The part that i'm confused about is the trust part since it looks like you don't do a recurring check to see if the public address still has funds with it. So, what prevents people from lying about what they have and earning against that? Maybe I misunderstood.
I don't check that you have any funds other than those you deposited.
When the coins you deposited and invested are no longer sufficient to cover the loss you would incur if a max-profit bet was won, your "offsite investment" is immediately zeroed.
In other words, your offsite investment is used to increase the rate at which your onsite investment grows and shrinks, but you're never allowed to run up a negative balance.
As I understand it you are implementing optional kelly control. Isnt that just what you are doing?