You admitted a bank would rarely be at common fault, yet you know just as much by depositing at a bank that the deposits will be lent afterwards and you're just as much led to believe the banks loaning behavior is sound. Yet depositors are not sharing the risk. Your analogies/examples always show an example where the investment is disclosed, while Patrick Harnett acted as a bank, being the financial service provider selecting who to loan to. Those benefiting from those loans made the actual investments (and lied to Patrick). The depositor is yet not at fault for the bank mismanagement.
The depositors were not investing in the bank itself such as would be the case if they became shareholders. (In which point they would be equally liable to a loss from the unsound business such as in your example.) They merely deposited with Patrick Harnett providing a financial service:
Depositor > Patrick (bank) > Lendee > Investment or Personal Purchase
I claim your proposed scenario cannot apply on behalf that it was not an investment but a deposit. Patrick was providing a financial service and was not directly making an investment or disclosing the lendees and the specific reason they are taking a loan just like a bank. The wording strongly suggest that he works as a bank and that he takes the responsibility to loaning cash to sound requests and doing proper investigation. Now the bank needs to default, Patrick voided part of the deposits but did not default himself personally, despite that he was acting as the bank entity (which has to default), directly and personally pocketing any profit.
You didn't acknowledge or argue against this logic. That unlike your example, deposits did not constitute an investment in Patrick business, but a deposit just as a bank. Your examples always shows:
Investors > Funding of a business > Profit or loss shared among investors
While this situation is:
Patrick creates a business under his own name for accepting deposits and then re-lending at a higher rate for a profit.
Depositor > Patrick (bank) > Lendee > Investment or Personal Purchase
Depositors are actually entrusting the bank for safekeeping of deposits as well as receiving a small interest from the financial service provider (Patrick Harnett). The money is not invested, it is entrusted. The only thing people knew about their deposit is that:
- Patrick would loan the deposits to others.
- Patrick would pay them an interest on deposits.
- Patrick would investigate lendees.
- Patrick was not exposed to a ponzi.
Which are basically the same you'd expect and know when depositing in a bank. You agreed that depositors at a bank are rarely at common fault for the bank's bad investments and everything seems to point that the situation is very similar to deposits at a bank. You know just as much when depositing at a bank yet you do not accept any risk other than the bank declaring bankruptcy. In this case the bank is Patrick Harnett himself and he did not declare bankruptcy. He just voided partially the deposit amounts and said he'd pay deposits if he manage to get something back.