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

[JoelKatz]

Normally when you say short sell, you are talking about selling at market price and buy back in the future hopefully at a lower price. He's not doing this. He's selling bitcoin at a higher than market price and try to buy the bitcoins back at a price around market price when he sold the bitcoins.  And he hedges bitcoin price rising.

So in normal short selling, you only make money if prie goes down. In his case, he should make money either way if his hedging is done correctly.

I explained why this makes no sense -- he takes a 10% loss on the borrowing, takes extra risk in case the price of Bitcoins goes up, and gains no benefit by doing so because he could get the same protection on downside risk (without the unlimited upside risk) just by short selling. It's completely irrational.

You *are* essentially arguing that he's paying 10% to short, taking extra risk in the bargain, and losing 100% of the upside potential of an increase in the value of the coins he holds. That makes no sense.

[1714131596]

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[1714131596]

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[1714131596]

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[PatrickHarnett]

After consideration, I'm pretty sure Pirate is trading to take advantage of volatility in the market. If he can make the 'buy at x-0.10', 'sell at x +0.10' cycle (4% increase) a few times a week he easily hits his mark. It's the only legal approach that seems to fit the pattern. My guess is he has some code to help with his trading. His main risk would be a rise in bitcoin price while he's on the 'sell' side of the pattern, so he probably has a band above the sell band where he would buy back in and ride it until volatility returns.

Less likely - tracing the coins and transactions does not lead to an exchange like Gox (at least on my looking at the money flows).  I concluded it doesn't hit the main trading pages months ago because it would show up quite quickly.  Also, if you talk to people trying to extract a decent number of coins or dollars from Gox, you would find out how difficult that is - and why many people avoid it.

[BoardGameCoin]

After consideration, I'm pretty sure Pirate is trading to take advantage of volatility in the market. If he can make the 'buy at x-0.10', 'sell at x +0.10' cycle (4% increase) a few times a week he easily hits his mark. It's the only legal approach that seems to fit the pattern. My guess is he has some code to help with his trading. His main risk would be a rise in bitcoin price while he's on the 'sell' side of the pattern, so he probably has a band above the sell band where he would buy back in and ride it until volatility returns.

Less likely - tracing the coins and transactions does not lead to an exchange like Gox (at least on my looking at the money flows).  I concluded it doesn't hit the main trading pages months ago because it would show up quite quickly.  Also, if you talk to people trying to extract a decent number of coins or dollars from Gox, you would find out how difficult that is - and why many people avoid it.

He's obligated to pay interest back in bitcoins, so difficulty/slowness of trading to USD doesn't factor towards his liabilities. I'm curious how you were able to track transactions, I'm guessing you're an investor so you were able to follow your own coins, but how can you differentiate a mtgox transaction from a non-mtgox transaction?

I could easily be wrong, its just my current working hypothesis.

-bgc

[PatrickHarnett]

He's obligated to pay interest back in bitcoins, so difficulty/slowness of trading to USD doesn't factor towards his liabilities. I'm curious how you were able to track transactions, I'm guessing you're an investor so you were able to follow your own coins, but how can you differentiate a mtgox transaction from a non-mtgox transaction?

I could easily be wrong, its just my current working hypothesis.

-bgc

Even people shifting large numbers of coins have faced Gox problems, it is not a simple USD/BTC issue.  Plus, if you believed BS&T was simply manipulating Gox, they would dominate the exchange with the number of coins that would need to be traded.

Might pay for people to re-read the BS&T thread, there is some interesting stuff in there, and you will find my posts from December when I opened my account.  So, yes, I can trace my own coins, and also some others.

[Coinoisseur]

http://news.yahoo.com/back-oblivion-russian-fraudster-pushes-scam-062530584.html

MMM-2011 is crumbling. Guess we shall soon see if that was the main source of income.

[elux]

MMM-2011 is crumbling. Guess we shall soon see if that was the main source of income.

Bets of Bitcoin: Bitcoin Savings and Trust will default before the end of 2012.

[Raoul Duke]

MMM-2011 is crumbling. Guess we shall soon see if that was the main source of income.

Bets of Bitcoin: Bitcoin Savings and Trust will default before the end of 2012.

So... what was wrong with this one? http://betsofbitco.in/item?id=349

[P4man]

So... what was wrong with this one? http://betsofbitco.in/item?id=349

The date. Clearly money is still flowing in through all the passthrough bonds, I cant see it default very soon even if it is a ponzi. However, I will be betting some coins on the longer term bet, if for no other reason as hedging .

[Raoul Duke]

So... what was wrong with this one? http://betsofbitco.in/item?id=349

The date. Clearly money is still flowing in through all the passthrough bonds, I cant see it default very soon even if it is a ponzi. However, I will be betting some coins on the longer term bet, if for no other reason as hedging .

Oh, I get it. It's like those guys who say every year that their sports team will win. Eventually they'll get it right.
Swell.

[ShadowAlexey]

May be pirate will just close his bank and drawback everything to us?

[tgmarks]

figure I otta keep an eye on this in the event someone has something real and factual to say.

[imsaguy]

figure I otta keep an eye on this in the event someone has something real and factual to say.

Is there some sort of contest going on that no one told me
to see who can come up with the most convoluted way of
saying 'sub' ?

shortstop.

[Vandroiy]

Bump, somehow missed this thread before.

I agree.

[ErebusBat]

Bump, somehow missed this thread before.

I agree.

You agree with the previos post?

Scuba diving

Pirate does have an island

[Micon]

I believe, to the best of my knowledge, that given the absence of any public financial disclosure and an extremely high rate of return that the Bitcoin Savings and Trust is a Ponzi scheme.

I'd like to make this a forum-based petition of bitcointalk users who agree with this.  I don't want to do a poll, because I want people to commit their user name to this statement.

I'm interested in seeing how many people agree with me.   I'd prefer to have any debate over this issue in a separate thread.

My theory is that if you want to develop community, then you need to figure out who to trust and what is a scam.  Bitcoin has suffered from too many scams.

So if you agree, reply and say "I agree".

I agree / started my own thread pointing them all out

we must at least contain these ponzis outside the marketplace > lending category - it's making BTC look foolish

[hashking]

I believe, to the best of my knowledge, that given the absence of any public financial disclosure and an extremely high rate of return that the Bitcoin Savings and Trust is a Ponzi scheme.

I'd like to make this a forum-based petition of bitcointalk users who agree with this.  I don't want to do a poll, because I want people to commit their user name to this statement.

I'm interested in seeing how many people agree with me.   I'd prefer to have any debate over this issue in a separate thread.

My theory is that if you want to develop community, then you need to figure out who to trust and what is a scam.  Bitcoin has suffered from too many scams.

So if you agree, reply and say "I agree".

I agree / started my own thread pointing them all out

we must at least contain these ponzis outside the marketplace > lending category - it's making BTC look foolish

I wish you didn't start another thread.  We have a million of them already.  Do you think by starting another thread you did any good. 

[dust]

MMM-2011 is crumbling. Guess we shall soon see if that was the main source of income.

Bets of Bitcoin: Bitcoin Savings and Trust will default before the end of 2012.

How does this bet work if pirate defaults before the bet deadline?  What prevents everyone from piling on bets on the winning side until the the deadline date?  Does betsofbitco.in have a system in place to invalidate all bets after an arbitrary date?

[John (John K.)]

MMM-2011 is crumbling. Guess we shall soon see if that was the main source of income.

Bets of Bitcoin: Bitcoin Savings and Trust will default before the end of 2012.

How does this bet work if pirate defaults before the bet deadline?  What prevents everyone from piling on bets on the winning side until the the deadline date?  Does betsofbitco.in have a system in place to invalidate all bets after an arbitrary date?

There's a feature called the 'time weight'.

[dooglus]

There's a feature called the 'time weight'.

The weighing will help reduce the effect of people putting on large bets after the result is known, but such behaviour would still significantly harm the return on winning bets placed in advance, especially if the default happens significantly before the deadline of the bet.

I would hope bets placed after the default became apparent would be cancelled, but I don't see anything about this on their site.

How are the losing bets distributed?

Here is the breakdown of the distribution:
45% goes to the bet winners proportional to their bets.
45% goes to the bet winners proportional to their weighted bets.
5% goes to the user who submitted the bet.
5% goes to the site.

Here is an example:
Let's say total of 10 btc is lost on a statement and there are three users who won:
User A bets 1 btc 6000 minutes before the deadline (weighted bet of 6000), she is also the submitter.
User B bets 3 btc 1000 minutes before the deadline (weighted bet of 3000)
User C bets 1 btc at the last second (weighted bet of 0)
4.5 btc is distributed proportional to bets:
User A gets 0.9, User B gets 2.7, User C gets 0.9.
4.5 btc is distributed proportional to weighted bets:
User A gets 3.0, User B gets 1.5, User C gets 0.
User A also receives 0.5 commission as a submitter.
So in total:
User A profits 4.4, User B profits 4.2, User C profits 0.9, and site profits 0.5.
Obviously every winner also receives back the bet they put.
Take home message: Bet early, win more.

[dust]

MMM-2011 is crumbling. Guess we shall soon see if that was the main source of income.

Bets of Bitcoin: Bitcoin Savings and Trust will default before the end of 2012.

How does this bet work if pirate defaults before the bet deadline?  What prevents everyone from piling on bets on the winning side until the the deadline date?  Does betsofbitco.in have a system in place to invalidate all bets after an arbitrary date?

There's a feature called the 'time weight'.

Assume that pirate defaults half way to the deadline.  It isn't fair that someone can put 10k btc on the default side after a default is confirmed and be at least half as effective as anyone who bet when the outcome was unknown.

The betsofbitco.in system is much better for events with known dates and unknown outcomes such as sports or elections.