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Comment by 015a | Hacker News Reader

> As of Friday, Voyager said it had approximately $137 million in U.S. dollars and owned crypto assets.

> Last week, Alameda (FTX founder Sam Bankman-Fried’s quantitative trading firm) committed $500 million in financing to Voyager Digital, a crypto brokerage. Voyager has already pulled $75 million from that line of credit.

Am I misunderstanding something, or: what kind of mismanagement could possibly lead to loans being given out to a single entity representing, like, over 70% of the entire value of your organization (pre-default)? Its excellent that FTX/Alameda stepped in to keep them solvent and not allow this to spiral further, but at the same time, its incomprehensible to me that Voyager allowed this to happen; so incomprehensible that it feels like I'm misunderstanding something.

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My understanding is that FTX probably holds a ton of cryptocurrency assets or is invested in other companies with cryptocurrency exposure and does not want a 'contagion' to spread. This might work, but I am not sure FTX has enough assets to stop it, for a similar scenario https://www.federalreservehistory.org/essays/ltcm-near-failu...

I think it’s a strange part of human psychology to ignore objective reality and double down to complete ruin. It seems remarkably common and with corporate power being so concentrated at the top it seems rather easy for these situations to happen.

I think the reason is that safety nets our system provides to big businesses (especially "too big to fail" ones) incentivizes them to take risks. If you have a 50/50 chance to strike gold or loose tons of someone else's money, why not take it. If it pans out, you get a lot of bonus $$$, if it doesn't - it's no skin off your back.

I see this in my industry. Above a certain level there isn’t really a failure state that matters to an individual.

Yes, it’s the throwing good money after bad problem. I think there’s a real name for it, “sunk cost” fallacy maybe?

I'm thinking "lender of last resort"

most crypto trading firms have been rewarded for this behavior over the last few years, so the lesson is hard to unlearn

Those crypto assets might have been worth a lot more when the deal was made. And the interest rate is probably pretty high.

Is it mismanagement? It's head-I-win-tails-you-lose. Why would Voyager be playing a radically different game than 3AC? That kind of leverage can mint a billionaire if the dice roll the right way.

Stepping in to support the wages of mismanagement may not seem so excellent if the situation worsens further

It's the lure of money. You did something, it worked, you made a killing. Very tempting to do it again (give 3AC more money etc etc).

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