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Alameda's story has many parallels with Celcius (and 3AC): if something happens that proves Alameda is insolvent, will you return to this analysis and hold the same viewpoint, that it's unhelpful to consider that their solvency may well hinge on value of illiquid nonsense assets? The problem Celcius had was not that they were lending to retail, it's that their entire investment thesis was based on insane bets with capital borrowed from retail investors. Celcius, Hodlnaut etc. were "lending" and "investing" with "credible" players like 3AC (who had a mythology much like Alameda's before they imploded).

Yes, some skepticism is required when considering whether or not Alameda is insolvent (or at risk of becoming insolvent) but the analysis is helpful in highlighting why Alameda might be at risk.

3AC had been packed to the gills with uncollateralized loans. Since then, most lenders have recalled loans and cleaned up their toxic balance sheet.

How ?

When it's collateralized with crypto it's uncollateralized. 3AC learned this. Like half the exchanges have learned this over the last year. There is no inherent value in any of them, there is no hard floor of assets, as the market continues to tank that 'collateral' becomes/remains worthless. It's turtles all the way down.

The 3AC saga wasn't because crypto collateralisation turned out to be bogus, it was just that lenders gave them un/undercollateralized loans. Their downbringing was taking cash liabilities, on leverage (the un/ndercollateralized part), and using that to make risky bets. They took a ton of leverage to bet that the GBTC/BTC spread would close (but it widened, a friend of mine called this killing them over a year in advance), iirc positions in stETH/ETH spreads, illiquid (but very profitable...) vc investments, as well as just going long crypto.

3AC was a prop trading firm flush with cash… until the curtain was lifted and it turns out it was just a big fraud. Alameda is a prop firm flush with cash…

Why do you assume that Alameda isn’t “packed to the gills” with financial gremlins?

If you asked anybody in the space about 3AC or Alameda 12 months ago, you’d have heard the same thing about them: prop trading firms that have been hugely successful investing their own money and thus have billions upon billions of self-generated money to invest. Today, 3AC is gone and we are now discovering Alameda has huge liabilities and (potentially) mostly junk assets.

What’s a bigger leap: Alameda is like 3AC, or that the information we’ve seen so far isn’t representative and actually alameda are doing great?

Alameda is helmed by quants from Jane Street etc., they are supposed to do better with regard to risk management, forecasting, bet sizing. Their whole M.O. is that they are smarter and actually do math and that is the source of their success.

https://www.alameda-research.com/our-team

Whether that is true or not, I don’t know. But from their tweets and podcasts it does seem they approach things very differently and in a way that makes sense.

> Alameda is helmed by quants from Jane Street etc.,

The CEO worked at Jane Street for less than 18 months and appears to have had a fairly junior role there. I'm sure they are smart folks but there's a limit to how much you can learn in 18 months, in your first job after college.

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

What are you implying?

My statement is clear with no implications at all.

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?

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.

Huh? Leaving Jane Street to start crypto trading isn't what I would do, but it seems to have worked out well for them. Why does that suggest they didn't choose to leave?

Sounds like Enron, turned out great for them too.

LTCM was also helmed by some smart guys who did a lot of math and understood risk management...

they are supposed to do better with regard to risk management, forecasting, bet sizing.

According to who? Themselves?

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.

That is the craziest proposition that I have heard today. The author posited a hypothesis based on whatever public information they could gather. Either Alameda comes out to refute it, or they don't (they haven't yet, as far as I know), in which case people can draw their own conclusion. The fact that SBF, one of the most outspoken mouthpieces of the crypto boom, has chosen to remain silent, provides some circumstantial evidence at best. But this is not a court of law, it's investigative journalism, which I think is the part you're missing.

A point that is getting missed is that nobody knows what the liabilities are. At one extreme, if the liabilities are all cash, alameda is in a dire place. At the other, if the liabilities are just the tokens on their balance sheet, there's nothing particularly interesting.

Any statement a bout their insolvency is a statement about their liabilities, which is just speculation.

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.

"This time is different [even though all the publicly-available evidence thus far indicates it's exactly the same]" is the calling card of the crypto booster who desperately needs the music to keep playing so they're not holding the bag.

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

~ P.T. Nakamoto

This is a popular idea, but it's not just wrong, it's both systematically and personally dangerous. I am entitled to come to conclusions based on the partial information I have. If someone doesn't like those conclusions, it's on them to increase my access to information.

The alternative means that anyone and everyone can hide anything they like behind partial information, then declare any suspicions baseless and groundless based on their own hiding of information.

I speak only to this. Whether the linked article did a good job of their analysis I don't know. I'm just saying, the idea that people are not entitled to come to conclusions based on partial information is not valid. The conclusions come to should be hedged and made with the understanding that information is partial, but there is no obligation to not come to them. Otherwise you're obligating yourself to walk naked into almost any old scam you can imagine. This idea doesn't scale out into the real world where people happily abuse this.

What we are entitled to do, what is polite to do and what we can do for clickthroughs are three different things. Coming to conclusions on partial information may as well be jumping to them in many circumstances. The ideal approach would be to add a disclaimer of where the fact to supposition transitions, and if the conclusion is sensible at least source similar cases.

If it walks like a duck and quacks like a duck it’s probably a duck. Or a duck robot, or my kid running around with my phone again imitating a duck while watching duck YouTube videos.

Whatever the conclusion, state facts but don’t state conclusions as facts.

Except in the real world if people are actually putting their money down based on what those conclusions might be, you have to jump to something.

And the right thing to do is to jump to the most likely one based on the information available to you (adjusted for the consequences if you're wrong).

In this case, the most likely conclusion appears to be based on the info presented that it may be insolvent, and further, acting as if it is insolvent means you lose on limited upside if you're wrong, but avoid significant downside if you're right.

If Alameda is not a fan of this conclusion and if it's gaining traction in the community they can refute whatever might be wrong in the analysis and if nothing is wrong, provide the additional missing information that will correct the conclusion.

This is what CEOs and CFOs for public companies do everyday. Present their company's thesis to the public and refute analysts' theses where they think they're either wrong and/or don't have sufficient information. Why do you think they take so much time out of their schedules to do interviews on Bloomberg, CNBC, etc.

Alameda doesn't need to go down that route, but that doesn't mean independent analysis with conclusions based on incomplete information is a faulty process.

> 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.

From the point of reference set to HN? I think so, yes, why not?

> If the liabilities are collateralized by assets on their balance sheet, then the financial risk is not to Alameda but the lender!

Fair point, but why do you seem to think you are defending Alameda? Collateralizing loans from fools with your own brand of worthless bullshit is the very definition of a Ponzi scheme.

What if the loans are minted DAI? How is that a Ponzi?

Loans are money. Collaterals can be "minted DAI", whatever it is, or anything else that a fool can be convinced is valuable: that is the opportunity for Ponzi schemes.

Please explain further what this means and how it helps.

The current circulating supply of DAI is slightly above 6B, so what you claimed is literally impossible.

The average case scenario is some of it is ponzi mixed in with other non ponzi, and in my book I'll call even a "10% ponzi", a ponzi scheme. Maybe you have a different bar to calling something a ponzi, so knock yourself out.

It's not a fair point. If Alameda goes down, then ftx goes down, and if ftx goes down and is clearly wash trading (the most interesting finding in the article imo), then prices will plummet.

It's not just a problem for the bank, it's threatening to the crypto ecosystem. Just as it would be if the binance tether thing ever implodes

>If the liabilities are collateralized by assets on their balance sheet, then the financial risk is not to Alameda but the lender!

Ok, this is kind of a fair point, if these loans are collateralized by the assets, then it's the lenders who have a problem. But that does actually mean there's someone out there who is going to get absolutely mugged. It's also a bit of a question who, other than some other SBF entity, would make these loans - who is accepting FTT as collateral? It also means that you need to apply that logic to their assets, meaning their supposed $14.6Bn you probably need to regard around $12Bn minimum to be absolutely worthless.

I would absolutely not say they for sure insolvent, but these numbers do clearly look very worrying.

The guy that wrote it, Dirty Bubble, was big on the Celsius exposé train and he is trying to strike gold again. Idk how accurate any of it is though but that’s Dirty Bubble’s history and backstory. Kind of like FatMan and Luna. They want to stay relevant and get the next “big scoop”.

They gladly and unapologetically have posted fake material for engagement https://twitter.com/otteroooo/status/1548010114136715264

Is this otteroooo trying to get famous again under a new name?

> If the liabilities are collateralized by assets on their balance sheet, then the financial risk is not to Alameda but the lender!

No, the risk is to both Alameda and the lender. An undercollateralized loan doesn’t just go away. It’s partially secured and partially unsecured debt.

The loans are outstanding loans given to Alameda. This article is assessing the balance sheet, so assets (various junk coins) and liabilities (loans)

> 4. Recently they have cropped up a set of anonymous people who purport themselves to be insiders only to reveal complete ignorance about the topic at hand (otteroo on Twitter, for instance).

Can you clarify this? By “they” do you mean this Substack? I didn’t see anything about “otteroo” or Twitter insiders in a quick search of the Substack, but I didn’t exhaustively search the entire backlog.

I mean this guy as well as a bunch of people on Twitter who have been clout chasing ambulance chasers, running over the truth to chase a story.

The formula is this: 1. Create an helpful explainer thread to explain some crisis (ex-post)

2. Start to make vague predictions about relatively easy to predict things (like that Celsius is going to go down, a couple days before it technically goes down).

3. Refer your readers back to your foresightedness

4. Get extremely excited as you receive DMs from people to check out x or y.

5. Lock your eyes on a juicy new company and start to make unfounded claims about said company, referring to a sole rando as a “source” (eg Nexo is insolvent!)

6. Create an expose on your new target, run shoddy analysis based on no actual data, and throw it into a larger conspiratorial framework that starts to implicate other actors.

7. All the while, build a captive audience who doesn’t know the better and eventually use that audience to run ads or to pay for your newsletter.

8. They can run this affinity scam because 1. What they say is not falsifiable, 2. you have an infinite timescale for which to be correct about any one company going bankrupt, 3. there are people out there who are earnestly trying to learn about the market and don’t know who to turn to, and 4. if you’re wrong, you’re not accountable to your actions because there was never any actual money on the line.

There are serious issues in the industry, do not get me wrong. It’s kind of messed up that people who have no connections have to look into the void and decide whether they’re going to trust an internet rando or nobody at all. Disclosures need to be better. But the people writing these sensationalist pieces are part of the problem and not the solution.

> if you’re wrong, you’re not accountable to your actions because there was never any actual money on the line.

I mean, that's the risk you run right?

Either you're a regulated system where you can avoid this kind of thing, or you're an unregulated system where you go 'screw the man', but you don't get the protections that are associated with the traditional financial system.

There's some deep irony about complaining about it; isn't the 'good' thing about crypto?

That's what people keep telling me anyway.

>> if you’re wrong, you’re not accountable to your actions because there was never any actual money on the line.

> I mean, that's the risk you run right?

> Either you're a regulated system where you can avoid this kind of thing, or you're an unregulated system where you go 'screw the man', but you don't get the protections that are associated with the traditional financial system.

He does not mean companies operating in the unregulated crypto space. He means the author of articles like this one.

"If it wasn't for these damn twitter personalities messing up the plans, they would have gotten away with it."

You sound like a Scooby Doo villain. If these companies are not run well, they can be brought down by mere twitter personalities. This is a stress test. Those who are run well, will survive this.

Another analogy: If you build a house out of straw (because you cut corners) should you blame the big bad wolf who can just blow it down?

Sure you can say this is a stress test - I’m just saying it’s misinformation. I am annoyed by people who spread misinformation for clout. Applies to both the bullish credit and the bearish crowd.

You have no evidence that this post is misinformation. You’re just choosing to believe it’s untrue.

I do not have the burden of proof.

No, Alameda/SBF does. And they haven't said anything about it. People are free to draw their conclusions from that.

You cannot complain something is misinformation without offering information to counter it. That never works, will never work. The only reason an article like this, speculative or not, has wind to it's sails because crypto is not regulated like equity and companies like Alameda does not have to publish regular financial reports that classic market participants moving billions of "dollars" have to publish.

What if I saw military helicopters flying above and told others “war has broken out!” I see how you can say that’s not misinformation, but wild speculation. For me, it’s both.

Turn on a TV. No news about a war? No war. Unless you think there is a deeper conspiracy to keeping a war secret.

There you go, some really simple sources of information to counter your misinformation.

Dude you sound like the saddest most desperate FTT bag holder of all time. Did you lose your house and did your wife leave you or what...

I have no interest in Sam, Sam coins, or the cult of Sam.

Well for having 0 interest you seem to be spending non 0 time defending him, his coins and his former hedge fund.

> What they say is not falsifiable

It's easily falsifiable by Alameda

> If the liabilities are collateralized by assets on their balance sheet, then the financial risk is not to Alameda but the lender!

What does that mean? How collateralization changes Alameda risk?

It reduces the lender risk a bit - but it does not touch the borrower risk at all:

https://www.investopedia.com/terms/c/collateral.asp

"In the event that the borrower does default, the lender can seize the collateral and sell it, applying the money it gets to the unpaid portion of the loan. The lender can choose to pursue legal action against the borrower to recoup any balance remaining."

I think OP is assuming things work the way US mortgages work, where you can walk away from the house. I think OP is labouring under a misapprehension here.

That depends on the terms of the loans. Can be recourse or non-recourse.

Right - but it looks like an exception not the standard way: https://www.investopedia.com/terms/n/nonrecoursedebt.asp Would you expect the Alameda loans to be non-recourse?

I think that Alameda should release its actual numbers, rather than to keep them private. Sunlight is the best disinfectant to these types of rumours.

Right now I think that your response isn't any more credible than these other posts.

A whole week later, turns out you were dead wrong and the article was spot on.

Ubelievable, only 6 days later, and not only did Alameda collapse, but also FTX and SBF himself

>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 collateralized by assets on their balance sheet, then the financial risk is not to Alameda but the lender!

Doesn't take a genius to figure out why a hedge fund needs 7B in loans. They aren't a tech giant expanding in a new direction or acquiring competitors. It's pretty clear why a hedge fund needs a massive cash infusion. Also interesting that they collateralize the loans with Tokens majority owned by Alameda and FTX so it's unlikely were they forced to liquidate to pay off their loans that they could get any where near the quoted value of the tokens.

I'm assuming you are implying that alameda is taking loans to cover insolvency?

There are plenty of reasons why a trading firm takes loans (it's also possible the FTT is structured as a long, inflating said number)

1. I want to short X, but don't actually have X. I borrow X and sell it.

2. I want to sell X and buy a derivative paying people who are long the derivative. Goto step 2.

3. I want to trade X but don't know how ahead of time, so i need inventory of X in case I want to sell RIGHT NOW. I don't want to actually have exposure to a ton of X, so I borrow it instead. Very common for a market maker like alameda, although there's no way they actually need billions of collateral for market making purposes.

4. I can borrow X, and put it in a defi yield farm for a better rate than what I borrowed it for.

5. I have a ton of Y, and I don't have any plans to use it soon. I put Y up as collateral to borrow X which I can meaningfully trade. This gets you in a lot of trouble when Y values goes down and X doesn't. Say "Four Bullets Investments" has some BTC, they post BTC as collateral to borrow dollars, and use that to buy more BTC. Then BTC goes down a lot - oops!

Not making value judgements on what risks are and aren't entailed here, just pointing out that there are reasons aside from covering losses. 1-3+5 equally apply in tradfi as well.

The really interesting thing, which you touched upon, is to what extent are they collateralising loans with FTT. COllateralising loans with a coin you hold isn't unusual at all, but what's unusual is that the potential FTT collateral size is monstrous compared to realistic available liquidity minus alameda.

Posting BTC is one thing since there are liquid spot markets trading billions a day, not to mention derivatives. But FTT? Good luck liquidation even 10-20MM without moving markets a lot.

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.

ZachXBT has repeatedly accused people with little to no evidence, he's a step up from most of the anon FUD accounts but by no means perfect.

You’re right. I edited that in later but I’m going to take it out. He’s made some pretty damning accusations based on circumstantial evidence.