Trust is earned, not given. What did pirate do to earn trust?
Member of the community, gpumax, OTC rating, etc
Do people know who he is or where he lives?
People are way too lazy this day. Google him. Look at his facebook page. Look at the facebook page of his wife. Look at the pictures of his sons, dogs. Hell, we know more about him, than we know about the whole dev team combined. But in sharp contrast we trust the dev team with ALL our bitcoins.
Do they know how the money they give him is used to make those returns?
I guess sometimes the business model itself can be the trade secret. That being said, read his post on this forum and on IRC and you will get an almost clear picture about his business.
Do they know how much of the profits he keeps for himself?
Yes, he stated to make about 10%/week and gave his lenders about 7%.
Do they even know why he needs other people's money instead of just earning the 7% weekly return on his own money?
He did not have such huge funds, and those were necessary for him to make this profit.
But while all those are neat questions that can be answered easily, it still leaves the actual one unanswered:
I don't really follow the logical connection between "some people may have lost money to a bitcoin scam" and "it's time to panic sell!"
Why would anyone panic sell over this type of announcement? Is the assumption that pirate's was going to dump his btc holdings, causing the price to go down? If so, why would he bother announcing?
Call me an eternal sucker, but the above viewpoints ring louder than any "HE MUST BE A PONZI BECAUSE _____" claims.
Disclaimer: I have never "invested" in Pirate or any derivative thereof and do not plan to as I find it highly risky and lacking much needed transparency.
I think DeathAndTaxes nailed it in another thread.
...Another way to look at it is IF you run a business that is 100% legit but it utterly indistinguishable from a ponzi scheme then guess what .... the risk that it will be confused with a ponzi scheme and you may suffer a lack of liquidity as a result is a business risk. A risk that both the operator of the business and the investors should have considered. Lets assume Pirate operation was 100% legit. Could he have done anything to mitigate that risk? Transparency? Delayed withdrawals? Working with a smaller pool of high net worth investors? Since he chose NOT to take steps to mitigate that risk factor and the "investors" decided to ignore that risk factor any losses are solely the fault of the operator and investors.
That's of course true, but opening yourself up to criticisms and not caring much doesn't make you a ponzi automatically either. Wait until Monday.