Bitcoin Savings and Trust is probably a Ponzi Scheme: A Petition

[Andrew Bitcoiner]

Now this is just jealousy.  Where is your evidence that he's driving out legitimate investment opportunities?  Because GLBSE, the steaming heap that it is, should be handling even more volume?  Because people should be buying more hot peanuts?

I'm not jealous. I have no skin in this game. I'm not associated with any Bitcoin investment of any kind. My total holdings in all things Bitcoin-related are worth under $50.

Err.  So you're just here to troll, throwing logical fallacies around hoping some will stick?  Your comments about legitimate investment opportunities hold no water.

If you "have no skin in the game" but are stirring up trouble, that's a classic troll.

Can you supply enough evidence to convince people to a different opinion?  If not, go troll somethingawful.com or lemonparty.org.

No disrespect but you don't know who Joel is, he is one of the best regarded cryptographers around, see stackoverflow.

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[MarketNeutral]

JoelKatz is making cogent and informed statements, yet it seems they're cast like pearls before swine. Reading this thread, I'm beginning to wonder just how much real financial experience some members have beyond the excitement of bitcoin. Seems like not much.

Mysterious bonds sold via an irreversible currency by a mystery person who goes by the name Pirate? Caveat emptor.

[Matthew N. Wright]

JoelKatz is making cogent and informed statements, yet it seems they're cast like pearls before swine. Reading this thread, I'm beginning to wonder just how much real financial experience some members have beyond the excitement of bitcoin. Seems like not much.

Mysterious bonds sold via an irreversible currency by a mystery person who goes by the name Pirate? Caveat emptor.

+1.

[MarketNeutral]

http://univ-pau.academia.edu/MarcArtzrouni/Papers/444230/The_Mathematics_of_Ponzi_Schemes

http://bear.warrington.ufl.edu/ritter/ForensicFinance.pdf

http://www.businessweek.com/magazine/harry-markopolos-how-to-spot-a-fraud-09222011.html

[MarketNeutral]

JoelKatz is making cogent and informed statements, yet it seems they're cast like pearls before swine. Reading this thread, I'm beginning to wonder just how much real financial experience some members have beyond the excitement of bitcoin. Seems like not much.

Mysterious bonds sold via an irreversible currency by a mystery person who goes by the name Pirate? Caveat emptor.

Where was there mention of Bonds in this thread?

What most call 'bonds' in the Bitcoin world are nothing more than loans renamed.

And I agree with Caveat Emptor.  One should do due diligence before investing in anything.

I shouldn't have been so generous. Some members here, such as Pirate and his apologists, use financial terminology like 'bonds' in an attempt to give legitimacy to their cause. Show me measures of convexity or any coupon correlation, and then I'll believe that said bond is an actual bond. Until then, reread JoelKatz's points, because they're spot on.

[MarketNeutral]

http://univ-pau.academia.edu/MarcArtzrouni/Papers/444230/The_Mathematics_of_Ponzi_Schemes

http://bear.warrington.ufl.edu/ritter/ForensicFinance.pdf

http://www.businessweek.com/magazine/harry-markopolos-how-to-spot-a-fraud-09222011.html

Did you actually read those or just google search and pick the best you thought you found?

Yes. I'm a fund manager. It's my job to know this stuff.

[MarketNeutral]

http://univ-pau.academia.edu/MarcArtzrouni/Papers/444230/The_Mathematics_of_Ponzi_Schemes

http://bear.warrington.ufl.edu/ritter/ForensicFinance.pdf

http://www.businessweek.com/magazine/harry-markopolos-how-to-spot-a-fraud-09222011.html

From your third reference:

"It is now possible to predict what will happen to the fund, at least under the simple assumptions made in the model described in this paper."  Essentially, everything in that paper is assumptions.. much like the trolling in the thread.

I'm not the author of that paper. Don't hold me to it, and don't be so defensive. I don't necessarily agree with everything there, but I linked to a few articles in an attempt to show that there is institutional and academic interest in the gravity of financial fraud, and that such things should not be taken lightly, and in fact, should be taken seriously for good reason.

[MarketNeutral]

JoelKatz is making cogent and informed statements, yet it seems they're cast like pearls before swine. Reading this thread, I'm beginning to wonder just how much real financial experience some members have beyond the excitement of bitcoin. Seems like not much.

Mysterious bonds sold via an irreversible currency by a mystery person who goes by the name Pirate? Caveat emptor.

Where was there mention of Bonds in this thread?

What most call 'bonds' in the Bitcoin world are nothing more than loans renamed.

And I agree with Caveat Emptor.  One should do due diligence before investing in anything.

I shouldn't have been so generous. Some members here, such as Pirate and his apologists, use financial terminology like 'bonds' in an attempt to give legitimacy to their cause. Show me measures of convexity or any coupon correlation, and then I'll believe that said bond is an actual bond. Until then, reread JoelKatz's points, because they're spot on.

Please explain how https://glbse.com/asset/view/PPT.A is not a bond.

We have absolutely no verifiable evidence that it is a debt issuance against anything at all. It's a guy asking to borrow money over the internet. You think that's a bond?





Don't question the man behind the curtain.

[MarketNeutral]

http://univ-pau.academia.edu/MarcArtzrouni/Papers/444230/The_Mathematics_of_Ponzi_Schemes

http://bear.warrington.ufl.edu/ritter/ForensicFinance.pdf

http://www.businessweek.com/magazine/harry-markopolos-how-to-spot-a-fraud-09222011.html

There is a flaw here. On page two of your first reference, actually.

Try to get an account with Pirate. He should be accepting everybody that wants in but he is not. Would this methodology fit in with your description of a Ponzi.

Same as Madoff. Madoff often didn't accept everybody and frequently told people no. Read the article I linked to.

[MarketNeutral]

I cannot think of anything else it could possibly be other than a Ponzi scheme, sheer insanity, or something very, very risky for some other reason. That could, of course, mean it's something so strange that I can't think of it. But I know of no other explanation that makes any sense.

Is a piece of art selling for USD$119mm indicative of a Ponzi scheme? Why or why not? How is it different or similar to the Bitcoin lending environment?

The difference is that nobody is being falsely told that they're investing in something when their money is actually going to pay the cash outs of previous investors. The difference is that real assets are held with a fair market value equal to the total of all amounts invested. While a legitimate investment scheme may look somewhat like a Ponzi scheme from the outside, the insides are totally different.

Very, very well put. This is the heart of the issue.

I would add a footnote that fraudulent investments, such as ponzi schemes, can actually distort price discovery, which can hurt growth in real terms (vis-a-vis nominal terms), create bubbles, and add undue volatility to monetary velocity.

[MarketNeutral]

JoelKatz is making cogent and informed statements, yet it seems they're cast like pearls before swine. Reading this thread, I'm beginning to wonder just how much real financial experience some members have beyond the excitement of bitcoin. Seems like not much.

Mysterious bonds sold via an irreversible currency by a mystery person who goes by the name Pirate? Caveat emptor.

Where was there mention of Bonds in this thread?

What most call 'bonds' in the Bitcoin world are nothing more than loans renamed.

And I agree with Caveat Emptor.  One should do due diligence before investing in anything.

I shouldn't have been so generous. Some members here, such as Pirate and his apologists, use financial terminology like 'bonds' in an attempt to give legitimacy to their cause. Show me measures of convexity or any coupon correlation, and then I'll believe that said bond is an actual bond. Until then, reread JoelKatz's points, because they're spot on.

Please explain how https://glbse.com/asset/view/PPT.A is not a bond.

We have absolutely no verifiable evidence that it is a debt issuance against anything at all. It's a guy asking to borrow money over the internet. You think that's a bond?





Don't question the man behind the curtain.

PPT.A is a debt issuance against PPT.

And PPT is what exactly???

We're going in circles now.

I can issue a bond UNI.A, an issuance against Unicorn Notional Investments. But so what? It doesn't mean it's a real bond.

We're really talking about loans.

But moving on, I don't see this debate progressing much further.

JoelKatz explained it all incredibly well.

No one is arguing that you or anyone shouldn't be allowed to invest your money however you see fit.

But it's also perfectly reasonable for one to question an investment that bears the hallmarks of fraud.

[MarketNeutral]

MarketNeutral,

 Let just cut to the chase. Do you think Pirate is running a Ponzi?

Yes Or No because if the answer is 'I don't know' or 'maybe' then we will all know what is going on here.

I think it's very likely a Ponzi scheme.

If you put a gun to my head and asked for a yes or no answer, I'd say yes.

I could be wrong, but whatever it is, it's not what he says it is.

If not a Ponzi scheme, then it's something similarly risky.

The level of risk is not being properly conveyed to the investors.

I don't care if someone runs a pyramid or ponzi scheme, or a fund based on trafficking illicit goods, or whatever––as long as they're upfront about the risk.

Even in those very rare instances when genuine market growth can temporarily sustain such incredible returns, the growth is never sustainable. The risk is in the bubble.

Ponzi? Yeah, probably.

[MarketNeutral]

MarketNeutral,

 Let just cut to the chase. Do you think Pirate is running a Ponzi?

Yes Or No because if the answer is 'I don't know' or 'maybe' then we will all know what is going on here.

I think it's very likely a Ponzi scheme.

If you put a gun to my head and asked for a yes or no answer, I'd say yes.

I could be wrong, but whatever it is, it's not what he says it is.

If not a Ponzi scheme, then it's something similarly risky.

The level of risk is not being properly conveyed to the investors.

I don't care if someone runs a pyramid or ponzi scheme, or a fund based on trafficking illicit goods, or whatever––as long as they're upfront about the risk.

Even in those very rare instances when genuine market growth can temporarily sustain such incredible returns, the growth is never sustainable. The risk is in the bubble.

Ponzi? Yeah, probably.

Now that we've established that, now what?  Grab the pitchforks and burn his house down?

No.  

I and others have offered an opposing interpretation of perceived risk.

That's sufficient for me.

I hope to have made people think about their money and their investments in a more critical way.

Again, people are free to invest however they wish.

Also, I'm attempting to get the bitcoin community to take seriously things such as investments, because the greater level of sophistication and legitimacy we can bring to bitcoin the better.

I know of several prominent firms and individuals that are considering supporting bitcoin in a large way, but are concerned that is may devolve into just another HYIP and laundering currency. Sure, all currencies have that aspect. But Satoshi's ingenuity has given bitcoin a potential greater than its predecessors and competitors.

[Meni Rosenfeld]

And PPT is what exactly???

We're going in circles now.

I can issue a bond UNI.A, an issuance against Unicorn Notional Investments. But so what? It doesn't mean it's a real bond.

We're really talking about loans.

I'm not an expert on financial instruments.

But based on my understanding of sources such as Wikipedia, a bond is pretty much just a publicly traded loan. I think you're using a very narrow definition of what a bond is, and I don't see anything that makes things like TYGRR-BANK not a bond.

[MarketNeutral]

And PPT is what exactly???

We're going in circles now.

I can issue a bond UNI.A, an issuance against Unicorn Notional Investments. But so what? It doesn't mean it's a real bond.

We're really talking about loans.

I'm not an expert on financial instruments.

But based on my understanding of sources such as Wikipedia, a bond is pretty much just a publicly traded loan. I think you're using a very narrow definition of what a bond is, and I don't see anything that makes things like TYGRR-BANK not a bond.

Good question. It's typically assumed that bonds can be verified by an independent third party and the issuer can pass an audit, or at least have the proper accounting records to submit to an audit. (Who does the audit is another can of worms.)

I don't follow a strict Wall Street definition of financial terminology and think there ought to be flexibility and creativity in economics (hence my support of bitcoin), but there has to be some way of substantiating someone's claims when it comes to handling other people's money for investment purposes--- or at least a general sense that they are who they say they are, and they're doing what they say they're doing. Once that's established, then it's pretty open. That's my opinion. It's up to the individual.

[Maged]

MarketNeutral,

 Let just cut to the chase. Do you think Pirate is running a Ponzi?

Yes Or No because if the answer is 'I don't know' or 'maybe' then we will all know what is going on here.

I think it's very likely a Ponzi scheme.

If you put a gun to my head and asked for a yes or no answer, I'd say yes.

I could be wrong, but whatever it is, it's not what he says it is.

If not a Ponzi scheme, then it's something similarly risky.

The level of risk is not being properly conveyed to the investors.

I don't care if someone runs a pyramid or ponzi scheme, or a fund based on trafficking illicit goods, or whatever––as long as they're upfront about the risk.

Even in those very rare instances when genuine market growth can temporarily sustain such incredible returns, the growth is never sustainable. The risk is in the bubble.

Ponzi? Yeah, probably.

Now that we've established that, now what?  Grab the pitchforks and burn his house down?

Nah, I would settle pressuring Pirate to have his business audited by a trusted third party. It shocks me that people are investing in him without this.

Remember, it is not our position to prove that he is a Ponzi - it's his job to prove that he's not.

You do see my point though that publicly calling someone a criminal can have consequences. So would it not be prudent to not publicly call someone a criminal until you can prove it and not qualify the statement with 'probably'.

...unless you live in the US. In the US, as long as you can demonstrate that you had a good-faith reason to believe what you said, no one can do anything to you. This would most certainly qualify.

[MarketNeutral]

Good question. It's typically assumed that bonds can be verified by an independent third party and the issuer can pass an audit, or at least have the proper accounting records to submit to an audit. (Who does the audit is another can of worms.)

Completely US-centric definition and therefore
irrelevant in the context of bitcoin.

Completely ignorant comment and therefore
irrelevant in the context of bitcoin.

Basic securities law doesn't differ that much from domicile to domicile, and my comment applies to most major financial jurisdictions. I've worked in many countries including Hong Kong, Cayman Islands, Switzerland, and other financial hubs, and their respective laws are all very similar to those of the United States. In fact, this applies to most countries without much deviation. There are differences here and there (Dodd-Frank, Basel accords, etc), and even differences like Napoleonic law versus English Common law, but overall, the basic foundations of securities laws are the same. Simply put, you have to prove you're not lying about what you're doing with other people's money. That's pretty basic stuff.

I'm not a lawyer.

And we're starting to veer into pointless minutiae.

[MarketNeutral]

Attack me all you want, but don't say no one warned you that Pirate is running a ponzi scheme.

[Edited to remove unnecessary sarcasm and invective.]

[Raoul Duke]

Yes. I'm a fund manager professional scammer who will lose all my clients funds and throw the burden on the government. It's my job to know this stuff.

Fixed that shit for you...

[JoelKatz]

I understood his concerns. I just don't think it is wise to throw around assumptions without some evidence especially when other things can explain the situation.

What are these other things that can explain the situation? Because I don't know of any. Other than a Ponzi scheme or demented charity, I know of no way to explain the rate of the return and the claimed lack of risk.

I don't deny that it's possible that it's something I cannot think of. In fact, I think it's more likely than not that it's something so strange that I haven't thought of it. But it's not like there are other possible explanations out there. Right now, it's simply unexplained.