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Author Topic: How to recognise a ponzi scheme  (Read 6071 times)
Vladimir
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July 04, 2012, 10:19:08 PM
 #1

The Inventor:
http://en.wikipedia.org/wiki/Ponzi


The Champion:
http://en.wikipedia.org/wiki/Madoff



http://en.wikipedia.org/wiki/Ponzi_scheme

I know one thing, it
"sounds too good to be true"
It seems there are lots of experts on the topic around here.
 
Feel free to share with us what ponzi schemes look like.
How to recognise investments that have high probability to actually be a ponzi scheme.

Share your experience with ponzi schemes, whether it is
running it
or
losing lots of money
or
making lots of money
or
promoting it
or
suffering from a ponzi related stockholm syndrome


There are many resources dedicated to helping people to recognize and avoid scams:
http://www.sec.gov/answers/ponzi.htm
http://www.fsa.gov.uk/consumerinformation/scamsandswindles
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02597.html
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/vwapj/Little-Black-Book-Scams-e.pdf
http://www.kpmg.com/ca/en/whatwedo/specialinterests/at-risk-magazine/pages/ponzischemes%E2%80%93howtorecognizethem.aspx
http://www.fbi.gov/scams-safety/fraud/


There is some action that can be taken by people to protect themselves and others:
http://www.fsa.gov.uk/consumerinformation/if_things_go_wrong
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02801.html

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July 04, 2012, 11:22:54 PM
 #2

anyone who hides their business model is up to no good.
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July 05, 2012, 12:41:36 AM
 #3

anyone who hides their business model is up to no good.

I thought it was clear silk road needs a mixer ?

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July 05, 2012, 12:43:45 AM
 #4

anyone who hides their business model is up to no good.

I thought it was clear silk road needs a mixer ?

yep, we heard ya, and this is an intriguing thought.

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July 05, 2012, 12:46:15 AM
 #5

That was my initial thought but why minimum investment now? That was the straw that broke the camel's back for me, and made no god damn sense unless it was a ponzi.

Interested to hear some theorizing on that front.

.

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July 05, 2012, 01:08:50 AM
 #6

I have the post directly under his OP which states now "Smells like a classical HYIP scam."

Some of you guys wanna rent it as advertising space?  
I don't wanna derail the thread but...

scnr  Cheesy
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July 05, 2012, 01:17:16 AM
 #7

anyone who hides their business model is up to no good.

The original ponzi business model was transparent enough.

Also, look around at the businesses you think you know and question their models.
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July 05, 2012, 03:12:39 AM
 #8

Can't believe nobody has posted a photo of Ben.

Or this guy:

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July 05, 2012, 03:13:31 AM
 #9

anyone who hides their business model is up to no good.

Like Apple hiding their products so people can't copy them?

Coming Soon!™ © imsaguy 2011-2013, All rights reserved.

EIEIO:
https://bitcointalk.org/index.php?topic=60117.0

Shades Minoco Collection Thread: https://bitcointalk.org/index.php?topic=65989
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Bitcoin Oz
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July 05, 2012, 03:18:13 AM
 #10

The world runs on 3 things I call GOD. Gold ,Oil and Drugs. Which one is most likely to be involved with bitcoin ?


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July 05, 2012, 03:51:58 AM
 #11

The world runs on 3 things I call GOD. Gold ,Oil and Drugs. Which one is most likely to be involved with bitcoin ?



WTF has gold got to do with anything.  Most US wars are over oil and ideology and that's where the money is.

And which one is the US dollar most likely to be associated with?
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July 05, 2012, 04:24:42 AM
 #12

anyone who hides their business model is up to no good.

I thought it was clear silk road needs a mixer ?

The SR is/was US based. That's the reason why there's no foreign language support and the only options to see prices is with USD/BTC

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cbeast
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July 05, 2012, 02:16:44 PM
 #13

The world runs on 3 things I call GOD. Gold ,Oil and Drugs. Which one is most likely to be involved with bitcoin ?
All three. I'll sell my gold for Bitcoin to buy fuel to pick up my prescription.

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
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July 05, 2012, 03:32:20 PM
 #14

Not an expert.

But, correct me if I'm wrong, it boils down to the following easy-to-determine model (in the case of Bitcoin at least:)

1) People contribute their X bitcoins
2) The "business" does something with the bitcoins
3) Everyone receives X+Y bitcoins back

If there's no other reasonably plausible source for the Y bitcoins, it's almost certainly a ponzi scheme.

Now, concerning the individual accused of having the above business model. I've not read all of the related threads; has he provided a reasonably plausible source for the bitcoin "interest" he returns? My understanding was that he avoids using the exchanges.

Bitcoin is the ultimate freedom test. It tells you who is giving lip service and who genuinely believes in it.
...
...
In the future, books that summarize the history of money will have a line that says, “and then came bitcoin.” It is the economic singularity. And we are living in it now. - Ryan Dickherber
...
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ATTENTION BFL MINING NEWBS: Just got your Jalapenos in? Wondering how to get the most value for the least hassle? Give BitMinter a try! It's a smaller pool with a fair & low-fee payment method, lots of statistical feedback, and it's easier than EasyMiner! (Yes, we want your hashing power, but seriously, it IS the easiest pool to use! Sign up in seconds to try it!)
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The idea that deflation causes hoarding (to any problematic degree) is a lie used to justify theft of value from your savings.
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July 05, 2012, 06:38:55 PM
 #15

It makes sense. It is so simple, is it not?

That specific individual is anonymous and there is no any evidence whatsoever known to me of:
Quote
2) The "business" does something with the bitcoins

He made a number of vague statements regarding this 2) but those statements have been inconsistent at least.

I personally do not believe a single word he says and until proven to the contrary assume that whatever he say is likely a lie.

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July 05, 2012, 07:47:24 PM
 #16

It makes sense. It is so simple, is it not?

That specific individual is anonymous and there is no any evidence whatsoever known to me of:
Quote
2) The "business" does something with the bitcoins

He made a number of vague statements regarding this 2) but those statements have been inconsistent at least.

I personally do not believe a single word he says and until proven to the contrary assume that whatever he say is likely a lie.


The thing is, step 2 is largely irrelevant. The bulk of the business will be done in USD, Euros or whatever, and any profits still have to be converted back to bitcoins.

Of course, one could claim the business was done in bitcoins. But that has problems that could actually be worse than the whole thing just being a ponzi. At the very least it would suggest that those borrowing the bitcoins are selling goods and/or services directly for bitcoins. I find that pretty implausible myself.

Bitcoin is the ultimate freedom test. It tells you who is giving lip service and who genuinely believes in it.
...
...
In the future, books that summarize the history of money will have a line that says, “and then came bitcoin.” It is the economic singularity. And we are living in it now. - Ryan Dickherber
...
...
ATTENTION BFL MINING NEWBS: Just got your Jalapenos in? Wondering how to get the most value for the least hassle? Give BitMinter a try! It's a smaller pool with a fair & low-fee payment method, lots of statistical feedback, and it's easier than EasyMiner! (Yes, we want your hashing power, but seriously, it IS the easiest pool to use! Sign up in seconds to try it!)
...
...
The idea that deflation causes hoarding (to any problematic degree) is a lie used to justify theft of value from your savings.
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July 05, 2012, 08:47:45 PM
 #17

American insurance: biggest ponzi scheme ever

Be humble!
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July 05, 2012, 08:51:25 PM
 #18

American insurance: biggest ponzi scheme ever

Nah its social security.


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July 05, 2012, 08:57:07 PM
 #19

Biggest red flags IMHO : huge returns over 3000% anually and after a while he still needs to use investor money ( instead of using his own capital to get filthy rich ).

This is a ponzi. Clear as day ...

The NDA and "I can't show you my business" is BS because he clearly hasn't got a clue. Arbitrage ? LOL !

Maybe he has invented time travel or free source of electricity from antimatter and he is using that to fund a mining operation where aliens are paying him to siphon all the BTC to another planet !

Occam's razor FTW doods ...
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July 05, 2012, 09:16:34 PM
 #20

Although I have nothing invested in BS&T, the whole ordeal worries me a bit. What if it turns out that clients don't get their funds back? In that case bitcoin will have to take another hit, and price will go down, which also hurts my bitcoin savings. I really hope we'll see some clarification soon..
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July 06, 2012, 04:58:36 AM
 #21

Although I have nothing invested in BS&T, the whole ordeal worries me a bit. What if it turns out that clients don't get their funds back? In that case bitcoin will have to take another hit, and price will go down, which also hurts my bitcoin savings. I really hope we'll see some clarification soon..

If that turns out to be the case, I'm going to buy me some more bitcoins.

Greedy people who don't bother to do their own due diligence have no one but themselves to blame if they lose their money to investment scams.
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July 06, 2012, 07:38:05 AM
 #22

Vladimir's logic, in every one of this cancerous threads/posts:

1. If anyone refuses to disclose their business details, they must be doing something bad that *others* would get upset about.
      
Why must *others* necessarily be investors? I can think of a handful of other groups who could become alarmed by his business dealings and seek to a) shut him down, b) steal his idea.

2. If someone offers returns far that "sound too good to be true"...
a. If legitimate, others will discover his idea and by competition, push the rate down.
b. If illegitimate, then it is a ponzi and will collapse.

Since when, in your rationalistic scenario, is there any competitive freedom in the money markets? Currencies are printed by treasuries, their prices (interest rates) closely controlled by state banks, and alternatives suppressed by state force. Efforts by the free market to circumvent these state controls will reap massive profits for those so bold --- but not everyone can simply set up shop across the street and provide a little "competition". Casino owners are in a far better position, for example, to launder money because they are a cash focused business. According to your arguments, competitive pressures should force down the rate to launder money because anyone can just set up up their own casino across the street. How many casinos and strip clubs are there that launder money? How many tax evasion services are there? How many loopholes exist in the US tax code? How many people know what the hell a "bitcoin" is?

You have proven yourself to be one of the many econ/investor-types who likes to shout mantras louder and louder as if this will somehow have any influence. Think outside the box, and see how bitcoin's unique properties allow for unique business opportunities with, as all revolutionary ideas do, massive returns. More than your day trading commodities certainly. Sure, pirate could wake up one morning and decide to jettison with our bitcoins (though people know who he is and where he lives), and he could in fact be running an elaborate ponzi that will collapse soon. But the notion that his ambiguity and high returns *necessitate* a ponzi is ludicrous. We have a scenario where an honest person taking advantage of bitcoin's unique characteristics and who is in a good position to do so, and a dishonest ponzi operator will, from the public's perspective, look the same. I'm willing to bet from the curious, forward-thinking individuals the bitcoin community so attracts that he is of the former, a belief only further strengthened by his willingness to expose himself to personal scrutiny that would render the latter an extremely unfavorable position.
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July 06, 2012, 08:59:09 AM
 #23

alexanderanon: here is my brief response to you: "utter nonsense"

now in more details:

Vladimir's logic, in every one of this cancerous threads/posts:

1. If anyone refuses to disclose their business details, they must be doing something bad that *others* would get upset about.
      
Why must *others* necessarily be investors? I can think of a handful of other groups who could become alarmed by his business dealings and seek to a) shut him down, b) steal his idea.

2. If someone offers returns far that "sound too good to be true"...
a. If legitimate, others will discover his idea and by competition, push the rate down.
b. If illegitimate, then it is a ponzi and will collapse.

Nope! Do not put your words in my mouth. Remember that we are talking here about 3 orders of magnitude higher returns than those the very best (and lucky) hedge fund managers can realistically and sustainably produce.

3 orders of magnitude! Can you grasp that?

3 orders of magnitude!

There is simply no known viable business model that can sustainably produce 3000% annual returns, except ponzi (direct or indirect). Technically, if you leverage something high enough, returns on some speculation can be indeed enormous but it ALWAYS, ALWAYS comes with corresponding risks, that make the biz model not viable. Continuously betting on the red and reinvesting all the winnings is one example of that.

Moreover, my posts are not so much about producing those returns, as about BORROWING at that kind of interest.  The only good reason to borrow like that is when there is no intention to pay out the capital.

Again, even if we go wild and assume hubrisly that those magical free markets of yours and revolutionary, out of this word, Bitcoin, indeed allows such outlandish returns for some unknown mysterious biz models, there is still only one "viable" biz model known that requires BORROWING at 3000% per annum. Yes the only biz model where such BORROWING required is Ponzi.

Since when, in your rationalistic scenario, is there any competitive freedom in the money markets? Currencies are printed by treasuries, their prices (interest rates) closely controlled by state banks, and alternatives suppressed by state force. Efforts by the free market to circumvent these state controls will reap massive profits for those so bold --- but not everyone can simply set up shop across the street and provide a little "competition". Casino owners are in a far better position, for example, to launder money because they are a cash focused business. According to your arguments, competitive pressures should force down the rate to launder money because anyone can just set up up their own casino across the street. How many casinos and strip clubs are there that launder money? How many tax evasion services are there? How many loopholes exist in the US tax code? How many people know what the hell a "bitcoin" is?

"According to your arguments"? another pile of BS. Go get logic 101 class.

Tax evasion? yea right, let's borrow at 3000% to avoid 30% hit.

You have proven yourself to be one of the many econ/investor-types who likes to shout mantras louder and louder as if this will somehow have any influence. Think outside the box, and see how bitcoin's unique properties allow for unique business opportunities with, as all revolutionary ideas do, massive returns. More than your day trading commodities certainly. Sure, pirate could wake up one morning and decide to jettison with our bitcoins (though people know who he is and where he lives), and he could in fact be running an elaborate ponzi that will collapse soon.

Where did you get all those bullshit assertions from?

I do not trade commodities. I do not daytrade. I almost do not trade at all. I make maximum 3-4 non trivial bitcoin transaction per year these days.

But the notion that his ambiguity and high returns *necessitate* a ponzi is ludicrous. We have a scenario where an honest person taking advantage of bitcoin's unique characteristics and who is in a good position to do so, and a dishonest ponzi operator will, from the public's perspective, look the same. I'm willing to bet from the curious, forward-thinking individuals the bitcoin community so attracts that he is of the former, a belief only further strengthened by his willingness to expose himself to personal scrutiny that would render the latter an extremely unfavorable position.

"high returns *necessitate* a ponzi", what is high return you mean? 5%? 10%? 20% 100%? 1000%? 3000%? [per annum, of course].

3000% is not just high. 3000% is "only naive idiots can believe that" high.

You can believe whatever.

"his willingness to expose himself to personal scrutiny" is not necessarily true. Actually objective evidence, so far points to exactly the opposite. Some announcement that he will appear on some meetup does not guarantee that this will happen. However, it creates a great window of opportunity to run away with money. Ponzi is based on lie, remember. This is a form of fraud after all.

If you think about it, that defcon appearance announcement is pointing to a high probability window of the default, specifically sometime between now and July 27th.

Also, Madoff did not hide where he live. Here goes the rest of your argument even if (big IF) it is based on a true assertion.

In the end of the day, I do not know for sure if that Pirate biz a ponzi or not. I, however, assert that the probability of it being a poinzi is very high and, if so, the probability of pirate's default asymptotically approaches 100% over time.

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July 06, 2012, 09:30:37 AM
 #24

I just want to mention that the term HYIP says everything...

Lots of people do this outside bitcoin, and there is a whole network of sites perpetuating these schemes.

At the highest level are people, like pirate who have a genuine forex trading account who want more capital.
Some of them open sites which act as bucket shops.
Some make sites where you can "invest" your money in (People who do this might not even do this out of fraudulent intention and may genuinely believe they can make enough to pay the interest but it never works out often perpetuated by those bucket shops)
Some make sites where you get affiliate links to other sites, and you can "invest" your money in them to get other links.
There are also sites which pay you a fraction of a cent to click on affiliate sites, sites which pay you to receive spam and everything in-between.

It's a whole sub-culture of people without anything trying to get rich quick feeding a few fraudsters at the top.


Now pirate isn't really like that, but close.
He may genuinely believe he can make enough money on mtgox/forex/maybe HFT to pay everything back. (Like that poor people on the second step of the above ladder pirate consolidated(*) 1+2 many people do that as well over there)
But since he now locked the thread it seems it hasn't exactly worked out for him.
So he either is a delusional fool or a fraudster. In case of the former he is in good company... but I doubt it -> (*) if I were to bet I'd say he knows what he's doing.
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July 06, 2012, 09:42:30 AM
 #25

Although I have nothing invested in BS&T, the whole ordeal worries me a bit. What if it turns out that clients don't get their funds back? In that case bitcoin will have to take another hit, and price will go down, which also hurts my bitcoin savings. I really hope we'll see some clarification soon..

Why would Bitcoin take another hit?
A few people get scammed. End of story. No big deal for Bitcoin.

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July 06, 2012, 10:04:45 AM
 #26

Although I have nothing invested in BS&T, the whole ordeal worries me a bit. What if it turns out that clients don't get their funds back? In that case bitcoin will have to take another hit, and price will go down, which also hurts my bitcoin savings. I really hope we'll see some clarification soon..

Why would Bitcoin take another hit?
A few people get scammed. End of story. No big deal for Bitcoin.


I'd say bad publicity, and perhaps more people losing faith in the credibility of bitcoin.
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July 06, 2012, 10:15:30 AM
 #27

I'd say bad publicity, and perhaps more people losing faith in the credibility of bitcoin.
Any publicity is probably good publicity. Bitcoin survived the MtGox hack, bitcoin survived the MyBitcoin scam, and a few others. Bitcoin will also survive the inevitable end of Pirate's operation.

The people who will suffer won't be bitcoiners as a whole; just those who "invested".
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July 06, 2012, 10:31:14 AM
 #28

There is a number of possible scenarios.

If we assume that it is a Ponzi and the only economic activity of Pirate was steadily selling some fraction of invested bitcoins. Unnatural bitcoin price stability lately could be an indirect evidence of such sustained sale pressure. In this case the sustained sale pressure will disappear and this might be bullish for bitcoin.

As ribuck has mentioned above this could be "there is no such thing as bad publicity" event AKA
"Shumer syndrome".

The default would produce lots of comedy value for 4chan and SA goons, most likely.

The default would also separate the wheat from the chaff on this forum. Not big deal really, who cares.

The default would potentially bring great educational value to some.

The default would make investors much more careful about their DD, which is only a good news for investment seeking companies that produce less than 3000% ROI.

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July 06, 2012, 10:47:21 AM
 #29

Although I have nothing invested in BS&T, the whole ordeal worries me a bit. What if it turns out that clients don't get their funds back? In that case bitcoin will have to take another hit, and price will go down, which also hurts my bitcoin savings. I really hope we'll see some clarification soon..

Why would Bitcoin take another hit?
A few people get scammed. End of story. No big deal for Bitcoin.


I'd say bad publicity, and perhaps more people losing faith in the credibility of bitcoin.

Scam victims may indeed lose faith in the credibility of Bitcoin. So what? Why should we bother about them losing faith?
If people are stupid enough to invest in what looks like a Ponzi scheme, it will be difficult to teach them the difference between the currency itself and the various scams they can fall for.

Let these people lose faith; a bit of natural selection will not hurt the community.

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July 06, 2012, 11:17:56 AM
 #30

It is possible that pirate from BS&T is Dread Pirate Roberts from Silk Road.  This would explain why he's got to keep so quiet about what he's doing with the invested coins.

That would mean it's not a Ponzi; it's simply profiting from the Silk Road mixer service.  Assume that that this is the case.  It would mean that BS&T is not a scam.  It doesn't mean it's risk free though.

Now, the feds will be looking to shut down Silk Road, and it's certainly not beyond their ken to make this same potential link as we have.  pirateat is leaving IP fingerprints around the place for BS&T... enough for a fed to physically find him (they're good at finding people from IP addresses).

That will then let them shut down Silk Road, but more importantly, will leave all the BS&T investors with no access to their investment.

The other possibility is that it's a Ponzi.

Not sure either of those have a good risk profile.

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July 06, 2012, 11:23:00 AM
 #31

from http://www.sec.gov/answers/ponzi.htm

Quote
What are some Ponzi scheme “red flags”?

Many Ponzi schemes share common characteristics. Look for these warning signs:

High investment returns with little or no risk. Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. Be highly suspicious of any “guaranteed” investment opportunity.

Overly consistent returns. Investments tend to go up and down over time, especially those seeking high returns. Be suspect of an investment that continues to generate regular, positive returns regardless of overall market conditions.

Unregistered investments. Ponzi schemes typically involve investments that have not been registered with the SEC or with state regulators. Registration is important because it provides investors with access to key information about the company’s management, products, services, and finances.

Unlicensed sellers. Federal and state securities laws require investment professionals and their firms to be licensed or registered. Most Ponzi schemes involve unlicensed individuals or unregistered firms.

Secretive and/or complex strategies. Avoiding investments you don’t understand or for which you can’t get complete information is a good rule of thumb.

Issues with paperwork. Ignore excuses regarding why you can’t review information about an investment in writing, and always read an investment’s prospectus or disclosure statement carefully before you invest. Also, account statement errors may be a sign that funds are not being invested as promised.

Difficulty receiving payments. Be suspicious if you don’t receive a payment or have difficulty cashing out your investment. Keep in mind that Ponzi scheme promoters sometimes encourage participants to “roll over” promised payments by offering even higher investment returns.


Let's just see how alleged Pirate ponzi fares on SEC check list:

High investment returns with little or no risk  --> Check. 3000% per year, it does not get any better than this.

Overly consistent returns. --> Check

Unregistered investments. --> Check, run by anonymous Pirate no less.

Unlicensed sellers.  --> Check, a network of intermediaries who take a cut for promoting and proxying it

Issues with paperwork.  --> Check. No paperwork, no issues.  Wink

Secretive and/or complex strategies.  -> Check, big secret to avoid competition, inconsistent claims on what it can be, one day it is genius trading and arbitrage, the other day it is some mysterious USD denominated investments, another day it is alien supplied mining tech and time travel.

Difficulty receiving payments. -> Nope. No difficulties reported so far.

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July 06, 2012, 11:23:57 AM
 #32

If people would lose faith, they would not have lost that many (worthless BTC). On the contrary, the fact that they would consider themselves 'scammed' would prove BTC's enduring value. The same would apply to outsiders (if you lost something with no value, why are you crying about it? Apparently, you lost something that you valued very much).

Happing investing to all  Roll Eyes

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July 06, 2012, 10:17:37 PM
 #33

Quote

Let's just see how alleged Pirate ponzi fares on SEC check list:

High investment returns with little or no risk  --> Check. 3000% per year, it does not get any better than this.

Overly consistent returns. --> Check

Unregistered investments. --> Check, run by anonymous Pirate no less.

Unlicensed sellers.  --> Check, a network of intermediaries who take a cut for promoting and proxying it

Issues with paperwork.  --> Check. No paperwork, no issues.  Wink

Secretive and/or complex strategies.  -> Check, big secret to avoid competition, inconsistent claims on what it can be, one day it is genius trading and arbitrage, the other day it is some mysterious USD denominated investments, another day it is alien supplied mining tech and time travel.

Difficulty receiving payments. -> Nope. No difficulties reported so far.

Great how bias works - try this.

Let's just see how alleged Pirate ponzi fares on SEC check list:

High investment returns with little or no risk  --> Nope, huge risk it might all dissapear at a moment's notice.

Overly consistent returns. --> Check - like most businesses, you smooth out returns by using a float (working capital), that's how banks offer fixed rate deposits.

Unregistered investments. --> Not anonymous, simple internet search reveals more than enough information.

Unlicensed sellers.  --> Check, but then 99%+ of bitcoin people are unlicensed.

Issues with paperwork.  --> No. No paperwork, no issues, but he keeps meticulous records.

Secretive and/or complex strategies.  -> Check, big secret to avoid competition, just like most businesses with IP to protect.

3 out of six and two other "hits" are not uncommon in legitimate businesses with "unlicensed" typical of bitcoin.
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July 07, 2012, 03:33:31 AM
 #34

Great how bias works - try this.
Indeed. You need to check YOUR bias. And BTW nice try taking things out of context.

Why do not you disclose your motivation for lying to public like that here? I would also suggest to check dictionary definition of FRAUD and see if it would maybe apply here. Ohh I'll help ya.

Quote
In criminal law, a fraud is an intentional deception made for personal gain

High investment returns with little or no risk  --> Nope, huge risk it might all dissapear at a moment's notice.

O Really! Why would it dissapear at moment's notice when Pirate claimed or implied so many times that it is not a ponzi and that all the money will be returned to investors both capital and interest?

FAIL

Unregistered investments. --> Not anonymous, simple internet search reveals more than enough information.

FAIL

Issues with paperwork.  --> No. No paperwork, no issues, but he keeps meticulous records.

Right. I am sure in the context SEC by paperwork meant something else than an accurate tally of who put how much money in. A simple google search would reveal what mentioned "investment prospectus" means, for example.

FAIL

3 out of six and two other "hits" are not uncommon in legitimate businesses with "unlicensed" typical of bitcoin.

BULLSHIT!

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July 07, 2012, 03:45:38 AM
 #35

I can feel the tension building in this thread....

I need some popcorn  Grin Grin Grin

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July 07, 2012, 04:32:01 AM
 #36


BULLSHIT!

Wow - you really are angry.  I provided a counter, and there is this angry, shouty person on the other side.  I wasn't necessarily arguing for or against, but putting a point of view - and one that was deliberately at the other extreme of the quoted post.  That you can not see this for what it is (and the comedic juxtaposition) is a worry.  

(Starfish leaves Vladimir to save the world and gets on with something else.)
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July 07, 2012, 04:37:08 AM
 #37

here is what KPMG has published as list of red flags:

http://www.kpmg.com/ca/en/whatwedo/specialinterests/at-risk-magazine/pages/ponzischemes%E2%80%93howtorecognizethem.aspx

Quote
Red Flags – Possible Ponzi Scheme

Higher than normal investment returns
No taxes on returns
Little or no stated risk
Opportunity spreads by word of mouth
Groups targeted by affiliation, ethnic, or social groupings
Appearance of “exclusive” opportunity – you need an “in” to invest
Stated or implied time constraint to invest
Mastermind is often known as a “guru”, “master,” or “genius”
Blind faith – investors lack understanding of investments
Little to no paperwork documenting investments.

-
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July 07, 2012, 04:43:44 AM
 #38

http://www.fbi.gov/scams-safety/fraud/

“Ponzi’ Schemes

Quote
“Ponzi” schemes promise high financial returns or dividends not available through traditional investments. Instead of investing the funds of victims, however, the con artist pays “dividends” to initial investors using the funds of subsequent investors. The scheme generally falls apart when the operator flees with all of the proceeds or when a sufficient number of new investors cannot be found to allow the continued payment of “dividends.”

This type of fraud is named after its creator—Charles Ponzi of Boston, Massachusetts. In the early 1900s, Ponzi launched a scheme that guaranteed investors a 50 percent return on their investment in postal coupons. Although he was able to pay his initial backers, the scheme dissolved when he was unable to pay later investors.

Tips for Avoiding Ponzi Schemes:

Be careful of any investment opportunity that makes exaggerated earnings claims.
Exercise due diligence in selecting investments and the people with whom you invest—in other words, do your homework.
Consult an unbiased third party—like an unconnected broker or licensed financial advisor—before investing.

-
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July 09, 2012, 04:18:55 AM
 #39

It is possible that pirate from BS&T is Dread Pirate Roberts from Silk Road.  This would explain why he's got to keep so quiet about what he's doing with the invested coins.

That would mean it's not a Ponzi; it's simply profiting from the Silk Road mixer service.  Assume that that this is the case.  It would mean that BS&T is not a scam.  It doesn't mean it's risk free though.

That couldn't possibly generate 3000% yearly returns.

It's a ponzi scheme. Ponzi schemes unravel slowly, since the investors (victims) tend to be very loyal. At 7%/week, even if no one new invests and everyone who has already invested just withdraws their profits, it takes 14 weeks to go through all their money. Usually most victims reinvest and many new victims come in, so the scheme can go on for an extended time.
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July 09, 2012, 10:22:52 PM
 #40

It's a ponzi scheme. Ponzi schemes unravel slowly, since the investors (victims) tend to be very loyal. At 7%/week, even if no one new invests and everyone who has already invested just withdraws their profits, it takes 14 weeks to go through all their money. Usually most victims reinvest and many new victims come in, so the scheme can go on for an extended time.

Loyal, tell me about it! I have a "FUD aura", I get shouted at the moment I touch threads related to BS&T.

They're taking me face-on with such hostility, I wonder how they can take the shutdown. My guess is, they don't have any more info than we do, only sold their opinion for the holy 7%. Probably, they were in early and ended up in the black, now helping to herd up newcomers to feed on. Yea, I'm not done with these people.
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September 03, 2012, 07:55:41 PM
 #41

Great how bias works - try this.
Indeed. You need to check YOUR bias. And BTW nice try taking things out of context.

Why do not you disclose your motivation for lying to public like that here? I would also suggest to check dictionary definition of FRAUD and see if it would maybe apply here. Ohh I'll help ya.

Quote
In criminal law, a fraud is an intentional deception made for personal gain

High investment returns with little or no risk  --> Nope, huge risk it might all dissapear at a moment's notice.

O Really! Why would it dissapear at moment's notice when Pirate claimed or implied so many times that it is not a ponzi and that all the money will be returned to investors both capital and interest?

FAIL

Unregistered investments. --> Not anonymous, simple internet search reveals more than enough information.

FAIL

Issues with paperwork.  --> No. No paperwork, no issues, but he keeps meticulous records.

Right. I am sure in the context SEC by paperwork meant something else than an accurate tally of who put how much money in. A simple google search would reveal what mentioned "investment prospectus" means, for example.

FAIL

3 out of six and two other "hits" are not uncommon in legitimate businesses with "unlicensed" typical of bitcoin.

BULLSHIT!


The SEC is watching porno movies and not reading bitcoin magzines yet Wink

Cheers Zyk
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September 04, 2012, 12:33:26 PM
 #42

Important thread. This fiasco we had with BTCST needs to become a prime example and people need to become more active in saying it out loud if they think something is a scam. The Wikipedia article needs to have something on this as well. Bitcoin is especially useful for ponzi operators so this needs special attention.

Of course we can't really get rid of these until we get rid of human greed, which might prove to be a quite difficult task. But what we can do is at least take a more active stance against scams and try to teach people as best we can. That's all we can do, and hope that people get smarter.

Check out the special auction for the NEW Denarium 1/2 BTC 1/2 Oz Gold Coin from here!
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September 09, 2012, 03:22:52 PM
 #43

Important thread. This fiasco we had with BTCST needs to become a prime example and people need to become more active in saying it out loud if they think something is a scam. The Wikipedia article needs to have something on this as well. Bitcoin is especially useful for ponzi operators so this needs special attention.

Of course we can't really get rid of these until we get rid of human greed, which might prove to be a quite difficult task. But what we can do is at least take a more active stance against scams and try to teach people as best we can. That's all we can do, and hope that people get smarter.

No, we can define trust as our most valuable asset and prosecute those, who are proven to have destroyed it and are still destroying it in any way.

Letting them ride in the sunshine scott - free, is being complicit to cover up ppl who are too stupid, too negligent, too lazy, too evil or too ignorant to be entrusted

with other peoples coins.

Cheers Zyk

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September 09, 2012, 04:57:19 PM
 #44

"Long story short, we hear a story too good to be true... it ain't." - Lt. Aldo Raine

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
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September 09, 2012, 06:49:39 PM
 #45

"Long story short, we hear a story too good to be true... it ain't." - Lt. Aldo Raine

No again ! This will be a never ending story, when even moderators are complicit in sweeping everything under the rug !

Scammers and those abetting them, deserve at least a scammer - tag, or how long will you try to play hide and seek

behind your ridiculous groupthink, that facts should be ignored when compared to "moderators evidence"Huh

Heroesk really Wink

Cheers Zyk

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