[BTC-TC] BTC Growth: Capital Growth via Hedge Fund-Style Investing

[Skinnkavaj]

Greg it is clear you are a state actor. Stop trying to idntiy us, bitcoin was anonymous for a reason and you are trying to ruin this. go back to patting down at the airpot

EDIT: This post was done by a hacker that took control over my account. I had not changed my password on bitcointalk and I had an easy one. I have no regained control over the account. Ignore this post.

[drawingthesun]

Greg it is clear you are a state actor. Stop trying to idntiy us, bitcoin was anonymous for a reason and you are trying to ruin this. go back to patting down at the airpot

Unfortunately running a fund where the participants are anonymous is not going to survive very long, especially from a UK based financial fund manager.

Bitcoin is anonymous, running a hedge fund is not.

[Skinnkavaj]

Greg it is clear you are a state actor. Stop trying to idntiy us, bitcoin was anonymous for a reason and you are trying to ruin this. go back to patting down at the airpot

Unfortunately running a fund where the participants are anonymous is not going to survive very long, especially from a UK based financial fund manager.

Bitcoin is anonymous, running a hedge fund is not.

Then run an anonymous hedge fund.


EDIT: This post was done by a hacker that took control over my account. I had not changed my password on bitcointalk and I had an easy one. I have no regained control over the account. Ignore this post.

[drawingthesun]

Greg it is clear you are a state actor. Stop trying to idntiy us, bitcoin was anonymous for a reason and you are trying to ruin this. go back to patting down at the airpot

Unfortunately running a fund where the participants are anonymous is not going to survive very long, especially from a UK based financial fund manager.

Bitcoin is anonymous, running a hedge fund is not.

Then run an anonymous hedge fund.

Well Greg cannot, unless he uses another account and in any case we could not tell it was Greg's fund.

So for Greg's purpose he can not run an anonymous hedge fund whilst we know it was his.

[DrGregMulhauser]

EDIT: This was a reply to someone who now says he didn't really make the post. (See the original...)

Then run an anonymous hedge fund.

Gosh, that's a novel suggestion.  

I guess there is that teensy weensy inconvenient little detail that if you'd like it to be exchange-traded, then you'll have to turn over a high-resolution copy of your passport, driving license, and other documentation to somebody who declines to provide his real name, does not operate in the context of a real company, does not provide a real data protection or data retention policy, and cannot be held accountable for potentially illicit use of your identifying documents.

But as long as you're happy with all that, you should be good to go!  

What's that, you don't want to hand over all that detail to an exchange? No problem then: just find some dude named 'Guido67', give him some cash, and hope for the best. I mean, it's all anonymous, right, so who cares whether Guido67 knows up from down?

[junkonator]

What's that, you don't want to hand over all that detail to an exchange? No problem then: just find some dude named 'Guido67', give him some cash, and hope for the best. I mean, it's all anonymous, right, so who cares whether Guido67 knows up from down?

Ah hey, I got his real name "Charles Ponzi", he seems to know up from down. I even got to see a copy of his driving license. Now I'll just give him some cash, and hope for the best. 

Real names tend to provide a false sense of security where there is little to none.

[DrGregMulhauser]

...a false sense of security where there is little to none.

As long as we keep believing there is little to no security to be had, I think that's exactly what we're going to get: little to no security.

I think part of the problem is that we as a community have such low standards, such low expectations, that we're far more accepting than we need be of folks telling us they accept responsibility for nothing, or folks telling us nothing is real and nothing is an investment, or folks telling us that shares purchased are purely for entertainment. We're simply far more accepting than we need be of dog and pony shows as a proxy for real investment.

(With my high horse moving on to a gallop, I'd also say we are far more accepting than we need be of words of wisdom passed down by traders -- not investors -- who manage to profit on small positions not through insight or strategy, but by exploiting the mistakes and inefficiencies of newcomers. Anybody can make high percentage gains on very small positions merely by setting "noob traps" -- for example, those designed to profit when someone mistakenly enters an order with a price off by an order of magnitude, or those which involve switching an option's strike and premium, in hopes of tricking someone into buying a grossly overpriced option. The forum is full of folks mistaking this sort of banal, labour-intensive and not at all scalable cherry-picking for actual trading ability or investment know-how.)

There, down from that high horse now.

[Deprived]

Anybody can make high percentage gains on very small positions merely by setting "noob traps" -- for example, those designed to profit when someone mistakenly enters an order with a price off by an order of magnitude, or those which involve switching an option's strike and premium, in hopes of tricking someone into buying a grossly overpriced option.

The options situation on BTC-TC/Bitfunder was pretty horrible in that respect - whenever I looked at options the vast majority seemed to have strike/premium reversed or be a decimal place out.

I'll raise my hand to having bought on prices likely (when you're the only liquidity on offer you can't ever assume it was a typo to sell to you) off by an order of magnitude twice - though in both cases there were reasons why my orders were placed other than just hoping someone typoed.

Personally I tended to make most profit either by taking advantage of irrational (but predictable) behaviour (especially in response to news) or from noticing things about securities which others seemed not to have noticed.  The rest of your post (which I didn't quote) explains why I rarely invested - the quality of most 'investments' (I put it in quotes - as where there's no reasonable expectation of profit something isn't really an investment) was too low for me to want to risk relying on them actually making a profit and/or honouring their contracts.

[stripykitteh]

Anybody can make high percentage gains on very small positions merely by setting "noob traps" -- for example, those designed to profit when someone mistakenly enters an order with a price off by an order of magnitude, or those which involve switching an option's strike and premium, in hopes of tricking someone into buying a grossly overpriced option.

Gawd, I wondered why the options markets on btct.co looked like a playroom for kindergarteners. There was scarcely anything that looked like it ever *could* be value available.

[DrGregMulhauser]

Gawd, I wondered why the options markets on btct.co looked like a playroom for kindergarteners. There was scarcely anything that looked like it ever *could* be value available.

Just so.

And unless 1) you've automated it or 2) your time is worthless or 3) you need to help yourself feel more clever by preying on other people's mistakes, deliberately mispricing options is so utterly pointless. And if you had actually done 1 (automated it), you probably wouldn't waste your time with noob traps, you'd move into legitimate market making and generate far greater profits -- something which I'd discussed at length with Ethan before BTC-TC went tango uniform.

(One could argue that mpbot provides an example of such usurious mispricing that it's one giant noob trap, perhaps even a great example of combining 1 and 3. My general rule is never even to mention that operation or operator unless I absolutely have to, but in this case I mention it specifically because the example fits so well.)

In any case, I wonder does anyone have any other thoughts on that whole PayPal suggestion I made a few posts back...? Deal-killer or a plausible alternative to handing over a bunch of private documents to an exchange operator with a hidden identity, operating without a real company, offering no data protection or retention policy, and subject to no accountability for potentially illicit use of those documents?

[Progressive]

In any case, I wonder does anyone have any other thoughts on that whole PayPal suggestion I made a few posts back...? Deal-killer or a plausible alternative to handing over a bunch of private documents to an exchange operator with a hidden identity, operating without a real company, offering no data protection or retention policy, and subject to no accountability for potentially illicit use of those documents?

Using PayPal as a way of identification seems interesting, not a deal-breaker for me.
On the other hand (with current BTC securities environment) I'm not sure that I would invest in fund not traded on exchange.

[DrGregMulhauser]

Using PayPal as a way of identification seems interesting, not a deal-breaker for me.
On the other hand (with current BTC securities environment) I'm not sure that I would invest in fund not traded on exchange.

Yep, I hear you -- in almost every way, I think an exchange is preferable, both for issuers and for participants.

Using PayPal as a KYC/AML gateway would only be suitable for something catering to participants wanting to forego the liquidity of an exchange and commit to a somewhat longer term horizon.

[jedunnigan]

If you are insistent on KYC, PayPal is not going to solve your problem from the eyes of the SEC.

And what good do you think KYC will do you exactly? Do you plan on barring US-based persons? Because that's what matters. Not what addy is on their PayPal address, but where they reside when they purchase the shares. If you logged the IP and made sure it wasn't US-based and then used a service like miicard to verify people's identity, then you'd be on to something.

[DrGregMulhauser]

If you are insistent on KYC, PayPal is not going to solve your problem from the eyes of the SEC.

And what good do you think KYC will do you exactly? Do you plan on barring US-based persons? Because that's what matters. Not what addy is on their PayPal address, but where they reside when they purchase the shares. If you logged the IP and made sure it wasn't US-based and then used a service like miicard to verify people's identity, then you'd be on to something.

I'm not talking about shares, and I'm not talking about the SEC. I'm talking about a prospective privately operated, non-exchange-traded, non-securitised fund. Anyone who wants to run any type of private fund -- be it private equity, buyout fund, hedge fund, whatever -- needs to have their KYC/AML in order, and that basic requirement has nothing to do with the SEC, nothing to do with securitisation, and nothing to do with the distinction between US and non-US entities.

[Esh]

Greg

If I'm following you correctly, you seem to be suggesting the use of a single Paypal transaction in order to establish the identity of investors in the proposed private fund, and that you intend this to be some kind of nominal fee with the substantive transactions taking place in Bitcoin later on?

If so then, in and of itself, that sounds fine (I am not so attached to my pseudonymity as others here, I suppose), but would you not then need to link the Paypal account to a Bitcoin wallet? A signed message on the blockchain could be used to establish the link in one direction, but how would you corroborate it on the Paypal side? And are you quite sure that Paypal's KYC/AML is something you want to count on? There have been some troubling accounts of Paypal freezing completely legitimate Kickstarter accounts in the name of anti-fraud/AML. That could be a problem if the kind of activity you're proposing were construed as crowd-funding by Paypal. Beyond that, Paypal may not necessarily be sufficiently compliant with UK law and might, in fact, add additional regulatory exposure as you'll be accepting 'real money' as part of the setup of the fund.

To answer your primary question though, the idea of using Paypal for ID verification doesn't strike me as a deal-breaker persay. I certainly find it far more palatable than turning over copies of my passport, credit card and driver's licence to WeExchange (A totally outrageous suggestion, in my books. That's more than enough information to facilitate identity theft). But I'd like to hear more about how you envision the logistics of this working.

[DrGregMulhauser]

If I'm following you correctly, you seem to be suggesting the use of a single Paypal transaction in order to establish the identity of investors in the proposed private fund, and that you intend this to be some kind of nominal fee with the substantive transactions taking place in Bitcoin later on?

Yes, the fee aspect would be deliberately inconsequential -- just a small charge to become a member of a site for a specific period of time. The important aspect would be to establish that Person A who has just become a member of the site is really Person A, according to PayPal.

If so then, in and of itself, that sounds fine (I am not so attached to my pseudonymity as others here, I suppose), but would you not then need to link the Paypal account to a Bitcoin wallet?

Once a person had become a member of a site, then anything else that needed to be done could be handled directly via that person's account on the site. (The idea is that this is done in connection with a payment flow that creates an account for the person on the site. This is something I do all the time with other PayPal-integrated membership sites in the health professions.)

There have been some troubling accounts of Paypal freezing completely legitimate Kickstarter accounts in the name of anti-fraud/AML...

Yes, clearly that would be something to avoided, since it would shoot the whole thing to pieces.

Beyond that, Paypal may not necessarily be sufficiently compliant with UK law...

Hopefully we can be reasonably confident that PayPal complies with the law in all countries in which it operates; if PayPal were found to be breaking the law in any of those countries, that would be rather a big deal, quite apart from any impact on us.

To answer your primary question though, the idea of using Paypal for ID verification doesn't strike me as a deal-breaker persay. I certainly find it far more palatable than turning over copies of my passport, credit card and driver's licence to WeExchange (A totally outrageous suggestion, in my books. That's more than enough information to facilitate identity theft)...

Me too: it seems crazy to me to hand over all those details to a pseudonymous entity with zero accountability. I've verified many different accounts using scanned copies of identity documents, and on every single occasion except for two, those receiving the documents were happy to have a big 'CONFIDENTIAL' splashed across my signature and photograph, so that you could still see it was me and could still see it was my signature, but you would find it much harder to use it to create a convincing fake document. The two exceptions? One was Mt Gox, and the other is WeExchange. Well, Mt Gox lacks any kind of credible data protection or data retention policy, but WeExchange is so far below the standard of Mt Gox that it's not even funny.

[Luckybit]

Greg it is clear you are a state actor. Stop trying to idntiy us, bitcoin was anonymous for a reason and you are trying to ruin this. go back to patting down at the airpot

Unfortunately running a fund where the participants are anonymous is not going to survive very long, especially from a UK based financial fund manager.

Bitcoin is anonymous, running a hedge fund is not.

Then run an anonymous hedge fund.


EDIT: This post was done by a hacker that took control over my account. I had not changed my password on bitcointalk and I had an easy one. I have no regained control over the account. Ignore this post.

If a hacker really took over your account you/they would just remove that edit. Duh.

[Esh]

Greg

I appreciate the quick and thorough response, as always. One further point of clarification/elaboration though.

Beyond that, Paypal may not necessarily be sufficiently compliant with UK law...

Hopefully we can be reasonably confident that PayPal complies with the law in all countries in which it operates; if PayPal were found to be breaking the law in any of those countries, that would be rather a big deal, quite apart from any impact on us.

It would be silly to worry that Paypal is anything but fully compliant in all its major jurisdictions for the business that it does. But that doesn't necessarily mean that the information that it passes to you or warrants for you would be sufficient for your KYC under UK law, nor does it necessarily mean that Paypal's KYC/AML obligations will match KYC/AML expectations or obligations for the kind of fund you're proposing. They might, and we might even say that they probably will, but there does seem to be a bit of a dis-analogy. Just because Paypal is on the right side of the law in what it does, that doesn't necessarily mean that a third party that makes use of them would also be on the right side of the law. That being said the more substantial point I wanted to get at there (which I expressed poorly in my original post) relates to regulatory compliance in the creation of a financial instrument which, in this case, would have some (albeit nominal) fiat component.

Actually, on second thought, maybe it would be best to just separate that point out from the Paypal question. What are your thoughts on the additional exposure, if any, that you and potential investors might have if you incorporate a nominal amount of fiat in a private Bitcoin fund offering? The Bitcoin-as-commodity situation in the UK was a bit regulatory plus when you launched the original fund. Might you not compromise that advantage by using Paypal?

[DrGregMulhauser]

...the creation of a financial instrument which, in this case, would have some (albeit nominal) fiat component.

...incorporate a nominal amount of fiat in a private Bitcoin fund offering? The Bitcoin-as-commodity situation in the UK was a bit regulatory plus when you launched the original fund. Might you not compromise that advantage by using Paypal?

I'm still thinking this through -- thus the rationale for floating it here and soliciting feedback -- but the way I'm envisioning it, there just wouldn't be any fiat component to a fund. There would be a PayPal fee to become a member of a site, but the only connection between that and an actual fund would be that a fund would be open only to members.

It would be analogous to saying that only members of ABC Car Club are eligible to take part in the XYZ Race at the weekend. That wouldn't mean that PayPal has any involvement in the racing activity, or that racing requires payment of a fee per se.

[DrGregMulhauser]

I'm not fond of legalese and certainly not an expert but the PayPal plan, although plausible at first does not seem feasible to me. If I'm not wrong Paypal AML requirements only kick in after transmitting certain amount, 1.7k euro or similar. Accounts are trivial to setup with VBB/VCC and this is a common practice...

PayPal "Verified" status requirements vary from country to country, but it goes without saying that only verified accounts would be of any use.

Have you seen this?

http://coincomply.com/_/CoinComply.html.html
http://blockscore.com/

Unfortunately, given that the original fund was only capitalised at 2000 BTC, passing on the costs required for consultancies like those would not be plausible unless or until a fund was much larger. I was looking for something ultra-lightweight, rather than something targeted at exchanges and the like, which might have a single day's turnover that exceeded the entire capitalisation of a fund.