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Author Topic: Starfish BCB - Loans and Deposits  (Read 56198 times)
Rassah
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October 12, 2012, 12:23:25 AM
 #601

If Patrick had only classified his investment thing as a managed hedge/mutual fund, with returns based on his investment skills as opposed to fixed interest "savings account" style returns, none of this would have been a problem. Losses would have had to be taken by the customers instead of Patrick, and his returns would have been consistent with the average hedge fund (lesson: don't invest in bitcoins, people. You'll save time by just flushing your money down the toilet).

the "average" hedge fund managed by a well-educated, certified professional typically grow at 3% per year.

Bitcoin "investments" claim to be capable of 5-7% per week, then typically collapse a month later with the 'manager' disappearing with all the 'investors'' money.

If you are getting 3% from your hedge fund, you ARE throwing away money. Also, Patrick was wrong: although managed funds might outperform index funds 1/3 of the time (closer the 1/4th), hedge funds do WAY worse. Even if they do as well as index funds, the ridiculous fees they charge you will likely eat up all your profits (the ones you'll earn 1/4th of the time). Hedge funds are overly glamorized BS investments that rich people who don't know a thing about money use to make the hedge fund managers rich.
So, yeah, you would definitely be way better off putting your money in Bitcoin.
BTW, FYI, I invested in bitcoins, even buying at $20. The thing is, the amount of time it spent at $20 was very short to the time it spent at $3, and I've been investing continuously through the drop and the subsequent rise. Now my investment is worth thousands more than what I originally invested, even including the few grand I bought at $20. Long story short, you're an idiot.

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JoelKatz
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October 12, 2012, 12:27:22 AM
 #602

I take it you're the one writing the "I'm sorry, and thank you PatrickBarnett" thread, then?
I think Patrick was a fool who suckered a lot of people including himself. I'm not sorry for anything I said to or about him. He certainly doesn't deserve a thank you for what he did.

It's entirely possible his losses are entirely mythical and he is basically just keeping his investors' money. It's possible that was his plan all along. But the evidence supporting that view isn't any stronger than the evidence supporting the view that he never planned to scam anyone, was in fact as naive and foolish as his customers, and took very real losses which he is reasonably sharing with his investors.

The risk of Pirate default, GLBSE shutdown, and the like was reasonably known to both Patrick and his investors and outside the control of Patrick. Losses due to these things weren't incurred due to negligence or malfeasance on Patrick's part (other than that known by and agreed to by his customers, inherent in the fund, and part of the accepted trade-off to get such high rates).

If I borrow money from you to build a hotel and pay you 3%/year and the hotel is destroyed by an earthquake, you are entitled to pursue any assets of mine you can find. You're not a partner in the hotel. But if I borrow money from you to build a casino and pay you 1%/week and the casino is destroyed by an earthquake, you should share the losses just as you would have shared the profits. You're effectively a partner in the casino and it is totally reasonable for you to bear some of the exceptional risk just as you expected to benefit from the expected exceptional return.

I am an employee of Ripple.
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October 12, 2012, 01:13:06 AM
 #603

If Patrick had only classified his investment thing as a managed hedge/mutual fund, with returns based on his investment skills as opposed to fixed interest "savings account" style returns, none of this would have been a problem. Losses would have had to be taken by the customers instead of Patrick, and his returns would have been consistent with the average hedge fund (lesson: don't invest in bitcoins, people. You'll save time by just flushing your money down the toilet).

the "average" hedge fund managed by a well-educated, certified professional typically grow at 3% per year.
Source?
If the average performance of any of the funds I invest in was that poor I'd have pulled my cash out long ago  Cheesy

It was an article I read for economics class years ago.  Safe growth for a hedge fund is 3% per year (above inflation), but the article's subject was this wildcat manager growing at 5-6% because he was shorting poorly-managed stocks, which is like the Wall Street equivalent of check-raising in poker.
Not really, I've made more shorting overvalued tech stocks in the past year than I have off anything else (Primarily Facebook, Apple, Groupon  Wink ).
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October 12, 2012, 01:30:49 AM
 #604

If I borrow money from you to build a hotel and pay you 3%/year and the hotel is destroyed by an earthquake, you are entitled to pursue any assets of mine you can find. You're not a partner in the hotel. But if I borrow money from you to build a casino and pay you 1%/week and the casino is destroyed by an earthquake, you should share the losses just as you would have shared the profits. You're effectively a partner in the casino and it is totally reasonable for you to bear some of the exceptional risk just as you expected to benefit from the expected exceptional return.

So a contract becomes something other than what it states, not because the risk is high, but the return is "insincere". So I don't have to pay what I borrowed from you and can just say "did you honestly believe that I was making that kind of profit?" and you're okay with this. If this was something defensible, nothing would work in real life, if only because of the heap paradox.

Also, even though GLBSE shutdown was a known risk, I don't think anyone had predicted such a mess. This was almost engineered in a way to cause as much trouble as possible.
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October 12, 2012, 01:36:41 AM
 #605

I'm still curious why people that are recently registered and have little real knowledge continue to scour these threads, unless it is simply for entertainment, or they are a sock-puppet for someone else - there are a few that have turned up.  The usual insults and speculation from the likes of Joel is rather ho-hum.  And the myopia for the last decade of US economics is also a bit tedious, but then reading textbooks is quite a bit different from having your own money at risk.

Although unlikely for most people browsing, I'll go back to being on-topic.
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October 12, 2012, 03:50:28 AM
 #606

Table of balances updated at https://bitcointalk.org/index.php?topic=61262.msg981017#msg981017
JoelKatz
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October 12, 2012, 04:10:22 AM
 #607

So a contract becomes something other than what it states, not because the risk is high, but the return is "insincere". So I don't have to pay what I borrowed from you and can just say "did you honestly believe that I was making that kind of profit?" and you're okay with this.
Yes, exactly. This is called "common mistake". http://en.wikipedia.org/wiki/Mistake_%28contract_law%29

Quote
Also, even though GLBSE shutdown was a known risk, I don't think anyone had predicted such a mess. This was almost engineered in a way to cause as much trouble as possible.
That's practically the definition of force majeure. http://en.wikipedia.org/wiki/Force_majeure

These are all reasons a contract won't, and shouldn't, be enforced as agreed.

I am an employee of Ripple.
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October 12, 2012, 06:00:26 AM
 #608

If Patrick had only classified his investment thing as a managed hedge/mutual fund, with returns based on his investment skills as opposed to fixed interest "savings account" style returns, none of this would have been a problem. Losses would have had to be taken by the customers instead of Patrick, and his returns would have been consistent with the average hedge fund (lesson: don't invest in bitcoins, people. You'll save time by just flushing your money down the toilet).

the "average" hedge fund managed by a well-educated, certified professional typically grow at 3% per year.

Bitcoin "investments" claim to be capable of 5-7% per week, then typically collapse a month later with the 'manager' disappearing with all the 'investors'' money.

If you are getting 3% from your hedge fund, you ARE throwing away money. Also, Patrick was wrong: although managed funds might outperform index funds 1/3 of the time (closer the 1/4th), hedge funds do WAY worse. Even if they do as well as index funds, the ridiculous fees they charge you will likely eat up all your profits (the ones you'll earn 1/4th of the time). Hedge funds are overly glamorized BS investments that rich people who don't know a thing about money use to make the hedge fund managers rich.
So, yeah, you would definitely be way better off putting your money in Bitcoin.
BTW, FYI, I invested in bitcoins, even buying at $20. The thing is, the amount of time it spent at $20 was very short to the time it spent at $3, and I've been investing continuously through the drop and the subsequent rise. Now my investment is worth thousands more than what I originally invested, even including the few grand I bought at $20. Long story short, you're an idiot.

So how does this work?  Every success story is worth one point, and every failure story is a negative point, and whoever has the most points at the end wins?  I mean, if your anecdote means that in every situation you are right, someone with an opposite anecdote in the same situation would then prove the opposite, right? 

Is this some dank style "Thinking defines reality" shit, or do you think maybe anecdotes aren't the same thing as data and are useless when discussing a large scale topic?
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October 12, 2012, 06:04:48 AM
 #609

I'm still curious why people that are recently registered and have little real knowledge continue to scour these threads, unless it is simply for entertainment, or they are a sock-puppet for someone else - there are a few that have turned up.  The usual insults and speculation from the likes of Joel is rather ho-hum.  And the myopia for the last decade of US economics is also a bit tedious, but then reading textbooks is quite a bit different from having your own money at risk.

Although unlikely for most people browsing, I'll go back to being on-topic.

We are very well educated on the vast, vast number of scams that continuously pour out of this community, and yours is prime for a drama filled explosion.  Go ahead and deny it and make a bunch of promises about how you'll never default, they all do, and the forumites always, always believe them.

Congrats on all the money you're about to ferret away from this place.  Take it and never look back; these people have been scammed so many times and so transparently that there's no way they can't see it coming.  They want to be scammed.
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October 12, 2012, 04:58:15 PM
 #610

Most people if they learn will only learn the hard way.
BorderBits
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October 12, 2012, 11:53:53 PM
 #611

Most people if they learn will only learn the hard way.

Most people yes. . . this community wants to be scammed over and over and over and over and over
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October 16, 2012, 05:30:06 PM
 #612

Good for them.  Cheesy
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October 16, 2012, 07:58:07 PM
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Most people if they learn will only learn the hard way.

Most people yes. . . this community wants to be scammed over and over and over and over and over

Pretty much.
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October 18, 2012, 10:23:23 PM
 #614

Received a small payment today. Keep it up Smiley

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PatrickHarnett
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October 18, 2012, 10:40:26 PM
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Yes, payments have been processed and sent.
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October 19, 2012, 11:00:35 AM
 #616

So a contract becomes something other than what it states, not because the risk is high, but the return is "insincere". So I don't have to pay what I borrowed from you and can just say "did you honestly believe that I was making that kind of profit?" and you're okay with this.
Yes, exactly. This is called "common mistake". http://en.wikipedia.org/wiki/Mistake_%28contract_law%29

I would need to see an analogous case and then agree with it, I can't imagine one myself. Anything can be a common mistake. For instance, I don't believe that there is a "common mistake" in my example, the borrower is just being an asshole. A lender is not a partner. You're not at fault if I tricked you.

Quote
Also, even though GLBSE shutdown was a known risk, I don't think anyone had predicted such a mess. This was almost engineered in a way to cause as much trouble as possible.
That's practically the definition of force majeure. http://en.wikipedia.org/wiki/Force_majeure

These are all reasons a contract won't, and shouldn't, be enforced as agreed.

Then why do you pursue the hotel's assets after the earthquake and not the casino?

Everyone is responsible for honoring their contracts to the furthest extent possible. The only reason I wouldn't ask someone to honor their contract is if I see that other contracts they have is in conflict with it, and I have more regard for those contracts; like starving kids and whatnot.
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October 23, 2012, 03:51:07 AM
 #617

Yes, payments have been processed and sent.

You didn't update the balances like you usually do.  And it looks like last week you updated the balances, but not the date of the last update.

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October 23, 2012, 04:16:40 AM
 #618

I would need to see an analogous case and then agree with it, I can't imagine one myself. Anything can be a common mistake. For instance, I don't believe that there is a "common mistake" in my example, the borrower is just being an asshole. A lender is not a partner. You're not at fault if I tricked you.
If both sides have a mutual misunderstanding that causes the contract to misallocate costs or risks, fairness requires that the misallocation be corrected unless the contract shows an intent to allocate the risk. Not all legal systems recognize a concept of "equitable mistake", but I don't think there's any serious disagreement that it's equitable.

A classic example would be two parties who each believe that a ship sunk in a particular place and negotiate a fixed-cost contract to retrieve the ship for a specified fee. If it turns out the ship was elsewhere and is therefore much more expensive to recover, fairness requires the fee be adjusted appropriately. This, of course, only applies if the party seeking the re-adjustment is not comparatively more at fault for the incorrect information. It also only applies if the contract doesn't show an intent to allocate the risk that the information was incorrect to the party being paid to recover the ship.

This situation is analogous. Both parties incorrectly (arguably, equally negligently) believed Starfish's high-interest loan model was sound. There's no evidence in the contract that the risk that the business model was fundamentally unsound was intended to be allocated to Patrick. So the contract cannot equitably be enforced as drafted because a situation not foreseen by the contract came to be. The risk of the unsound business model has to be allocated among the parties somehow, the contract doesn't specify how to allocate it, equity demands it be split.

Again, not all legal systems recognize a doctrine of equitable mistake. Some will insist a contract be enforced as written even if a risk that contract fails to allocate (due to a common mistake of fact shared by both partied to the contract and forming part of the basis of the actual "mental" agreement) materializes unless that makes complying with the contract impossible. But there are very few people who think this is actually fair.


I am an employee of Ripple.
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October 23, 2012, 09:27:59 AM
 #619

Both parties incorrectly (arguably, equally negligently) believed Starfish's high-interest loan model was sound. There's no evidence in the contract that the risk that the business model was fundamentally unsound was intended to be allocated to Patrick. So the contract cannot equitably be enforced as drafted because a situation not foreseen by the contract came to be. The risk of the unsound business model has to be allocated among the parties somehow, the contract doesn't specify how to allocate it, equity demands it be split.

Patrick described his deposits as guaranteed. He stated that he carries the risk from bad loans. That means that he takes the loss if his loans go bad.

Patrick knew that the loans were risky and had the "potential to lose serious money":

I know there are some risks involved and potential to lose serious money on some of the loans I have out in the wild.

I have a diversified portfolio of investments, a good mix of customers and carry the risk from bad loans and the timing of requests.

This isn’t a charity and there is real money at stake. For January 2012 I have done a dozen loans, have one bad and another was “impaired” for a while before being paid back. There are two others due in February that I've flagged as higher risk, that’s why the interest rates are high.

Lending and Seeking a Loan
I decide if you’re a good credit risk or not.

These quotes show that the risk that the business model was unsound was intended to be allocated to Patrick. Even though he knew he had the "potential to lose serious money" on his loans, Patrick guaranteed his deposits and explicitly stated that he carries the risk for bad loans. Thus, Patrick is on the hook for all of the losses and is responsible for paying pack his deposits. Simple.

Patrick is doing his best to live up to his promise, as he should, and I commend him for it.
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October 23, 2012, 05:47:53 PM
 #620

Greetings, how can I deposit in Starfish BCB?  There is no info in the OP, does that mean that it's closed to new depositors?  Also, is there a minimum amount to deposit, or any other kind of limits?  Thanks!
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