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Author Topic: A Theory on what pirateat40 is doing  (Read 35965 times)
mp420
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July 10, 2012, 05:32:25 AM
 #121

Reality check:

A stranger says to you: "If you lend me money, I can pay back in double, in three and a half months' time." He doesn't quite tell you how he's going to achieve this. Do you trust him?

This is exactly what's happening.

In a ponzi scheme, he's not even lying, if the scheme is succesful. He doesn't have any incentive to stop paying out interest and the withdrawals of principal as long as the grand total of his funds keeps on growing. As soon as the growth dies out, though, if he's at all smart, he's going to vanish with all the money.

Some of the earliest investors may have turned profit at that point, if they've been smart enough to not reinvest. Everyone else loses.
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July 10, 2012, 05:38:56 AM
 #122

A stranger says to you: "If you lend me money, I can pay back in double, in three and a half months' time." He doesn't quite tell you how he's going to achieve this. Do you trust him?

Also, he calls himself a pirate. There certainly is a sucker born every minute and I guess in a way Mr Pirate deserves his plunder.
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July 17, 2012, 07:39:45 AM
 #123

Theory:
-- considers BTC as a consumable item?
-- prefers cash to purchase BTC?
-- enjoys anonymity?
-- is legal?

He takes cash for BTC at (some magic percentage >7%) above the market price, uses the cash to buy more coin, takes his percentage, rinse and repeat. He needs the coin (BTCS&T/GPUMAX) so he has enough coins on hand to fulfill demand, then buys via gox/dark/etc to renew the coin pool.

Perhaps bitcoin-only gambling operations?

RE: Who Pirate is, where he is, etc:

In 5 minutes of focused Googling, you can find a trail of 3 people.. You could call them "The Idea", "Zee Code", and "Money", or T, Z, and M for short.
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July 17, 2012, 08:02:41 AM
 #124

Instead of trying to second guess whatever Pirate is doing in order to justify the interest rates that he offers, lets assume that he is running a ponzi (most likely the correct assumption). How much damage will the unraveling of this cause? The last thing the Bitcoin community needs at this point is for another blow up, this time from a massive ponzi-scheme, undermining confidence once again.

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July 17, 2012, 08:12:48 AM
 #125

The most plausible explanation I see of some people announcing "huge dump" and then dumping large amount of BTC to the marked at bid is eve-like "lottery" where someone is playing with borrowed money that was never intended to be paid back.

IF pirate converts borrowed BTC into USD, now it is all the more difficult to covert it back to pay those "dividends", if not why the hell to try to sell then?

And one final question? How does it feel to sell so much BTC 1$ below market price just to get some more popularity points among already captive audience.



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mp420
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July 17, 2012, 09:47:50 AM
 #126

If Pirate wasn't running a ponzi scheme, he definitely would try to grow his net wealth by repaying the high-interest debts with all the profit he'd be getting from his extremely profitable enterprise. Come on, every repayment of principal would earn him 7% per week.

Actually. If I had a business idea that would (in medium term) generate 10% per week ROI for up to (say) one million dollar investment, I would borrow the money from somewhere other than the bitcoin community. I'm a pretty poor chap but I figure I'd get at least $150,000 loan from my bank at less than 5% fixed annual rate. (I have a small property I could put up as collateral). If that wasn't enough for an initial investment, I'd have to shop around a bit or maybe find a business partner with more liquidity on hand.
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July 17, 2012, 11:28:13 AM
 #127

I don't think that it comes as a surprise to almost anyone if pirate's operation turns out to be a ponzi. Each and every person investing in his operations should keep in mind that the money might vanish any day. Any investor who is not completely fine with losing everything deserves to lose every penny.

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July 17, 2012, 11:34:50 AM
 #128

I don't think that it comes as a surprise to almost anyone if pirate's operation turns out to be a ponzi. Each and every person investing in his operations should keep in mind that the money might vanish any day. Any investor who is not completely fine with losing everything deserves to lose every penny.

Investing with pirate is like investing with bitcoinica, except pirate has a higher interest rate. 
Likely hood of getting your money back is about the same Tongue

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July 17, 2012, 11:56:11 AM
 #129

I don't think that it comes as a surprise to almost anyone if pirate's operation turns out to be a ponzi. Each and every person investing in his operations should keep in mind that the money might vanish any day. Any investor who is not completely fine with losing everything deserves to lose every penny.

Investing with pirate is like investing with bitcoinica, except pirate has a higher interest rate. 
Likely hood of getting your money back is about the same Tongue

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July 17, 2012, 03:53:53 PM
 #130


Outside of popular forum theories like ponzi, my current favorite guess is gambling-related lending or trading -- bitcoins for pokerstars or whatnot.  Depending on the US state (hello, Nevada), it might be legal or at least a grey area, rather than obviously illegal.


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July 17, 2012, 04:42:33 PM
 #131

I think that that's the best legal, not-a-scam theory.  He's basically offering a line of BTC credit "hard money" in the unlikely event that the house loses.  Because the slippage would be huge to acquire it on the open market to cover a loss.  A bigger reserve in the vault allows the gambling houses to cover bigger bets or more simultaneous players (in fact there are laws defining these amounts in physical gambling locations).  If the house loses pirate pays out but then has an entire month to buy back on the open market.  Or more likely, the house simply stops converting their advantage (collected in BTC) to USD for a while and so little if anything needs to be done on the open market.  If gambling houses are backing any loans drawn with USD, that would explain why pirateat40 wants price stability. 

The kicker is that he could actually sell the SAME BTC reserve to multiple houses, so long as there is an automatic (instantaneous) way to inform every house about changes in his ability to cover.  This would mean that in theory he could offer a lower rate to each house then their own cost to hoard BTC.  The only problem with this entire theory is this service really worth 1% or even .1% per day?  Probably not.  And why not use his own $ or USD loans?  The only possibility there is that he's got every USD line of credit he can find fully tapped but the BTC gambling market growth is faster then his ability to borrow USD.


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July 17, 2012, 04:48:30 PM
 #132


Someone running a very large bitcoin ponzi is IMO unavoidable,
due to the very nature of the bitcoin ecosystem:

      - pseudo anonymity
      - valuable super liquid commodity
      - a herd of financially clueless btc holders

I disagree here. A lot of people are attracted to Bitcoin because they understand the financial system well and see the potential in a decentralized currency. It's still a very small community, and requires a certain level of financial and technical knowledge to even get through the front door. Grandma isn't getting fooled by a Bitcoin Ponzi scheme because she can't figure out what Bitcoin is, much less how to put all of her savings in it.

You are right about Ponzi schemes being unavoidable. But is really such a bad thing? Sure it's gambling, but it's even more exciting than a slot machine or playing the lottery. Just look at all the forum threads here, and the emotions and energy. It's exciting! No matter how it all plays out, people will be talking about it for years, I'm sure of that.
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July 17, 2012, 07:30:36 PM
 #133


Someone running a very large bitcoin ponzi is IMO unavoidable,
due to the very nature of the bitcoin ecosystem:

      - pseudo anonymity
      - valuable super liquid commodity
      - a herd of financially clueless btc holders

I disagree here. A lot of people are attracted to Bitcoin because they understand the financial system well and see the potential in a decentralized currency. It's still a very small community, and requires a certain level of financial and technical knowledge to even get through the front door. Grandma isn't getting fooled by a Bitcoin Ponzi scheme because she can't figure out what Bitcoin is, much less how to put all of her savings in it.

Knowledgeable != Clueful

Head on to the speculation sub-forum for an endlessly renewed proof.



We're already on the speculation sub-forum.

https://www.bitcoin.org/bitcoin.pdf
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notme
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July 17, 2012, 07:42:54 PM
 #134


Someone running a very large bitcoin ponzi is IMO unavoidable,
due to the very nature of the bitcoin ecosystem:

      - pseudo anonymity
      - valuable super liquid commodity
      - a herd of financially clueless btc holders

I disagree here. A lot of people are attracted to Bitcoin because they understand the financial system well and see the potential in a decentralized currency. It's still a very small community, and requires a certain level of financial and technical knowledge to even get through the front door. Grandma isn't getting fooled by a Bitcoin Ponzi scheme because she can't figure out what Bitcoin is, much less how to put all of her savings in it.

Knowledgeable != Clueful

Head on to the speculation sub-forum for an endlessly renewed proof.



We're already on the speculation sub-forum.

See what I mean ?


If I say no, I prove your point about cluelessness and am wrong.

If I say yes, I disprove your point about cluelessness and am wrong.

Maybe Tongue.

Also, I'm no longer entertained by all this pirate FUD.  Now it's boring.  Anyway, carry on.

https://www.bitcoin.org/bitcoin.pdf
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Raize
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July 18, 2012, 04:10:34 PM
 #135

It is either money laundering (for Sinaloa or Zetas cartels most likely) or it's a Ponzi.

If it's money laundering, this is how it is happening:


I think I'd be willing to pay 1 BTC to see someone take this flow chart and make it more suitable for a magazine or info-graphic. PM me if you  would be willing to do this.

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July 18, 2012, 04:23:28 PM
 #136

It is either money laundering (for Sinaloa or Zetas cartels most likely) or it's a Ponzi.

If it's money laundering, this is how it is happening:


I think I'd be willing to pay 1 BTC to see someone take this flow chart and make it more suitable for a magazine or info-graphic. PM me if you  would be willing to do this.

Likely problems with the above scheme:
1. can money launderers just move money into Bitcoin via monitored bank accounts and not hurt those who receive this money i.e. pirate?
2. can miners satisfy his demand for clean coins given the huge amounts he gets with BS&T plus the cartel coins that need to be washed
3. can you really fool the dwolla and gox with "smurf" accounts given their strict verification processes?
4. do you just hope the exchange rate doesn't fall for when you need to sell bitcoins in order to return USD to "underbosses"


So your theory is he either runs this highly complicated scheme which needs to work perfectly or he is running a simple HYIP ponzi scheme? Yeah... I'll go with ponzi.

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July 18, 2012, 04:31:25 PM
 #137

It is either money laundering (for Sinaloa or Zetas cartels most likely) or it's a Ponzi.

If it's money laundering, this is how it is happening:


I think I'd be willing to pay 1 BTC to see someone take this flow chart and make it more suitable for a magazine or info-graphic. PM me if you  would be willing to do this.

Let me get this straight. pirateat40 is alleged to be laundering money to the tune of $18 - $39 billion a year using a currency that has a total capitalization of $85 million? I do not think so. www.nytimes.com/2012/06/17/magazine/how-a-mexican-drug-cartel-makes-its-billions.html

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July 18, 2012, 04:37:05 PM
 #138

It is either money laundering (for Sinaloa or Zetas cartels most likely) or it's a Ponzi.

If it's money laundering, this is how it is happening:


I think I'd be willing to pay 1 BTC to see someone take this flow chart and make it more suitable for a magazine or info-graphic. PM me if you  would be willing to do this.

Let me get this straight. pirateat40 is alleged to be laundering money to the tune of $18 - $39 billion a year using a currency that has a total capitalization of $85 million? I do not think so.

Guys, forget Occam because he did not have a clue what he was talking about.

Raize has it all figured out ! GPUMAX leased work is getting fewer and fewer so this theory does not seem likely.

Also, the man himself said GPUMAX is not involved and he does not do ML.

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July 18, 2012, 05:07:23 PM
 #139

Hazek, all three of your first three questions basically come down to saying: "Really?" So my answer is "Yes". You're responsible for verifying these things yourself, I thought I gave sufficient enough information that one could easily verify such a thing is possible, and probable given how well it would work.

Quote
1. can money launderers just move money into Bitcoin via monitored bank accounts and not hurt those who receive this money i.e. pirate?

Yes, authorities track money, but it's almost always moved again before they can close accounts if they choose to do so. In these cases, it could be cartels and their families using family accounts and even possibly legitimate business accounts that they think/know the authorities are monitoring (but not closing) Keep in mind, when you have $1-2 billion in cash lining the walls of your home as an underboss, you're certainly paying that DEA agent who gets crappy pay to tell you which of your bank accounts are being watched or about to.

As to the rest of your question about who they hurt, uhh, the chart explains how they don't know or cannot prove it is him. By the time it gets to Pirate, it's all online and all Bitcoin. He doesn't even have to know they are cartels or that they are specifically laundering, which he claims is often the case. But I bet they've asked him specifically for clean/mined coin. The few times people receive payments from BS&T is the *only* time he has to clean the money via a third party, the rest of the time he can operate it like a huge ponzi, when the ponzi explodes, he can give all the whales uncleaned coin and forgo the external "cleaning" service costs. It's possible that service doesn't exist and he just uses his own mixer of some sort anyway, or maybe even simply dumps the coins in Silk Road and then extracts them right back out.

Quote
2. can miners satisfy his demand for clean coins given the huge amounts he gets with BS&T plus the cartel coins that need to be washed

This question shows you've never had an account at GPUMax. Yes, there were often more miners wanting to mine than people wanting mining work done anymore.

It has dried up especially in the last few weeks as a VERY RECENT thing, and it is as a result of people thinking BS&T is a scam. Because there's no new money, it doesn't get moved into GPUMax. Surprise surprise, the chart looks even more legitimate. I think that if Pirate is laundering for a cartel, yes, he is presently having a very difficult time doing so right now because of the dry spell in loans, no wonder he's so distraught about it, it's hurting his ability to make money.

Quote
3. can you really fool the dwolla and gox with "smurf" accounts given their strict verification processes?

You haven't learned about money laundering apparently. The answer is yes, the justification is: you don't know what a smurf is or why launders would use them. Smurfing isn't trying to fool anybody, it's entirely legitimate and above board, Dwolla has no regulatory authority, and if they want to make money, they aren't going to care.

Quote
4. do you just hope the exchange rate doesn't fall for when you need to sell bitcoin in order to return USD to "underbosses"?

This is probably the most relevant question you asked, because yes, volatility would hurt Pirate's business. Especially with what is happening now, it makes it more difficult to smurf with a rising Bitcoin price, but your mined coin is certainly more valuable. Doesn't mean it's not happening, though. Also, no underboss is going to be happy if he gives you $2 million to move and you give him back only $750,000. They'd be far more willing to attempt to launder using their own crappy businesses if they knew the returns were so horrible.

If I were advising them, I'd recommend maybe throwing money into some of these Bitcoin-based businesses or GLBSE in general, that way they actually get to start having ownership in something.

Keep in mind, I'm just saying this is how I would be cleaning coin if I were Pirate. I'm saying he's doing this, but I do have reason to believe he could, and such a service would be invaluable. Ultimately, I still think it's just a regular old Ponzi, but his very first message indicating why he set up GPUMax was because he said he was approached by a group of shady people that needed clean coin. He's since went back and deleted some of those posts. I think it behooves us to consider the fact he may have been telling the truth back then.

Quote
to the tune of $18 - $39 billion a year

Hold your horses, ArticMine, I made NO such claim. They could easily launder via the traditional method too. But Bitcoin absolutely can be used to launder a few million every couple weeks.

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July 18, 2012, 05:18:25 PM
 #140

You don't even understand money laundering. After you cash out a bitcoin and have the USD in your hand is when the laundering comes into play, your whole chart is useless before that for the purpose of laundering drug money. Bitcoin is useful to separate a crime from the currency but not to launder it.
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