The problem with this is that the asset will lose all value. This means that the principal, and your margin loan will both be at full risk. Margin companies will not stay in business like this long.
That's why I would restrict the money I loan, and any lender who chooses so, so the trader wouldn't be able to deal in Pirate-related securities. But if a lender wanted to allow it, and then charge a higher interest rate, then I would not see a problem with it.