Topic: [ANN] Bitcoinica Consultancy abandons customers. Bitcoinica to enter Liquidation - page 7. (Read 54938 times)

Perhaps you could petition the court for your Bitcoinica deposits to be returned as Bitcoins in your lawsuit.  The court certainly has more flexibility in respect of remedies than a liquidator, who is required by law to liquidate assets for the benefit of all creditors.

Even if a liquidator could return deposits as Bitcoins, they still couldn't return them in a greater proportion than what was being returned to those owed USD - someone who was owed Bitcoins to the value of $50 immediately after the Rackspace hack (~10 BTC then) would still only be able to claim BTC to that value now (~5 BTC now) and not an absolute number of BTC.

Im sorry to say it probably wont work that way and they will simply liquidate all the coins and pay out proportionally the value at the time the hack happened. Thats the way administration works and unfortunately only fiat is accepted "as payment for debts". It doesnt matter what the underlying asset is as everything will be converted to government fiat. Thats the problem with going to the existing legal system not private arbitration.

Edit: What I mean is that I doubt the administrator will buy bitcoins but sell them for fiat and then divide the fiat between creditors.

I had Bitcoins on deposit and I expect Bitcoins to be returned.
I don't care if Bitcoins are worth $1 or $1,000

I suspect the other creditors feel the same way.

BTC weren't worth $5 when the MtGox theft occurred though.  Had those 40k BTC never left MtGox, they'd be worth around $400,000 now.  Because only 20k Bitcoin were returned, the value of the returned BTC is around $200,000.  Even though the total recovered is about the same as the total amount stolen in July (~$280,000 in Bitcoins plus USD 40,000), about $100,000 in value has been lost as the current value of 40,000 BTC is about $400,000. 

Zhou is effectively saying that because the value of Bitcoins has increased, the amount recovered from Chen already covers the value of the theft at the time it occurred.  Frankly, I'm not sure why Bitcoinica users should give a shit about this, though and why Chen shouldn't pay a premium for the additional losses caused by the theft - Chen should not be the one to profit from the increase in the value of BTC since the theft.

I think that what Zhou was saying is that the 20K BTC + 140K USD that he is able to recover from Chen would cover the 40K BTC + 40K USD stolen from MtGox if you apply the ~$5 conversion rate that Bitcoinica used to close open positions.

I would argue that property should be returned in the same form it was originally stolen.

To be clear - there is no magical number that the numbers add up to.  It is arbitrary.  Move that rate up and some people lose more while others gain more.  Now, technically if you moved it too high then it would be past the point of liquidation for those that shorted and you would be short on funds to payout those that went long.

But Bitcoinica had a good month of stability in btc price to payout and they failed to do so - so they should have to pay the difference.  And if they don't have the funds then the loss is spread between those in long positions.

But the bottom line is that the exchange rate should be the rate at the time that the money is paid out.  Either that or they take the highest rate between then and when paid out for long positions and the lowest rate between then and when paid out for short positions and close at those rates and then spread the loss between all those that held positions (as a percentage of the gains made from their positions).

Zhou had mentioned possibly picking a number in that range before (if he were running the show) because he figured that the payouts would happen as quickly as possible so any price change would be insignificant.

Bitcoinica seems to have chosen that number because presumably it was more favorable for those that were buddy-buddy with Tihan.  I can't think of any other reason to do so.

Possibly NZD, but yes - they'll liquidate the assets and pay people in dollars, whether the assets are BTC, diamonds, bananas, or shares in Berkshire Hathaway.

Zhou may have misled Patrick Murck about the funds on AurumXchange. Patrick seemed unaware of Zhou claiming those funds belong to a "friend" (not Chen) of Zhou's on whose behalf he conducted a transaction.

https://bitcointalksearch.org/topic/m.1098392

Possibly. He certainly did his best to avoid being named in lawsuits (who can blame him?):


Anyway, I will now stop selectively quoting Zhou from the conversation I had with him this week. If Zhou agrees, I would be happy to make the entire conversation public.

Ninjarobot - thank you very much for the intelligence. This kind of information should be public.

#1 is this a fact that the numbers add up at 5.1USD/BTC? who can confirm?

#2 haha - I thought that's part of the deal with Chen (according to #4 he holds still 40.000). Besides that he could only benefit making this information public.

#4 He was allowed by WHOM? So he admits taking Bitcoinica's funds hostage for something unrelated?

Honestly, this sounds like an attempt to avoid being named in any lawsuits related to the collapse of Bitcoinica and/or being pursued by a liquidator for the recovery of funds.  In theory, creditors whose combined claims total 75% of the total owed can accept payment arrangements but it's really, really unlikely that a liquidator is going to ignore the criminal aspect of Bitcoinica's failure.  

Liquidators have some discretion, but it's not absolute and any liquidator who did not seek Zhou's active co-operation in providing information about Chen would be taking a substantial risk - liquidators have legal liability for the manner in which they administer insolvent estates.  In this particular case, I think there's zero chance that a liquidator is going to be able to avoid investigating the issues of personal liability of those connected with Bitcoinica and their connections to any criminal activity - there'd be a flurry of complaints to the Registrar of the Insolvency and Trustee Service if that happened and a very real possibility that the private liquidator would be replaced by the Official Assignee.

No-one can "go after Chen" unless Zhou is willing to provide all the information he has about Chen in order for that line of enquiry to be pursued.

#4 is a bullshit answer.  There is no reason whatsoever why Zhou's "friend's" funds on AurumXchange should be released to Bitcoinica.  Zhou's just using that argument to get people to pressure AurumXchange to release the funds without them verifying the true source and legitimacy of the funds.  According to Zhou, it's the $5,000 AurumXchange transaction which is Chen's, not the $40,000 one.

There is zero reason for Chen not to pay the remaining $40,000 to Patrick Murck other than Zhou's desire to use that money as leverage for getting the AurumXchange account unlocked.  That he's doing so strongly suggests that he's unable to prove the source and origin of the AurumXchange funds - otherwise he'd have done so by now and the funds would have either been paid to Bitcoinica or returned to Zhou's "friend".

Zhou always wants to come out of every shit-storm looking like a hero.  It's probably not going to happen this time because it's not just this community who'll be judging his role in the fall of Bitcoinica.

Well, technically I guess the 40,000 USD belongs to Bitcoinica. And the operators of Bitcoinica apparently didn't really care about recovering those funds anyway.


Zhou addressed some of those concerns to me so I will quote them here.

on #1:

on #3:

on #4:

LOL, psy! You're not a mod anymore?

~Bruno~

It could have been worse. Imagine if it was a pineapple...

Wont the liquidator sell the bitcoins and only deal in USD ?

Innocent or not doesn't matter here - he chose to pay off his friend with money returned from "Chen". These 40.000 belong to US and WE didn't agree to give Zhou Tong a loan!

Also consider:
1. The amount recovered is substantially less than stolen - we don't know in detail what happened here (there is enough room for a profit margin).
2. Chen A MILLIONAIRE didn't replace the cost of his laundering activity
3. Zhou protects Chens identity
4. Zhou strictly rejects to provide information about his 40.000 AurumXchange transaction to simply unlock these funds and repay the 40.000 Dollar loan he took from us without permission.

Especially 4. makes his promise to repay from future profits implausible. It's time to put the screws on.

All I know is that I turned one guy onto Bitcoin who just inherited a chuck of money. I never mentioned Bitcoinica to him--just Bitcoin. The next thing I learn is that supposedly he (Jerry) had about $10,000 USD tied up in Bitcoinica. Although he never mentioned the exact amount, via conversations that's my best assessment. I'm pretty sure he bought in at $5/BTC, thus he could have made 200% profit recently. Instead, he would have been better off having it sitting in a conventional bank collecting 1% interest.

This past Sunday, I stopped over at the Sandwich Flea Market--two blocks from my home--to rap with a couple vendor friends of mine--Mike and Kenny. After talking shop awhile, I got ready to leave when Mike asked me about that internet money I'm involved in. I have never mentioned Bitcoin to either one of those guys, so I was taken aback when he bought it up. I asked him if he meant Bitcoin, whereupon he said yes, recalling that that's what he thought it was. Come to find out that Mike learned about Jerry's lost via a friend, via a friend, via a friend (think small town gossip, if you will). Fortunately, I had the opportunity to set the matter straight with him and Kenny, but did learn that a lot of people think elsewise about me here in Sandwich.

So, here I am on Bitcointalk trying my damnest to uncover the truth and, admittedly, fucking up along the way, and what do I get as a reward?



~Bruno~

I had a conversation via email with Zhou earlier this week and this is what he told me:


Here you go:

• 2012/03/02 - LINODE hack. 43,554 BTC stolen. LP (Tihan’s fund) covers loss.
• 2012/05/11 - RACKSPACE hack. 18,547 BTC Stolen, Full data loss. LP covers loss.
• 2012/07/13 - MtGox account compromise: 40,000 BTC and 40,000 USD stolen.
• 2012/08/14 - MtGox fund recovery from Chen: 20,000 BTC and 100,000 USD recovered.

Ouch! Now I understand the meaning of the word 'liquidator'. At that rate there will be little left (Consider the time needed to reconstruct the DB and vet claims). I certainly hope Tihan can find a receiver and liquidator that does not eat baby panda hearts for breakfast. Personally I'm hoping to see at least 70% back. (That would still mean a ~12,000 USD haircut in my case..)

When the MtGox intrusion was originally announced, Amir posted that it would likely result in a forced reduction in refunds of 30%.  However that was based on refunding users at a price of ~USD 5 per BTC (the figure being used when Bitcoinica was taken offline after the MtGox hack).  The increase in BTC price plus the return of some of the funds from the MtGox breach should close that gap in theory, but liquidation costs now need to be factored into the equation and liquidators typically charge upwards of $200 per hour. 

A liquidator can only give preferential treatment to unsecured creditors in limited circumstances, so if some unsecured creditors have received a 50% payment and those creditors aren't entitled to be treated as preferential, the liquidator will need to ensure that either other unsecured creditors also receive a 50% payment or claw back the 50% payments which have already been made so that other creditors are not disadvantaged by those payments.  We know that there is currently at least 20,000 BTC and USD 100,000 in the Mt Gox account but we don't really know the dollar value of 50% initial payments yet to be made.

I am aware of the obstacles here - that's why I addressed aurumXchange directly hoping for a clear statement. If aurumXchange states clearly that there is no way they can pass through these 40.000 to the Bitcoinica trust account without Zhou's help, Zhou Tong would be clearly without any doubt committing some kind of embezzlement. 

Zhou stated clearly he is able to secure 140.000 of which 100.000 are to be returned and 40.000 used to pay off his friend. The 40.000 for his friend are compensated by the aurumXchange account. Ergo:  if his collateral shows to be illiquid (NB by his own wrongdoing) he has to offer another option to compensate us. e.g. like repentance suggested. He can't take Bitcoincia customers hostage in his dispute with aurumXchange. His transaction on aurumXchange (according to his own words) is completely unrelated to Bitcoinica so I suggest him to leave it at that!

@Zhou How do you in all seriousness propose to return the remaining 40.000?