I don't think that the act of running a pass-through, by itself, is scamming, as long as the pass-through details and risks were disclosed appropriately.
I disagree.
Running a PPT was paying Pirate to make you and your investors the recipients of obviously fraudulent transfers of other people's money. If that's not scamming, what is? But as I've said elsewhere, I'm willing to give PPT operators who aren't on record as saying they knew or suspected it was a Ponzi a free pass this one time. But in the future, I will be holding people to a higher standard.
But if the investors knew going in that a pirate default meant a pass through default, how is the pass through operation scamming?
I bolded the portion that explains that, which you seem to have quoted without reading. The pass through operation is scamming Pirate's other victims by hiring Pirate to take money from them and give it to the PPT's customers. If I help a woman hire a hitman to kill her husband, I am as responsible for the murder as the hitman is. This is true even if I was completely honest with the woman and got her a trustworthy and reliable hitman.
No. They were just resellers of the Pirate security. Independent entirely. They should not suffer any liability for the product they only resold.
Really? So if someone wants someone killed and they pay me to hire a hitman for them, I'm not responsible for the actions I paid the hitman to take because I'm just "reselling" his product?
Ok, I see your point of view. But, I see two differences:
1) The scam wasn't known as a scam for certain. You KNOW that a hitman is going to kill someone in your example - you don't KNOW that people are going to lose their money in a scam until it happens in the case of pirate. Sure, there was a strong likelihood, but it still wasn't certain.
2) I see risky investments as a form of gambling. If people want to gamble their monies away, or give it to a homeless guy on the street, or light it all on fire, it really doesn't make a bit of difference to me. And I would even help them do it if they wanted and I had some incentive. Therefore, I don't feel as though the people who invested in Pirate were wronged. They knew the risks of investing up front, and they chose to invest anyway. I wouldn't say they got what they deserved, but at the very least, they understood the risk they were taking by investing in the scheme. That is far different from someone who unknowingly has a hit placed on them.
Do you also think casinos are in the wrong for letting people lose money? And banks that let people withdraw their money to spend at casinos?