USMS auction group buy

[DannyHamilton]

This thread is a holding place for discussing the idea of (and possibly organizing) a group buy to bid on 3,000 BTC sold at auction by the U.S. Marshals Service as seen here:
http://www.usmarshals.gov/assets/2014/bitcoins/

At this point this topic is in the "lets see if there's interest and if we can find the funding" phase.

This thread is self-moderated to keep out off topic discussions and trolls.

The idea would be for participants in the group buy to send a minimum of 1 BTC to be held in escrow and used as collateral for a loan (or loans).

The total of the loan (or loans) would probably need to be close to $1.5 million to participate in the auction with any chance of submitting a profitable winning bid.

If a lender (or lenders) can be found with a small enough collateral requirement, and a low enough interest rate, then I'd place bids at below market value at the time of the auction.

If none of the bids win, then the loan is paid back (with some interest), and all participants get their collateral (minus their share of the interest) back.

If a bid does win, then the 3,000 bitcoins will be purchased.  They will be sold off over time through exchanges such as BitStamp.  When enough bitcoins have been sold to pay off the loan and interest, the loan will be paid off and all participants will get their contribution back along with a matching percentage of the remaining bitcoins as profit.

Given the time constraints, it will be extremely difficult to assemble dozens (or hundreds) of U.S. cash contributions in time to get registered and place bids.  The only way I can see to move that much money fast enough is by accepting BTC contributions.  Then the actual cash funding would have to be done by just a few very large contributions (such as a loan).

[DannyHamilton]

Reserved for future announcements.

[pirsquared]

I should have looked for this before starting this thread: https://bitcointalk.org/index.php?topic=650238.0

I will point folks here. Oh, and I'm down for $20,000.

[Peter R]

Let's say you had a bunch of USD lenders lined up, how would they pool the money?  If you look at the application form on the USMS website, they want to see that the bidder has $2 million in a single bank account.  I suppose each lender could individually wire his funds to the trustee's account, and then the trustee would submit his account information with the form.  

This does seem a bit complicated, but who knows....  

Out of curiosity, what is the minimum loan amount before the process becomes too annoying?  $250k, $25k?  

Also, what if someone wanted to contribute, e.g., $25k not as a loan, but as cash towards the purchase?

And would any of this raise any legal problems?  

[DannyHamilton]

I suppose the total amount of USD we'd need to raise would need to be something like $600 x 3,000 BTC = $1.8 million.  So let's call it $2 million.  

Let's say you had a bunch of USD lenders lined up, how would they pool the money?  If you look at the application form on the USMS website, they want to see that the bidder has $2 million in a single bank account.  I suppose each lender could individually wire his funds to the trustee's account, and then the trustee would submit his account information with the form.  

This does seem a bit complicated, but who knows....  

Out of curiosity, what is the minimum loan amount before the process becomes too annoying?  $250k, $25k?  

Also, what if someone wanted to contribute, e.g., $25k not as a loan, but as cash towards the purchase?

And would this raise any legal problems?  

Moving that much money around in a trustworthy manner fast enough to satisfy the registration requirements will be very difficult.  That's why I'm thinking it probably needs to be done with 1 to 5 really big contributions.

Contributing cash instead of bitcoins makes transparency and tracking a bit more difficult, but I'm not ruling it out.

There very well may be some legal problems here.  I tend to feel like it should be okay, but if it starts to look like this is really going to come together, we'd have to consult an attorney.

[bithalo]

I may be interested if buying the coins and we are sent a proportionate amount of coins back, versus the group selling them. 

[DannyHamilton]

I may be interested if buying the coins and we are sent a proportionate amount of coins back, versus the group selling them. 

the idea would be to sell only enough to pay off the loan. After that rest of the bitcoins would be distributed amongst all of the participants.

[Beliathon]

Sorry, I'm not fiat-wealthy enough to do any such thing. I dumped all my obsolete funny-monie into crypto long ago. Also, property is theft.

[techgeak300]

I would be happy to go in 50BTC if this becomes a thing.

[protokol]

I'm interested, but I'm confused about one thing:

Won't the lots of 3,000 BTC be sold at a premium, as incentive to avoid slippage? I guess if you put in a bid below market value, and it's accepted, then we win. But the more I think about it, the more unlikely it seems that we'd get a discount.

I guess it would be cool to own some of the "infamous FBI seized coin stash" 

[DannyHamilton]

I'm interested, but I'm confused about one thing:

Won't the lots of 3,000 BTC be sold at a premium, as incentive to avoid slippage? I guess if you put in a bid below market value, and it's accepted, then we win. But the more I think about it, the more unlikely it seems that we'd get a discount.

I guess it would be cool to own some of the "infamous FBI seized coin stash" 

I figure it could go either way.

If there aren't many bidders, and they are all looking for a discount, then there might be an opportunity to get some cheap coins.

If there are a lot of bidders, and they're looking to own a significant sum while reducing their exposure to slippage, then our bid wouldn't win.

As far as I can tell from the USMS announcement, this isn't going to be an "English Auction" (open ascending price auction).  The announcement makes it sound like this will be a FPSB (first-price sealed-bid auction).  Therefore there won't be an opportunity for a "bidding war" to drive the price up significantly.  Each bidder will send in a bid for the exact amount they are willing to pay for the bitcoins.  Highest bidder wins the number of lots they bid on.  If any lots are left, then the next highest bidder wins as many lots as they bid on (up to the remaining number of lots.  This process continues until ll lots are distributed.

[protokol]

^^ Thanks for the clarification on the type of auction, yes it does seem to be a sealed-bid type.

I'll keep an eye on this thread - I'm still interested but I'd only be prepared to put forward maybe 2 BTC, I think this idea would be more suited to people with a bit more to bid like the 50 BTC offer above.

Great idea though, would be cool if it worked out!

[bithalo]

If we were to put in a bid, wouldnt we price it low enough, like say at a 30% discount from the market value at the time, so we're not buying coins at a premium, unless the market tanks after our bid?

Whats the incentive for someone to knowingly purchase coins at a higher rate (premium) than market value?  Doesn't make sense to me.

If the coins we invest are used as collateral, how much collateral do you think will be needed to secure the loan...maybe say 20% of the total loan amount?

[nitehawk]

i actually kinda feel sorry for whomever wins the auction... its gonna be a media feeding frenzy once someone fills out the FOIA request

[DannyHamilton]

I haven't found anyone willing to put up the U.S. cash necessary to make a bid, and there doesn't seem to be enough interest to acquire the necessary BTC for collateral anyhow.

As such, I'm closing this thread and abandoning this project.