Topic: Pirate accomplices - page 3. (Read 30339 times)

This model for Pirate has already been refuted. If this was his model, his number one priority would be getting rid of his high-interest debt. Since he was actually acquiring such debt as quickly as he could, this translates into another version of, "Pirate has some secret business strategy that makes so much money, he can afford to give tons of it away, and he just happens to like giving money away to people whose investment strategy is picking things that look exactly like Ponzi schemes."

I loathe that it got brought up, but basically, the price wasn't dropping, so his liability wasn't magically dropping.  He never claimed to be making 30%, instead only confessing to something like 10%. When you factor in the 7% on the btc side, that leaves 3%.  Perhaps he thought growing was worth the continued debt load.

Even I will admit 30% is just stupid/crazy.

I would have thought posts like this are out of fashion.

Please explain why someone making 30% would need to borrow any money at all after the first few weeks.

In my hypothetical model, pirate has two sets of customers: The whale(s) who give him money to be cleaned, and his BTC depositors who expect 7%/week on their BTC balance.  The former don't want ANY bitcoins, they simply want to turn their dirty $ into clean $ as quickly as possible.  The latter only want their interest credited to their account weekly (and many never make any withdrawals).

If the price of BTC doubles, his whale customers care not.  Pirate's obligation to them is in dollars - and at 70 cents on their dollar.  He just buys/sells half the amount of coin with their money.  He still earns 30% USD in the process.

On the depositor side, pirate's 7% BTC interest obligation simply costs him 2X the USD it would if the BTC/USD price remained stable.  His 30% cut of the whale money easily covers this exposure.  If pirate's depositors make no withdrawals after the price doubling, his cash flow is unaffected.  He simply records a liability on his books...a liability that disappears if BTC prices drop to their previous level.

But guess what?  BTC/USD price never doubles in the near term, because pirate controls BTC/USD price!

In a Ponzi, every cent of profit the "clever" people make is money that other investors lose. The people that invest in the scheme are guaranteed to lose money on average no matter how clever they all are, because it's a Red Queen's Race - the sooner everyone pulls out, the sooner the scheme collapses and the sooner they'd have had to have pulled out in order to avoid losing their shirts in the collapse.

That's why - if you're an utterly unethical, greedy scammer - it's to your benefit to convice as many of the other investors as possible that it's not a ponzi, that they're idiots who just don't understand the scheme if they think that it is, that anyone who claims otherwise is an evil troll slandering the good name of the scheme's operator, and so on and so forth. Sound familiar?

bitcoins are worth 1 BTC each.

Because half as many coins do whatever it is they need to do. Whether they're buying drugs or laundering money, they now need half as much BTC to do it.

No, it doesn't. It's independent of what denomination is used to measure the value of investments.

You may think it doesn't affect you because you loan to someone a number of bitcoins and just expect a number of bitcoins back. And they may think it doesn't affect them because they deal with others in bitcoin amounts. But somewhere at the bottom there will be someone who cares what bitcoins are worth. There just isn't any enterprise that can operate in terms not connected to an amount of value either directly or indirectly other than by pure hoarding. And there's nothing you can hoard that will give you a significant net positive return over bitcoins. Value fluctuations ripple through the chain with bitcoins just as they do with dollars. And right now, bitcoin is much more volatile.

https://bitcointalksearch.org/topic/m.1130274

Close to Washington ? 

why?

that assumes their investment was denominated in USD.

as with my 1800 BTC shakaru debt, the value of the coins in USD was irrelevant. To me the debt was always 1800 BTC.

whether USD/BTC triples or halves... i just want the coins.

Say the price of BTC doubles. Now, Pirate's customers need half as much BTC as they did before. Yet Pirate still has to pay the same amount of interest. Does he now double his customer base?

Pirate's debt is denominated in BTC and his interest obligations are denominated in BTC.  I don't see how an "unstable currency" is a problem, as long as you make certain assumptions.

If pirate has a source of dirty capital willing to be cleaned at 70 cents on the dollar per week, it's a simple matter for him to pay "investors" 7% per week out of the 30%/week he earns.  Since he must pay interest on his BTC debt in BTC, all he has to do is be a net purchaser of BTC over the long term.  And when all his "investors" never withdraw squat, he can defray BTC purchases in the short term and be even more wildly profitable.

Since the scheme doesn't require borrowed BTC to sustain itself, why would pirate need any investors at all?  Keeping BTC prices stable limits his exchange rate exposure.  Controlling the exchange rate of an otherwise volatile currency is a good thing if you're planning on flushing a lot of $ in and out of BTC.

Consider (if you will) the following:

• You are a BTC sophisticate
• You are able to move large amounts of coin OTC (off exchange)
• You know a guy who knows some dude who's brother in law generates $1M/week in dirty money
• Guy's dude's brother in law will take $0.70 on the dollar to clean his money
• You see an opportunity to earn 1/.7 per week

but

• Your OTC customer base can't handle 100% of guy's dude's brother in law's volume
• Cleaning guy's dude's brother in law's money via the exchanges exposes you to more xrate risk/fees

however

• BTC exchanges are (relatively) illiquid/thinly traded - therefore easily manipulated
• If you can control enough coins, you can control BTC price

but you aints gots enough coins to control BTC price, so

• Offer 7%/week on bitcointalk.org marketplace for large deposits
• Deposits roll in; you now control enough coin to control BTC price
• xrate risk to launder guy's dude's brother in law's money is now minimized
• You enjoy the additional financial benefits of being the only elephant on the BTC dance floor

then

• Babies start screaming about how you won't take their candy, but you don't need any more coin to control BTC price
• Eventually decide that accepting babies' candy is ultimately good for business
• Farm out admin overhead for baby accounts to proxies

Rinse/repeat/vacation in Vegas

_________________________________

Look, I don't claim the above scenario reflects reality - so don't respond to it as such.  It's merely my latest thought experiment to figure out how BTCST might not be a ponzi.

Critiques welcome.  

+1

This is an especially terse and lucid explanation of why it makes no sense to pay so much for lending, even if you did have a fabulously profitable business that could cover it.

The actual reason is explained in this scientific paper.

Here's a big thumbs up to the so called "bankers" as well as to the rest of the citizen finance Doolittle Brigade. Well done fellas, great treasure awaits.

Question:
Now that the fraud has finally collapsed and BS&T has defaulted on all its obligations, are you planning on making a public apology for your role?

What's with putting your text above the quote?

Pirate did at one point pay interest every 3 days instead of 7.

Yeah, because the only bump he hit was that far into it... until just that point, he didn't need to adjust inflows of capital at all. Oh and is his completely legitimate enterprise still offering compounding interest while shutting down? That's the most mind boggling part, he admits he doesn't have the BTC to pay it all out yet doesn't announce interest of 0%.

Interesting you blame FUD for a stampede, didn't seem like the attitude of Pirateat40 skeptics changed much at all in intensity this whole time. Just maybe it was the opaque and seemingly unsustainable nature of Pirateat40's offer that created an easily spooked customer base.

None of these require borrowing funds at way above fiat market rates over anything but the very shortest time frames. None of these require taking the huge exchange rate risks that Pirate takes by having debt denominated in an unstable currency. None of these work if your cash flow rate is forced by these kinds of exponentially increasing interest payments. Basically, if you can afford to borrow money at 3,000+%, your first priority would be paying down that debt.

The idea that he had some business that was so profitable that paying 3,000% was doable translates into an argument that Pirate had so much money, he could afford to needlessly give it away to people. And the people he picked to be the beneficiaries, for some reason, are people who would invest in something that looks exactly like a Ponzi scheme.

If you put your keys in your desk drawer, there's always a possibility someone moved them. Normally, we ignore this possibility because the odds of it happening are low and the affect it has is small. However, if my life depended on the keys being there, I'd probably check them. For unlikely events, you can assign a rough probability and ignore them unless you have some situation where their affect is dramatic.

If I had to assign a probability to Pirate being something other than a Ponzi scheme, I'd make it less than 1%. Unless I'm dealing with something that has an affect by more than a factor of 100+, I can ignore this possibility. If I was going to make some decision where I'd be killed if Pirate wasn't running a Ponzi scheme, then I'd have to consider the possibility that he's not. I have yet to encounter a situation where I can't ignore that possibility.

+1
At first I thought he was just a little slow on the uptake, but right now I have no option but to believe that he realised that he can either come out of this looking like a scammer (if he knew it was a ponzi and encouraged others to invest) or like an idiot. He went with idiot, but is overplaying his hand if you ask me. If you really are that stupid IRL you are virtually guaranteed to do yourself an injury before reaching adulthood. That's how evolution works.

Naive and stupid people got fucked by a scammer, but it's not their nor the scammer's fault. It's the fault of those who warned them.

Fuck logic. Let's use emotions instead!