Arbitrage with guaranteed profits with Bitcoin-Brokers.

[Rishodi]

I admit when I am wrong. In this case, I was wrong. I had my fingers in my ears and was refusing to hear what needed to be heard.

I think it was Winston Churchill who once said

"You can always count on the Americans to do the right thing after they have tried everything else"

I suppose this Canadian acted in the same way with respect to this issue. I am sorry. Thank you for helping me see this situation properly.

And to think that I was just about to give up on this conversation as being futile! It takes fortitude and humility to publicly admit error, and for that you've certainly earned my respect. I think that your business, in terms of total bitcoins exchanged and thus net profit, will improve as a result of this realization and subsequent changes. How long will it take you to implement your proposed changes?

[sayulita]

I admit when I am wrong. In this case, I was wrong. I had my fingers in my ears and was refusing to hear what needed to be heard.

I think it was Winston Churchill who once said

"You can always count on the Americans to do the right thing after they have tried everything else"

I suppose this Canadian acted in the same way with respect to this issue. I am sorry. Thank you for helping me see this situation properly.

And to think that I was just about to give up on this conversation as being futile! It takes fortitude and humility to publicly admit error, and for that you've certainly earned my respect. I think that your business, in terms of total bitcoins exchanged and thus net profit, will improve as a result of this realization and subsequent changes. How long will it take you to implement your proposed changes?

They have already been implemented. Transactions today reflected the changes.

[Rishodi]

I admit when I am wrong. In this case, I was wrong. I had my fingers in my ears and was refusing to hear what needed to be heard.

I think it was Winston Churchill who once said

"You can always count on the Americans to do the right thing after they have tried everything else"

I suppose this Canadian acted in the same way with respect to this issue. I am sorry. Thank you for helping me see this situation properly.

And to think that I was just about to give up on this conversation as being futile! It takes fortitude and humility to publicly admit error, and for that you've certainly earned my respect. I think that your business, in terms of total bitcoins exchanged and thus net profit, will improve as a result of this realization and subsequent changes. How long will it take you to implement your proposed changes?

They have already been implemented. Transactions today reflected the changes.

I figured as much, since I'd assumed that you're doing manual trade matching. I'm intrigued enough that I may have to give it a try.

[arbitrage001]

Sayulita, consider very carefully how you structure the confirmations / time allowances.

Time delays should be minimized because any delay is market risk for one party.

It is true though that since once the deposit is made, the transaction is so to speak "binding", it's at least not a free option to any party (being short these options is my constant worry with anything like this).

Nice thought actually.

Any buyer can abuse the system doing the following:
1) Order bitcoin.
2) Wait for confirmation on price.
3) Wait an hour or two. If price goes up more than fee, honor the deal. If not, discard the deal without consequence.

[sayulita]

Sayulita, consider very carefully how you structure the confirmations / time allowances.

Time delays should be minimized because any delay is market risk for one party.

It is true though that since once the deposit is made, the transaction is so to speak "binding", it's at least not a free option to any party (being short these options is my constant worry with anything like this).

Nice thought actually.

Any buyer can abuse the system doing the following:
1) Order bitcoin.
2) Wait for confirmation on price.
3) Wait an hour or two. If price goes up more than fee, honor the deal. If not, discard the deal without consequence.

There are no time delays or anything of the such.

This is how it works:

Buyer is given deposit information.

Buyer goes to bank and makes a deposit.

Timestamp on the deposit slip is matched against the price in the market at the minute the deposit was made to establish the price per BTC. There is no way to abuse the system as you have said.

[stex2009]

I totally understand there has to be some kind of BTC deposit to make this work in a loop. The only thing I am concerned about is depositing 10-20 BTC in someone's account for a long run. If this concern goes away I am ready to join in.

[Rishodi]

There are no time delays or anything of the such.

This is how it works:

Buyer is given deposit information.

Buyer goes to bank and makes a deposit.

Timestamp on the deposit slip is matched against the price in the market at the minute the deposit was made to establish the price per BTC. There is no way to abuse the system as you have said.

That is a very nice feature. Currency fluctuation is one of the risks I have to account for on localbitcoins, because some buyers will try to exploit price changes in just that fashion. Where are you pulling historical market data from -- is it the price on a particular exchange or a weighted average?

[justusranvier]

Currency fluctuation is one of the risks I have to account for on localbitcoins, because some buyers will try to exploit price changes in just that fashion.

FYI, you can fix that with better formulas: http://localbitcoins.blogspot.com/2013/06/this-is-first-in-series-of-posts.html

[sayulita]

Where are you pulling historical market data from -- is it the price on a particular exchange or a weighted average?

Looking at the prices of MtGox at the same time displayed as the timestamp on the bank receipt.

[Rishodi]

Currency fluctuation is one of the risks I have to account for on localbitcoins, because some buyers will try to exploit price changes in just that fashion.

FYI, you can fix that with better formulas: http://localbitcoins.blogspot.com/2013/06/this-is-first-in-series-of-posts.html

Touché. I'd read that post before. It's about time to implement it.

Where are you pulling historical market data from -- is it the price on a particular exchange or a weighted average?

Looking at the prices of MtGox at the same time displayed as the timestamp on the bank receipt.

Cool, I was just wondering if you were using MtGox data, or a weighted average, etc.

[lucasjkr]

This is bad news. Sorry guys. 

You need to fill out paperwork whenever you make daily cash deposits of $10,000 or over, and whether you do or don't, the bank will report to the govt whenever they get $10'000 deposited in cash in a day, or if in a series of transactions over the course of longer than a day. The penalties for not complying are incredibly stiff, can be forfeiture of 50% of the funds. So an account holder whose taking in random cash deposits from all across the country every day, not reporting any of it, they'll feel rich for a time, then they'll get walloped.

The the OP:  too many potential customers is a great problem to have. If you can't borrow funds or obtain investment capital, tighten up your belt and save more money so that it can. Because what you're asking for will land people in hot water, no matter the promise of spectacular returns. You can't structure a business around running all your money through people's individual accounts. Sorry there's so much money left on the table, but we all see the gap between btce and mtgox, no surprise there.

Best solution is to cultivate trust. Have the cash get deposited to your account, then buy btc from us.

If this takes off and people start getting daily deposits of the amount you describe, not moly will their accounts be quickly shuttered and maybe frozen, but you'll end up with many angry customers demanding why they're not getting the bitcoins promised because the "arbitrager" couldn't make good after having their account frozen

Moreover, say customer deposits money int person x's account,person x buys btc and sends to you, and you don't fulfill (send them to customer), when person x asks who they can sue, the lawyer will respond "we'll, who received the money? Oh? Joe Schmoe from bitcointalk? Lets serve papers."

Or, more logically, your customer deposits to jimbobs account. Jimbob keeps the money. Says he had no clue who bitcoin brokers is and assumes his aunt Cindy deposited the money". What then?

I do like hen people come up with business ideas, but this one has so many holes the only way you can't see them is if your rose colored glasses have fogged up completely...

[marcus_of_augustus]

You need to fill out paperwork whenever you make daily cash deposits of $10,000 or over, and whether you do or don't, the bank will report to the govt whenever they get $10'000 deposited in cash in a day, or if in a series of transactions over the course of longer than a day. The penalties for not complying are incredibly stiff, can be forfeiture of 50% of the funds. So an account holder whose taking in random cash deposits from all across the country every day, not reporting any of it, they'll feel rich for a time, then they'll get walloped.

If this were true how does a big business like Walmart, Home Depot, Burger King, etc work ... surely they get more than $10k in cash sales in short amounts of time? Are you telling me that Walmart is filling out paperwork everyday they get more than $10 k in 'random' cash sales?

Or is this another case of one law for them and one law for the rest of us?

[lucasjkr]

You need to fill out paperwork whenever you make daily cash deposits of $10,000 or over, and whether you do or don't, the bank will report to the govt whenever they get $10'000 deposited in cash in a day, or if in a series of transactions over the course of longer than a day. The penalties for not complying are incredibly stiff, can be forfeiture of 50% of the funds. So an account holder whose taking in random cash deposits from all across the country every day, not reporting any of it, they'll feel rich for a time, then they'll get walloped.

If this were true how does a big business like Walmart, Home Depot, Burger King, etc work ... surely they get more than $10k in cash sales in short amounts of time? Are you telling me that Walmart is filling out paperwork everyday they get more than $10 k in 'random' cash sales?

Or is this another case of one law for them and one law for the rest of us?

Why would I make it up?

Yes, Walmart and Burger King likely fill out a currency transaction report everyday. There's nothing illegal or wrong about it so theyed have no problems doing so. It's a simple form. I knew a Guy who owned a used car lot, and he had a pile of them, routinely filled them out whenever someone bought a car and paid cash. And the penalties, again, are pretty still for not doing so...

Banks have to report daily cash transactions of over $10,000 or transactions that they believe are broken up in order to stay below that threshold (structuring). If you're depositing at a branch, they'll tell you. And if you decline the transaction, they'll then report that. But if you're not even at the branch, if people all a ross the country are making small deposits, even if they don't aggregate $10'000 in a single day, but rather over a week or a month, the banks software will certainly notice this's e generate a report. But you need to, too,otherwise thats where penalties can kick In. And you had better make certain that your tax return matches up with the deposits that are hitting your account. (Ie, your account takes in $50,000 in cash deposits, your tax return had better show more than W-2 work.

http://en.wikipedia.org/wiki/Currency_transaction_report
http://www.bankersonline.com/security/sar/ctrsars_08.html
http://www.fincen.gov/whatsnew/pdf/CTRPamphletBW.pdf
http://www.occ.gov/news-issuances/bulletins/2003/OCC2003-48a.pdf (a 2003 version of the form)

It's best just to let this guy run transaction through his own businesses account. If he's asking users to escrow their coins with him, then he should have customers deposit cash to his account and then transfer your cash back to you from his account.

Really he should do that anyways. All it takes is one dishonest person on this forum deciding to keepa large deposit and there goes his business and reputation.

[marcus_of_augustus]

You need to fill out paperwork whenever you make daily cash deposits of $10,000 or over, and whether you do or don't, the bank will report to the govt whenever they get $10'000 deposited in cash in a day, or if in a series of transactions over the course of longer than a day. The penalties for not complying are incredibly stiff, can be forfeiture of 50% of the funds. So an account holder whose taking in random cash deposits from all across the country every day, not reporting any of it, they'll feel rich for a time, then they'll get walloped.

If this were true how does a big business like Walmart, Home Depot, Burger King, etc work ... surely they get more than $10k in cash sales in short amounts of time? Are you telling me that Walmart is filling out paperwork everyday they get more than $10 k in 'random' cash sales?

Or is this another case of one law for them and one law for the rest of us?

Why would I make it up?

Yes, Walmart and Burger King likely fill out a currency transaction report everyday. There's nothing illegal or wrong about it so theyed have no problems doing so. It's a simple form. I knew a Guy who owned a used car lot, and he had a pile of them, routinely filled them out whenever someone bought a car and paid cash. And the penalties, again, are pretty still for not doing so...

Banks have to report daily cash transactions of over $10,000 or transactions that they believe are broken up in order to stay below that threshold (structuring). If you're depositing at a branch, they'll tell you. And if you decline the transaction, they'll then report that. But if you're not even at the branch, if people all a ross the country are making small deposits, even if they don't aggregate $10'000 in a single day, but rather over a week or a month, the banks software will certainly notice this's e generate a report. But you need to, too,otherwise thats where penalties can kick In. And you had better make certain that your tax return matches up with the deposits that are hitting your account. (Ie, your account takes in $50,000 in cash deposits, your tax return had better show more than W-2 work.

http://en.wikipedia.org/wiki/Currency_transaction_report
http://www.bankersonline.com/security/sar/ctrsars_08.html
http://www.fincen.gov/whatsnew/pdf/CTRPamphletBW.pdf
http://www.occ.gov/news-issuances/bulletins/2003/OCC2003-48a.pdf (a 2003 version of the form)

It's best just to let this guy run transaction through his own businesses account. If he's asking users to escrow their coins with him, then he should have customers deposit cash to his account and then transfer your cash back to you from his account.

Really he should do that anyways. All it takes is one dishonest person on this forum deciding to keep a large deposit and there goes his business and reputation.

You have just described why all the incentives are now in place to not use any bank at all for cash handling (regardless of bitcoins) ... p2p cash and bitcoins are clearly simpler and with less friction than all the palaver you describe above.

[lucasjkr]

They're not "now" in place, those laws are from the 80's at least. Not a recent development.  There's certain incentives for bitcoin, yes, but there's reality that its going to be a long time, if ever, that you can avoid the need fir banking services. Food. Rent utilities. Getting paid. Sorry, were all stuck with banks for a while.

I like that. A user posted yesterday or the day before about 190 btc being stolen from their wallet. Kapoof. Gone someone breaks into your bank account, its inconvienent, but at the end of the day, you won't lose much, and you'll likely see someone prosecuted. You lose $15-$20k in btc?

"Wow that sucks dude. Why weren't you using a offline wallet?"

If soneone familiar with bitcoin can lose thar muxh, imagine what would happen once less savvy people start usung it? Irreversible e currencies fail just as much as our current system, just I'm different ways.

[marcus_of_augustus]

They're not "now" in place, those laws are from the 80's at least.

This is totally wrong ... do your homework before you come here spouting off about regulations you seem to have little knowledge of.

[lucasjkr]

They're not "now" in place, those laws are from the 80's at least.

This is totally wrong ... do your homework before you come here spouting off about regulations you seem to have little knowledge of.

You're saying that Currency Transaction Reports are what? A recent tool the government concocted to attack bitcoin?

Does Wikipedia count as research or would you prefer I pull up the actual legislation? Seriously don't get the aggression here. All I can say is try using Google before launching attacks.

From Wikipedia, the date of mandatory Currency Transactuon Reports is October 26. 1986. :
When the first version of the CTR was introduced, the only way a suspicious transaction less than $10,000 was reported to the government was if a bank teller called law enforcement. This was primarily due to the financial industry's concern about the right to financial privacy. On October 26, 1986, with the passage of the Money Laundering Control Act, the right to financial privacy was no longer an issue. As part of the Act, Congress had stated that a financial institution could not be held liable for releasing suspicious transactional information to law enforcement. As a result, the next version of the CTR had a suspicious transaction check box at the top. This was in effect until April 1996 when the Suspicious Activity Report (SAR) was introduced.

[PuertoLibre]

I'll reply here since you've made this new thread.

And the award for best solution goes to..........

That could work!

The problems start to show up when you consider that transaction volumes large enough to make this worth the effort are very likely to cause banks to close one's account.

Somebody with enough fiat and bitcoins to act as a constant liquidity provider for your site is going to run into a significant problem - a personal bank account in the US that receives cash deposits from random people all over the country and wires out all received funds to an offshore bitcoin exchange is very quickly going to be identified as a high-risk account, probably reported for suspicious activity, and surely closed.

What if you instead arbitraged between people who want to buy bitcoins and traders who want to cash out their fiat from BTC-e and Bitstamp (or any exchange that allows account-to-account transfer of fiat balances)?

Bitcoin-Brokers opens accounts on both of those exchanges and announces that they will buy fiat balances at a 1% premium (the person selling fiat receives 1% more in their bank account than they sold). Bitcoin-Brokers can then locate a bitcoin buyer who can deposit cash in the appropriate bank account.

Once that transaction is successfully completed, Bitcoin-Brokers can buy bitcoins with the fiat balance, give the bitcoin buyer their funds, and keep 1% + the spread between the exchange they are buying on and Mt Gox in bitcoins as profit.

Note that as your volume increases the act of you buying bitcoins will tend to bring down the spread.

If you need more people willing to deposit fiat into bank accounts, you can also service people trying to move fiat into the exchanges.

Or Bitcoin Brokers could also average out the median rate for different percentages into one unique offer.

For example, if they have 30 sellers who give them 100 BTC to sell on their brokerage site:

If,
10 BTC are at MtGox +10%
and the rest are MtGox +5%

Then they should sell all of it at the average median rate rather than:

90BTC at +5%
and
10BTC at +10%

=================

It might possibly make the sales go much faster.

[marcus_of_augustus]

This was in effect until April 1996 when the Suspicious Activity Report (SAR) was introduced.

So you are wrong ... unless 1996 was "sometime in the '80's? ... this was when they actually started asking customers this kind of crap ... or you have evidence that you were asked for such a report in 1980's?

[lucasjkr]

Currency Transaction Reports still exist. They were augmented by the addition of Suspicious Activity Reports.

Currency Transaction Reports are for when a customer transacts in over $10,000 of currency.

Suspicious activity reports can be filed at any time, for any amount, and is what gets filed when a customer is suspected of trying to avoid having a CTR filed, among other things.

heres the CTR from 2003, now its become an e-filing apparently.

http://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_017.htm