"Anyone who plans to waste the shareholders' money can undercut the competition.  The easiest thing in the world is to charge too little, it is just as easy as spending too much of other people's money.  Customers will flock to those who do because they are giving away some, if not all, of the value for free.  Somebody may even pick up the underpriced goods and sell them at a profit when the stupid company ceases to exist or raises prices to try to survive after all.  People of very limited intellect just _love_ "free" stuff. That is how they can be lured into bad and costly deals with free offers, miniscule chances to win some "prize", and other marketing techniques aimed at the non-thinking.  And then there are the cynics, who do not understand that by only taking the free stuff and not buying anything else, they are making everybody else lose, so that free stuff is no longer goodwill to honest people, but reduced to free crap for the fools.  When something _must_ be widespread in order to be used, the only option may well be to give it away to lots of people until you have enough market share that those who want on the bandwagon later will be willing to pay for it, but then you need to be damn certain that you are able to keep your customers and not provide free marketing for your competitors, who do not need to recover those marketing costs.  Fax machines, cellular phones, even operating systems, have been sold with this technique.  Many other products have failed to gain the required market share and have lost all the shareholders' money.  Remember all the web sites that used this trick to cause people to use them, but who were left behind when the _next_ outlet for free goods and services sprung up to waste new money."
Erik Naggum: comp.lang.lisp. Thu, 17 May 2001. (Emphasis mine.)

MPEx presently derives two-thirds of its profit from registration fees.  And its own stock is among the best-performing.  Does this, by itself, make it a scam?  I do not think so.  There is nothing devious about operating a bubble, so long as the participants are made to understand exactly what they have become involved in.  In fact, in some countries, traditional pyramid schemes are legal, so long as they advertise themselves as such.  Do Popescu's clients understand their place in life?  Given their level of investment, I should like to think so.  The Popescu bubble is not my problem, and it won't become your problem unless you choose to make it so.

My problem with MPEx lies elsewhere, and serious students of Bitcoin would do well to give it some thought.  MPEx is an example of just the kind of thing I spoke of when I wrote that Bitcoin is a microscope being used as a hammer.  Bitcoin is an elegant jewel of mathematical engineering because, for the first time in the entire history of money, it makes it possible to conduct commerce without trusting anyone.  Or, more precisely, without trusting any particular person or small group of people.  It is even possible to construct a stock or futures exchange in this manner. Or a universal reputation-tracking system.  One must simply build on top of the mathematical foundation of Bitcoin, creating a fully-decentralized system secured by strong cryptography - rather than a conventional organization made up of fallible human beings.  The problems of interfacing such a system with the world of physical commerce and fiat currencies are genuinely hard - but not unsolvable.

Is Popescu interested in converting MPEx into a peer-to-peer system which does not require you to trust a Romanian businessman - and could not be shut down by a well-placed lawsuit or bullet?  Yes and no.  Let's ask him:

"In its current incarnation MPEx is a centralised system. This is not happenstance, all markets are by their very nature centralised affairs and financial markets especially, as trust is the only required ingredient to their continued operation. Decentralisation will occur, if and only if the environment makes it impossible for MPEx to be operated as is, but it will probably not exactly take the form of a blockchain-based system for reasons already discussed."

Mircea Popescu, Feb. 3, 2013: "So, What's the Plan with MPOE/MPEX?"

21. What happens if your domain(s) or server(s) are confiscated ?

In case the domain is confiscated or otherwise lost MPEx will move to a different domain, in a different jurisdiction. Should the same happen again, MPEx would move to what will at the time be a solid alternative for a free Internet, be it the TOR network, namecoin or some equivalent DNS or any comparable solution. No government will ever be able to stop the Internet, in general. We're prepared to show this in the particular.  Should the systems be confiscated or otherwise lost the service will failover to different systems, possibly on bulletproof hosting if need be. If sufficient pressure is put on this side MPEx will be recoded as a p2p system.

Mircea Popescu, MPEX FAQ.

I admire the man's optimism, but to me it reads a bit like: in the event of MPEx being thrown off the roof of a skyscraper, we intend to invent the parachute on the way down. I understand Popescu's reluctance to discuss details of MPEx's contingency plans within earshot of the enemy, I really do.  But the tight lips and inexplicable bravado ought to raise some eyebrows.

I do not, at present, believe that Mircea Popescu is a dishonest man.  His creation operates more-or-less exactly as described, and he takes great pains to ensure that everyone who decides to trust him with money understands what he is getting into.  Yes, there are a great many off-putting aspects to MPEx. Its home, Romania: the land of countless spammers who have never seen the inside of a jail; the fact that its relationship with traditional meatspace commerce and law is quite murky (Is MPOE incorporated? Where? What are its liabilities? Has anyone won legal redress from it for any perceived wrong, in a traditional court?)  But none of these things are secrets.  Although certain features of Popescu's behavior are rather worrisome.  I am not, of course, referring to his disdain for idiots. (I enthusiastically share in it.)  Instead I mean things like this:

So, either BTC is a "game currency" and MPEx is a toy (and children ought to be able to purchase time on it with their lunch money) or BTC is serious adult business, fit to displace the New York Stock Exchange when its hour comes.  Which is it?  I understand that the above is intended to keep the hordes of predatory lawyers and bureaucrats at bay.  Unfortunately, governments bent on confiscating wealth (and, more importantly, retaining control over the basic mechanisms of commerce) are seldom stopped by one man's Talmudic arguments, no matter how clever.  When American bureaucrats finally decide that Bitcoin is a threat to their hegemony, cryptocurrencies might continue to exist.  But will MPEx?  At times, it seems to me that Popescu has declared war on traditional meatspace institutions: banks, stock exchanges, courts.  What are the rules of this war?  What other aspects of mainstream society is Popescu at war with?  This kind of thinking is not by itself damning, but these are questions which I would like to see some clear answers to before I give a man serious money.

Popescu insists that his contigency plan will allow MPEx to operate regardless of what any government might do.  It will, he insists, carry on as a massively distributed peer-to-peer system. What interest might Popescu have in a fully-decentralized Bitcoin stock exchange? Well, presumably he will own it, and reap the profits.  But I confess that I am rather unclear on the concept of how a genuinely peer-to-peer system could have an owner.  Ah, but it must have an owner.  Popescu and his friends have to eat, after all.  Well, in that case it is not peer-to-peer.  Anything with an identifiable meatspace owner can be destroyed by a bureaucrat in the blink of an eye.  If MPEx were owned and operated by the ruler of North Korea - or some other organization which might stand a chance against a modern army and a real blockade - I might be willing to believe that it could weather the wrath of the U.S. financial overlords.  Otherwise it looks like a bit of a long shot, to put it mildly.

Popescu posted some very insightful criticisms of the peer-to-peer Bitcoin stock exchange concept, but studiously ignored the most obvious one: a decentralized MPEx would have no room for an owner, any more than the Bitcoin network itself does.

In conclusion, I would like to reproduce one unusually-insightful comment from the peanut gallery.

"he should not be trusted. here's why: a person with his attitude, believing that idiots should die, may not be a scammer today but could easily be one tomorrow. just like that. because a scammer is essentially exploiting "idiots" (by his own definition at least) and he can easily rationalize his actions (at least to himself) and even think he's doing humanity a service. so by extension you would automatically be an idiot if you trusted him."
(http://www.reddit.com/r/Bitcoin/comments/17zq8j/because_most_people_are_idiots_in_spite_of_never/c8abuqh)

Popescu patiently explains that bamboozling his clients would not be in his best financial interests. This is well and good, but it can be turned around, and one could reasonably ask whether he will betray, should it ever be in his best interest to do so.  Among technologists, a disdain for "human" emotional mishmash is almost a universal.  Yet it remains a character flaw.  By rejecting the seemingly-irrelevant world of human trust-building (beyond strict adherence to promises) one asks to be thought of as a mechanism. That is, to be reasoned about game-theoretically.  And reasonable people will sit around and try to predict exactly when and in what manner you, the master of reasoned thought, will betray them.  To his credit, Popescu appears to be making this tradeoff consciously.  The disdain of Internet chatterers neither picks his pockets nor breaks his bones.  But at some point, when the MPOE gravy train comes to a halt, MPEx might find it necessary to stop ignoring these aspects of public relations. [10]

At present, Mr. Popescu is genuinely and truly loaded, and does not need my (or anyone else's) advice on how to do business. Right now there is a never-ending supply of people eager to purchase shovels in his gold mine without asking too many questions.  But should this gold rush end, the crowd of wealthy risk-takers who ask few questions might give way to a considerably smaller crowd of somewhat poorer ones, who do ask questions.  Should this come to pass, Popescu may need to rethink some of his choices (or retire to writing books. I'm quite in favor of that.)

If you have a hundred thousand dollars stashed between your sofa cushions, by all means invest it in stocks and futures on MPEx.  But make sure they aren't the last hundred thousand in your sofa, as you may well lose them.  Contrary to Popescu's claims, if American bureaucrats should decide to give MPEx the "full WikiLeaks treatment," he will run into nontrivial problems - not necessarily limited to legal ones.  I, for one, will wait for the fully-decentralized systems. [11]

Once again, Mircea Popescu could very well be an exceptionally-honest man.  I, for one, have little reason to think otherwise.  He might even have the moral integrity given to few, and will one day stoically face the firing squad, taking his PGP private key passwords to the grave to protect his clients.  Such men do exist.  But I would like to point out the obvious yet important fact that MPEx relies heavily on the future honesty of a small handful of people.  We take this for granted in our meatspace dealings, as "the cost of doing business."  Yet there is no reason for Bitcoin users to make permanent peace with this constraint.  Bitcoin makes trust-free systems thinkable, if not immediately practical. And they are a worthy goal, because the world has a way of turning honest men into, well, other kinds.  With money, or with firing squads.

Edit: Popescu's reply.

[1] MPEx communicates almost exclusively through Mircea Popescu's personal secretary.  A bit of an oddity for an operation consisting of a handful of people.

[2] ~630 USD, at the time of this writing.

[3] It is possible that Popescu, being a clever fellow, invests the bitcoins he holds in trust in some conservative way.

[4] Private communication.

And here's how it ended (2020).