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Author Topic: How is Bitinstant not at the top of this section?  (Read 4690 times)
crazylikeafox
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March 20, 2013, 08:53:00 PM
 #1

I'm a little bit curious how Bitinstant isn't at the top of this section all the time.  There are ~85 pages of people wondering where their money is in this thread:

https://bitcointalk.org/index.php?topic=128314.1640

Bitinstant almost certainly owes more people more coins/money/mtgox coupons than anyone else in this section by a long shot, yet they aren't in here.  People keep posting in that thread saying that they wish they had seen the thread sooner, because they sent them money before seeing it and their money is now off in space.  I have absolutely no evidence that it is a scam per se, but a healthy percentage of their transactions are resulting in money simply vanishing.  Whether technical error or outright fraud, we may never know, but it clearly needs to be brought out more into the open than that one thread in the newbies section that people apparently have a hard time finding.

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March 20, 2013, 09:30:11 PM
 #2

Usually they are pretty good about handling things, so I'd guess that this price spike has simply overwhelmed them. I'd be surprised if they ran with the money given how amazingly well they are doing as a business...

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March 20, 2013, 09:52:06 PM
 #3

Usually they are pretty good about handling things, so I'd guess that this price spike has simply overwhelmed them. I'd be surprised if they ran with the money given how amazingly well they are doing as a business...

Yeah, well, they need to start communicating.
crazylikeafox
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March 21, 2013, 12:07:38 AM
 #4

Usually they are pretty good about handling things, so I'd guess that this price spike has simply overwhelmed them. I'd be surprised if they ran with the money given how amazingly well they are doing as a business...

All signs point to them not doing "amazingly well as a business".  If you look at that thread, the problems run far deeper than price spikes.  They have been caught in a couple of outright lies and have gone for weeks without responding to issues.  In fact, if their business operated as they claim to operate it, there would be zero risk on their end regardless of price fluctuations.  Something major happened that they still haven't and may not recover from, and they won't say what it is.  Maybe it's a scam and maybe not, but if the net result is the same - customer money being lost - the reason doesn't really matter much.  People still need to be warned.

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March 21, 2013, 01:19:34 AM
 #5

As I suspected:
Just received this via email:

Quote from: Seth
Hello,

Due to heavy customer volume and technical difficulties on our end I regret to inform you that we are experiencing massive delays in processing orders.

Rest assured your funds are safe and will eventually be processed. Our web developers are working over time to fix these problems.

Regrettably, it may be several days before your funds are successfully transferred. Again, your funds are safe and your order will eventually be processed and you will be entitled to a refund of your fees.

Thank you for your patience. You will be hearing from us again.

---
Sincerely,
Seth

So, hopefully my 6.1 BTC order is filled in a day or two. Sad

crazylikeafox
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March 21, 2013, 08:40:48 AM
 #6

As I suspected:
Just received this via email:

Quote from: Seth
Hello,

Due to heavy customer volume and technical difficulties on our end I regret to inform you that we are experiencing massive delays in processing orders.

Rest assured your funds are safe and will eventually be processed. Our web developers are working over time to fix these problems.

Regrettably, it may be several days before your funds are successfully transferred. Again, your funds are safe and your order will eventually be processed and you will be entitled to a refund of your fees.

Thank you for your patience. You will be hearing from us again.

---
Sincerely,
Seth

So, hopefully my 6.1 BTC order is filled in a day or two. Sad


Yeah,  not going to happen.  The simple fact of the matter is that their system is automated.  If they had the funds, all transactions would be processed in a couple of seconds.  Code doesn't just break for all of their interactions with all exchanges at once, and in the trillion-to-one situation that all exchanges simultaneously issued changes to their APIs that broke Bitinstant's code with no prior notice, they would contact the exchanges, find out the new processes, and modify their code.  Then they would run the transaction processing script again, and all transactions would be processed in a few seconds.  At most, in this imaginary worst-case situation that would never occur, it would take maybe taken 3 hours to recover.  We are at over 30 days now.

I have been a web developer for 12 years, and a desktop software developer for 7 years before that.  These excuses simply do not hold water, and the fact that they are lying about technical issues to buy time should send up immediate red flags. They seem to be on life support financially and are just processing enough older transactions, likely funded with newer transactions (aka a Ponzi scheme), to keep a small flow of positive posts in the Newbies section.  That serves to keep hope alive and delay people from suing or contacting law enforcement, but it will only work for so long.

Bitinstant started off as a legitimate service, which of course is why everyone has given them so much slack.  But something either catastrophic or nefarious has happened over there, and it is quite apparent that they don't have a way to stop it from careening over the cliff.  Having watched a few of these things unfold in the real world, whomever is left over there that has clean hands needs to go into self-preservation mode.  Take the reigns, come clean publicly about what has happened, cooperate with any resulting investigations, and either take the company into bankruptcy or find investors willing to stop the bleeding. You don't want to go down with this ship.  The jig is up.

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March 21, 2013, 09:23:22 AM
 #7

It's unlikely that an API error would take them this amount of time to resolve. I'm guessing that they sold more BTC than they could buy at gox (aka ran out of money), and a price spike caught them off guard.
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March 21, 2013, 09:39:04 AM
 #8

It's unlikely that an API error would take them this amount of time to resolve. I'm guessing that they sold more BTC than they could buy at gox (aka ran out of money), and a price spike caught them off guard.

This would certainly be the most innocent explanation.  However, for a service that promised BTC in a few hours, I'm not sure why they would ever sell more BTC than they had on hand plus the amount that they could buy in realtime to settle the transaction.  Surely one of the key design aspects of a system like this would be to make sure that under no circumstances were they taking on trading risk for even a single transaction.  They are a processing company, not an arbitrage company.  I can't imagine that they wouldn't have it programmed so that it automatically stopped taking orders for BTC the moment that they crossed into this territory.

So for those reasons, I still think there is a lot more to the story (the simple fact that they have been lying and have left us to speculate, points to much deeper issues as well).

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March 21, 2013, 01:46:18 PM
 #9

Bitinstant started off as a legitimate service, which of course is why everyone has given them so much slack.  But something either catastrophic or nefarious has happened over there, and it is quite apparent that they don't have a way to stop it from careening over the cliff.  Having watched a few of these things unfold in the real world, whomever is left over there that has clean hands needs to go into self-preservation mode.  Take the reigns, come clean publicly about what has happened, cooperate with any resulting investigations, and either take the company into bankruptcy or find investors willing to stop the bleeding. You don't want to go down with this ship.  The jig is up.

Certainly this matches past experience with blowing up ventures, in general speaking.

It's unlikely that an API error would take them this amount of time to resolve. I'm guessing that they sold more BTC than they could buy at gox (aka ran out of money), and a price spike caught them off guard.

This would certainly be the most innocent explanation.  However, for a service that promised BTC in a few hours, I'm not sure why they would ever sell more BTC than they had on hand plus the amount that they could buy in realtime to settle the transaction.  Surely one of the key design aspects of a system like this would be to make sure that under no circumstances were they taking on trading risk for even a single transaction.  They are a processing company, not an arbitrage company.  I can't imagine that they wouldn't have it programmed so that it automatically stopped taking orders for BTC the moment that they crossed into this territory.

So for those reasons, I still think there is a lot more to the story (the simple fact that they have been lying and have left us to speculate, points to much deeper issues as well).

It'd seem from randomly going through that thread that it's a list of people having issues which are then subsequently resolved only for new people to have new (or similar) issues later, which also get resolved. 30 days certainly doesn't sound too good but it also doesn't seem to actually be the case? I've not pored over the thread though, so maybe I've missed something.

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crazylikeafox
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March 21, 2013, 05:49:14 PM
 #10

It'd seem from randomly going through that thread that it's a list of people having issues which are then subsequently resolved only for new people to have new (or similar) issues later, which also get resolved. 30 days certainly doesn't sound too good but it also doesn't seem to actually be the case? I've not pored over the thread though, so maybe I've missed something.

The problem is that what you just described is a Ponzi scheme, and those tend not to work out very well.  My gut feeling is that someone - most likely an insider - made off with their float.  That would include all of their cash in the bank, their BTC, etc. that they had for operating the business, plus all customer funds that happened to be in on that day.  As long as new money keeps coming in, they'll be able to keep the charade up, but I have never heard of one of these things lasting, and it appears that the natives are getting restless.  My guess is that the massive delays have caused the flow of new money to dwindle, which means that this thing is coming to an end sooner than later.  The email they sent yesterday is a pretty good indication that they have or are about to reach their breaking point.

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March 21, 2013, 06:47:25 PM
 #11

The problem is that what you just described is a Ponzi scheme, and those tend not to work out very well.  My gut feeling is that someone - most likely an insider - made off with their float.  That would include all of their cash in the bank, their BTC, etc. that they had for operating the business, plus all customer funds that happened to be in on that day.  As long as new money keeps coming in, they'll be able to keep the charade up, but I have never heard of one of these things lasting, and it appears that the natives are getting restless.  My guess is that the massive delays have caused the flow of new money to dwindle, which means that this thing is coming to an end sooner than later.  The email they sent yesterday is a pretty good indication that they have or are about to reach their breaking point.

Why a Ponzi? If Ford Motors had a support board somewhere it'd look the same, people coming in with complaints, complaints getting resolved, new people coming in with new (or rehashed old) complaints.

Your theory seems highly speculative.

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March 21, 2013, 10:40:47 PM
 #12

The problem is that what you just described is a Ponzi scheme, and those tend not to work out very well.  My gut feeling is that someone - most likely an insider - made off with their float.  That would include all of their cash in the bank, their BTC, etc. that they had for operating the business, plus all customer funds that happened to be in on that day.  As long as new money keeps coming in, they'll be able to keep the charade up, but I have never heard of one of these things lasting, and it appears that the natives are getting restless.  My guess is that the massive delays have caused the flow of new money to dwindle, which means that this thing is coming to an end sooner than later.  The email they sent yesterday is a pretty good indication that they have or are about to reach their breaking point.

Why a Ponzi? If Ford Motors had a support board somewhere it'd look the same, people coming in with complaints, complaints getting resolved, new people coming in with new (or rehashed old) complaints.

Your theory seems highly speculative.

Funding old orders that you couldn't deliver with money from new orders (that you won't be able to deliver unless and until further new orders come in) is the very definition of a Ponzi scheme.  They last until new orders stop or slow, as is beginning to happen here.  Then it all comes crashing down.

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March 21, 2013, 10:52:32 PM
 #13

That is assuming they don't have the funds. It MAY (but I agree it's unlikely) be that their dev can not API and they're just processing orders manually or what.
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March 21, 2013, 10:58:52 PM
 #14

Looks like they're seeking more support employees: https://www.hireart.com/login?token=cbfykjd8

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March 21, 2013, 11:13:33 PM
 #15

Its probably inadequate funds at specific exchanges.

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March 23, 2013, 09:18:18 AM
 #16

Possibly they dont have enough fiat at exchanges to actually buy coins when the customer orders them. Could be from a massive demand overtaxing their reserves.

They should raise some seed capital in such a  case.

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March 24, 2013, 07:22:54 AM
 #17

Possibly they dont have enough fiat at exchanges to actually buy coins when the customer orders them. Could be from a massive demand overtaxing their reserves.

That would be a reasonable explanation for a few days or even a week, but not for a month.  I think cashpayment.com, their cash deposit provider, pays them only a couple of days behind the initial transaction.  The cycle is continuing - they process a few orders in that thread at a time, then wait a few days to get some more money in from new orders and say nothing at all in the thread while the complaints again pile up.  Those new orders go unprocessed until more new orders arrive.  It's just a really bad sign and I can't believe anyone is still sending them money.  It may last for a while, but it really isn't possible for a scheme like this to end well.

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March 24, 2013, 01:06:53 PM
 #18

Possibly they dont have enough fiat at exchanges to actually buy coins when the customer orders them. Could be from a massive demand overtaxing their reserves.

That would be a reasonable explanation for a few days or even a week, but not for a month.  I think cashpayment.com, their cash deposit provider, pays them only a couple of days behind the initial transaction.  The cycle is continuing - they process a few orders in that thread at a time, then wait a few days to get some more money in from new orders and say nothing at all in the thread while the complaints again pile up.  Those new orders go unprocessed until more new orders arrive.  It's just a really bad sign and I can't believe anyone is still sending them money.  It may last for a while, but it really isn't possible for a scheme like this to end well.

This is pretty concerning as a mechanism. Any way you could you do a write-up on this, as documented as possible? If you can get enough data points to actually support what seems to be your gut feeling this could be going somewhere.

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March 24, 2013, 08:39:26 PM
 #19

Bump.

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March 24, 2013, 10:27:08 PM
 #20

That would be a reasonable explanation for a few days or even a week, but not for a month.  I think cashpayment.com, their cash deposit provider, pays them only a couple of days behind the initial transaction.  The cycle is continuing - they process a few orders in that thread at a time, then wait a few days to get some more money in from new orders and say nothing at all in the thread while the complaints again pile up.  Those new orders go unprocessed until more new orders arrive.  It's just a really bad sign and I can't believe anyone is still sending them money.  It may last for a while, but it really isn't possible for a scheme like this to end well.

This is pretty concerning as a mechanism. Any way you could you do a write-up on this, as documented as possible? If you can get enough data points to actually support what seems to be your gut feeling this could be going somewhere.

If you ask any of the people that have had to wait 3-4 weeks (some longer) to get their money with the only explanation being "technical difficulties" (an excuse that simply doesn't hold water) they will tell you it's more than a "gut feeling".  You can see this cycle playing out in their support thread.  Those are just the unprocessed transactions from forum members that choose to post publicly.   Also, I would imagine that someone from Bitinstant has seen this thread.  Rather curious that they aren't disputing any of it, don't you think?  They know that if someone were to pry even a little bit into the specifics of their "technical difficulties" that they would be caught in a massive, growing, lie.

I will try to get together what data I can from the outside, but it would take a whistleblower-type insider to provide actual proof (or the new order flow would have to slow or stop to the point where they simply couldn't process any more old transactions).  All I'm saying is that I know for certain they are lying about the technical difficulties, and transactions are getting processed several days, and in some cases several weeks, after the transactions are made on a site with the headline "Pay For Your Bitcoins in Under an Hour".  There are not many innocent explanations for the way this thing is playing out.

Even with their problems, they are still presenting statements like this in order to induce new orders: (from their FAQ)

"Our service aims to make most deposits happen instantly - within a matter of seconds in ideal cases, and in an absolute worst-case scenario we will still aim to have funds into your exchange account before a stated maximum deadline (on average about 60 minutes depending on various conditions)."

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