[Payout Updates] Bitcoinica site is taken offline for security investigation

[genjix]

3 June 23:20: We're adding extra fields to the claims database (should be finished soon)

Would it be safe to assume this is pretty much done by now?

Yes it's done. The problem is not technical but bureaucratic. Anyway hopefully this gets resolved quickly. Don't really have much more to add right now.

[1714860666]

1714860666

[kokjo]

Genjix: how will positions be handled? have they been liquidated? when will they be liquidated? at what price?

[ssaCEO]

3 June 23:20: We're adding extra fields to the claims database (should be finished soon)

Would it be safe to assume this is pretty much done by now?

Yes it's done. The problem is not technical but bureaucratic. Anyway hopefully this gets resolved quickly. Don't really have much more to add right now.

Would you mind adding how we can check the status of USD claims and why no one responds from the verify@ address?

[disclaimer201]

3 June 23:20: We're adding extra fields to the claims database (should be finished soon)

Would it be safe to assume this is pretty much done by now?

Yes it's done. The problem is not technical but bureaucratic. Anyway hopefully this gets resolved quickly. Don't really have much more to add right now.

Would you mind adding how we can check the status of USD claims and why no one responds from the verify@ address?

As I understand it there won't be replies to your emails to that address. It's a database. Let's hope so anyways. For as far as we're being told it might as well be a black hole.

[chunglam]

Genjix: how will positions be handled? have they been liquidated? when will they be liquidated? at what price?

+1, I also would like to know answers.

[Vladimir]

One bad move here is failing to disclose how exactly they will deal with open positions. This might cause quite a few legal disputes down the road, because whichever way they do it eventually someone will lose and will be able to argue that by failing to disclose method and timing of position liquidation they made it impossible for victim to mitigate the damages by hedging. If NZ law is any similar to English law, which is likely, then it is going to be quite an attack weapon.

The argument probably wouldn't fly because Tihan injecting funds means that they're taking action to mitigate customer losses beyond what they're required to do by law.   Commonwealth law tends to require proof of actual damages rather than opportunity cost - not easy to establish at an individual level and group litigation is difficult and costly to pursue.

  No, you got it wrong. It has nothing to do with funds injection or that repayments will be  made. It has something to do with the fact that there are leveraged bets that are not closed and that it seems ought to be liquidated somehow, and whichever way you liquidate someone will not be happy with the way it is done or with timing.

  What I mean is, generic contract law (English style) allows an injured party to recover reasonable compensation for damages, however the injured party shall make every reasonable attempt to mitigate those damages. The argument there could be that by withholding information it was made impossible for the injured party to do hedging and as such to do damage mitigation. And therefore bitcoinica by not disclosing how and when position will be liquidated theoretically puts itself into position where it needs to cover the damages so that everyone (but bitcoinica) is a winner on opened bets. This is a trivial matter that could be easily argued by bitcoinica users in NZ equivalent of small claims court or proper court for higher amounts.

The more Bitcoin moves during this silent period the more potential damages could be claimed this way, given the leverage this could be substantial. And BTW publishing anything on forums or IRC would not qualify for giving effective notice. The disclosure would need to be made either by email or on the website, most likely.

[dizzy1]

Then what is stopping them from paying out people who didn't have positions?

[repentance]

Then what is stopping them from paying out people who didn't have positions?

Whatever payout process they use has to stand up to legal scrutiny if they end up in voluntary or involuntary liquidation. Giving an unfair preference to an unsecured creditor while insolvent can be a legal minefield which results in those who received preferential payments being required by the liquidator to disgorge the funds they received.

[Phinnaeus Gage]

Dare we give voice to the likely Sixth Option?

6.  Continue to pay lip-service to their customers, while continuing to earn interest on their deposits, maintain a steady flow of denials, contradictory statements, and keep shifting the blame off onto others- hackers, unknown shadow-men who gain root access, strikingly inept service hosts, unsecured (mea culpa, mea maxima culpa) servers, youthful ignorance, and "it's the other guys that are deciding...", and when the world can no longer tolerate these stories a few paltry pennies will be paid out on the dollar, and the rest is lost because it A: took months to add a couple of fields to a database; B: unknown malfeasants broke into the server where the refunds were being calculated and stole everything else; C: it is Lithuanian New Year and the banks are closed, so we regret to inform you but we cannot make good on this scam, err, I mean terrible thing.

I stated laughing after reading up to the comma of 6., knowing this was going to be a fun post, but just about fell off the porcelain stool when I reached Lithuanian New Year. Thanks, LG.

Back to reading, for I'm two pages behind. Hope the rest of this thread is just as good.

~Bruno~

Edit: Option 6 is currently in the lead, but I still have money on a long shot in this race--http://www.youtube.com/watch?v=hq2kv-QQhIE.

[Phinnaeus Gage]

Dare we give voice to the likely Sixth Option?

6.  Continue to pay lip-service to their customers, while continuing to earn interest on their deposits, maintain a steady flow of denials, contradictory statements, and keep shifting the blame off onto others- hackers, unknown shadow-men who gain root access, strikingly inept service hosts, unsecured (mea culpa, mea maxima culpa) servers, youthful ignorance, and "it's the other guys that are deciding...", and when the world can no longer tolerate these stories a few paltry pennies will be paid out on the dollar, and the rest is lost because it A: took months to add a couple of fields to a database; B: unknown malfeasants broke into the server where the refunds were being calculated and stole everything else; C: it is Lithuanian New Year and the banks are closed, so we regret to inform you but we cannot make good on this scam, err, I mean terrible thing.

I used your complete post as a search term wrapped in quotation marks on Google, and the following was the only result returned.

https://bitcointalk.org/index.php?topic=57422.msg794583#msg794583

Guys,
I'm sorry things are taking this long. We are still trying to recover the lost withdrawals database table, and it seems there's no way to get it back. So we'll try to recover the whole accounting this way :  Please send an email to info@bitscalper.com with the amount you claim you had left to widthdraw, including a list of all your deposits to bitscalper, once we have figured out how much we owe to anyone we will proceed to reimbursements.  Anyhow we're back to business with a powerful new strategy and we'll update the website in the next few days.

[bitcoinBull]

I'm wondering if this "legal wrangling" / bureaucratic hurdles might be Tihan (or whoever the owner is) trying to force bitcoinica consultancy out of their contract. Or maybe they're arguing over which party will be liable for the theft or potential loss of profits. Whatever it is, it feels like depositors are serving as hostages in these additional delays to the claims process.

[N12]

Bitcoinica is a regulated entity, verifiable by government records. We are one of the most legitimate businesses in Bitcoin community, by any standard.

If this latter part is true, we might have a problem.

[zhoutong]

Bitcoinica is a regulated entity, verifiable by government records. We are one of the most legitimate businesses in Bitcoin community, by any standard.

If this latter part is true, we might have a problem.

Well, I feel very upset that people are not getting their funds back. But I can't do anything now. I have spent over half a year to build the brand, but it's suddenly destroyed by bureaucracy, which is something I hate the most in the business world.

I learned an important lesson: Being responsible for something that I don't have control over is one of the worst things in life.

I hope Bitcoinica Consultancy can do something, or at least say something immediately.

[zhoutong]

I'm wondering if this "legal wrangling" / bureaucratic hurdles might be Tihan (or whoever the owner is) trying to force bitcoinica consultancy out of their contract. Or maybe they're arguing over which party will be liable for the theft or potential loss of profits. Whatever it is, it feels like depositors are serving as hostages in these additional delays to the claims process.

I would also guess that inaction is going to force more people to take legal action, this making things worse and worse...  

-- This is all about publicly available information. Nothing should be secret or any way official. --

The problem is, Bitcoinica LP is a Limited Partnership, with a General Partner being a limited company (it could be either Core Credit Ltd or Bitcoinica Consultancy Ltd, depending on their status and agreement). Most likely the limited company has no or very little capital. They can declare bankruptcy outright and no one will be able to do anything by legal actions.

The limited partner can't manage the company, so the bureaucracy isn't likely to come from Tihan.

EDIT:

It's worrying that the price of Bitcoin is moving. On the second day since the hack I had already advised them to immediately announce settlement plans, because there are at least 100K long and 100K short open positions (this was in publicly available charts). One cent means $2,000 disputed loss. ($0.50 means $100,000 disputed loss) The longs will want their positions to be recognised, while the shorts won't. And there will be associated opportunity costs as some people re-established their positions elsewhere to hedge, and some people didn't. There's no way to verify at all.

I still hope that they can come up with something fair for most customers. It's unfortunate that they keep ignoring my advice as the ex-operator of the platform.

[Vladimir]

The problem is, Bitcoinica LP is a Limited Partnership, with a General Partner being a limited company (it could be either Core Credit Ltd or Bitcoinica Consultancy Ltd, depending on their status and agreement). Most likely the limited company has no or very little capital. They can declare bankruptcy outright and no one will be able to do anything by legal actions.

This is so, but only if veil of limited liability cannot be pierced and this might be not impossible under the circumstances. Limited companies have been declared a sham on many occasions before. Do not believe everything formation agents tell you. All I am saying is that this all not so black and white as some might think.

Anyway this is all just academic discussions. Since surely Bitcoin Consultancy guys will do the right thing and all will be sorted soon.

[zhoutong]

The problem is, Bitcoinica LP is a Limited Partnership, with a General Partner being a limited company (it could be either Core Credit Ltd or Bitcoinica Consultancy Ltd, depending on their status and agreement). Most likely the limited company has no or very little capital. They can declare bankruptcy outright and no one will be able to do anything by legal actions.

This is so, but only if veil of limited liability cannot be pierced and this might be not impossible under the circumstances. Limited companies have been declared a sham on many occasions before. Do not believe everything formation agents tell you. All I am saying is that this all not so black and white as some might think.

Alright, I would imagine a shareholder running away with all assets away leaving the debt behind for his company. The shareholder should still be liable by common sense. Essentially the company has been robbed, even though the decision-maker permits so.

[zhoutong]

Personal announcement:

I'll officially resign from Bitcoinica immediately after they have returned at least 50% of total amount owed, or when they ask me to resign, whichever is earlier.

As promised before, before my resignation, I will assist all Bitcoinica customers who signed up under my management with their claims and communication with the company. And this will be my only involvement about Bitcoin-related projects.

My new project, NameTerrific, will accept Bitcoins after the public launch in August, most likely via the new Mt. Gox merchant platform. However, if PayPal or the merchant bank objects, credit card processing will remain a priority.

[kokjo]

Personal announcement:

I'll officially resign from Bitcoinica immediately after they have returned at least 50% of total amount owed, or when they ask me to resign, whichever is earlier.

As promised before, before my resignation, I will assist all Bitcoinica customers who signed up under my management with their claims and communication with the company. And this will be my only involvement about Bitcoin-related projects.

My new project, NameTerrific, will accept Bitcoins after the public launch in August, most likely via the new Mt. Gox merchant platform. However, if PayPal or the merchant bank objects, credit card processing will remain a priority.

did i sign up under your management, i signed up before 21/11/11?

[dancingnancy]

Personal announcement:

I'll officially resign from Bitcoinica immediately after they have returned at least 50% of total amount owed, or when they ask me to resign, whichever is earlier.

As promised before, before my resignation, I will assist all Bitcoinica customers who signed up under my management with their claims and communication with the company. And this will be my only involvement about Bitcoin-related projects.

My new project, NameTerrific, will accept Bitcoins after the public launch in August, most likely via the new Mt. Gox merchant platform. However, if PayPal or the merchant bank objects, credit card processing will remain a priority.

[disclaimer201]

I signed up in early April before the official announcement was made. Thought it was a good idea to earn some interest on BTC, so I had no open positions whatsoever. If the company was long sold by then I critizise strongly that such mundane information as a fricking CHANGE OF OWNER was withheld from the customers for weeks if not months!!!

Edit: If you really want to help why not talk to Bitcoinica consultancy about personally starting to pay back customers' deposits without open positions (aka those who will have no legal ways to complain about being treated unfairly and therefore likely won't take legal action) on your own account and get the money back once the consultancy has finalized their database?