This looks like a plausible scenario about what happened at Alameda that matches with what I read earlier (especially the effect of Luna's collapse): https://twitter.com/AutismCapital/status/1592406121368543233...
What Happened at Alameda Research
181–190 of 437 posts
Re: What Happened at Alameda Research
#182Earlier quoted context omitted.
Canadian teachers and retired teachers have $220b, which they paid into the plan from their not particularly opulent pay packets. Nearly $100m was given to a company based in a regulatory haven, which does not know to within $5bn how much money it has, and which was able to steal from its customers without any oversight. Ontario Teachers were an anchor investor in a round which lots of less clueless people must have…
They accepted the risk of losing $100m because they thought there was a significant chance of getting a much bigger return. Obviously in this case the bet didn't pay off, but putting 0.05% of the AUM in a high risk investment is hardly a scandal.
-- also it was out of their early stage fund - the vast majority of their money is in traditional investments - don't understand why everyone is so up in arms - they really think they know better than the most successful investment group in Canada? --
Re: What Happened at Alameda Research
#183> Most news accounts seem to portray the scale of the bankruptcy as relatively small. This is a key point. They lost $16B in customer deposits. LTCM lost $4.6B in investor funds. Enron lost $11B in shareholder capital. Interestingly, while Madoff is widely quoted as having lost $65B, that was almost all fabricated paper wealth, actual losses were around $18B and $14.4B of that was recovered and returned. All of these…
If only these calls for regulation from the two persons in this interview, could have been heard on time. Most interestingly, and as it's obvious from the interview, regulators were watching these children playing and only poking gently. At correct time: https://youtu.be/2ozjiX1E7ZA?t=25
May have something to do with FTX having paid off both US political sides and having close ties to SEC's chair.
Re: What Happened at Alameda Research
#184Earlier quoted context omitted.
"their systems became unprofitable" - "Alameda & FTX jointly continued to lose large amounts of money" - "uncompetitive market-making strategies, risky lending practices" - "erratic behavior and unprofitable gambling". > losing all the money accidentally rather than malice (far more likely) They sound an awful lot like trading / accidental losses than malice to me.
Normally if your fund is out of money and your exchange is fine you could spin down the fund rather than stealing customer money from the exchange
Normally you dont have a fund and an exchange sharing capital
Re: What Happened at Alameda Research
#185Earlier quoted context omitted.
This is simply not true. Their liabilities are in dollars because their customers wired them dollars.
Many of their customers (if not most, on volume) wired USDT obtained from other parts of the ponzi ecosystem, then traded them internally for dollars. This way, FTX could accumulate internal USD liabilities without ever having those dollars wired into their accounts. Even if we were to take at face value the $5 billion liabilities from SBF's "Excel ballancesheet", that's still less than a third of the loses. Sure, Te…
If most of the losses are USDT, how do we know Tether didn't just print them out of thin air to lend to FTX / Alameda as their "Commercial Paper"?
That would be my first guess.
Re: What Happened at Alameda Research
#186Earlier quoted context omitted.
Canadian teachers and retired teachers have $220b, which they paid into the plan from their not particularly opulent pay packets. Nearly $100m was given to a company based in a regulatory haven, which does not know to within $5bn how much money it has, and which was able to steal from its customers without any oversight. Ontario Teachers were an anchor investor in a round which lots of less clueless people must have…
They accepted the risk of losing $100m because they thought there was a significant chance of getting a much bigger return. Obviously in this case the bet didn't pay off, but putting 0.05% of the AUM in a high risk investment is hardly a scandal.
Teacher's Venture Growth is 8bn AUM. It makes complete sense to me that Ontario Teachers as a whole should put 4% of its assets into a venture fund.
TVG put well over 1% of its assets into FTX. Numerous people who work for the venture fund, who are paid 10-100X the income of the retirees in the fund to make investing decisions, went ahead with this investment without asking themselves:
1. Why isn't there a crypto-savvy lead investor for this funding round? Why are we, Teachers Venture Growth, the best placed people to make this investment?
2. Why are 3 individuals with, ostensibly, enormous personal wealth, seeking outside investment from Ontario Teachers for this business?
3. Why isn't this business headquartered in a jurisdiction where people who commit massive financial fraud will be investigated and held to account?
4. What checks and balances regulate the relationship with Alameda, a hedge fund which a) trades with leverage and favorable fee structures on FTX b) is reputed (long before the Series B and the recent trouble) to have privileged access to FTX data c) is run by a romantic partner of the head of FTX?
5. Who are the grown-ups at FTX? You might well think that SBF and his posse have some magical crypto skills. But why don't they have senior people with experience in accountancy, compliance, or risk management helping keep them on the right path? This is the easiest question to answer - you can simply check who works for them, who's on risk committees and other oversight bodies, and what their resume is.
People like to excuse massive due diligence failings like this by pointing out that not all venture investments are supposed to end up in the money. It's fine, if you have huge winners, to use them to justify a certain number of losers.
If you don't have a proven track record for finding out-of-the-park winners, it's perfectly reasonable to ask why you think you can risk large amounts of money on things that look dubious to other investors, while not performing basic checks.
Re: What Happened at Alameda Research
#187Earlier quoted context omitted.
They accepted the risk of losing $100m because they thought there was a significant chance of getting a much bigger return. Obviously in this case the bet didn't pay off, but putting 0.05% of the AUM in a high risk investment is hardly a scandal.
-- also it was out of their early stage fund - the vast majority of their money is in traditional investments - don't understand why everyone is so up in arms - they really think they know better than the most successful investment group in Canada? --
Why do an investment group which is successful in making large, traditional, real money investments think they know better than the numerous seasoned venture funds and experienced crypto investors who did not give $95m to FTX?
What was it about FTX's lack of internal controls or experienced decision-makers which only TVG was able to identify as a source of value?
Re: What Happened at Alameda Research
#188Who is the author of this piece?
Re: What Happened at Alameda Research
#189Earlier quoted context omitted.
I’m no expert in the space but was under the impression FTX was still considered a low volume exchange. If Alameda mm was still providing substantial volume they may have felt the price they were paying being bad at trading was worth it from a marketing point of view. This was the same crew buying stadium naming rights and over paying for eSports teams. As for hiring an adult, have you seen some of the things they’ve…
OTP put in something like that in the fund I was at. Yes it's small for them but it's still serious, the guy in charge wants to move on to bigger things. Oh and I totally forgot to comment on the math. Kelly criterion, I don't get how the guy could have studied physics at MIT and not understood it. It's simply a result that tells you how much to bet of your stash if you are presented with some repeated betting opport…
I don’t want to besmirch this particular person I’ve never met, but I definitely have met engineers who look at the stock market, look at their sophomore or junior level signal processing class and decide that all those Econ guys are a bunch of dummies and they could totally beat the market with some Fourier transforms or whatever (the fact that investing firms hired a bunch of quants is left unaddressed). So, I could see somebody making this sort of error.
Re: What Happened at Alameda Research
#190Earlier quoted context omitted.
-- also it was out of their early stage fund - the vast majority of their money is in traditional investments - don't understand why everyone is so up in arms - they really think they know better than the most successful investment group in Canada? --
Why do an investment group which is successful in making large, traditional, real money investments think they know better than the numerous seasoned venture funds and experienced crypto investors who did not give $95m to FTX? What was it about FTX's lack of internal controls or experienced decision-makers which only TVG was able to identify as a source of value?
-- their portfolio is pretty fantastic - so they made 1 bum investment based on cooked books - VC is literally about standard deviation --
https://www.otpp.com/en-ca/investments/our-investments/teach...