So Micon, what else would you have PatrickHarnett disclose to show it is not a ponzi?
Anything sufficient to do these four things would be enough for me:
1) Determine that claimed profits are in fact profits from investments.
2) Realistically assess the risk to investors.
3) Assure investors that there's a mechanism in place so that if they do take losses, they'll be able to reasonably assure themselves that those losses were due to legitimate investment losses and not just him deciding to keep people's money.
4) Assure investors that there's a mechanism in place such that if there are reductions in the total worth of all investments, losses will be taken proportionately by all investors instead of processing full payouts to those who happen to withdraw first and leaving essentially nothing for those who don't withdraw at the right moment.
It's not a matter of whether it's a Ponzi or not really. There are lots of scams that aren't Ponzis. The idea is to show that it's a legitimate loan or investment. If there was something that was otherwise a legitimate investment but couldn't do at least two of these four things, rational people would not invest in it.
Thanks for the list Joel.
1: Given confidentiality, and a lack of audit processes, it might be difficult to confirm. I could get various people to verify the loans/rates/payments that they've made and similarly the list of dividends received over time from GLBSE and other investments that pay regular returns. To provide the full list, demonstrating how 200 coins/week are generated I would expect people to pick on holes and deliberate omissions rather than the overall picture.
2: That's a good idea, and I do assess the risk of the loans and investments that I make. I probably have one of the better databases of credit risk, but I still have some that have been spectacular failures (Rebate springs to mind).
3: Normally I take the losses, and not my customers. Not aware of anyone that has had a loss on their deposit yet. If anyone can provide a counter example that would be useful.
4: See #3 above. People depositing to Starfish are not really exposed to the underlying. When I consider some of the real-life bank runs I have observed, there can be queuing. I think that if someone wanted to force the issue and required me to liquidate all my assets at a loss (rather than an orderly wind out) then they should accept that as their choice. I have discussed that with several people recently and it is a feature of most investment funds/deposit schemes that coins are put to work, not simply lying around.
Also, thank you for noting there are many more scams than ponzis. There are many scams on these forums, and I have had a decent number of people that have stolen funds from me either by simply running away with coins through to more elaborate identity theft. However, I also have some other people I do good business with, some deals returning up to 5% a week (occasional), but more generally in the 2% to 2.5% per week range.
I will add that currently I don't need any more funds to run the current business, and extra funds simply add more drag on profitability. That's why I have limits on accounts in both number and value.
