Bitcoin Savings and Trust is probably a Ponzi Scheme: A Petition - page 10.

MarketNeutral

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Quote from: MarketNeutral on May 06, 2012, 11:49:12 PM

http://univ-pau.academia.edu/MarcArtzrouni/Papers/444230/The_Mathematics_of_Ponzi_Schemes

http://bear.warrington.ufl.edu/ritter/ForensicFinance.pdf

http://www.businessweek.com/magazine/harry-markopolos-how-to-spot-a-fraud-09222011.html

From your third reference:

"It is now possible to predict what will happen to the fund, at least under the simple assumptions made in the model described in this paper." Essentially, everything in that paper is assumptions.. much like the trolling in the thread.

I'm not the author of that paper. Don't hold me to it, and don't be so defensive. I don't necessarily agree with everything there, but I linked to a few articles in an attempt to show that there is institutional and academic interest in the gravity of financial fraud, and that such things should not be taken lightly, and in fact, should be taken seriously for good reason.

MarketNeutral

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Quote from: MarketNeutral on May 06, 2012, 11:49:12 PM

http://univ-pau.academia.edu/MarcArtzrouni/Papers/444230/The_Mathematics_of_Ponzi_Schemes

http://bear.warrington.ufl.edu/ritter/ForensicFinance.pdf

http://www.businessweek.com/magazine/harry-markopolos-how-to-spot-a-fraud-09222011.html

Did you actually read those or just google search and pick the best you thought you found?

Yes. I'm a fund manager. It's my job to know this stuff.

MarketNeutral

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Quote from: MarketNeutral on May 06, 2012, 11:38:41 PM

JoelKatz is making cogent and informed statements, yet it seems they're cast like pearls before swine. Reading this thread, I'm beginning to wonder just how much real financial experience some members have beyond the excitement of bitcoin. Seems like not much.

Mysterious bonds sold via an irreversible currency by a mystery person who goes by the name Pirate? Caveat emptor.

Where was there mention of Bonds in this thread?

What most call 'bonds' in the Bitcoin world are nothing more than loans renamed.

And I agree with Caveat Emptor. One should do due diligence before investing in anything.

I shouldn't have been so generous. Some members here, such as Pirate and his apologists, use financial terminology like 'bonds' in an attempt to give legitimacy to their cause. Show me measures of convexity or any coupon correlation, and then I'll believe that said bond is an actual bond. Until then, reread JoelKatz's points, because they're spot on.

MarketNeutral

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http://univ-pau.academia.edu/MarcArtzrouni/Papers/444230/The_Mathematics_of_Ponzi_Schemes

http://bear.warrington.ufl.edu/ritter/ForensicFinance.pdf

http://www.businessweek.com/magazine/harry-markopolos-how-to-spot-a-fraud-09222011.html

Matthew N. Wright

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Quote from: MarketNeutral on May 06, 2012, 11:38:41 PM

JoelKatz is making cogent and informed statements, yet it seems they're cast like pearls before swine. Reading this thread, I'm beginning to wonder just how much real financial experience some members have beyond the excitement of bitcoin. Seems like not much.

Mysterious bonds sold via an irreversible currency by a mystery person who goes by the name Pirate? Caveat emptor.

+1.

MarketNeutral

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JoelKatz is making cogent and informed statements, yet it seems they're cast like pearls before swine. Reading this thread, I'm beginning to wonder just how much real financial experience some members have beyond the excitement of bitcoin. Seems like not much.

Mysterious bonds sold via an irreversible currency by a mystery person who goes by the name Pirate? Caveat emptor.

Andrew Bitcoiner

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Quote from: JoelKatz on May 06, 2012, 11:07:06 PM

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Now this is just jealousy. Where is your evidence that he's driving out legitimate investment opportunities? Because GLBSE, the steaming heap that it is, should be handling even more volume? Because people should be buying more hot peanuts?

I'm not jealous. I have no skin in this game. I'm not associated with any Bitcoin investment of any kind. My total holdings in all things Bitcoin-related are worth under $50.

Err. So you're just here to troll, throwing logical fallacies around hoping some will stick? Your comments about legitimate investment opportunities hold no water.

If you "have no skin in the game" but are stirring up trouble, that's a classic troll.

Can you supply enough evidence to convince people to a different opinion? If not, go troll somethingawful.com or lemonparty.org.

No disrespect but you don't know who Joel is, he is one of the best regarded cryptographers around, see stackoverflow.

JoelKatz

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Now this is just jealousy. Where is your evidence that he's driving out legitimate investment opportunities? Because GLBSE, the steaming heap that it is, should be handling even more volume? Because people should be buying more hot peanuts?

I'm not jealous. I have no skin in this game. I'm not associated with any Bitcoin investment of any kind. My total holdings in all things Bitcoin-related are worth under $50.

Matthew N. Wright

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Quote from: JoelKatz on May 06, 2012, 06:52:40 PM

All he's doing is associating Bitcoin with something that appears to be a Ponzi scheme and driving out legitimate investment opportunities.

Now this is just jealousy. Where is your evidence that he's driving out legitimate investment opportunities? Because GLBSE, the steaming heap that it is, should be handling even more volume? Because people should be buying more hot peanuts?

Because more people should be using mybitcoin.com!

You mean this? http://MYBITCOlN.COM

PatrickHarnett

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Quote from: JoelKatz on May 06, 2012, 09:36:46 PM

While a legitimate investment scheme may look somewhat like a Ponzi scheme from the outside, the insides are totally different.

Yes, I (and several others) pay 1%+ per week to people. Some have scarcity, and the return is far above a normal return. QED I am running a ponzi because it is too good to be true? No.

If Pirate wasn't at the top of the heap, then someone would throw stones at the next one in line. Just because people are not smart enough to work it out, it's like the good old days - may as well burn him at the stake for being a witch.

JoelKatz

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Quote from: miscreanity on May 06, 2012, 09:34:27 PM

Quote from: JoelKatz on May 06, 2012, 06:52:40 PM

I cannot think of anything else it could possibly be other than a Ponzi scheme, sheer insanity, or something very, very risky for some other reason. That could, of course, mean it's something so strange that I can't think of it. But I know of no other explanation that makes any sense.

Is a piece of art selling for USD$119mm indicative of a Ponzi scheme? Why or why not? How is it different or similar to the Bitcoin lending environment?

The difference is that nobody is being falsely told that they're investing in something when their money is actually going to pay the cash outs of previous investors. The difference is that real assets are held with a fair market value equal to the total of all amounts invested. While a legitimate investment scheme may look somewhat like a Ponzi scheme from the outside, the insides are totally different.

miscreanity

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Quote from: JoelKatz on May 06, 2012, 06:52:40 PM

I cannot think of anything else it could possibly be other than a Ponzi scheme, sheer insanity, or something very, very risky for some other reason. That could, of course, mean it's something so strange that I can't think of it. But I know of no other explanation that makes any sense.

Is a piece of art selling for USD$119mm indicative of a Ponzi scheme? Why or why not? How is it different or similar to the Bitcoin lending environment?

JoelKatz

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I gave you an example. Lets put it another way. Lend me $100 dollars to buy and Ipad. I will sell the Ipad for $200. I will give you back $101 dollars and keep $99 dollars. BTW: Anyone in retail will know that 100% Mark-up is low. I did it here for simplicity.

Right, but there I make 1% and the next time, you don't need to borrow any money from me. So this would be a one-time thing that makes a normal profit.

We know Ponzi schemes exist. We know how they work. We know that they do work. Your argument boils down "maybe there's some conceivable way it could be something else, even though I can't quite imagine what it might be". That was the argument made to investors during pretty much ever Ponzi scheme since the first one. Madoff, for example, claimed to have some kind of unusual investment strategy. He claimed no risk. He paid extraordinary interest. If this isn't a Ponzi scheme, it's something else nobody can think of that looks exactly like one.

(By the way, I'm completely open to the possibility that it's something bizarre that I can't imagine. Honestly, from what I've seen, that may actually be more likely than that it's a Ponzi scheme.)

Otoh

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JoelKatz

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You are essentially asking: Why isn't he greedy enough to keep it all and pay nobody? If he used his own money, that would be plausible. However, it would also be plausible for him to still give back 1% of his profits to help spread the use and interest of BTC.

I don't see that he's spreading the use and interest of BTC. All he's doing is associating Bitcoin with something that appears to be a Ponzi scheme and driving out legitimate investment opportunities.

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You seem like the type of person that if they could make all the Bitcoins out there, you would get them and not share anything back.

This is the classic argument in defense of a Ponzi scheme.

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The problem is if you did, you lose. It is a Game Theory which could be interpreted many ways. You have 100 pieces of candy. You get them all but there are 9 other people in the room. I would suggest to you that it is to your benefit to share your hoardings. If not, well lets say, you will lose.

I have no idea what you're talking about. How do I lose in that scenario?

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But as to my post, I am not saying this is what he is doing. Just that there are plausible ways of paying 1% with out it being a ponzi.

Which are? I've yet to hear the example.

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Typically startups do this but retroactively with stock options. I wonder what the daily percentage paid on Facebook will be when his IPO sells. Something tells me it might be more than 1% per day.

Sure, but that's because the investors are taking very high risks. Are you suggesting that's what's happening here?

I cannot think of anything else it could possibly be other than a Ponzi scheme, sheer insanity, or something very, very risky for some other reason. That could, of course, mean it's something so strange that I can't think of it. But I know of no other explanation that makes any sense.

JoelKatz

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Quote from: PatrickHarnett on May 06, 2012, 04:51:12 PM

Because people operate irrationally. Perhaps that's why charities survive.

Trust in those who appear to be acting irrationally are the hallmarks of the less-subtle Ponzi schemes. Solid businesses are based on rational actions, not irrational ones. Benevolence is not irrational, but giving money to those who extend trust to people who appear to be acting irrationally and driving out legitimate investment schemes is.

miscreanity

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I have access to 1% of the Bitcoin resource pool and can earn a 50% return in the USD resource pool using Bitcoin resources. If I offer part of that 50% return, I can still make a profit while gaining access to 10% of the Bitcoin resource pool. As long as the USD pool is larger than the Bitcoin pool and has room to shrink or shed wealth, it can flow into Bitcoin - even at ridiculously high rates that would be inconceivable if remaining exclusively in the USD pool.

This is parasitic arbitrage at the most fundamental level of financial system foundations, eroding the USD (and other currencies to an extent) while enriching Bitcoin.

Question: assuming an inevitable decline of the USD, and pirate understands this process, why would he kill the golden goose when it still has so much to offer?

ShadowAlexey

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I just think that to draw some real money you need to have a reasonable percentage. For bitcoin where you can loose half of your investments becouse of a rate drop there is not a big deal to pay 30% a month, just to keep money with you, because who would invest 20k $ if with in a month you can end up with 5? I do think that percentages from 8-30 a month are reasonable, for bitcoins(it all depends on btc\$ rates). Just think about a fact that some people in real life are ok to pay 1% a day for money they take, then why should rates be lover here when you dont give any identity, only your history matters?
The main idea of any ponzi should be easiness of investing...

terrytibbs

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The problem is if you did, you lose. It is a Game Theory which could be interpreted many ways. You have 100 pieces of candy. You get them all but there are 9 other people in the room. I would suggest to you that it is to your benefit to share your hoardings. If not, well lets say, you will lose.

Hahahaha! A+, would read again.

PatrickHarnett

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Quote from: JoelKatz on May 06, 2012, 04:46:34 PM

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2. Or since he is really only paying you a small amount of his profits, it doesn't bother him to pay 1%.

In other words, again, it's a gift. That's certainly possible, but as for a reason why -- I've yet to hear one.

Because people operate irrationally. Perhaps that's why charities survive.

Topic: Bitcoin Savings and Trust is probably a Ponzi Scheme: A Petition - page 10. (Read 25616 times)