A Bitcoin Mining Company Offering 10% Returns Denies Ponzi Allegations

A Luxor Technology executive made a firm statement, saying, "Profits come from the hash rate. Not from Ponzi or other dubious sources."

The creator of the product, Bitcoin mining company Luxor Technology, stated that they can achieve a 10-13% return with a Bitcoin hash rate-based product and emphasized that this product is different from those of BlockFi or Celsius. Luxor explained that the returns come from the proof-of-work system, not from "ponzi chains."

This hash rate-based product was discussed on the What Bitcoin Did podcast's episode on October 17, and the host, Peter McCormack, expressed his concerns about Luxor's offer. Matt Williams, the president of Luxor's derivatives products, mentioned that hash rate-based products are backed by economic production. He said, "Here, there is real business proof and provable economic activity. The return comes from miners leaving a portion of their margin from mining operations to an investor," and he added: "The main takeaway is that the return comes from the hash rate. Not from fairy dust, ponzi chains, or rehypothecation."

Luxor's product works by allowing investors to show Bitcoin collateral to Luxor and receive a share of the loan repayments, which Luxor lends to other miners to finance their operations. This involves a transaction where Bitcoin hash rates are bought at a discounted price and sold at a higher price. The return comes from Bitcoin mining rewards. Luxor predicts that investor returns will range from 10% to 13%. This offer will be managed through the hash rate market that Luxor will launch soon, allowing miners easier access to capital. Miners can finance their operations without having to sell the Bitcoin they mine.

TLDR: @LuxorTechnology intends to take customer Bitcoin and loan it to well established mining companies looking for funding.

Luxor will do ‘due diligence’ on the recipient of the loan and the donor will immediately start receiving #Bitcoin at a pre determined rate (ie 10-13%)

— The ₿itcoin Therapist (@TheBTCTherapist) October 27, 2023

Luxor emphasized that it acts as an intermediary between investors and mining companies and does not operate its mining pools. They mentioned that they only hold Bitcoin for a short period as they transfer it from investors to mining companies.

Joe Kelly, the CEO of Bitcoin lending company Unchained, stressed the importance of caution for BTC owners during investment or lending transactions. He stated, "Any investment or lending transaction that requires a Bitcoin holder to control their BTCs demands great scrutiny and examination. Bitcoin lending and borrowing markets are still relatively new, and investors should be careful to prevent a repeat of failures like those at BlockFi and Celsius."

Matt Williams mentioned that hash rate-based products are not available to the public and are only offered to those who pass the company's checks.

Are you tired of your #Bitcoin sitting safely in cold storage?

Do you want to earn 10-13% yield on your Bitcoin?

Do you want to have counterparty risk in one of most competitive fields in the world?

This is the video for you 👇🏽 😂 pic.twitter.com/hv0nURg0Cu

— The ₿itcoin Therapist (@TheBTCTherapist) October 27, 2023

Matt Williams acknowledged that Luxor's hash rate-based product understandably raises concerns, especially in light of the bankruptcies experienced by BlockFi and Celsius. He also noted that investors assume counterparty risk with Luxor.

Luxor mentioned that they would work exclusively with "reputable miners" to reduce these risks and could even push those miners to get insurance. However, Luxor did not provide information about when their product would be available for use.