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blankseplocked Losses, Gains, Loans, Scams, & Getting Out ... A Discussion Thread
 
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Stealing Honest
Stealing Honest Speculation Group LLC
Posted - 2011.09.02 19:54:00 - [1]
 

This is a discussion about offerings that don't go an planned. Some of these investee's mean well, and start well...but after a bit end up showing a loss.

This brings us to the problem.

We have seen from some higher profile offerings that claimed scam when in fact they were only starting to turn a loss, or saw a setback and didn't know how to get out...so pulled a runner.

The question is, how as a lending group can we as investors help clients end their offering once it sees a major setback, in a way that closes the offering without scam.

Discuss please.


SH

Luxi Daphiti
Posted - 2011.09.02 20:01:00 - [2]
 

Edited by: Luxi Daphiti on 02/09/2011 20:02:41

Just an idea, but we could set a floor. i.e.: the investor could say "I will lend you x ISK, but if you lose more then y % of it, return what is remaining" - So it cuts the losses of the investor should things not go to plan.

I could, for instance, offer 1 Billion ISK under the guarantee that should things go wrong and the capital fall below, say, 900 Million (10%), it is sent back as it. Saving both from larger losses.

Although i'd lose 100 Million it is still better then losing the whole billion. On the same token i'd rather receive half my money back then none of it.

RAW23
Posted - 2011.09.02 20:08:00 - [3]
 

Originally by: Stealing Honest


We have seen from some higher profile offerings that claimed scam when in fact they were only starting to turn a loss, or saw a setback and didn't know how to get out...so pulled a runner.




Could you give some examples to help contextualise the discussion?

Florestan Bronstein
24th Imperial Crusade
Posted - 2011.09.02 20:15:00 - [4]
 

Edited by: Florestan Bronstein on 02/09/2011 20:17:40
there is little you can do when being a mediocre scammer is still better than being a failed businessman...

we all saw the ridicule you can expect when you spend countless hours running missions to repay your debts - why not save yourself that humiliation and scam?


some food for thought: the US has a tradition of government & FED stabilizing the financial system by brokering the buyout of failed/insolvent banks by larger competitors; neither government nor central bank would directly intervene but they would enable one of the few large banks to buy all liabilities of the failed bank and continue its business (by extending cheap credit to the large bank).
That system worked well for a long time (eventually the big banks did of course forget that their tremendous freedom and power was tied to their responsibility of helping to stabilize the banking system as a whole).

RAW23
Posted - 2011.09.02 20:23:00 - [5]
 

Originally by: Florestan Bronstein
Edited by: Florestan Bronstein on 02/09/2011 20:17:40
there is little you can do when being a mediocre scammer is still better than being a failed businessman...




This is a question of self image though. If someone would rather be a mediocre scammer than a failed businessman then they were a bad investment in the first place.

I'm struggling to think of an example where someone has got a hard time for trying to close down a business properly due to the business plan failing.

Stealing Honest
Stealing Honest Speculation Group LLC
Posted - 2011.09.02 20:36:00 - [6]
 

Ok lets take Bock Nelsons first disaster. He ran missions to pay off his failed plan. Though i find this admirable, he did and still does get alot of flak over it.

He claims his 2nd was a scam, but meh. What if it was just another down turn into loss, and he didnt know how to get out?


And yes i know many will claim it was a planned scam, but lets discuss as if it wasn't.


SH


Florestan Bronstein
24th Imperial Crusade
Posted - 2011.09.02 20:38:00 - [7]
 

Edited by: Florestan Bronstein on 02/09/2011 20:42:09

I think RAW's view is a little overly pessimistic (i.e. I believe one can work with people who might consider a "fake" scam to avoid having to declare their failure as businessmen).

If the issue is recognized early enough and more due to unfortunate circumstance than sheer incompetence a debt/equity swap might help.

Investors can propose to convert their loans into equity - thus signalling their long-term confidence in the business manager and removing the interest payments while the business struggles/is rebuilt (while taking a larger cut of profits later on).

Simple assurances to roll over loans if necessary can probably be of help in many situations (and comes without social stigma) but it all depends on the manager signalling that his business is in some trouble first.

regular performance audits can ofc force this disclosure but as the investors' strategy has to center around avoiding the manager's public embarrassment and signalling him their confidence/support this may not be a feasible option.


RAW23
Posted - 2011.09.02 20:49:00 - [8]
 

Originally by: Stealing Honest
Ok lets take Bock Nelsons first disaster. He ran missions to pay off his failed plan. Though i find this admirable, he did and still does get alot of flak over it.

He claims his 2nd was a scam, but meh. What if it was just another down turn into loss, and he didnt know how to get out?


And yes i know many will claim it was a planned scam, but lets discuss as if it wasn't.


SH




I'm not sure Brock is really a good example for this. As far as the public record shows, the first business didn't fail. Rather, his account was hacked and as soon as he made clear his willingness to work to clear the debt he didn't get much in the way of grief from anyone except the normal trolls (who won't change their approach in any case). On the contrary, his willingness to clear the debt left him sufficiently well-situated to be able to raise a larger amount of isk in the future, so any negativity that might have attached itself to him seems to have been fairly minimal. As to working on the assumption that the scam was actually a result of business failure, I don't see the value for the discussion as it introduces a hypothetical example when the subject of the discussion assumes that there really is a problem. Before trying to solve such a problem I think we need to establish that it really exists.

RAW23
Posted - 2011.09.02 20:57:00 - [9]
 

Originally by: Florestan Bronstein
Edited by: Florestan Bronstein on 02/09/2011 20:42:09

I think RAW's view is a little overly pessimistic (i.e. I believe one can work with people who might consider a "fake" scam to avoid having to declare their failure as businessmen).

If the issue is recognized early enough and more due to unfortunate circumstance than sheer incompetence a debt/equity swap might help.

Investors can propose to convert their loans into equity - thus signalling their long-term confidence in the business manager and removing the interest payments while the business struggles/is rebuilt (while taking a larger cut of profits later on).

Simple assurances to roll over loans if necessary can probably be of help in many situations (and comes without social stigma) but it all depends on the manager signalling that his business is in some trouble first.

regular performance audits can ofc force this disclosure but as the investors' strategy has to center around avoiding the manager's public embarrassment and signalling him their confidence/support this may not be a feasible option.




This sounds reasonable but I'm not convinced that this is not already a viable option. As to the pessimism, the problem, as I see it, is that by trying to work with someone who would otherwise carry out a fake scam you might, as an investor, achieve a positive outcome. However, if the person you work with is someone who is willing to run with your isk when it suits them, for whatever reason, there seems to be a not inconsiderable risk of simply being strung along until they decide to fleece you anyway. Again, I'd like to discuss this in the context of a case-study to see if there is anything that can really be done on the public level if it is in fact the case that the problem exists.

Stealing Honest
Stealing Honest Speculation Group LLC
Posted - 2011.09.02 21:03:00 - [10]
 

Raw

As we are both dealing in near 100% collateral, does that sway our view?

Or do we need an absolute case study?

SH

RAW23
Posted - 2011.09.02 21:20:00 - [11]
 

Originally by: Stealing Honest
Raw

As we are both dealing in near 100% collateral, does that sway our view?

Or do we need an absolute case study?

SH


I'm not sure I follow on the collateral question. I have made some pretty big uncollateralised investments on MD (the biggest being 25bil into the One Stop buyout) and I have also had some experience of dealing with large (40bil plus uncollateralised) private loans that have run into trouble for various reasons and that have needed negotiated solutions. So I don't have a view on this conditioned purely by my recent focus on collateralised loans on MD (this focus mainly comes from not having the time to really pay attention to what goes on on MD at the moment, meaning I don't feel sufficiently well informed to invest in the uncollateralised stuff at the mo).

As far as a case study goes, I would prefer a historical one to actually establish the problem but if you could construct a purely hypothetical one for the purpose of an academic discussion as to how best to deal with such a situation should it in fact arise then that would work, I think. I don't mean to be picky about the Brock example but we will run into problems discussing the issues if the example to hand does not really illustrate the problem.

Stealing Honest
Stealing Honest Speculation Group LLC
Posted - 2011.09.03 02:55:00 - [12]
 

What about Liberty Eternal, who tried to get out early as his offering was falling down around his ears?

SH

RAW23
Posted - 2011.09.03 10:33:00 - [13]
 

Originally by: Stealing Honest
What about Liberty Eternal, who tried to get out early as his offering was falling down around his ears?

SH


Liberty wasn't given a hard time for the failure of his business plan or for his attempt to close the bond (apart from by Block, but that was sour grapes). He was given a hard time for attempting to close by unilaterally imposing a settlement on his investors without consulting them and for refusing to pay out the promised interest despite being able to afford to do so. Basically, he wanted to socialise his losses, as per an IPO, whilst retaining a bond structure that enabled him to privatise the profits. When he did, eventually, pursue a settlement that had the approval of his investors he was largely supported.

Shar Tegral
Posted - 2011.09.03 11:15:00 - [14]
 

Originally by: RAW23
I'm struggling to think of an example where someone has got a hard time for trying to close down a business properly due to the business plan failing.
Not sure if this qualifies but I'll do all the linkage I did on the old e-bank forums.

Revelations Direct [RDIR] (Benvie/Shar Tegral)
- Initial Prospectus
- Successful IPO
- Hit By A Bus
- Benvie's Last Communication - Ever
- Disappointing Conclusion

Vaerah Vahrokha
Minmatar
Vahrokh Consulting
Posted - 2011.09.03 11:36:00 - [15]
 

Originally by: Stealing Honest
Ok lets take Bock Nelsons first disaster. He ran missions to pay off his failed plan. Though i find this admirable, he did and still does get alot of flak over it.



I found his effort at repaying investors admirable and corageous.
In a game where EVERYONE can easily be a common boring scammer, he acted different.

Sadly he later changed his mindset but still...

Claire Voyant
Posted - 2011.09.03 13:34:00 - [16]
 

The obvious answer is to stop feeding the beast. If you don't lend money to these people they won't turn into scams.

Suppose person A can run a legit business at a reasonable profit if he pays x% interest on his loan. Person B comes along with his scam offering x+delta%. Now person A can't get funding at x% so he has to raise his interest offering to the "market rate" which is set by the scammers, thus increasing his chance of burnout and/or failure and eventual scam.

The open market competition for investments is doomed to failure. Perhaps an investment bank approach would work better. A consortium of large investors evaluate the business plan and conduct their own audit and take a large portion of the investment and offer the remainder to the public.

Tom Hagen
Posted - 2011.09.03 13:44:00 - [17]
 

Originally by: Claire Voyant
The obvious answer is to stop feeding the beast. If you don't lend money to these people they won't turn into scams.



That's fine and all, the question just is: How do you know which one of the bond offerings on MD that belong to "these people" and which turn put to be legit?

I have a slightly different view on investments via the open market at MD (unlike personal loans that I would consider partly different).

I am generally surprised by the very quick level of trust that people put into a name and an avatar. I see that as the root cause of the scam problem and why players like Jaxx openly wished to gring rep.

Personally, I always want to evaluate the offering and not the person why deciding upon investing or not. Part of the attractiveness of an offering is the character behind an offering - but my feeling is that many investors overestimate this portion, in relation to many other factors, such as size of investment, time and efforts invested into avatar etc.

As an example of this logic it pointed me to investing into Tutskiis early bonds - where ROI and the size were attractive , but to avoid the later ones (where size and hence risk of scam increased).


Elise DarkStar
Posted - 2011.09.03 13:46:00 - [18]
 

Or just stop giving ISK to strangers in a culture where stealing is glorified.

The only thing keeping this ridiculous institution alive is a few legit people who do it simply to be the "Honerable Kings of the Spaceship Investing Forum". If they stop propping this **** up to feed their egos, it will all just go away.

IceFyre S18
Zulu Labs
Zulu People
Posted - 2011.09.03 13:48:00 - [19]
 

100% Collateral is the only way.
My only investment into people without collateral is the ones I can reach easy and fast in real life.
Needless to say, in all this years no one scammed me.

Tom Hagen
Posted - 2011.09.03 13:54:00 - [20]
 

Originally by: IceFyre S18
100% Collateral is the only way.
My only investment into people without collateral is the ones I can reach easy and fast in real life.
Needless to say, in all this years no one scammed me.


100% certainly is an investment philosophy that reduces the risk of getting scammed and a viablestrategy for the individual risk-averse investor to choose.

What I struggle to understand if why those forum posters that only engage into the risk averse category are so persistently trying to troll and generally look down on the group of investors that are willing to lend without collateral, with higher risk and against a better interest.

Is it just pure envy, or is there a more constructive reason why you are so negative to the entore concept of not-fully-collaterelized loans?

IceFyre S18
Zulu Labs
Zulu People
Posted - 2011.09.03 14:00:00 - [21]
 

Ah, people just have too much time and without anything positive to think, they go trolling.

Anyways, 100% collateral have risk too.
Failing back/defaulting to collateral is time consuming, and generally it's a loss; just to mention, so it's not 100% safe.
Uncollateralized bonds have a chance of salvaging some value if something go wrong only if ccp implement some mechanism for that.
Without collateral it's just fly the peregrine and hope for the best.

Kethas Protagonist
Protagonist Ventures
Posted - 2011.09.03 14:12:00 - [22]
 

Originally by: Elise DarkStar
"Honerable Kings of the Spaceship Investing Forum"


You misspelled my name pretty badly.

Tom Hagen
Posted - 2011.09.03 14:12:00 - [23]
 

Originally by: IceFyre S18
Anyways, 100% collateral have risk too.
Failing back/defaulting to collateral is time consuming, and generally it's a loss; just to mention, so it's not 100% safe.
Uncollateralized bonds have a chance of salvaging some value if something go wrong only if ccp implement some mechanism for that.
Without collateral it's just fly the peregrine and hope for the best.



I am very aware that collateral does not mean "no risk", hence my statement of "reduces risk" previously.

Even though I wouldn't mind having a bond-mechanism implemented in game (in fact I think it would be very cool, and open up for new careers in game), I don't think that the lack of such a mechanism makes non-collateralized worthless in it's current form.

But again, the availibility of both collaterallized and non-collateralized loans gives all investors the chance to choose what risk profile they want in their lending portfolio (much like RL investments), which I generally think is a good thing.

IceFyre S18
Zulu Labs
Zulu People
Posted - 2011.09.03 14:18:00 - [24]
 

I get your point and that's good.
I wish this game to have one more level of risk between colateralized and "you have my word", so investors can have wider area to play.

Tom Hagen
Posted - 2011.09.03 14:25:00 - [25]
 

Originally by: IceFyre S18
I get your point and that's good.
I wish this game to have one more level of risk between colateralized and "you have my word", so investors can have wider area to play.



Hmm. Do you mean that my point is good, or that you appriciate the fact that I am coherent enough to be understood? I wonder. Laughing

Still, we seem to agree that an in-game functionality for bonds/loans, with repercussions of some kind would be an improvement.

Funnily enough, that also closes the circle and brings us back to the OP, as that could be a way to manage bond failures - depending of course what the in-game penalties would be Razz

IceFyre S18
Zulu Labs
Zulu People
Posted - 2011.09.03 14:35:00 - [26]
 

Originally by: Tom Hagen
Originally by: IceFyre S18
I get your point and that's good.
I wish this game to have one more level of risk between colateralized and "you have my word", so investors can have wider area to play.


Hmm. Do you mean that my point is good, or that you appriciate the fact that I am coherent enough to be understood? I wonder. Laughing
Razz


Well, wonder no more, both.
You present me a good reason to think of all this uncolateralized bonds.

Claire Voyant
Posted - 2011.09.03 14:50:00 - [27]
 

Originally by: Tom Hagen
Originally by: Claire Voyant
The obvious answer is to stop feeding the beast. If you don't lend money to these people they won't turn into scams.


That's fine and all, the question just is: How do you know which one of the bond offerings on MD that belong to "these people" and which turn put to be legit?

Perhaps I wasn't clear. I meant all of them. Scams and legit businesses. The question was how do you prevent failed businesses from turning in to scams and my answer was stop lending isk. Anything you do after the fact is pointless.

If you read the rest of my post you will see why I feel this way and a possible alternative.

Tom Hagen
Posted - 2011.09.03 15:04:00 - [28]
 

Originally by: Claire Voyant

Perhaps I wasn't clear. I meant all of them. Scams and legit businesses. The question was how do you prevent failed businesses from turning in to scams and my answer was stop lending isk. Anything you do after the fact is pointless.



Aha - then I misunderstood your post, sorry 'bout that.

AS for your proposal to effectively shut down the entire non-collateralized market (i.e. no loans w/o coll.), I think I've made my opinion know already in this thread - I feel that would reduce (but to remove) risk of scams, but would also remove an investment strategy from the game, hurting both the group of investors interested in more high-risk lending, as well as the pool or legitimate borrowers who prefer to loan "in blanco" at a higher interest rate.

While I fully understand and respect your opinion, I personally disagree and would not see that as a great solution. In fact that also - except without an in-game machanic being implemented - voids your suggestion, as that assures that their is (at least for now) at least one investor (me Smile) willing to invest into non-collateralized bonds.

RAW23
Posted - 2011.09.03 16:20:00 - [29]
 

Originally by: Elise DarkStar

The only thing keeping this ridiculous institution alive is a few legit people who do it simply to be the "Honerable Kings of the Spaceship Investing Forum". If they stop propping this **** up to feed their egos, it will all just go away.


The only reason I don't steal in real life is because I worry what people would think about me.

I am also deterred from killing puppies for the same ego-driven reasons.

RAW23
Posted - 2011.09.03 16:22:00 - [30]
 

Originally by: Shar Tegral
Originally by: RAW23
I'm struggling to think of an example where someone has got a hard time for trying to close down a business properly due to the business plan failing.
Not sure if this qualifies but I'll do all the linkage I did on the old e-bank forums.

Revelations Direct [RDIR] (Benvie/Shar Tegral)
- Initial Prospectus
- Successful IPO
- Hit By A Bus
- Benvie's Last Communication - Ever
- Disappointing Conclusion



Thanks Shar. Before my time but looks very interesting. Digesting now.


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