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Author Topic: Bryan Micon's List of BTC Ponzi Schemes that should not be listed as "Lending"  (Read 107914 times)
finkleshnorts
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August 10, 2012, 07:28:06 AM
 #521

*Ok, I'm going to beat the dead horse again*

If you haven't noticed, he appears to be grasping at straws for new investors. I just don't see it growing much more. I thought that awhile back, but then the PPTs came about. Later, he acted against type with the announcement of lowered interest rates (which proved to be meaningless). After that, the Vegas thing. Now he's rolled out new incentives for investors. I really don't see what else he can do to bring in more money, since he can't advertise on the forum.

We can observe that his grand total from investments has grown roughly exponentially. We can also observe that his debt continues to grow exponentially (the math, compounding interest). What we cannot observe is that his "business" is also growing exponentially, faster than his debt and faster than his incoming deposit capital (plus the profit his business is allegedly earning). Seriously, if he is this desperate for investors and he is running a legit and profitable operation, his business must undoubtedly be a mammoth by now. Otherwise he would neither be scrambling for new investors nor be continuing to hold and compound existing deposits.

The above proposal of an audit that only peeks at his bitcoins and doesn't pull back the curtains over his business plan is foolhardy. Pirate likely has plenty of bitcoins of his own. He could (and would, assuming he is sufficiently wealthy) buy more to cover the audit.

Which brings me to the kicker: He could even do a mass forced withdrawal buy paying everybody back exactly what they are owed, with the existing principal plus money out of his own pocket. Then, he could reopen BTCST, and his investments would drastically exceed his previous total. Maybe even Micon would invest. Legendary.

All that to say... we will never know for sure whether it's a Ponzi until D-Day arrives. No matter what happens now, unless I can see his "trade secret," I will continue assuming it is a scam. Sorry Pirate, you are a friendly chap. I hope you are honest as well.
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August 10, 2012, 07:33:21 AM
 #522

If he's able to pay out everyone at the same time the business cannot be a Ponzi, so your argument doesn't fly.

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August 10, 2012, 07:36:27 AM
 #523

If he's able to pay out everyone at the same time the business cannot be a Ponzi, so your argument doesn't fly.

He knows people would be drooling in line to get their 7% all over again.  So yes, it flies if you look at the big picture. It's not an argument anyway. It's a hypothetical situation. Imagine what would happen if he forced a mass withdrawal: The word might even spread outside of this forum. "I heard some guy on the Internet named Pirateat40 has been offering 1% a day for a year, they say he just proved it's legit." It could even cause a price spike from all the new interest in bitcoin and newcomers buying in. Just some silly speculation, but seriously. It would *easily* be worth it to Pirate in the long run, assuming he can fund such a spectacle at this point in the game.

assume the Ponzi scenario for a moment:

Suppose payb.tc decides to close his pass-through and send all of the coins back to his sub-depositors. Considering the size of bitcoinmax, it would be tempting for Pirate to fold his arms and disallow the withdrawal, ending the scheme. Or, he could "purchase" more trust from the community by following through with such a massive withdrawal, with the hope that he could bring in more money in the long run. A Ponzi operator must walk a very fine line to achieve maximum profit.
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August 10, 2012, 08:12:01 AM
 #524

Actually, I'm guessing something like that will be his next move. It's probably his only option left.

Or he may simply wave his hands, say a few words, and publicly move a huge amount of bitcoins around from address to address, perhaps combined with an unveiling of some kind of ledger for all to see. We already know pirate likes to jingle his bitcoins for us Smiley
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August 10, 2012, 09:04:40 AM
 #525

If he's able to pay out everyone at the same time the business cannot be a Ponzi, so your argument doesn't fly.

i think you missed the part where bob said "plus money out of his own pocket", in which case he could pay out everyone at the same time and more, depending on how personally rich he is.


Yes but if he is that wealthy the profit he gains with the Ponzi is only a small fraction of his net worth and the risk it brings will not be economical.

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August 10, 2012, 09:08:58 AM
 #526

If he's able to pay out everyone at the same time the business cannot be a Ponzi, so your argument doesn't fly.

i think you missed the part where bob said "plus money out of his own pocket", in which case he could pay out everyone at the same time and more, depending on how personally rich he is.


Yes but if he is that wealthy the profit he gains with the Ponzi is only a small fraction of his net worth and the risk it brings will not be economical.

If you say so.

Depends on how big you think it can potentially become, really.
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August 10, 2012, 11:37:21 AM
 #527

And while I love a big "I told you so" as much as anyone, I honestly would love to be wrong about this, because a lot of people are going to get hurt very badly. This could be the Bitcoin equivalent of the global economic collapse because so many Bitcoin-related things have serious exposure that they may not even realize.

This.
I've been trying to find new BTC investments lately, but honestly finding something that's not constantly losing value (mining bonds) or heavily exposed to pirate... there's not a lot left really.
I'm in two minds over this - first is that if people get badly burnt they might give up on BTC altogether and we'll see a big capital outflow.
Second is that at the moment demand for mining company shares and the like are very low, because so much cash is going out of those and directly into more Pirate Pass-Through bonds and the like, and the collapse of super-high-return super-high-risk debt instruments (heh, sound familiar?) might cause some of what capital was left in the markets to go to mining companies.

Again, I'm not giving you grief here.  Your statement that "most of them feign not being interested in taking your money (even though they are supposedly paying absurd rates). Ponzi schemes like to seem "exclusive"; this is a diagnostic characteristic." is fascinating, and I would love to read case law or the original research that has concluded this.

Honestly, this is really, really basic stuff. It's Ponzi 101. Any good introduction to Ponzi schemes will cover this. Madoff famously refused many investor's money. It was not unusual to hear people argue that if Madoff was running a Ponzi scheme, he wouldn't refuse any deposits. He also cleverly warned people that because withdrawals disrupted his strategy, people who withdrew might not be permitted to re-invest.

For anyone looking for an explanation of some of this stuff, look at "Chasing Madoff" - Bernie's scheme was probably the most successful financial fraud of all time, and it had a very similar structure with the feeder funds and such.


Also Honest Bob, you're talking about having to buy probably $2-3 million in BTC to cover the likely shortfall if all the coins have just been sitting there. It's very questionable whether or not he has that much in liquid capital.
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August 10, 2012, 11:41:45 AM
 #528

For anyone looking for an explanation of some of this stuff, look at "Chasing Madoff" - Bernie's scheme was probably the most successful financial fraud of all time, and it had a very similar structure with the feeder funds and such.
The most successful financial fraud of all time is still going on - it is called USD
CoinCidental
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August 10, 2012, 12:21:07 PM
 #529

It should not be very difficult to figure out if pirate has been paying 7% a week out of all the principal investments and praying deposits keep exceeding withdrawls 

there has got to be either  a massive deficit  in the deposists + compounded interest   by this stage unless hes raking in coins by the truckload from somewhere

if he even allowed someone independent to verify that he still has ability to repay everyone or maybe 500-750k BTC  still under his control in the BTCST account  it would go a long way

How does this affect the temporary and long term value of the bitcoin though ,when people are getting 7% free every week does it not devalue the currency  itself and also take away  the benefits of mining and other activities that are paying less than 7% but may not be scams?



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August 10, 2012, 01:44:33 PM
 #530

Again, I'm not giving you grief here.  Your statement that "most of them feign not being interested in taking your money (even though they are supposedly paying absurd rates). Ponzi schemes like to seem "exclusive"; this is a diagnostic characteristic." is fascinating, and I would love to read case law or the original research that has concluded this.

Honestly, this is really, really basic stuff. It's Ponzi 101. Any good introduction to Ponzi schemes will cover this. Madoff famously refused many investor's money. It was not unusual to hear people argue that if Madoff was running a Ponzi scheme, he wouldn't refuse any deposits. He also cleverly warned people that because withdrawals disrupted his strategy, people who withdrew might not be permitted to re-invest.

One very basic thing any major scammer does is at least occasionally, intentionally act against type. You have to look carefully to get the big picture.

Indeed. I've posted this link several times, which has a good overview of modern internet Ponzi schemes: http://fc12.ifca.ai/pre-proceedings/paper_27.pdf

Warning signs from the author of a treatise on Ponzi schemes: http://www.npr.org/blogs/money/2012/07/30/157606305/four-signs-your-awesome-investment-may-actually-be-a-ponzi-scheme
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August 10, 2012, 01:47:56 PM
 #531

Similarly, a stability requirement "makes sense" in some sort of way--capital stability, of course!  But penalizing withdrawals and not deposits absolutely screams "scam," so it's unsurprising that such a rule is not put into writting.

It was put in writing.  It was mentioned on IRC by pirate himself.  Both withdrawals and deposits count towards the stability requirement.

I was saying that he wouldn't put a one-sided limit on withdrawals in writing. Has he?  I would think that would be a big red flag event to the credulous.

Hence it's a bonus for maintain the same amount (while still letting in new money).  Same effect, no red flag.

Also Honest Bob, you're talking about having to buy probably $2-3 million in BTC to cover the likely shortfall if all the coins have just been sitting there. It's very questionable whether or not he has that much in liquid capital.
Yes. It might make sense to "prove" you're legit early on if the out-of-pocket is just a few hundred dollars (and I imagine some smaller-scale scamers do that with regular BTC loans). The risk-reward situation is different if you presuppose Pirate is already rich (while writing bad $500 checks for some reason, and having to scrounge for investors on a freaking web forum). I'm skeptical he was rich; if he paid everyone off, I'd probably drop the Ponzi talk.
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August 10, 2012, 01:57:25 PM
 #532

Also Honest Bob, you're talking about having to buy probably $2-3 million in BTC to cover the likely shortfall if all the coins have just been sitting there. It's very questionable whether or not he has that much in liquid capital.

I was going to say. If pirateat40 had been a millionaire already at the beginning, why would he start a massive illegal scheme to obtain money? Typically you look at illegal sources of money when you have none and cannot get it legally.

Going illegal has fundamental disadvantages. You may end up in jail or you may get shot by a hothead whose money you stole.

I had this funny, but surely very unrealistic dream with the following story:

"It was all a social experiment. I just wanted to demonstrate gullibility. I will now pay you back every penny you paid in—without interest, of course. I hope you didn't take it too seriously."
imsaguy
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August 10, 2012, 02:04:47 PM
 #533

Similarly, a stability requirement "makes sense" in some sort of way--capital stability, of course!  But penalizing withdrawals and not deposits absolutely screams "scam," so it's unsurprising that such a rule is not put into writting.

It was put in writing.  It was mentioned on IRC by pirate himself.  Both withdrawals and deposits count towards the stability requirement.

I was saying that he wouldn't put a one-sided limit on withdrawals in writing. Has he?  I would think that would be a big red flag event to the credulous.

Hence it's a bonus for maintain the same amount (while still letting in new money).  Same effect, no red flag.

He's penalizing deposits as well as withdrawals.  How many times do I have to say this before you actually acknowledge it?

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August 10, 2012, 02:11:41 PM
 #534

I was saying that he wouldn't put a one-sided limit on withdrawals in writing. Has he?  I would think that would be a big red flag event to the credulous.

Hence it's a bonus for maintain the same amount (while still letting in new money).  Same effect, no red flag.

He's penalizing deposits as well as withdrawals.  How many times do I have to say this before you actually acknowledge it?

I acknowledged it the first time. I said: "But penalizing withdrawals and not deposits absolutely screams 'scam,' so it's unsurprising that such a rule is not put into writing."

If he had a rule like that, it would deter even the credulous, so it's not surprising he doesn't have an express rule like that.
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August 10, 2012, 02:13:24 PM
 #535

He's penalizing deposits as well as withdrawals.  How many times do I have to say this before you actually acknowledge it?

Just say it a couple more times. Nobody in his right mind will believe it anyway.

There are so many obvious ways to lodge new deposits that your intention is equally obvious, just one of them being that he can bend his own rules. This had already been mentioned in this thread.
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August 10, 2012, 07:00:00 PM
 #536

Forced withdrawals in the beginning are the expected behavior, to limit the growth curve and extend the run-time. I've said this a gazillion times, the forced withdrawals are an indicator of a Ponzi scheme, very especially in the way they were used at BS&T. It's silly to use this as an argument against Ponzi accusations.

Keep the user base growth above, but close to the paper coin growth to limit the fraction of nonexistent coins as long as possible. This is a basic application of the exponential function, why are we discussing this yet again?
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August 10, 2012, 07:39:03 PM
 #537

And another thing that helps convince me personally, though I completely understand if you don't find it convincing, is that I know a lot of people who are very active in the Bitcoin economy. Every single one of them that I've discussed this with, and that's most of them, is 100% firmly convinced that it's a Ponzi. This includes top-level people associated with Mt. Gox, formerly associated with Tradehill, associated with Bitcoin Magazine, three people who each hold in excess of 50,000 bitcoins each, and so on. Not one of them has any other explanation that they think is even remotely likely.

And while I love a big "I told you so" as much as anyone, I honestly would love to be wrong about this, because a lot of people are going to get hurt very badly. This could be the Bitcoin equivalent of the global economic collapse because so many Bitcoin-related things have serious exposure that they may not even realize.

Why isn't everyone creating The Next Big ThingTM? Wealth has little to do with the ability to understand an idea. There's a perspective shift required to make use of a situation, especially when it comes to new technologies. It's summed up well by the phrase:

"Why didn't I think of that?"

If everything Pirate is doing were confined exclusively to the Bitcoin economy, there would be no chance of perpetual operation; it would've been over almost three months ago. Instead, I think churn at the margins is being capitalized on. As long as that continues, there will be profit potential.

As I've suggested - gold and silver market management is extremely profitable for the entities involved, and it continues to be profitable for them even as the USD price rises. The same applies to Bitcoin on a smaller scale (for now). To understand how this is possible, that perspective shift is necessary. There are perhaps a few dozen prominent individuals with this view regarding gold, and they're mostly labelled as the fringe. Gold and silver continue to defy the skeptics, who happen to be the vast majority and many of whom are very wealthy.

How many big, wealthy household names understand Bitcoin (not that [m]any are even aware)? Does that make them right and us wrong, or do we share a unique perspective that they haven't been able to grasp?
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August 10, 2012, 07:49:19 PM
 #538

or do we share a unique perspective that they haven't been able to grasp?

Nope. It's a Ponzi scheme. 
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August 10, 2012, 08:27:16 PM
 #539

miscreanity is spouting vague salesman-type Ponzi gibberish like its his job

lmao

nothing he says makes any sense

"churn at the margins is being capitalized upon"
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August 10, 2012, 09:06:29 PM
 #540

He's penalizing deposits as well as withdrawals.  How many times do I have to say this before you actually acknowledge it?
You can say it all you want, because the unofficial audit team has irrefutable proof that this is absolutely not the case. For example, despite growing over 10% per week, BitcoinMax is still making 7.7% per week in interest.

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