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Comment by phphphphp | Hacker News Reader

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.

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

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?

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.

"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

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.

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.

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?

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?

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

Sounds like Enron, turned out great for them too.

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

According to who? Themselves?

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.

How ?

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