MPEx claims to have a valuation of BTC700,000, which would make it the most valuable bitcoin business of early 2013. Their main business is to issue options on USD/BTC exchange rate. As they claim the position is in excess of BTC100,000, it is obviously impossible to hedge in other exchanges. The risk is instead borne by "bondholders", auctioned out monthly, who will either win a fixed percentage on their bond amount, or lose a prorated amount of MPEx trading loss. In March they lost over BTC27,000.
I suspect the exchange has blown its risk management and will likely default in April/May if the USD/BTC rate keeps increasing as it has done.
The idea that bondholders take the hit if the month turns negative, is a clever one. But if you personally guarantee the black swan of bitcoin's disproportionate rise in excess and/or absence of enough bondholders, you play a dangerous game. The owner has clearly grown desperate as he sees his end coming.
The owner has something against me, and is likely to respond with hatestorm once again, skipping his chance to clarify my suspicions with actual facts, (which would be easy if everything is in order). Do your own due diligence.
I hold absolutely no long or short positions in S.MPOE or anything listed there.
