-

[maqifrnswa]

here are two example systems that follows the spirit of LRM's initial IPO and should be fair and legal. I strongly prefer system 2, which is modelled after ADDICTION which successfully did that for the purchase of 22+ KNC Jupiters in 3 separate group buys purchased weeks apart, but trade as the same security. The difference is LRM wants to do reinvestment.

System 1 (more closely in line with the spirit of the IPO, but I don't like this since fees are still opaque):
1) shares were 300 MH/s, and split 3x so they are currently 100 MH/s. The total number of shares outstanding equals 75% of the current total hashrate.
2) When new hardware (that has already been ordered) arrives, shares split again so that the total number of shares outstanding equals 75% of the total hashrate.
3) LRM purchases hardware and pays bills with the remaining 25%
4) when new hardware arrives, every shares splits to keep it so that each share is 100 MH/s

System 2 (more economically/financially "correct" but people may not like it. System 2 is much easier to calculate share valuation, and easier to put economic pressure on LR to make good decisions):
1) shares were 300 MH/s, and split 3x so they are currently 100 MH/s. The total number of shares outstanding equals 75% of the current total hashrate.
2) When new hardware (that has already been ordered) arrives, shares split again so that the total number of shares outstanding equals 75% of the total hashrate.
3) At this point, LRM purchases new hardware by one of two methods:
3a) Raise funds from the community at a rate LR finds fair and covers expenses, and issues shares to those that invested at a rate of 1 share per 100 GH/s. For example, if in the future he wants to buy a 1 TH/s miner, her can sell up to 1000 more shares at whatever price he wants to sell them for and keep the rest (1000 minus what is sold) for himself/LRM as a fee to pay expenses (this is fair and expected, if he takes too much the market will reject his offering). The shares ARE NOT ISSUED (thus no dividends or dilution) until the hardware arrives and is mining. Risk and reward are placed directly on investors that want to increase the mining hashrate and think it is a good deal.
OR
3b) LRM buys hardware with internal funds and sells share on the open market at 100 MH/s. Here the assumption, for LR, is that he can sell the hashrate for more than he bought it for to cover expenses. LR takes all the risk and reward in 3b.
4) An exchange is set up so users can choose what they want their reinvestment percentage to be. If you liked the original 25%, then 25% of your dividends will buy new shares. These new shares are either from LRM (3b above) or from other users and acts to properly set the market for how much LR should pay for new hardware. If you don't want to reinvest (i.e., don't trust LR), then make it 0%. If you think LR makes great decisions and will make more money in the future, set it to 100%.


In both of the above cases, the value per share is continuously decreasing, but the number of shares you own is increasing to keep up with LRM growth. The first case is pretty much the way LRM was set up from the start, the second case I think is a much improved and probably more "legal" solution - and it allows market forces to control how much hashrate is bought for how much money. LR won't like system 2 because it takes control out of his hands and puts it into the market and investors.

EDIT: one economic error with system 2, the total number of shares outstanding should account for >75% of the hashrate since reinvestment should occur through automatic dividend reinvestment instead of through LRM owning hashrate. It should be something fair that can cover expenses and LR fee - maybe 90%?

[1714468427]

1714468427

[1714468427]

1714468427

[Endlessa]

None of which would fix an issue with FinCEN

[ksenter]

No he didn't.  He said he'd attempt to find a way to benefit us.  Maybe he'll offer us a 25% discount on future bond purchases.  That would also qualify as an attempt to benefit us.  As of right now he has not once said he would honor the original agreement of our shares growing proportionally with the company's hashrate.

He also indicated he is having a detailed report on the issue produced and that "I'm doing what's necessary and I believe that the end result will be something everyone can live with."

While it might be nice to have all the information on everything related to LRM the instant it is available, that's just not how business works.  I expect we'll have something concrete within a week or two.


grnbrg.

I don't need, or even strongly desire, a concrete answer right now.  I, and I think most people here, would be perfectly satisfied if he simply committed to continuing the original intent of the "bonds".  All he needs to do is reassure us that we are not stuck with 300 mh permanently, but rather our hash rate value will continue to grow with the company's.  

I don't understand why he would suddenly say your bonds are now a fixed hashrate, and then not clarify any of the details, if he intended for us to benefit from the future hashrate growth.  Why say anything at all, he clearly had no problem being silent before now.

I hope he does come back with something better in a couple of weeks.  That would be terrific.  I just don't have my hopes up very high.

I can't provide reassurance without giving information that I can't give until things are in place.  All I can say is that I'm working on the permanent solution and believe I have found a reasonable and legal way to provide over 300MH.

Well that's something I suppose. 

[||bit]

No he didn't.  He said he'd attempt to find a way to benefit us.  Maybe he'll offer us a 25% discount on future bond purchases.  That would also qualify as an attempt to benefit us.  As of right now he has not once said he would honor the original agreement of our shares growing proportionally with the company's hashrate.

He also indicated he is having a detailed report on the issue produced and that "I'm doing what's necessary and I believe that the end result will be something everyone can live with."

While it might be nice to have all the information on everything related to LRM the instant it is available, that's just not how business works.  I expect we'll have something concrete within a week or two.


grnbrg.

I don't need, or even strongly desire, a concrete answer right now.  I, and I think most people here, would be perfectly satisfied if he simply committed to continuing the original intent of the "bonds".  All he needs to do is reassure us that we are not stuck with 300 mh permanently, but rather our hash rate value will continue to grow with the company's.  

I don't understand why he would suddenly say your bonds are now a fixed hashrate, and then not clarify any of the details, if he intended for us to benefit from the future hashrate growth.  Why say anything at all, he clearly had no problem being silent before now.

I hope he does come back with something better in a couple of weeks.  That would be terrific.  I just don't have my hopes up very high.

I can't provide reassurance without giving information that I can't give until things are in place.  All I can say is that I'm working on the permanent solution and believe I have found a reasonable and legal way to provide over 300MH.

301MH fixed?  

Ok, just kidding, don't get any ideas.

By the way, here's a solution to some of the tension. A problem that has been a problem since the beginning. Your fee structure should not be built into the 25%. It causes concern as there is no transparency. And one of your stated goals/intentions in the was to be transparent.

Instead! A fine solution if I must say so myself.

You should eliminate any Labrat fee terminology... and in place of it create 5000 new bonds for yourself, and call the dividends from that as your fee for management.
That way 100% of the 25% goes to electricity and new hardware, and less speculation on what is going on behind the curtain. Your pay would be very fair and dependent upon performance of LRM - along with everyone else. You claimed you wanted to operate more openly/transparent. This is a very fine opportunity to do that and win support in the midst of any legal wrangling. You'd receive about 8% of all dividends - isn't that plenty fair if not very generous? I'm willing to bet this idea receives a lot of welcome b/c it shouldn't affect your pay and it peels back the curtain a bit.

By the way, the video above of Dave's PH farm was scary. LR, are you ready to handle that kind of facility?

[||bit]

here are two example systems that follows the spirit of LRM's initial IPO and should be fair and legal. I strongly prefer system 2, which is modelled after ADDICTION which successfully did that for the purchase of 22+ KNC Jupiters in 3 separate group buys purchased weeks apart, but trade as the same security. The difference is LRM wants to do reinvestment.
[...]

maqifrnswa

Great post. I hope it doesn't get overlooked. It's nice seeing people think about solutions. Even though the problems aren't well defined to many of us. But it seems you have some familiarity with what is going on in terms of legality issues - which has an effect of relief because it seems to mean you'd might concur with (or be understanding of) LR's dilemma. Correct me if I'm wrong on that.

[Endlessa]

301MH fixed?  

Ok, just kidding, don't get any ideas.

By the way, here's a solution to some of the tension. A problem that has been a problem since the beginning. Your fee structure should not be built into the 25%. It causes confusion and there is no transparency (one of your stated goals in the past).

Instead! A fine solution if I must say so myself.

You should eliminate any Labrat fee terminology... and in place of it create 5000 new bonds for yourself, and call the dividends from that as your fee for management.
That way 100% of the 25% goes to electricity and new hardware, and less speculation on what is going on behind the curtain. Your pay would be very fair and dependent upon performance of LRM - along with everyone else. You claimed you wanted to operate more openly. This is a very fine opportunity to do that and win support. You'd receive about 8% of all dividends - isn't that plenty fair if not very generous? I'm willing to bet this idea receives a lot of welcome b/c it shouldn't affect your pay and it peels back the curtain a bit.

By the way, the video above of Dave's PH farm was scary. LR, are you ready to handle that kind of facility?

I could get behind that, especially if  we could see the blockchain activity from mining.  we would know exactly what was happening.

Some questions that would be nice to have answered concerning Due Diligence LR performed on executing the old bonds/contracts/mining shares (whatever we want to call them now) and the change to new ones:

• What is the problem?
• Did this problem suddenly happen? (I assume no, since you said you've been working on this for 2-3 months)
• If not, why are we addressing it right now with partial solution?
• Why didn't we address this earlier?
• Why didn't we discuss the problem prior to taking action?
• Can we have a copy of what the lawyers had to say on the issue and the solution?
• What agency is exerting pressure on LRM, if any?
• Why tell us the purchase of new hardware was going to give us 2 gh/s per share, if you already knew there were problems with the shares being legal?
• Why sell more shares, if you already knew about this?

[bittymitty]

You guys are missing the main points of all this.

The bonds are worthless.

The BF delivery is going to be setup and mining BTC this week but LRM has no obligation to distribute mined funds now or even in the future as it currently stands.

It will take months/years for any legal issues to be resolved (Lab Rat can hide behind this indefinitely).   

Lab Rat has not supplied his lawyers details

[||bit]

You guys are missing the main points of all this.

The bonds are worthless.

The BF delivery is going to be setup and mining BTC this week but LRM has no obligation to distribute mined funds now or even in the future as it currently stands.

It will take months/years for any legal issues to be resolved (Lab Rat can hide behind this indefinitely).  

Lab Rat has not supplied his lawyers details

I think he will distribute the coins mined by all future new hardware to original bond holders. And I think he left that impression earlier if not mistaken.

Besides, if he were to let investments decay, that would be corporate suicide b/c a lawsuit would be imminent. Why? Because there would be no point in watching investments go to being worthless, when liquidating could return to investors about BTC0.04+ per bond.

Notwithstanding his apparent confidence that LRM would win a lawsuit,  I think LRM would easily lose. And eventually, if threatened with a lawsuit, that would become apparent to LR when the lawyers report back to him that he should settle out of court. So, I think, not paying proportionately on all future hardware would be a bad decision.

[maqifrnswa]

here are two example systems that follows the spirit of LRM's initial IPO and should be fair and legal. I strongly prefer system 2, which is modelled after ADDICTION which successfully did that for the purchase of 22+ KNC Jupiters in 3 separate group buys purchased weeks apart, but trade as the same security. The difference is LRM wants to do reinvestment.
[...]

maqifrnswa

Great post. I hope it doesn't get overlooked. It's nice seeing people think about solutions. Even though the problems aren't well defined to many of us. But it seems you have some familiarity with what is going on in terms of legality issues - which has an effect of relief because it seems to mean you'd might concur with (or be understanding of) LR's dilemma. Correct me if I'm wrong on that.

I don't know the specific problem is, the proposals address legal issues around what is a contract and what is a stock/bond - but it doesn't address anything about FinCen (i don't even know if this is a FinCen issue or not). The originally structured offering didn't really follow any legal precedence - it was a hybrid stock/bond/derivative/contract. That might cause problems with SEC and IRS since you can't pick and choose which rules you operate under from those four, you have to pick one set and go with it. I think it is possible for LR to figure this out fairly and for the company/offering to be much improved next week compared to two weeks ago.

I think he's turning this into how a "real" company should work, but that will probably piss a lot of people off and share value will drop as there is a market correction. Shares were possibly overvalued since no one could do a proper valuation since so much of the offering was invisible to investors (how much hashrate incoming, how much BTC was spent on what, how many BTC are left, what are rent/utility bills, what is LR's fee). The sad thing is that the majority of investors thought they were undervalued because of lack of liquidity (I was even ridiculed at one point for suggesting shares were overvalued because it was "obvious" to some investors that the only reason why they were trading so low was because bitfunder collapsed). The new system (if LR does something like system 2) makes everything extremely transparent and easy to know what you actually own.

I've been very critical of how everything about LRM has been handled and am the one that posted about sendmany within hours of the fee debacle (when LR kept all dividends of low-share count accounts after bitfunder collapsed). Even though i've been very critical, I think LR actually cares and wants to fix this - and there are ways that can fix it to be fair. We'll have to see if he can find a way to do it.

[maqifrnswa]

You guys are missing the main points of all this.

The bonds are worthless.

The BF delivery is going to be setup and mining BTC this week but LRM has no obligation to distribute mined funds now or even in the future as it currently stands.

It will take months/years for any legal issues to be resolved (Lab Rat can hide behind this indefinitely).  

Lab Rat has not supplied his lawyers details

If bonds stay at 300MH/s (that is, pre-split value), then yes they are worthless. I think many are operating under the assumption that more bond splits are coming in proportion to future hash rate. It's wishful thinking but is the only logical conclusion that you can get at if LR wants to be fair. Sure, there'll be lots of debate on that, but we'll have to wait and see.

luckily, i have no more bonds ;-) but i'm looking for good deals, and this may turn in to one...

[Frankthechicken]

Perhaps bonds could be converted to shares of (token) ownership in a subsidiary of LRM functioning as a "services" company.  I worked for a company that had a "services" subsidiary that only had internal customers but posted huge "profits" and everyone in the "services" division always received giant bonuses... those a-holes.  

But anyway, we would still have "ownership" over nothing of LRM's if all assets remained within LRM as originally intended with the bond structure and would received dividends as expected from the services company's profits.  But then there would probably be lots of tax implications.  Maybe?  And it wouldn't do much of anything to address transparency.

But, the same end result could probably be achieved if we were all issued non-voting shares(as others had mentioned earlier) in place of bonds except we'd have ownership over a portion of the company itself at that point, which the intent of bonds was to avoid.

Perhaps the best fix would be LR just has to give up 100% ownership and issue shares in place of bonds which would potentially be a huge boon for bond holders.  That would also fix (potentially) the issue of the opacity of the 25% since he'd have to show financial statements and funds not used for rent and maintenance or spent on new hardware whether that was 75% or 50% or 95%, would be profit distributable to shareholders.  Perhaps the new terms just become 90% of profit after expenses (with financial statements proving that of course).

I'm still optimistic that something good will come of this and bond holders will receive a fair deal.  Time will tell.  Hopefully we'll know within days.  Or 14 days at most from the 'announcement'.

[||bit]

You guys are missing the main points of all this.

The bonds are worthless.

The BF delivery is going to be setup and mining BTC this week but LRM has no obligation to distribute mined funds now or even in the future as it currently stands.

It will take months/years for any legal issues to be resolved (Lab Rat can hide behind this indefinitely).  

Lab Rat has not supplied his lawyers details

If bonds stay at 300MH/s (that is, pre-split value), then yes they are worthless. I think many are operating under the assumption that more bond splits are coming in proportion to future hash rate. It's wishful thinking but is the only logical conclusion that you can get at if LR wants to be fair. Sure, there'll be lots of debate on that, but we'll have to wait and see.

luckily, i have no more bonds ;-) but i'm looking for good deals, and this may turn in to one...

If LR's intention is to grow investments, which I think he communicated... then how could it not grow proportionately? The only way I see that would happen is if he started taking minded coins and keeping them for himself instead of re-investing. But that would be highly disingenuous and would fuel a firestorm. At worse, I think he restructures the re-investment ratio.

The one way LRM could be successful with the 25/75 ratio is to operate far more transparently and responsibly to investors. And allow people to continue to buy more bonds with their dividends. That way,the success of the company is driven by satisfied investors, and not by feeding a mindless company. I mean really, what's the point of a company growing if nobody is helped by it's growth? That would be like building a giant sand castle ONLY for the sake of building a giant sand castle - why? to look at and feed only one or two people's pride at the big sand castle? How worthless that would be. But...if it was operated responsibly, and people could choose to re-invest, then - if it grew - it would grow because it helped people that want to re-invest in it. So far, LRM is on the polar opposite end of a company a person would want to re-invest in. And this is largely due to the uncertainty in management. This is one reason I think EVERY decision made should by made while respecting this priority list:

1. investors
2. employees
3. company

[BKM]

Yea, BKM... I guess NONE of us actually had any "understanding" in the "investment" we made because it was not an actual investment. Now it is over. No understanding of "accounting" or "business" needed here.  

If it is over for you then post your bonds for sale and move on...... Clearly Zach and many others see that it is not over and that change =/= death..... For some the choice is "Cake or Death" http://www.youtube.com/watch?v=rZVjKlBCvhg - Personally I'll take Cake

[daemonfox]

Yea, BKM... I guess NONE of us actually had any "understanding" in the "investment" we made because it was not an actual investment. Now it is over. No understanding of "accounting" or "business" needed here.  

If it is over for you then post your bonds for sale and move on...... Clearly Zach and many others see that it is not over and that change =/= death..... For some the choice is "Cake or Death" http://www.youtube.com/watch?v=rZVjKlBCvhg - Personally I'll take Cake

But... we're all out of cake... death or death then shall we?

[bittymitty]

"Benjamin Lawsky, the superintendent of financial services, announced the move in a statement today, saying his office will propose a set of rules for virtual-currency firms by the end of the second quarter."
http://libertyblitzkrieg.com/

Looks like Lab Rat has until Jun/July before he will have legal clarification.

[electerium]

Guys, stop panicking.


Until the terms are released, according to LRM the split gives roughly +20mh/s a bond.


It certainly would be nice for him to come out and say that he has yet to receive the 150TH miners, and to unequivocally state that he wont mine with them until the contract issue is resolved.

Should the new contract provide no clause or provision for how contracts are compensated for when the mine adds hashing value, then yes, the contracts are effectively worthless and LRM should just dissolve itself. But I cannot believe that there wont be some mechanism that appropriately compensates present and future contract holders. Otherwise what is the point in continuing this distributed mining company? No additional bonds will ever be sold, and the mine would be completely reliant on the 75/25 split, which as LRM put it himself-- as unsustainable past 2014.

[rangerbob21]

Yea, BKM... I guess NONE of us actually had any "understanding" in the "investment" we made because it was not an actual investment. Now it is over. No understanding of "accounting" or "business" needed here.  

If it is over for you then post your bonds for sale and move on...... Clearly Zach and many others see that it is not over and that change =/= death..... For some the choice is "Cake or Death" http://www.youtube.com/watch?v=rZVjKlBCvhg - Personally I'll take Cake

I can only go on the information provided by LR. So far that has been very little in the way of specifics of why the change, what the problem actually is and how will this change be made right to the bond holders. This is not a long list to SPECIFICALLY address, but LR has chosen not to do so. Why? He points to posts with vague explanations when cornered (which is why there are questions to begin with) or just "I answered that..." replies. These are not answers. 

[Endlessa]

Yea, BKM... I guess NONE of us actually had any "understanding" in the "investment" we made because it was not an actual investment. Now it is over. No understanding of "accounting" or "business" needed here.  

If it is over for you then post your bonds for sale and move on...... Clearly Zach and many others see that it is not over and that change =/= death..... For some the choice is "Cake or Death" http://www.youtube.com/watch?v=rZVjKlBCvhg - Personally I'll take Cake

lol yeah sell your valued at "$0.36" bonds and go! hahah so lawl.

[Endlessa]

I could get behind that, especially if  we could see the blockchain activity from mining.  we would know exactly what was happening.

Some questions that would be nice to have answered concerning Due Diligence LR performed on executing the old bonds/contracts/mining shares (whatever we want to call them now) and the change to new ones:

• What is the problem?
• Did this problem suddenly happen? (I assume no, since you said you've been working on this for 2-3 months)
• If not, why are we addressing it right now with partial solution?
• Why didn't we address this earlier?
• Why didn't we discuss the problem prior to taking action?
• Can we have a copy of what the lawyers had to say on the issue and the solution?
• What agency is exerting pressure on LRM, if any?
• Why tell us the purchase of new hardware was going to give us 2 gh/s per share, if you already knew there were problems with the shares being legal?
• Why sell more shares, if you already knew about this?

also bump!

[Lab_Rat]

OK.  Just out of a meeting with my lawyer and things look very very good in respect to how they have looked.  I can't give time frames as things in the real world operate 9-5 m-f (NOT INCLUDING LUNCH HOURS) and my lawyer stated this loud and clear to me.  When I asked for an estimate on time he said it will come when it's done and it's a priority.

What he specified I can share is that there will be an announcement that will provide some clarification followed by a contract to be presented.  More info will come when it is available and no sooner.  It is the intention of LRM to provide further than 300MH/s per contract and is apparent that the way this will be done is legal.