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Crypto trading firm Alameda Research might be insolvent

dirtybubblemedia.substack.com

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Re: Crypto trading firm Alameda Research might be insolvent

#151

Post by dchftcs »

kennend3 wrote: post #133
dcolkitt wrote: post #108

As someone in the industry, it's almost certainly not . First very simple point, to become insolvent you have to actually take a loss somewhere. They may have a lot of junk tokens on their balance sheet, and these tokens may be overmarked, but Alameda's cost basis (most of them were from seed rounds) is still way below their current value. With Three Arrows it was very obvious where the loss was from, they were hyper…

> First very simple point, to become insolvent you have to actually take a loss somewhere. This has absolutely NOTHING to do with being insolvent. "Insolvency In accounting, insolvency is the state of being unable to pay the debts, by a person or company, at maturity; those in a state of insolvency are said to be insolvent. There are two forms: cash-flow insolvency and balance-sheet insolvency. " Insolvency deals wit…

Given the assumption that their balance sheet is liquid enough or they have the cash flow to pay the debts, it's reasonable to say that they have take losses as a trading firm to be potentially insolvent.

In fact you could turn your argument around to critize the article too, as they are based on the assumption that some of the assets should marked to zero, rather than examining empirically whether those assets could be either collateral or be used to pay the debt.

Re: Crypto trading firm Alameda Research might be insolvent

#152

Post by mytmpaccount »

This makes sense to me in the sense that as far as I can tell SBF and Alameda's claims for the origin of their wealth is obviously false: He claims he made billions of dollars on an arbitrage with Korean exchanges and the rest of the world. Price differences existed, but with extremely small volume. If he claimed to have made millions from it I would have been highly skeptical, but billions? And during a major crypto down market to boot-- not a time when any idiot in the space could accidentally make a fortune just by having exposure.

But if that trade wasn't real where did the money come from? One possible answer is that the money never was: maybe it was always just marked up balance sheets holding multiple times the circulating market of illiquid and close traded tokens-- all a great big fake it until you make it.

[Apologies for the throwaway account, but I don't want to risk taking more retaliation from crypto scammers]

Re: Crypto trading firm Alameda Research might be insolvent

#153

Post by JumpCrisscross »

dcolkitt wrote: post #108

As someone in the industry, it's almost certainly not . First very simple point, to become insolvent you have to actually take a loss somewhere. They may have a lot of junk tokens on their balance sheet, and these tokens may be overmarked, but Alameda's cost basis (most of them were from seed rounds) is still way below their current value. With Three Arrows it was very obvious where the loss was from, they were hyper…

> the bulk of their liabilities are in the same tokens on their balance sheet

Do we have evidence of this?

The article says $292mm are FTT-denominated, with the rest unknown. Absent further information, it’s fair to assume some of that is dollar denominated. With less than 2% cash to cover liabilities, even a small amount of normal borrowing could render Alameda insolvent.

Moreover, if the losses are entirely passed through, whose are they? That’s over $7bn of losses sitting on someone’s balance sheets. Are they distributed? Is it FTX’s?

Re: Crypto trading firm Alameda Research might be insolvent

#154

Post by JumpCrisscross »

deetsb wrote: post #150
kennend3 wrote: post #133

Earlier quoted context omitted.

> First very simple point, to become insolvent you have to actually take a loss somewhere. This has absolutely NOTHING to do with being insolvent. "Insolvency In accounting, insolvency is the state of being unable to pay the debts, by a person or company, at maturity; those in a state of insolvency are said to be insolvent. There are two forms: cash-flow insolvency and balance-sheet insolvency. " Insolvency deals wit…

I'd argue balance sheet insolvency is really the most colloquial definition insolvency. You can always sell assets (at a haircut of course) to evade cash flow insolvency (arguably that's closer to illiquidity really), but you can't do anything to get out of balance sheet insolvency except restructure your liabilities. Alameda being in balance sheet insolvency would depend on their assets taking enough of a hit to wip…

> can always sell assets (at a haircut of course) to evade cash flow insolvency (arguably that's closer to illiquidity really)

For financial institutions, particularly those with short-term liabilities, illiquidity is insolvency. The initial liquidity depresses prices which marks down the balance sheet.

Re: Crypto trading firm Alameda Research might be insolvent

#155

Post by JumpCrisscross »

shorthistory wrote: post #124
dcolkitt wrote: post #108

As someone in the industry, it's almost certainly not . First very simple point, to become insolvent you have to actually take a loss somewhere. They may have a lot of junk tokens on their balance sheet, and these tokens may be overmarked, but Alameda's cost basis (most of them were from seed rounds) is still way below their current value. With Three Arrows it was very obvious where the loss was from, they were hyper…

FTT 24h volume is ~$100M according to coinmarketcap.com Alameda hold $5.8B FTT according to the article. Any market makers able to advise how much is normally held relative to daily volume/mean transaction size?

This looks more like a dealer book than a classic MM. If they’re long $5.8bn and short $5.79bn, their net position is fine. That said, they’d be carrying major counterparty risk.

Re: Crypto trading firm Alameda Research might be insolvent

#157

Post by shorthistory »

JumpCrisscross wrote: post #155
shorthistory wrote: post #124

Earlier quoted context omitted.

FTT 24h volume is ~$100M according to coinmarketcap.com Alameda hold $5.8B FTT according to the article. Any market makers able to advise how much is normally held relative to daily volume/mean transaction size?

This looks more like a dealer book than a classic MM. If they’re long $5.8bn and short $5.79bn, their net position is fine. That said, they’d be carrying major counterparty risk.

1. They are understood to be classic MM [source?]

2. Balance sheet shows they are not classic MM

3. Counterparty is FTX

4. ...

Re: Crypto trading firm Alameda Research might be insolvent

#158

Post by [deleted] »

paulusthe wrote: post #127
dcolkitt wrote: post #108

As someone in the industry, it's almost certainly not . First very simple point, to become insolvent you have to actually take a loss somewhere. They may have a lot of junk tokens on their balance sheet, and these tokens may be overmarked, but Alameda's cost basis (most of them were from seed rounds) is still way below their current value. With Three Arrows it was very obvious where the loss was from, they were hyper…

Sure, but at some point real dollars enter the financial equation, backed by these coins, none of which are probably priced correctly to serve as collateral. The ftt coin is shady as hell though. A 40% trading rebate for holding $1m is insane; that's nothing. And it's not open to anybody touching the US - a blatant attempt to prevent US regulations, which would catch this stuff. It's very weird for exchange owners to…

[deleted]

Re: Crypto trading firm Alameda Research might be insolvent

#159

Post by FabHK »

shorthistory wrote: post #145
blitzar wrote: post #101

Earlier quoted context omitted.

Nobody is leaving Jane Street after 18 months - straight out of college, of their own accord.

Was it only 18 months? Wikipedia states: ...he returned there full-time after graduating [in 2014]. In September 2017, Bankman-Fried quit Jane Street... Seems closer to 3 years, but it doesn't state whether he started there immediately after graduating or not. What do you suggest are the reasons for his leaving?

GP was talking about the CEO of Alameda, who, according to page linked by GGP, is

> Caroline Ellison, CEO > Before joining Alameda in 2018, Caroline worked at Jane Street as a trader on the equities desk.

You seem to be talking about SBF.

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