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What Happened at Alameda Research

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Re: What Happened at Alameda Research

#221

Post by jrochkind1 »

A side issue, but I found it distracting that the text consistently refers to Caroline Ellison by her first name alone, rather than last name or both names or initials like all other people discussed (and like is generally done for public figures covered in news articles etc).

But I'm not in the "community", I don't read a lot of this inside baseball stuff. Is this the way she is usually referred to? It looks like her twitter name, in tweets quoted here, was just her first name too? And she's referred to by just her first name in the "insider's account" quoted at the end too. What's up with that?

Re: What Happened at Alameda Research

#222

Post by matwood »

DebtDeflation wrote: post #120

> 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…

For another reference, 16B is Spotify's entire market cap. The amount lost here is staggering. And given what's leaked from their balance sheet, I don't see how people avoid jail time.

I'll also add, if you want to really dig into FTX details, simply read Matt Levine's newsletters.

Re: What Happened at Alameda Research

#223

Post by simiones »

naijaboiler wrote: post #219
jasode wrote: post #142

Earlier quoted context omitted.

>LTCM lost $4.6B in investor funds. [...] All of these situations are obviously somewhat different, [...] biggest financial frauds/scandals in history. LTCM shouldn't be in that list because that wasn't fraud. That hedge fund had a flawed math model of volatility of their holdings when a cascade of events got triggered by Russia defaulting on their bonds. LTCM losses were magnified by their over leveraged positions.…

this is exactly what happended at FTX/Alameda. A bunch of "smart" guys who backstopped and over-extended loans to players, and their losses were magnified with their over-leveraged positions, that was backed up with assets with no values. That's exactly what happens in just about every financial scandal.

FTX took customer deposits (which were supposed to be held in custody and untouched, according to their TOS) and loaned them out to Alameda to gamble with. That is entirely different from being over-leveraged and having your debts default.

Re: What Happened at Alameda Research

#224

Post by kumarvvr »

SilasX wrote: post #214
jasode wrote: post #142

Earlier quoted context omitted.

>LTCM lost $4.6B in investor funds. [...] All of these situations are obviously somewhat different, [...] biggest financial frauds/scandals in history. LTCM shouldn't be in that list because that wasn't fraud. That hedge fund had a flawed math model of volatility of their holdings when a cascade of events got triggered by Russia defaulting on their bonds. LTCM losses were magnified by their over leveraged positions.…

It had the potential to cascade to the rest of the market because of how they used leverage, and the only reason it didn’t was because of emergency Fed intervention.

That does not make it a fraud. They took investor money and leveraged it and made bets on basis of their mathematical models. Their models didn't work out.

I don't think their intention was to rob / hide / betray / hoodwink.

Re: What Happened at Alameda Research

#225

Post by pezezin »

remoroid wrote: post #66
rxyz wrote: post #55

Earlier quoted context omitted.

I don't think League is a popular game in that demographic. I see it as a old man/woman game now, like counter strike

Do you have any data to back that up? Do you not understand that the lowest ranked players on the server are going to disproportionately include children that are bad?

https://www.statista.com/statistics/1018224/league-of-legend... https://theglobalgaming.com/lol/average-age-player

According to that data, most players are between 18 and 34 years old, with children and teens being only 12% of the demographics.

Re: What Happened at Alameda Research

#226

Post by SilasX »

kumarvvr wrote: post #224
SilasX wrote: post #214

Earlier quoted context omitted.

It had the potential to cascade to the rest of the market because of how they used leverage, and the only reason it didn’t was because of emergency Fed intervention.

That does not make it a fraud. They took investor money and leveraged it and made bets on basis of their mathematical models. Their models didn't work out. I don't think their intention was to rob / hide / betray / hoodwink.

I was replying to this:

> A bunch of PhD traders lost their wealth

That is, the only reason the losses were limited to them was because of special intervention. Otherwise, it would have caused losses for many others.

Re: What Happened at Alameda Research

#227

Post by onlyrealcuzzo »

H8crilA wrote: post #100

> When loans were recalled in early 2022, an emergency decision was made to use FTX users’ deposits to repay creditors. Just so you know, this is a clear and obvious prison sentence in normal finance. Also FTX itself was trading with customer deposits instead of just keeping them like an exchange is supposed to do, which is also prison in normal finance. Matt Levine wrote a good piece on this debacle, and will probab…

FTX supposedly collected 0.1% commission on $100B+ volume per day.

Why couldn't they just get a loan to cover their losses?

Re: What Happened at Alameda Research

#228

Post by pjc50 »

belter wrote: post #147
DebtDeflation wrote: post #120

> 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

The secret is that regulators can only have a fairly limited effect, and retrospectively. As well as the inherent jurisdiction difficulties in operating out of the Bahamas. Mind you, that's something crypto investors wanted: freedom from government!

There's a real "accountability overhang" not just in crypto but so many other things. Justice is slow and getting slower.

Re: What Happened at Alameda Research

#229

Post by jasode »

naijaboiler wrote: post #219
jasode wrote: post #142

Earlier quoted context omitted.

>LTCM lost $4.6B in investor funds. [...] All of these situations are obviously somewhat different, [...] biggest financial frauds/scandals in history. LTCM shouldn't be in that list because that wasn't fraud. That hedge fund had a flawed math model of volatility of their holdings when a cascade of events got triggered by Russia defaulting on their bonds. LTCM losses were magnified by their over leveraged positions.…

this is exactly what happended at FTX/Alameda. A bunch of "smart" guys who backstopped and over-extended loans to players, and their losses were magnified with their over-leveraged positions, that was backed up with assets with no values. That's exactly what happens in just about every financial scandal.

>this is exactly what happended at FTX/Alameda. A bunch of "smart" guys [...]

No, they're different situations.

The current details trickling out of the FTX scandal is that CEO Samuel Bankman-Fried secretly used customer funds to prop up Alameda which is unethical and criminal. This is fraud.

In contrast, the LTCM guys lost billions honestly and transparently via flawed math models based on overconfident assumptions of price spread behavior. That wasn't criminal fraud. There was no illegal transfer of investor funds.

Re: What Happened at Alameda Research

#230

Post by pge »

ZeroGravitas wrote: post #31

I liked the chapter in Nate Sivers' Signal and the Noise when he talks about how hard it is to know if you're a good professional poker player. Been a while since I read it but feel like even after a couple of years of winning games and tracking his own performance, he had enough stats knowledge to realise that he didn't actually know if he was good or just lucky. The noise swamped the signal. This feels relevant to…

The same is very true in VC investing. Because any individual partner does not make that many bets per year, and the time frame to exit is long, it is very difficult to distinguish skill from luck (including being in a long-term bull market like the last decade).
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