MPOE-PR's list of things you always suspected were scams but never dared say so.

[MPOE-PR]

First off, this list doesn't include proven scammers. There's a different mechanism to handle those. That said, if you hold outstanding unpaid obligations from anyone on this list I'd certainly want to hear about it, either publicly or privately.

Second off, this list doesn't include nickel and dime outfits (which is why people like usagi aren't here). There's currently no mechanism to handle those (outside of reading the lending forum, I guess), but there's also not much incentive.

Third off, this list doesn't include well known, argued to death cases. That's why BFL isn't here: if you don't know by now that a lot of people are suspicious of them and for what reasons you're beyond help.

To sum up: large, dangerous, lurking just under the waterline. Taking the icebergs out of the high seas of Bitcoin finance one at a time.

This list is, as anything woman made (which you'll notice includes all men), subject to error. I will diligently endeavor to correct any actual errors as best I can. On the other hand, anyone and everyone included would claim the list itself and any part thereof is erroneous - simple game theory dictates it. Quite frankly I couldn't care less.

Finally, you'll have plenty of warning before showing up here. In general, I'll ask you some questions in whatever thread you're using to announce your thing and you'll fail to respond adequately. Note that simple stupidity isn't enough to make the cut, significant potential of harm to the clueless investor from interacting with your stupidity has to also be present.

The List

Bitfinex - coupla dudes picked up Bitcoinica's source as leaked by Taaki and are since herpderping around.

Btcjam - not a scam per se, just carries the scam-enabler torch dropped by GLBSE. Repayment rate of 77% declared by op (tho that's probably significantly overstated).

Picostocks - possibly the most laughable thing on the forum. Guy's gonna make a 100Th farm out of bitfuries and other stuff (after having bought 1000 bASIC boards bASIC never sold).

Coinlab/Coinbase/Coincrap - Multiple cases of stealing from users through the "canceling BTC sale when price goes up" scam, amplified by "pay anyone complaining on the forum" double-down. In any event their burn rate takes them out of the picture this year, so damage should be limited, but try and sit at a safe distance.

Opencoin's Ripple - closed source scamcoin built on top of an ill baked, badly designed reimplementation of the Federal Reserve. Owned by Jed Caleb (the first guy who stole from MtGox). Supported by some clueless VC funds, which led to absurd claims on obscure blogs ("larger than bitcoin") and a lot of noise on this forum from well known shill accounts (MisterBigg, JoelKatz etc) dragging some naive/new people along.

Bitcoin Foundation. Pretends with no basis to be representative for Bitcoin. Is organized as a swindle, in the sense that it takes "donations" in exchange for "membership" (ie, like any "investment club" out there) but it never reports income and expenditure. The head and treasurer are the same person (Peter Vessenes), a known confidence artist from the start-up congame, who already blew up a so-called Bitcoin venture or two (above) and who is actually using the donated Bitcoin for his own purposes on his own account. Sells reputation propping services to various known scams (BFL, MtGox etc). Steer as clear as at all possible.

MtGox Notorious fractional reserve "exchange". Famous for having nearly destroyed Bitcoin in 2009 and for having tried (unsuccessfully) to brand it as a Ponzi in 2013. The principal (Mark Karpeles) is currently on the hook with the DoJ for having lied in filings, which means any BTC you send to MtGox is practically speaking a donation to his defense fund.

BFL Collected large sums of BTC from the general public for the past ~18 months, principally via heavy google advertising and with the help of meanwhile notorious scammers and shills (like gigavps, lukejr, quite a pirate-like list) on the pretense they are to deliver ASIC mining technology. Blew most of the Bitcoin on hookers (Josh Zerlan) and blow, managed to buy some functioning chips from competitors (much like their earlier FPGA deliveries consisted of sanded off chips bought on the cheap) and are for the past few months trying to parlay token prototype deliveries into more orders. Any BTC you send to BFL is practically speaking a donation to the forum lolfund.

The ex-List

icbit.se - old site, suspected at some point coupla months ago of running as bucket shop. They did however fully honor their obligations to MP (to the tune of ~500 BTC) and made various changes to their code. I've not looked it into it since, and have currently no reason to suspect shenanigans.

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[nebulus]

Gigamining

[Atruk]

Gigamining

I thought that MP's opinion on Gigamining wasn't that it was a scam, but that it was just absolutely worthless. Mining bonds depreciate faster than a Chevy Celebrity in a demolition Derby.

[MPOE-PR]

Gigamining

I thought that MP's opinion on Gigamining wasn't that it was a scam, but that it was just absolutely worthless. Mining bonds depreciate faster than a Chevy Celebrity in a demolition Derby.

More importantly, much like in the case of BFL, it's been done to death. If anyone still doesn't get what the issue is with PMBs... well... what can you do anymore.

[BlackLilac Jordan]

Does BTC Jam really enable scams any more than #Bitcoin-OTC or this forum?

[DeathAndTaxes]

Interesting on the 77% stats for BTCJam.  I wonder how many lenders realize that if the successful repayment rate is 77% and the average interest rate is less than 29.9% then it is a capital sink.  Meaning that collectively the repayments are less then the amount lent.

Wonder if the JTCJam operators are willing to publish a ROIC% for the whole site.  My guess is -30% annualized.

[MPOE-PR]

Does BTC Jam really enable scams any more than #Bitcoin-OTC or this forum?

I think so. At the very least it makes an array of willful misrepresentations (such as "credit ratings" and claiming it prosecutes defaulters - tho in honesty dunno if that hasn't been abandoned in the meanwhile).

Interesting on the 77% stats for BTCJam.  I wonder how many lenders realize that if the successful repayment rate is 77% and the average interest rate is less than 29.9% then it is a capital sink.  Meaning that collectively the repayments are less then the amount lent.

Wonder if the JTCJam operators are willing to publish a ROIC% for the whole site.  My guess is -30% annualized.

I bet they don't realize it at all.

The main concern here is the noob pump, ie: new person joins BTC, it's kinda cool, buys himself one or two bitcoins, reads a little on the forum, plays a little with gribble, decides to try out this investment thing. Goes to BTCJam, "invests" his Bitcoin there, one to six weeks later he's "lost" it and well...that's that.

Out of 1,000 noobs a week 20 get lucky and make a profit (1% is a profit after all), they then report it and there's 20 happy customers on the forum. 980 make a loss and disappear, never to be seen again. Rinse and repeat and rinse and repeat and rinse and repeat. The widespread low level perception that "Bitcoin is a scam", how do you think that came to be? Twasn't the SEC, I'll wager.

Site can work these numbers for as long as Bitcoin exists, 20 success stories a week, 980 silent deaths a week, fiddy bitcoins in "profits" a month. Horrible story, imo.

[LoweryCBS]

Does BTC Jam really enable scams (...) ?

I think so. (...)

How would you describe the ideal crowd-sourced p2p-lending BTC-based operation?

[Tomatocage]

Btcjam - not a scam per se, just carries the scam-enabler torch dropped by GLBSE. Repayment rate of 77% declared by op (tho that's probably significantly overstated).

So it's basically just think of it as a really REALLY slow game of Satoshi Dice with less reward for a win.

[Walter Rothbard]

Does BTC Jam really enable scams (...) ?

I think so. (...)

How would you describe the ideal crowd-sourced p2p-lending BTC-based operation?

It might be worth asking if "crowd-sourced," "p2p," and "lending" all belong in the same sentence with "ideal."

[MPOE-PR]

Does BTC Jam really enable scams (...) ?

I think so. (...)

How would you describe the ideal crowd-sourced p2p-lending BTC-based operation?

I really don't think citizen finance has a chance. It's a specialist field, and for very good reasons.

That aside, D&T has a point above. Publishing default rates per loancount and per btc, ROIC%s (ideally as a usercount histogram, actually) with some frequency (monthly?) would do a lot to help transparency. Unfortunately all that transparency would accomplish would be highlighting the poor results of investors, leading to higher interest rates, leading to higher default rates in a spiral of ponzi.

[ThaddeusB]

Dead right on BTCJam.  The site enablers scammers in many ways  (e.g. forbidding lenders to contact buyers), makes false promises ("we'll report deadbeats to credit agencies soon..." has been "soon" since day 1), and in general has terrible customer service.  Unfortuantely, if you dare make a negative comment in the BTCJam thread some guy who thinks everyone but him is a fools because he is 2 for 2 on not getting scammed will jump in and insult you and reap praise on the site.

Reported repay rate (if not an unright lie) is inflated by scammers who repay a 1 BTC loan, then a 2 BTC loan to get a reputation and then stiff on two 10 BTC loans.  That looks like 50% repaid, but is really 13% (3/23) in terms on BTC.  I suspect the real repay rate is well under 50%. (And yah even teh claimed rate amounts to a huge -EV situation for lenders.)

[MPOE-PR]

Unfortuantely, if you dare make a negative comment in the BTCJam thread some guy who thinks everyone but him is a fools because he is 2 for 2 on not getting scammed will jump in and insult you and reap praise on the site.

For any values of "some guy" equal to Gweedo or w/e that muppet's name is.

[dust]

I always suspected that BTCJam was -EV.  It would be interested in seeing analysis of personal loans in the lending forum. (Excluding large loans, "banks", and deposit programs which would surely skew the results in the -EV direction)

[MPOE-PR]

I always suspected that BTCJam was -EV.  It would be interested in seeing analysis of personal loans in the lending forum. (Excluding large loans, "banks", and deposit programs which would surely skew the results in the -EV direction)

The problem with this is the hobbyist attitude. What I mean is: most people involved in BTC do it as a hobby, and the point of a hobby is to have fun. More importantly, the more fun it is the more work one's apt to put into it. Because of this, good results will be documented ad nauseam and bad results will not even be seriously considered, let alone written about. In fact it may be argued that even seriously considering whether something is +EV or -EV is not a good use of a hobbyist's time, because it may ruin their enjoyment of the entire thing (never count your money while you're sitting at the table sort of thing). To compound problems, most of these people don't have any education at all, and those who do sport degrees from rural agricultural colleges and whatnot.

Not that the sort of attitude and these sorts of problems aren't getting more and more prevalent in mainstream business too, or to quote Greenspun:

At this point you might ask "Hey, weren't you still on the Board?" Sure. But for most of this year Chip, Peter, and Allen didn't want to listen to me. They even developed a theory for why they didn't have to listen to me: I'd hurt their feelings by criticizing their performance and capabilities; self-esteem was the most important thing in running a business; ergo, because I was injuring their self-esteem it was better if they just turned a deaf ear. I'm not sure how much time these three guys had ever spent with engineers. Chuck Vest, the president of MIT, in a private communication to some faculty, once described MIT as "a no-praise zone". My first week as an electrical engineering and computer science graduate student I asked a professor for help with a problem. He talked to me for a bit and then said "You're having trouble with this problem because you don't know anything and you're not working very hard."

[Deprived]

The problem with this is the hobbyist attitude. What I mean is: most people involved in BTC do it as a hobby, and the point of a hobby is to have fun. More importantly, the more fun it is the more work one's apt to put into it. Because of this, good results will be documented ad nauseam and bad results will not even be seriously considered, let alone written about. In fact it may be argued that even seriously considering whether something is +EV or -EV is not a good use of a hobbyist's time, because it may ruin their enjoyment of the entire thing (never count your money while you're sitting at the table sort of thing). To compound problems, most of these people don't have any education at all, and those who do sport degrees from rural agricultural colleges and whatnot.

I partially agree with this.  The reason I don't fully agree is because different people's fun come from different aspects of running a business - some of which aren't as bad as others.  Here's my attempt to split up the hobbyists into a few categories (talking here primarily about ones that take in investment - though much of it also applies to ones that sell services).  Do note that this is ONLY

1.  The "I want to run a business" group.  A huge portion of BTC businesses fall into this category.  They're people with no experience of running businesses who want to do something to help/be a part of the community.  They have no clear plan of what they're doing and usually very shoddy reporting - as their fun comes from the DOING of it: reporting and actually making a profit for investors don't have much importance to them (though they vaguely hope they'll somehow luck into a profit).  In my view these people are actually a blight on the community - as they their enthusiasm sucks in investment which would be much better served being used for something productive.

2.  The "I want a profit" group.  The second largest portion of businesses (many are actually a mix of this and part 1) - especially prevalent in the mining sector.  These ones want to make some profit for themselves - and aren't that worried about things like being transparent, honest or fair to investors.  Their contracts are vague on details, strong on THEIR rights and weak on investors rights.  They ensure that even if their business is an abject failure they personally make money irrespective of how badly their investors do.  Their fun comes from personally making some money even if at the expense of investors rather than from turning a profit.  Many of these are borderline scammers - as they misrepresent their investments to get sales and don't properly disclose risks.  Reporting will tend to be of a higher quality than type 1 - their (personal) profit  and ability to attarct investors come from them looking fairly professional whilst actually losing investors' funds.  These are also of very little use to the community.

3.  The "Let's see how well I can do" group.  The tiny minority of hobbyist businesses.  Ones where the operator knows what to do and gets their enjoyment from running a successful (for them AND investors) business.  Part of that requires proper reporting and disclosure of risks - there's no fun or challenge in tricking people here (it's way too easy to do - as shown by the number of totally ridiculous schemes/businesses that have successfully leeched funds).  Actually making a profit for investors (and yourself) whilst surrounded by (and routinely dealing with) incompetents/scammers/idiots is a genuine challenge which a few will try to rise to.  Of course a lot of people who THINK they're in this group are actually in group 1.

As a hobbyist myself I'd like to think I'm in group 3 - but that's not really my call. 

The main difference between group 1 and 3 is competence.  Also group 3 will tend to be better at reporting negative news - they know sometimes things go wrong and that when they do the best approach is to face up to them, learn lessons from them and carry on.  Group 1 tend to try to hide bad news as they're embarassed about it, don't want to look bad and hope somehow it'll magically go away.  Group 2 report bad news, claim it was unexpected, blame it on someone/something else and move on: they don't need to address it - as their personal profits typically come from turnover rather than from profit so making a loss doesn't really harm them (other than in terms of long-term reinvestment - but they gave up on that as soon as they decided to make personal profit whilst investors lost out).

I'd contend that group 3 ARE hobbyists but otherwise don't meet the general complaint you had against hobbyists.  As their fun comes from the challenge of doing well, things going awry don't significantly detract from the fun: they just have to try a bit harder for a while to make up for it.  Which isn't to say that there's no fun in doing well - there definitely is.  But the harder it IS to do well, the more fun there is when you manage it.

[MPOE-PR]

These ones want to make some profit for themselves - and aren't that worried about things like being transparent, honest or fair to investors.  Their contracts are vague on details, strong on THEIR rights and weak on investors rights.

We've certainly seen a lot of this.

They ensure that even if their business is an abject failure they personally make money irrespective of how badly their investors do.

Isn't this how most fiat banks / corps are run? Buffett certainly seems to think so, and for a while at that.

But interesting classification I would say, certainly seems to jive well with the dataset. I guess you have a solid point re #3. After all, hobbyist astronomers discover new planets all the time and every day plenty of serious and competent people turn hobbies into serious business. I guess in my terms these would be hobbyists without the hobby attitude, which is what it boils down to: people can take their hobby seriously, people can treat their profession as if it were a hobby. Or in other words, driving on Sundays is no stigma. Being a Sunday driver is, and every day of the week at that.

[Deprived]

They ensure that even if their business is an abject failure they personally make money irrespective of how badly their investors do.

Isn't this how most fiat banks / corps are run? Buffett certainly seems to think so, and for a while at that.

Well yes - but I was talking about people doing it for a hobby, not doing it as profession/for a living.  If you do something for a living then you pretty much HAVE to make sure you cover your living expenses whether your investors make profit or a loss.

That's why I'd argue a competent hobbyist is a better investment than someone doing it for a living - as the hobbyist doesn't need to personally make a profit that covers the time/effort they put in (if they regularly DO then debatably it ceases to be a hobby). 

The problem around here is that there's plenty doing it for a hobby - but few with competence.  I'd argue that lack of competence is actually the root problem - with the hobbyist attitude exascerbating it by causing loads of incompetents to do the wrong thing (run a business they aren't competent to manage) for the right reason (to help/be a part of the community).

[MPOE-PR]

It's now been confirmed by Ari Asmar - owner of the real Can Electric - that they have no association with the re-branded bASIC.  A scammer tag needs to be applied right now, IMO.

Good grief.

Meanwhile, clowns are clowns.

[repentance]

The problem around here is that there's plenty doing it for a hobby - but few with competence.  I'd argue that lack of competence is actually the root problem - with the hobbyist attitude exascerbating it by causing loads of incompetents to do the wrong thing (run a business they aren't competent to manage) for the right reason (to help/be a part of the community).

Yes and no.  One factor which many Bitcoin enterprises have had to deal with is explosive growth - growth which they have neither the financial resources nor the experience to handle. 

Outside of Bitcoin, you can often "learn on the fly" because you're not going to have people throwing hundreds of thousands of dollars at you a few weeks after you've launched.  In Bitcoinland, your business can literally be taking a couple of hours a week of your time one month and the next month pretty much require a team of employees with different skill-sets who you can't yet afford to employ.

Hobbyists need to recognise their own limitations and plan for controlled growth before they even launch.  Past a certain point, it's neither possible nor desirable for a business founder to try to micro-manage all aspects of the operation.  You need to set your ego aside and find the best people available for the tasks which need doing as an enterprise grows.  You need to be willing to *shock*, *horror* refuse additional customers if you don't have the capacity to service them properly. 

The community are their own worst enemies in some ways.  They keep throwing money at businesses which have extremely limited capacity to absorb losses.  We know most of these businesses are so under-capitalised that a loss of even tens of thousand dollars is something they couldn't compensate and yet people insist on placing hundreds of thousands of dollars with them and just leaving it there.

The community also tends to hail new services as heroes and feed the egos of new service providers - perhaps in the process convincing those operators that they're more competent than they actually are.