conceded, but some are still holding out hope for the 9th and that something magical will happen.

Also keep in mind some of the ones saying they don't think it's a ponzi have to say that, since they took other peoples money to invest in it. Big ol can of legal worms there.

[Cluster2k]

I am baffled by all the posters who still don't believe it was a ponzi. Could any / all of you please expand on why you still don't believe this?  

People fall for Ponzi schemes all the time.  Here's a recent one from meatspace in Poland:

http://www.ft.com/cms/s/0/0c6e25e4-e553-11e1-b758-00144feab49a.html#axzz25PQZ8bGS

Poland’s Amber Gold to liquidate

At a time when banks are paying only about 6 per cent a year on deposits (backed by state guarantees), which also face a 19 per cent capital gains tax, Amber Gold was promising an untaxed guaranteed return of up to 16.5 per cent for investments in gold – a metal that has seen its price stagnate in recent months.

Some are easier to spot than others.  The above case was paying up to 16.5%pa which is well above prevailing interest rates, yet it touted itself as a guaranteed place to invest (according to ads posted by the company).  Pirate was offering 3400%pa.  Not hard to work that one out.

[hannesnaude]

People fall for Ponzi schemes all the time.  Here's a recent one from meatspace in Poland:

Sure, I understand that people fall for them, and there is a gray zone between commonplace returns and what-sort-of-idiot-do-you-take-me-for returns where I can see myself falling for such a scam as well. What baffles me is people who still believe that BTCST wasn't a ponzi. Some of them even appear to have accepted that they will never see a single satoshi, yet they come up with alternative explanations of what could have gone wrong. These are usually accompanied by the statement that no-one can prove that it was a ponzi.

Now, I am not asking for proof that it wasn't a ponzi. I am just asking for evidence. Any single scrap of evidence, however circumstantial. Is there any reason to believe that it was not a ponzi? Is there a single aspect of the scheme or of Pirate's behaviour which is atypical for a ponzi? Or is all of this wishful thinking (even from people who were allegedly not invested in BTCST)?

[n8rwJeTt8TrrLKPa55eU]

People fall for Ponzi schemes all the time.  Here's a recent one from meatspace in Poland:

Sure, I understand that people fall for them, and there is a gray zone between commonplace returns and what-sort-of-idiot-do-you-take-me-for returns where I can see myself falling for such a scam as well. What baffles me is people who still believe that BTCST wasn't a ponzi. Some of them even appear to have accepted that they will never see a single satoshi, yet they come up with alternative explanations of what could have gone wrong. These are usually accompanied by the statement that no-one can prove that it was a ponzi.

Now, I am not asking for proof that it wasn't a ponzi. I am just asking for evidence. Any single scrap of evidence, however circumstantial. Is there any reason to believe that it was not a ponzi? Is there a single aspect of the scheme or of Pirate's behaviour which is atypical for a ponzi? Or is all of this wishful thinking (even from people who were allegedly not invested in BTCST)?

The problem is that for most people, since we've been kids, we've been taught that others are "innocent until proven guilty".  Nice humans (which most of us are) like to trust other humans.  And our skeptical bullshit detectors have been thoroughly dulled from living under paternalistic governments that (claim to) protect us from harm via a plethora of three-letter agencies.

Whereas Bitcoin is a truly free market, the first pseudonymous free market that many people have been exposed to in their entire lifetime.  The rules for Bitcoin are quite different from face-to-face life under governments, but it takes a while for that difference to sink in.  Among other things, life under true freedom includes a necessity to do more thorough due diligence on all claims, to realize that if we screw up there is no recourse, and to therefore assume "guilty until proven innocent" for anyone and anything.  You have no way of knowing whether the person that's asking you for money, is one of the 90% good guys or one of the 10% crooks.

The methodology you advocate is totally correct for the Bitcon universe, because you assume guilt first, and then request falsifiability: prove to me it's not a scam.  Give me fine-grained details.  I need to be 99.999% certain before I grant you legitimacy, or give you a single penny.  These are the right questions to ask under a pseudonymous free market with no legal recourse.  

But, unfortunately, in the Pirate/ZT/Mybitcoin/etc cases (and other borrowing requests currently running) the attitude seems to be to assume innocence and put the burden of proof on the doubters.  Skeptics, instead of being treated as people who perform a valuable service, are demonized.  That attitude might not be too dangerous in meatspace, but will lead to self-destruction in an environment where it's trivial for smart crooks to construct unverifiable stories, and then get away scot-free with virtually no repercussions.

[the_thing]

People fall for Ponzi schemes all the time.  Here's a recent one from meatspace in Poland:

Sure, I understand that people fall for them, and there is a gray zone between commonplace returns and what-sort-of-idiot-do-you-take-me-for returns where I can see myself falling for such a scam as well. What baffles me is people who still believe that BTCST wasn't a ponzi. Some of them even appear to have accepted that they will never see a single satoshi, yet they come up with alternative explanations of what could have gone wrong. These are usually accompanied by the statement that no-one can prove that it was a ponzi.

Now, I am not asking for proof that it wasn't a ponzi. I am just asking for evidence. Any single scrap of evidence, however circumstantial. Is there any reason to believe that it was not a ponzi? Is there a single aspect of the scheme or of Pirate's behaviour which is atypical for a ponzi? Or is all of this wishful thinking (even from people who were allegedly not invested in BTCST)?

It is called denial. People want to believe in good things. When something spoils their good beliefs, they desperately search for even the stupidest excuses, so they don't have to stop believing.