Hmmm...good analysis. Perhaps I'll try to corner Randy and ask him. A horrific failure could mean the end of this whole enterprise (FlyerTalk included).

If you are truly a gambler, you sell your miles in advance of a bankruptcy.

The scenario that you described almost smells like a Ponzi scheme, if in fact they do not have a financial backer. If they accept new member fees while they know that the payouts from previous claims made the enterprise insolvent, there will be jail time involved. That's a big no-no.