Topic: Bryan Micon's List of BTC Ponzi Schemes that should not be listed as "Lending" - page 37. (Read 119653 times)

Indeed. I've posted this link several times, which has a good overview of modern internet Ponzi schemes: http://fc12.ifca.ai/pre-proceedings/paper_27.pdf

Warning signs from the author of a treatise on Ponzi schemes: http://www.npr.org/blogs/money/2012/07/30/157606305/four-signs-your-awesome-investment-may-actually-be-a-ponzi-scheme

It should not be very difficult to figure out if pirate has been paying 7% a week out of all the principal investments and praying deposits keep exceeding withdrawls 

there has got to be either  a massive deficit  in the deposists + compounded interest   by this stage unless hes raking in coins by the truckload from somewhere

if he even allowed someone independent to verify that he still has ability to repay everyone or maybe 500-750k BTC  still under his control in the BTCST account  it would go a long way

How does this affect the temporary and long term value of the bitcoin though ,when people are getting 7% free every week does it not devalue the currency  itself and also take away  the benefits of mining and other activities that are paying less than 7% but may not be scams?

The most successful financial fraud of all time is still going on - it is called USD

This.
I've been trying to find new BTC investments lately, but honestly finding something that's not constantly losing value (mining bonds) or heavily exposed to pirate... there's not a lot left really.
I'm in two minds over this - first is that if people get badly burnt they might give up on BTC altogether and we'll see a big capital outflow.
Second is that at the moment demand for mining company shares and the like are very low, because so much cash is going out of those and directly into more Pirate Pass-Through bonds and the like, and the collapse of super-high-return super-high-risk debt instruments (heh, sound familiar?) might cause some of what capital was left in the markets to go to mining companies.


For anyone looking for an explanation of some of this stuff, look at "Chasing Madoff" - Bernie's scheme was probably the most successful financial fraud of all time, and it had a very similar structure with the feeder funds and such.


Also Honest Bob, you're talking about having to buy probably $2-3 million in BTC to cover the likely shortfall if all the coins have just been sitting there. It's very questionable whether or not he has that much in liquid capital.

If you say so.

Depends on how big you think it can potentially become, really.

Actually, I'm guessing something like that will be his next move. It's probably his only option left.

Or he may simply wave his hands, say a few words, and publicly move a huge amount of bitcoins around from address to address, perhaps combined with an unveiling of some kind of ledger for all to see. We already know pirate likes to jingle his bitcoins for us

He knows people would be drooling in line to get their 7% all over again.  So yes, it flies if you look at the big picture. It's not an argument anyway. It's a hypothetical situation. Imagine what would happen if he forced a mass withdrawal: The word might even spread outside of this forum. "I heard some guy on the Internet named Pirateat40 has been offering 1% a day for a year, they say he just proved it's legit." It could even cause a price spike from all the new interest in bitcoin and newcomers buying in. Just some silly speculation, but seriously. It would *easily* be worth it to Pirate in the long run, assuming he can fund such a spectacle at this point in the game.

assume the Ponzi scenario for a moment:

Suppose payb.tc decides to close his pass-through and send all of the coins back to his sub-depositors. Considering the size of bitcoinmax, it would be tempting for Pirate to fold his arms and disallow the withdrawal, ending the scheme. Or, he could "purchase" more trust from the community by following through with such a massive withdrawal, with the hope that he could bring in more money in the long run. A Ponzi operator must walk a very fine line to achieve maximum profit.

If he's able to pay out everyone at the same time the business cannot be a Ponzi, so your argument doesn't fly.

*Ok, I'm going to beat the dead horse again*

If you haven't noticed, he appears to be grasping at straws for new investors. I just don't see it growing much more. I thought that awhile back, but then the PPTs came about. Later, he acted against type with the announcement of lowered interest rates (which proved to be meaningless). After that, the Vegas thing. Now he's rolled out new incentives for investors. I really don't see what else he can do to bring in more money, since he can't advertise on the forum.

We can observe that his grand total from investments has grown roughly exponentially. We can also observe that his debt continues to grow exponentially (the math, compounding interest). What we cannot observe is that his "business" is also growing exponentially, faster than his debt and faster than his incoming deposit capital (plus the profit his business is allegedly earning). Seriously, if he is this desperate for investors and he is running a legit and profitable operation, his business must undoubtedly be a mammoth by now. Otherwise he would neither be scrambling for new investors nor be continuing to hold and compound existing deposits.

The above proposal of an audit that only peeks at his bitcoins and doesn't pull back the curtains over his business plan is foolhardy. Pirate likely has plenty of bitcoins of his own. He could (and would, assuming he is sufficiently wealthy) buy more to cover the audit.

Which brings me to the kicker: He could even do a mass forced withdrawal buy paying everybody back exactly what they are owed, with the existing principal plus money out of his own pocket. Then, he could reopen BTCST, and his investments would drastically exceed his previous total. Maybe even Micon would invest. Legendary.

All that to say... we will never know for sure whether it's a Ponzi until D-Day arrives. No matter what happens now, unless I can see his "trade secret," I will continue assuming it is a scam. Sorry Pirate, you are a friendly chap. I hope you are honest as well.

Actually, withdrawal limits are unusual for a Ponzi. It's *discouraging* withdrawals that's common for a Ponzi.

No, that's not the only thing at all. There's a long list of things. The key is that excessive returns are promised at an unspecified risk with no disclosure of what the investments are (and thus no way to assess risk) and without any disclosure of the amounts of funds held. That it is a Ponzi perfectly explains all observed facts and requires no improbable circumstances at all. Every other theory has holes in it you can drive a truck through or requires improbable assumptions.

Your comparison is not apples to apples. You are comparing small retail high-risk loans with giant wholesale allegedly low-risk ones. You're comparing a $500 payday loan to General Electric borrowing a billion dollars.

We wouldn't do that because it's so obviously deceptive and irrelevant. But if you think it's valid, *you* do it and let us know what you think it shows. There have been a few arguments for why BTC loans should be different and we've patiently explained why they don't apply to large loans.

And another thing that helps convince me personally, though I completely understand if you don't find it convincing, is that I know a lot of people who are very active in the Bitcoin economy. Every single one of them that I've discussed this with, and that's most of them, is 100% firmly convinced that it's a Ponzi. This includes top-level people associated with Mt. Gox, formerly associated with Tradehill, associated with Bitcoin Magazine, three people who each hold in excess of 50,000 bitcoins each, and so on. Not one of them has any other explanation that they think is even remotely likely.

And while I love a big "I told you so" as much as anyone, I honestly would love to be wrong about this, because a lot of people are going to get hurt very badly. This could be the Bitcoin equivalent of the global economic collapse because so many Bitcoin-related things have serious exposure that they may not even realize.

Honestly, this is really, really basic stuff. It's Ponzi 101. Any good introduction to Ponzi schemes will cover this. Madoff famously refused many investor's money. It was not unusual to hear people argue that if Madoff was running a Ponzi scheme, he wouldn't refuse any deposits. He also cleverly warned people that because withdrawals disrupted his strategy, people who withdrew might not be permitted to re-invest.

One very basic thing any major scammer does is at least occasionally, intentionally act against type. You have to look carefully to get the big picture.

It was put in writing.  It was mentioned on IRC by pirate himself.  Both withdrawals and deposits count towards the stability requirement.

The interest payments don't count either way.. whether invest or paid out.

The bonus is over a month's time, so the balance can't move more than 5% over 30 days.

1)  I add humor to even serious proceedings such as this.  The accountant approach would be better, but I'm not an accountant

2)  I know I come across as condescending and have taken some measures to alert possible "investors" in other threads and in general tried to make a lot of noise about this because as the smart ones know this will be another black eye for bitcoin, another "lol look at how easy it is to steal these bitcoins" article.   This thread is the 2nd most viewed thread ever in Lending section, behind BitcoinMax.  almost 10k views as of now.  I'm also linking it to a handful of other BTC and scam-detection sites as it's hard to find one of these so blatent, so public, and still running.  So whatever I did, it has brought attention to this massive scam and will continue to do so.  I know I wasn't the first or only to say this, but this thread needed the organization and the continued logical arguing vs. team Pirate and the FUDdettes to drive the point home.

Ponzi schemes try not to do things that scream illegitimate. For example, most of them feign not being interested in taking your money (even though they are supposedly paying absurd rates). Ponzi schemes like to seem "exclusive"; this is a diagnostic characteristic.

Similarly, a stability requirement "makes sense" in some sort of way--capital stability, of course!  But penalizing withdrawals and not deposits absolutely screams "scam," so it's unsurprising that such a rule is not put into writting.

But think about it--is he declining to take new deposits?  No?  So how does that help his stability?  Does he offer promotions for new deposits, as was reported for Las Vegas weekend?  What is the combined effect of these policies?  A: Withdrawal discouraged, deposits encouraged.

ok so now you have to write on your ponzi affiliate thread "NO MORE ROOM FOR INVESTMENT" and "CURRENTLY CLOSED" and now the donks really want to invest next time they get an opening.

lets say a big investor comes in.  Wants to deposit 5000 BTC. The schemer then says "Ok, don't you ever tell anyone I let you in when it's closed.  I am doing this as a favor to you. You are a long standing trust account and I'm still going to give you the .5% extra"

easy game if u don't have the capacity for empathy that would personally overwhelm me if I scammed so many people for so much money.

1)  The "stable balance" bonus is a trick to get you not to withdraw your principal
2)  Pirateat40 needs new investors to pay out old ones - or trick old depositors that are owed interest to "re-invest" so all he has to show them is a number on a page, and avoids an actual BTC payout for 1 more week.
3)  When [actual BTC weekly interest payout] < [actual BTC new investment] then the Ponzi scheme collapses - but remember in that calculation if Pirate didn't have to send a hard payment, i.e. BTC sent to your wallet, then that amount is not added to [actual BTC weekly interest payout]
4) Pirateat40 and all Ponzi schemers will offer you many propositions to delay taking a payment.  All of them are trying to lower total weekly payouts so the schemer can keep on scheming, profiting each week that new investment > actual payout.  

It's another mental barrier to people considering removing funds. If interest payments don't count and are just allowed to compound, then people who might otherwise draw down their balances will be tempted to let them sit, reducing the number of withdrawals that call upon a limited pool of funds.
To be honest, if I were running a ponzi I'd probably do just that - it looks legitimate and it makes juggling cashflow easier and more predictable.

Over what time period are we talking for this .5% bonus?

Someone else already pointed out that the auditor doesn't need to know the core business. 

All you would need is a list of the deposits on paper (anonymized, perhaps, as long as the depositors could verify that their account is on the list).  Then Pirate just has to make some move the coins on the block chain to show that Pirate has about as much money as is shown on paper.  Pirate tells the auditor in advance the precise amounts he will transfer to certain addresses, then moves all the money within a few minutes to prove that he has control of approximately as many bitcoins as reflected on the paper balances.  He doesn't need identify these transactions publicly.  In this way, the auditor could confirm that he has the money, which suffices to disprove it being a Ponzi at this point.

Not that this is worth discussing--won't happen--but I wanted to point out that the auditor doesn't need to confirm the business model, just the amount of money controlled by Pirate.

There is a difference between having a valid argument and trolling.  That being said, I wouldn't doubt that I've called you a troll although I don't recall a specific instance.

I am no longer a part of the 6 partner PPT.  My shares were bought out.  I do have a straight pass-through setup running, but since the max rate is 7% and that's what I'm offering, the only advantage is that I have enough coins in my account to qualify for the 7%.

And now for the non-troll, legit question that I'm hoping someone can reasonably explain..

If BS&T is somehow a ponzi, why would Pirate encourage stable balances?  He's offering people running the trust accounts a .5% bonus if they can keep their total trust account balance stable within 5%.  Interest payments don't count, but deposits and withdrawals do.  If he is indeed a ponzi, why would he be discouraging deposits >5%?  Obviously paying out 7% would rapidly overtake deposits <5%, so what's the game plan with that.  I'm not convinced Pirate is a ponzi, although I cannot 100% say he isn't since I'm not actually him so I'm hoping someone from the 'other side' can help with this.