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Crypto trading firm Alameda Research might be insolvent

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Re: Crypto trading firm Alameda Research might be insolvent

#191

Post by gamblor956 »

dcolkitt wrote: post #184
gamblor956 wrote: post #181

Earlier quoted context omitted.

To put it bluntly: Alice becomes legally and technically insolvent if the market value of the acquired assets falls below $1 billion: the value of the assets is no longer sufficient to pay off the $1 billion loan.

So you agree with me? For Alice to become insolvent the price of her assets has to fall below her cost basis. Alameda's cost basis on Solana is the seed round at approximately ten cents, and it's currently trading at $30. Similar story for all the Solana protocol tokens. I don't know what Alameda's cost basis is on FTT (if it's even holding a significant amount financed with hard currency), but we can almost certainl…

No, I don't agree with you.

Solana is only worth $33 right now at the current spot rate, but at the volume that would need to be liquidated to pay off Alameda's debts, the price would crash to pennies because the amount would represent over half of the daily trading volume in Solana for the past month. (For comparison, in the stock market, selling the equivalent a single-digit % of the daily volume of a stock can tank the stock.)

Similarly, Alameda owns 80% of FTT, which has a 24h trading volume of less than 20% of Alameda's debts, and fewer than 250 active daily traders. It would be literally worthless if Alameda tried to liquidate enough to pay off its debts. And as the linked blog points out, FTT is just a shitcoin exchanged between two related entities on their accounting books, meaning that at least $5.8 billion of the value of FTT, i.e., 80% of the putative value, is purely made-up.

OTOH, as the Voyager debt was collateralized entirely with shitcoins, it's possible that the other $7+ billion in Alameda debt was also collateralized in shitcoins. If that's the case, than Alameda should be solvent because it appears they actually have about $100m in cash assets. But if not, they are legally insolvent.

Re: Crypto trading firm Alameda Research might be insolvent

#192

Post by tough »

shorthistory wrote: post #160
tough wrote: post #156

Earlier quoted context omitted.

He was fired

Is that a fact, or are you stating that is the implication of the parent comment?

The latter, I didn't even read TFA.

Sorry if my prior message was confusing, but why would a top tier company let go one of their best performers after just a half and a year out fresh of college?

Re: Crypto trading firm Alameda Research might be insolvent

#193

Post by NotYourLawyer »

dcolkitt wrote: post #184
gamblor956 wrote: post #181

Earlier quoted context omitted.

To put it bluntly: Alice becomes legally and technically insolvent if the market value of the acquired assets falls below $1 billion: the value of the assets is no longer sufficient to pay off the $1 billion loan.

So you agree with me? For Alice to become insolvent the price of her assets has to fall below her cost basis. Alameda's cost basis on Solana is the seed round at approximately ten cents, and it's currently trading at $30. Similar story for all the Solana protocol tokens. I don't know what Alameda's cost basis is on FTT (if it's even holding a significant amount financed with hard currency), but we can almost certainl…

Cost basis has nothing to do with insolvency. If a company is mismanaged badly enough, it can easily become insolvent even if its investments are doing fine.

Re: Crypto trading firm Alameda Research might be insolvent

#194

Post by kibwen »

ethanbond wrote: post #85
cryptoanon wrote: post #66

Earlier quoted context omitted.

I’m not saying alameda is not insolvent. Im saying that the burden of proof is on the author to prove that they are insolvent.

Good news for crypto world that there are still people like yourself, I suppose. It's quite the strategy to assume everything with Entity X is above board based on the (intentional) lack of information and then when it turns out to be a scam, there's Entity Y where you can place the same assumption of legitimacy based on the same intentional lack of transparency.

"There's a sucker minted every ten minutes."

~ P.T. Nakamoto

Re: Crypto trading firm Alameda Research might be insolvent

#195

Post by from »

dcist wrote: post #165
paulusthe wrote: post #127

Earlier quoted context omitted.

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…

The trading fees for crypto exchanges are also insane, which enriches the exchange operators.

If you think someone's leaving money on the table with high fees you should start your own exchange. Of course before you even got off the ground you'd have to register as a MSB, draft a very extensive compliance plan given the "high risk" nature of your industry, find a banking partner who will even consider accepting you and hopefully won't kick you out after you get too big (you may have to buy a credit union if this step doesn't work out), get a money transmitter license in every state except Montana (which by the way all require a substantial bond, application fees, and delays), find former regulators who are now $1500/hr lawyers who still have some influence at NY DFS in order to get approved in New York, get approved for ACH, spend at least $50k a month on Chainlysis and OFAC screening software in order to placate regulators, and of course you actually have to write the exchange backend too. If you want to offer leverage (you will in order to be competitive with other exchanges) you need to have a pretty sophisticated risk management system because liquidations in crypto don't work like they do anywhere else. And you have to pay a browser fingerprinting vendor $20k/mo too because your halfwit customers will get phished and cause you bad publicity if you don't stop it. You'll also need Onfido or some other identity verification company in order to satisfy 31 CFR § 1020.220. But yes, once it's all set up it's a practically license to print money.

Re: Crypto trading firm Alameda Research might be insolvent

#196

Post by WastingMyTime89 »

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…

>> First very simple point, to become insolvent you have to actually take a loss somewhere.

> This has absolutely NOTHING to do with being insolvent.

This has everything to do with being insolvent.

If you don’t lose money somewhere - interests costing more than what you win being a loss for exemple - you should be able to pay back what you owe in the end.

You could be temporary insolvent because you have issues with payment delays and are strapped for cash but there are ways to deal with that especially at Alameda size.

Re: Crypto trading firm Alameda Research might be insolvent

#197

Post by yellowapple »

tucnak wrote: post #99
cryptoanon wrote: post #87

Earlier quoted context omitted.

> I'm just saying, the idea that people are not entitled to come to conclusions based on partial information is not valid. It’s possible to get scammed by a person that’s telling you that something is a scam. That’s an affinity scam. I’m not trying to tell you what to think. I’m saying that there are material flaws in the analysis.

Don't worry, your critique is fair and square, what you have to understand is that you probably piss a fair amount of people here already by virtue of your username alone! Cue takes on how "affinity scam" somehow doesn't apply & even more contrarian moaning re: crypto bad.

Is "crypto bad" even contrarian? It strikes me as the precise opposite: conformity to the "traditional finance good" status quo.

Re: Crypto trading firm Alameda Research might be insolvent

#198

Post by yellowapple »

standeven wrote: post #188
cryptoanon wrote: post #8

I really do not like this article and the discourse here for several reasons: 1. The entire Coindesk article lacks meaningful substance. For instance, we have zero idea about what those $7.4 billion of “loans” are. It’s really irresponsible to say that they’re insolvent. If you believe, so, you are applying no more rigor to your understanding of the space than the idiots who say HODL YOLO HFSP. If the liabilities are…

The title of the article is not “Alameda Research is Insolvent!”. Instead it poses the question, “Is Alameda Research Insolvent?”. Depending on the unknown liabilities, it very well could be.

And by posing it as a yes/no question, it brings to mind Betteridge's law of headlines.

Re: Crypto trading firm Alameda Research might be insolvent

#199

Post by yellowapple »

mritchie712 wrote: post #74
rufusroflpunch wrote: post #56

Earlier quoted context omitted.

Owning and holding Bitcoin is not a scam. That's about it.

It'd be pretty easy to create a "defi credit union" that's not a scam, it'd just be hard to cut thru all the noise. Give 3% to 5% yields on saving, lend at 8% to 12%. The problem is people see "230% yields" (which are scams) and wouldn't know your legit 5% yield is for real.

Or just stake some proof-of-stake cryptocurrencies. Most Cardano stake pools (for example) are right around that ~4% yield figure, last I checked.

Re: Crypto trading firm Alameda Research might be insolvent

#200

Post by yellowapple »

thr0wawayf00 wrote: post #90
FortiDude wrote: post #86

Why is it so difficult for trading companies to simply keep the money in the reserve and never touch it unless your client wants to liquidate his share? I know, having that huge pile of cash and not doing anything with it can lead to huuuuuge temptations, but that's what I'm paying the company to do. If I wanted to invest my funds into something I would move my money to a separate investment account that the institut…

Because they don't make as much money that way. History has repeatedly shown us that asking companies to voluntarily forgo profit-earning opportunities does not work. Companies exist to make money and this why regulators like the FDIC exist, to ensure that financial institutions are liquid enough when things go south. This is simply not something that financial institutions are capable of doing themselves.

This doesn't even seem like a financial regulation issue. More like a "I'm paying you to store my stuff so please store my stuff" issue. If I paid for a storage unit and the company running it sold all the stuff in it while promising "don't worry, when you want your stuff back we'll buy it back for you", I'd be pretty peeved.
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