Okay, not defending pirates business here, as I think its a ponzi, but:
1. Everyone withdrawing shows nothing. If I was running a legitimate business investing peoples money in wind turbines (serious pooling benefits) then I would not be able to pay out a dime or much anyway (edit: During a bank run).
... then again if I was doing that I would just show documents for turbine ownership.
2. The reason you invest other peoples money and not just your own is so you can scale up. I may only have a small amount, say 5K$, and even if I get the full return for that, taking 1-10% of other peoples return while investing 50-500K$ more still nets me extra income.
As others said it is also safer for me to "gamble" with other peoples money.
The benefit for my clients is that I would have the contacts, pooling benefits and save them time investing themselves.
So yeah pirate is likely running a ponzi, but the above are not suspicious signs.
1. Everyone withdrawing shows nothing. If I was running a legitimate business investing peoples money in wind turbines (serious pooling benefits) then I would not be able to pay out a dime or much anyway (edit: During a bank run).
... then again if I was doing that I would just show documents for turbine ownership.
2. The reason you invest other peoples money and not just your own is so you can scale up. I may only have a small amount, say 5K$, and even if I get the full return for that, taking 1-10% of other peoples return while investing 50-500K$ more still nets me extra income.
As others said it is also safer for me to "gamble" with other peoples money.
The benefit for my clients is that I would have the contacts, pooling benefits and save them time investing themselves.
So yeah pirate is likely running a ponzi, but the above are not suspicious signs.
actually he's probably not running a ponzi. what he is likely doing is very profitable. in this scam traders get burned. his clients, his investors profit from that. they do not get burned. clients could get hurt if he is levered up ("scale up") with money he has borrowed from when his strategy eventually fails. leverage works both ways. risk/reward multiplier.
the definition of ponzi has broadened but generally most say it is the type of scam that requires more new suckers coming in to pay off the old suckers. it blows up when there aren't enough new suckers. sometimes people misapply the word ponzi to any type of business fraud that happens to fail. there's more ways to steal from people than simply running a ponzi scam.
his scam is more like penny shaving or salami slicing.
http://en.wikipedia.org/wiki/Salami_slicing
nothing new under the sun. as old as time.
the type of scam we see before us now ends when whatever market advantage he is exploiting disappears. he has said that he has an advantage simply because he is a good trader. the thing is there are a lot of smart talented traders how there. even he found something they missed they will surely will find the same market inefficiency with haste. they should have found it long before now once they exploit it his strategy the game is over. there are many sharks out there and somehow he has managed to evade them for an improbable amount of time. risk adjusted performance is way out there in the tail. beyond six standard deviations.
abnormal and extraordinary performance like this tell us that something is rotten in Denmark. explanations like market manipulation, fraud, insider trading, and exchange collusion are no longer implausible. they are the only theories that make sense. Occam's Razor.
