Topic: bitfloor needs your help! - page 4. (Read 177459 times)

Suppose the current debt is 23,300 BTCs which equates to $3.27 million at the current price of $140.

He can pay it back in two ways:

1) Build up his commissions, which are in dollars, and periodically pay off the debt in bitcoins.  That means he accumulates dollars, then buys BTCs.  If the price of BTCs doubles to $280, he will still owe 23,300 BTCs which would equate to $6.54 million.  As the price of bitcoins grows, so does the dollar value of what he owes.

or

2) Take a loan for $3.27 million, buy 23,300 BTCs, return those BTCs to whom they are owed.  Then he needs to generate $3.27 million to pay back to whomever he borrowed from.  If the price of BTCs doubles to $280, his commissions will also double, and time taken to pay off the debt gets cut in half for a given volume of BTCs traded.

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If he had taken approach #2 after the heist, he would owe someone $250K, an amount he'll probably make in revenues in 2013.  Instead, he owes close to $3.27 million.  

Who would give him a loan for $3.27 million?  Maybe nobody.  But I think there could be investors out there.  With the growth in trading volume since the beginning of 2013, the revenue growth rate is astronomical.  Correct me if I'm wrong, but I think Bitfloor is the largest US based exchange.  As a user, I think it's fantastic, probably as good as any other exchange, if not better, out there.  There is huge room for growth here.

And he doesn't necessarily need to take a loan.  He could sell ownership of 49% of the company and still keep control.

I hope I've made it clear that these numbers are simplified, just to spur discussion.  I don't expect him to operate without expenses; nor do I expect him to not keep ANY profits for himself.  My message here is that Bifloor is growing like a weed, and there is a way for everyone to win here.  If not now, then very soon as it continues to grow.

I haven't seen anything to indicate that Roman disagrees with you.

I think those that had X bitcoins on the day of the hack should be repaid X bitcoins, not 10X bitcoins.

Well, it is a relief bitfloor is MSB registered.  Thanks for clarifying that D&T.

I think it would be reasonable for him to split the revenues 50-50; take half for profit or further business development, and use the other half to make regular payments on the lost coins.

(full disclosure: I own a fair amount of bitfloor debt)

This.  Most of these creditors unrealistic goals assume repayment = 100% of gross revenue and that running bitfloor has no costs and Roman will gladly work for 3 to 5 years without any compensation.  Of course if the exchange rate goes higher and higher and higher the drive to repay creditors 1000%, 5000%, 20,000% of what they lost (in USD terms) for years and year and year is likely going to run dry.  Any debt scenario (any from loan shark to mortgage) involves benefit and risk for both parties.  When benefit/risk becomes significantly onsided then one entity will seek to end the agreement. 

For full disclosure TC, LLC sold our debt to a third party so I have no direct involvement however we do move some significant volume through bitfloor so our company has a vested interest in bitfloor being a solid growing exchange.


It is just MSB.  MT is just one classification of MSB.  Bitfloor is registered as an MSB (has been for sometime) although since it was prior to the FinCEN guidance IIRC the classification is "currency exchange" not "money transmitter".   All MSBs are subject to the same reporting, AML program, compliance officer, and third party audits.  It would make no sense for Roman to register (a defacto admission one believes they must be compliant) and then not comply.  My guess (no inside information) is that he is complying with MSB requirements.  He can file with FinCEN to have the MSB classification changed. 

That is my concern as well - that he has lost inspiration for the project.  It would suck to work hours a day on something that you won't see payouts on for four years.  But I know people do that all the time, so...

Another concern is whether he is MT/MSB registered, and whether he is doing the proper reporting.

As a bitcoin investor, obviously I would prefer to get what I was investing into, since as an investor I was expecting my investments to continue to grow, not stagnate (had I wanted that, I would've just put my money into a savings account).

But then, I may just be biased and greedy.

Also, since I'm investing long-term, I can wait for years to be paid back.
Also, with MtGox having scaling issues (lags), the concerns about them being too big, and a lot of newbies going to Bitfloor (MtGox having huge application ques), I don't think Bitfloor will have too much trouble paying off the debt.
Also, even if MtGox has a lot of trouble paying off the debt, if Bitcoin continues to grow, eventually a 5% return of what we're owed could STILL be worth way more than the value of what we lost.

That said, I would be concerned if Roman wasn't making enough profit for himself to make this be worth his while.

I really don't understand: "convert btc debt into dollar debt". He buys bitcoin elsewhere, then credits your account and you can sell for this mythical stable price if you so choose. What is the advantage here?

Thing is, I don't believe that's true.

Just as an example, there were about 24K BTCs stolen.  If the exchange were to stabilize at today's volume (6,500 BTCs), then every day, it would earn in commission 19.5 BTCs.  That would mean 3.37 years to pay off the BTCs if he converted his commissions to BTCs at the end of each day.  Obviously, that doesn't include operating costs, and today's volume may not stay constant, etc.

But I can wait 4 years.  

It might even be less time if the BTC debt is converted to dollar debt and the price keeps rising.

Shtylman started the exchange 1 year ago.  He could pay the debt off in 4 years.  Imagine starting a startup, and not earning much for the first 5 years, but then earning millions after that.  Wouldn't that work for you?  That's the situation he's in.  (A simplified scenario, obviously).

So far I haven't even talked about outside investors, but that's a way to pay off the debt even faster, whether via equity or bonds.  There are multi-million dollar investment houses looking for a way to get on the Bitcoin trade without enough liquidity at the exchanges to get on board.  Buying equity or debt in Bitfloor on a 3-4 year horizon might be an attractive alternative.

Wouldn't it be wiser to peg the debt to USD value at the time of the hack? I understand not everyone would like it but that's pretty much the only way the debt can be repaid and it is done this way on another exchange that lost money (bitmarket.eu).

I don't really want to argue about this since nobody I've seen, Shtylman included, makes your argument.  But just for the hell of it:

1) The value of the missing bitcoins has grown by X*10.  That's a huge difference in what I'm missing.  For me personally, if those coins hadn't been stolen, I'd be contemplating retirement right now.  It's like a fork in my existence that decides what kind of life I will have.

2) Shtylman made the decision to allow cash withdrawals after the heist.  He could've said that everyone who had funds on the exchange, both dollars and BTCs, would take a haircut.  But he made a clear differentiation between cash holders and BTC holders.  He let cash holders withdraw their funds while BTC holders would
have nothing in their accounts.  By that decision, he's owes us BTCs, not cash.

3)  As I said originally, it can work out for all parties involved, Shtylman included, if the next time there's a stabilization in prices, he converts the BTC debt to dollar debt.  Everyone benefits in that scenario provided Bitcoin flourishes in the future (and if it doesn't, everyone, Shtylman included, loses whether or not the debt is paid back).

It is ludicrous to demand that anyone who loses value X be repaid at value X*10.

Look at the exchange rate on the day of the hack, and return debt based on that.

According to Bitcoincharts.com, Bifloor traded nearly a million dollars in volume today.  That's a daily commission of $2,700, and over a year, that totals $1 million dollars.

Now granted, this was an unusually high volume day, and the exchange can't be expected to match today's activity every day, especially not the weekends.

So to take a more conservative estimate, over the last month, nearly $5.1 million has been traded no Bitfloor.  Over a year, that yields commisions of $184,000.

Couple these estimates with two more observations:

1) The volume on Bitfloor has been rising very fast, much faster than any of the other exchanges over the last few months.

2) There's a lot of angst over Mt. Gox's performance of late.  People are looking for an alternative.

Granted, the debt it owes is growing just as fast, but exponential spikes like this are temporary and the price will settle down soon.  As one of the people who lost bitcoins in the heist, I'm hoping volume stays strong when the price wanes.

What I'm getting at is:

Bitfloor is making some serious money, and is growing very fast.  From a cash flow perspective, it's thriving.

The next time the price settles, the best thing for both people like me who are owed bitcoins and for Shtylman is to convert the BTC debt to dollar debt.  The debt will be paid off quickly the next time the price spikes, and Shtylman will start raking in some serious profits after the debt is cleared.

After our shooting I spent a lot of time at the courthouse.  There is a lot of people watching there.  Another father lost a son in another case, and he was deeply (and justifiably) angry.  He wanted revenge.  It ate at him, and it worried everyone in the courthouse:  none of us wanted to be in any crossfire.

I wanted my daughter back.  Nothing else, only that.  I was clear that revenge would still leave her dead.

Both cases proceeded to a guilty verdict.  I was relieved that the trial was over, and I could spend time on the rest of my life, heal, find out who I was without my kid.  The other case also proceeded to a guilty verdict, with a death penalty.  That father just crumpled at the verdict:  he got what he had pursued for almost 2 years, and only when he had it did he realize it had no value to him.

Do you want Roman to be out of business?
Do you want him to be publicly humiliated?
Do you want him to be shut down?
Would you accept it if Roman is successful and repays everyone in time?

I like the idea of buying the debt.  I would make it a negotiable thing, and buy and sell it on an exchange.  It would end up in the hands of the people who can carry it, and those who have a liquidity crisis would get some liquidity now.  Bah, it sounds like I believe in markets.

I would agree with you, up until FinCEN defined bitcoin as a currency.  That is a huge game changer across the board, and specifically in this situation.

I'm pretty happy I got a payment.  I just hope bitfloor changes the fee's to BTC rather than USD.  I'm not to worried about the 10 year length of time.  I'm hoping bitfloor volume goes up 10 fold then we will all be paid off in 1 year and Roman with have a nice profitable exchange, that has made a name for itself with integrity of fixing a mistake.
Good Luck to you Roman hope your exchange is around for years and is a big player when btc is traded at $3000 plus USD per coin.

Lastly no way I'm selling my debt for 5% lol

That's fine, but legal responsibility is not social responsibility. Also, thats 2 mil now. The exchange rate may drop sometime in the future.

Exactly.  That is above my paygrade.  This is one of those questions where if you ask 3 lawyers you will get three different answers.  Ultimately it gets decided in court.