The Largest Bitcoin Scam of Them All?

[BubbleBoy]

The notion of "risk" does not apply. You take no risk when giving your money to a hobo, you give them up voluntarily. If 10 years later the same hobo turned successful business man gives you a million dollars out of gratitude, that's not an investment paying off, it's just serendipity. In the same way, giving money to random people on GLBSE cannot be considered an investment that caries a risk.

It strikes me that these folks set to live out their libertarian fantasies online behave much like a cargo cult: they duplicate the institutions from the statist world without bothering to understand why those regulations come to be, and how to supplement them in a deregulated fashion. They seem to believe that if you buy a domain called bitcoinbank.com or bitcoinstockexchange.org and cobble a web interface that claims it's a bank or a stock exchange, it will magically start to behave like the real thing, only much better because of the moral superiority of deregulation, freedom et al.

Don't get me wrong, maybe a stock exchange can function in a deregulated fashion, but they have to supplement the lack of government enforced contracts with real private contracts, and put meat on the bones of the "freedom of contract" mantra. Strong requirements of identity and financial disclosure, audits by respected 3rd parties, real contracts backed by escrow and/or private mediation etc.

Without these there's no "freedom of contract" at play because there's no contract - an enforceable bilateral agreement; it's all just a gentleman's agreement, in effect creating a lemon market where everybody is out to scam his counterpart since there's no way to know if you are talking with a real gentleman.

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[teflone]

Hahahaa...

Yes, everyone is a stranger..

They are out to get you, I cant possibly trust anyone on the internet!  lol  (heavy sarcasm)



People, do your research, and invest with an educated mind..   There is always risk.. 

[Gabi]

lol bubbleboy, you make me laugh 

and well yes you are right

[Anonymous]

The notion of "risk" does not apply. You take no risk when giving your money to a hobo, you give them up voluntarily. If 10 years later the same hobo turned successful business man gives you a million dollars out of gratitude, that's not an investment paying off, it's just serendipity. In the same way, giving money to random people on GLBSE cannot be considered an investment that caries a risk.

It strikes me that these folks set to live out their libertarian fantasies online behave much like a cargo cult: they duplicate the institutions from the statist world without bothering to understand why those regulations come to be, and how to supplement them in a deregulated fashion. They seem to believe that if you buy a domain called bitcoinbank.com or bitcoinstockexchange.org and cobble a web interface that claims it's a bank or a stock exchange, it will magically start to behave like the real thing, only much better because of the moral superiority of deregulation, freedom et al.

Don't get me wrong, maybe a stock exchange can function in a deregulated fashion, but they have to supplement the lack of government enforced contracts with real private contracts, and put meat on the bones of the "freedom of contract" mantra. Strong requirements of identity and financial disclosure, audits by respected 3rd parties, real contracts backed by escrow and/or private mediation etc.

Without these there's no "freedom of contract" at play because there's no contract - an enforceable bilateral agreement; it's all just a gentleman's agreement, in effect creating a lemon market where everybody is out to scam his counterpart since there's no way to know if you are talking with a real gentleman.

A contract can be enforced in an anonymous online world, just without the usual consequences. In our situation, the collateral would simply be a loss of reputation and ability to do business. So grand agreements will require just as grand people.

Identities can be verified with GPG keys and other technology, if you aren't familiar. It enables business online but not as optimally as real transactions.

[Rassah]

A contract can be enforced in an anonymous online world, just without the usual consequences. In our situation, the collateral would simply be a loss of reputation and ability to do business. So grand agreements will require just as grand people.

Identities can be verified with GPG keys and other technology, if you aren't familiar. It enables business online but not as optimally as real transactions.

Perhaps an escrow holding Bitcoin (or if the ever get it working, multi-key scripts to share control of Bitcoin) can be used as collateral in future contracts, too?
I really think we need some "open source" accounting geeks to start drafting the other, likely just as important, component of Bitcoin: Bitcoin specific GAAP (Generally Accepted Accounting Practices). I'm no accountant myself (had many classes, but hate the subject), but I thing certain things should be standardised, such as keeping some of the company's internal transactions on the public block chain, with matching addresses on financial statements. Things like this will go far to help people independently verify a business and improve trust over all.

[nighteyes]

It seems the root of the complaint here is that the GLBSE is not subject to a regulatory authority, like the SEC.

Good luck telling the SEC that they have no authority over the GLBSE.

I think initially it was a bit scary that the GLBSE went into business, but now its so much discredited that its a good thing. Anything that identifies these people so easily is a good thing. Thats why I dont like censorship, which is what the OP is suggesting.

You get MemoryDealers who sounds decent, and then "Bruce Wagner"......thanks for making it easy to see your true identity.
Same thing with GLBSE....instead of 6 page proof of smoke&fire just say "GLBSE"...case closed.

I was opposed for saying that a company has to prove that its not a scam....well if you think a company is innocent till proven guilty(and even then it still gets a second/third/tenth chance apparently), then the GLBSE is all for you....but again all that does is expose your identity, which is a good thing.

[EhVedadoOAnonimato]

Don't get me wrong, maybe a stock exchange can function in a deregulated fashion, but they have to supplement the lack of government enforced contracts with real private contracts, and put meat on the bones of the "freedom of contract" mantra. Strong requirements of identity and financial disclosure, audits by respected 3rd parties, real contracts backed by escrow and/or private mediation etc.

Without these there's no "freedom of contract" at play because there's no contract - an enforceable bilateral agreement; it's all just a gentleman's agreement, in effect creating a lemon market where everybody is out to scam his counterpart since there's no way to know if you are talking with a real gentleman.

I mostly agree, but how do you make a truly "enforceable contract" when you're clearly violating the arbitrary laws imposed by the "enforcement monopoly"? Besides the "mafia way", which is obviously not a solution for GBSLE, I can't see much better alternatives than trying to improve their reputation system. This way at least it becomes harder to be a "fake gentleman".

How can they improve their reputation system is a tough question, but the things you mention (identity and financial disclosure, audits, escrow, mediation etc) might be some answers - they don't entirely need actual enforcement to happen.

[Rassah]

It seems the root of the complaint here is that the GLBSE is not subject to a regulatory authority, like the SEC.

Good luck telling the SEC that they have no authority over the GLBSE.

Is GLBSE based in USA? Does it transact using American currency? Then why would the SEC have any authority over it?

I think initially it was a bit scary that the GLBSE went into business, but now its so much discredited that its a good thing. Anything that identifies these people so easily is a good thing. Thats why I dont like censorship, which is what the OP is suggesting.
Same thing with GLBSE....instead of 6 page proof of smoke&fire just say "GLBSE"...case closed.

I was opposed for saying that a company has to prove that its not a scam....well if you think a company is innocent till proven guilty(and even then it still gets a second/third/tenth chance apparently), then the GLBSE is all for you....but again all that does is expose your identity, which is a good thing.

You're confusing "GLBSE" with "Companies listed on GLBSE." GLBSE is just a service. Some of the companies it lists will be scams, some will be risky businesses, and some will be good businesses. It's not that a "company is innocent till proven guilty," it's that the company is an unknown until it is researched, establishes itself, and becomes known. There's no guilt or lack of it (unless the business is exposed as a scam). No one should ever invest in anything they don't know about, anyway, and, hopefully, most of the companies listed on the GLBSE that did not provide any business details were not invested in, either.

[Rassah]

I mostly agree, but how do you make a truly "enforceable contract" when you're clearly violating the arbitrary laws imposed by the "enforcement monopoly"? Besides the "mafia way", which is obviously not a solution for GBSLE, I can't see much better alternatives than trying to improve their reputation system. This way at least it becomes harder to be a "fake gentleman".

One suggestion is another more-or-less libertarian system: private arbitration. Those types of "courts" already exist, and perhaps with this can be expanded on even more (like, a company willing to submit to arbitration in various locations around the world, with the decision being enforced by the legal system of the country where the dispute happens). It can get really complicated really fast, though, but that also probably means that there is a huge untapped market for online- and bitcoin- specific arbitration courts. Perhaps even putting up some publicly verifiable collateral (Bitcoin) with a third party as a part of your initial business start-up costs will help with establishing reputation, too (e.g. as a start-up, you have %80 operating cash, and 20% collateral cash held with escrow or arbitration service, from which payments are made to customers who were harmed, or to stock holders if the business fails. Then as business reputation and cash flows improve, the %20 gets adjusted to %10, and so on. This way the business can still claim that 20% as part of their company asset/equity, and will have an incentive to do whatever it can to reclaim that money for personal use).
I agree that a large part of the enforcement will also simply be customers not wanting to deal with you if you sound shady.

[Nagle]

One suggestion is another more-or-less libertarian system: private arbitration.

Arbitration hasn't worked out too well. There's a tendency for arbitrators to be "captured" by their "regular customers". The "National Arbitration Forum" turned out to be a front for a debt-collecting firm. Also see "The Arbitration Trap", from Public Citizen.

[nighteyes]

Is GLBSE based in USA? Does it transact using American currency? Then why would the SEC have any authority over it?

"The Dodd-Frank Act grants federal district courts jurisdiction over SEC actions charging federal securities violations where (i) conduct within the United States constitutes a significant step in furtherance of a violation, even if the transaction occurs outside the United States and involves only foreign investors, or (ii) conduct occurring outside the United States has a foreseeable substantial effect within the United States"
http://www.mayerbrown.com/securities-litigation-enforcement/article.asp?id=9987&nid=13067

But again, feel free to disagree and fight the SEC. And thanks for nitpicking the word SEC.

You're confusing "GLBSE" with "Companies listed on GLBSE." GLBSE is just a service. Some of the companies it lists will be scams, some will be risky businesses, and some will be good businesses. It's not that a "company is innocent till proven guilty," it's that the company is an unknown until it is researched, establishes itself, and becomes known. There's no guilt or lack of it (unless the business is exposed as a scam). No one should ever invest in anything they don't know about, anyway, and, hopefully, most of the companies listed on the GLBSE that did not provide any business details were not invested in, either.

Its not that in particular they are evil or have guilt....they are contaminated.

[Rassah]

One suggestion is another more-or-less libertarian system: private arbitration.

Arbitration hasn't worked out too well. There's a tendency for arbitrators to be "captured" by their "regular customers". The "National Arbitration Forum" turned out to be a front for a debt-collecting firm. Also see "The Arbitration Trap", from Public Citizen.

Oh yes, I'm quite aware of all this. Personally, it bothers me to see so many companies require all disputes to be handled through arbitration instead of public court when you sign contracts with them.
But that doesn't mean that the system can't be improved, or a more transparent system specifically dealing with international law and international currency can't be established. That project is still in it's infancy right now, but with so much outsourcing, offshoring, cloud services, etc, it is DESPERATELY needed. Granted, that project is very much beyond the scope of this forum  

[speeder]

I love US silly laws that say that US can judge non-US citizens for actions taken outside US...


Or US silly laws that say that US citizens that are living abroad, even if they never stepped on US, owe taxes to US...

I am glad I am NOT a US citizen.

[Rassah]

"The Dodd-Frank Act grants federal district courts jurisdiction over SEC actions charging federal securities violations where (i) conduct within the United States constitutes a significant step in furtherance of a violation, even if the transaction occurs outside the United States and involves only foreign investors, or (ii) conduct occurring outside the United States has a foreseeable substantial effect within the United States"
http://www.mayerbrown.com/securities-litigation-enforcement/article.asp?id=9987&nid=13067

Well ain't that some sh*t (in a specific use of the word). Conduct within the United States can be charged with violation, even if the conduct occurs outside the United States? Huh???

[Ben Walsh (beamer)]

*** There is absolutely nothing stopping you from creating a competing stock exchange !!! ***

In fact, if you do and it is as functional as GLBSE is right now, I personally pledge to invest £1000 across the companies listed on it and test it for you for free, once it has run for the same period of time that GLBSE has to this date.

I pledge to repeat this for each further year it continues to run.

Crack on or quit your jibber jabber.

hmm how about at a minimum:


The 'Companies' must follow generally accepted accounting standards. Have you seen how these 'Companies' are reporting their earnings? Did the people complete 6th grade math?

Have an independent Board of Directors

A minimum stock price set before delisting

Full contact information for the responsible party. Asshat776@gmail.com isn't full contact info.

Must respond to information requests in a timely manner.

An audit committee so what the 'owner' is saying is true. A picture of your bedroom isn't sufficient.

A report must be filed - in Bitcoin timelines, this should probaly be weekly.

Sufficient working capital for at least 6 months.

Public float - At least x% of shares must be owned by the public.

An audit committe for GLBSE to enforce standards.

[Ben Walsh (beamer)]

That is a whole lot of judgement for someone who doesn't have the courage of conviction to put their name to the piece.

Any chance GLBSE or any of the companies slandered get to face their accuser ?

Or is identification just something the author feels they can demand of others but not demonstrate of themselves ?

GLBSE?

http://www.efwhyeye.com/?p=252

[buttcoin1]

There's no reason they can't reply in this thread if their so called 'company' isn't a scam. Or the GLBSE site. Who makes money from GLBSE? Just the owner who gets a percentage.

And I'm not the one asking for capital to fund my 'mining' operation with no intention of paying anyone back.

You must be one of the people who think ponzi schemes are ok to market on this so called 'exchange'.

[Ben Walsh (beamer)]

I was paid to do testing work for GLBSE - see here : https://glbse.com/contact.rhtml

Guess that means I make money from GLBSE.

Anyone that knows me in real life, knows full well that I don't invest my time in something unless I believe in it and consider it worth spending a portion of my finite time on this planet on.

There is more than one owner of GLBSE - which you could ascertain from some basic due diligence - it is trivially easy to discover - because there is nothing to hide.

You have not perform any of the necessary investigation you should have before making the statement you have.

I would tread extremely carefully - you are running the very real risk of being convicted of slander by the various individuals and the businesses you have made statements against so far.

There's no reason they can't reply in this thread if their so called 'company' isn't a scam. Or the GLBSE site. Who makes money from GLBSE? Just the owner who gets a percentage.

And I'm not the one asking for capital to fund my 'mining' operation with no intention of paying anyone back.

You must be one of the people who think ponzi schemes are ok to market on this so called 'exchange'.

(Edited to include the link I missed out)

[bbit]

glsbe is that one.

[BubbleBoy]

I would tread extremely carefully - you are running the very real risk of being convicted of slander by the various individuals and the businesses you have made statements against so far.

How can he be convicted of slander if he never signed a contract with the accusers or the mediators ? Ah I see, you are talking about the good old monopolistic mediator and the mandatory social contract established by violence.

The irony.