The PhD guys from LTCM, not so much. Just arrogant.
Robert C. Merton got the nobel prize, but it seems 3 years later (ironic)
LTCM imploded in 1998.
I don't think their intention was to rob / hide / betray / hoodwink.
> 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.
The kind of situation they were worrying about and rushed to prevent in 2008, IOW.
You are correct, in a trivial sense, that maybe the entire market should have just not trusted everyone else, except perhaps under extreme constraints, which would have amounted to almost no financial intermediation and thus almost no financial industry whatsoever. But even the most hardcore "you should have vetted your counterparty" finger-waggers aren't willing to go that far.
Can you provide the exact wording? At least when it comes traditional finance, if there's margin involved (FTX most definitely has margin), your deposits/holdings are fair game for your broker to use as they please.
https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_ma...
>Some margin accounts allow the brokerage firm to lend out securities in the account to a third-party, at any time without notice or compensation to the account holder, if the investor has any outstanding margin loan in the account
https://www.axios.com/2022/11/12/ftx-terms-service-trading-c...
This is what I initially suspected. But we can see FTX's balance sheet [1]. There is no loan to Alameda. "FTX shot its customer money into some still-unexplained reaches of the astral plane" is the best explanation we have for billions of missing dollars [2].
[1] https://www.ft.com/content/0c2a55b6-d34c-4685-8a8d-3c9628f1f...
[2] https://www.bloomberg.com/opinion/articles/2022-11-14/ftx-s-...
>negative $8bn entry described as “hidden, poorly internally labled ‘fiat@’ account”
probably had something to do with the loan as that seems to be roughly the amount and the description literally makes no sense.
I think the running bet is there is no full accounting.
The problem with this is that the customer funds are also not present on their balance sheet. Levine opined about this yesterday; Like 3 of the biggest assets are coins ftx didn't pay for - so where did the money go?
That's why the Alameda explanation is likely, in one way or another. Money had to go somewhere.
> Meanwhile, at a meeting with Alameda employees on Wednesday, Ms. Ellison explained what had caused the collapse, according to a person familiar with the matter. Her voice shaking, she apologized, saying she had let the group down. Over recent months, she said, Alameda had taken out loans and used the money to make venture capital investments, among other expenditures.
> Around the time the crypto market crashed this spring, Ms. Ellison explained, lenders moved to recall those loans, the person familiar with the meeting said. But the funds that Alameda had spent were no longer easily available, so the company used FTX customer funds to make the payments. Besides her and Mr. Bankman-Fried, she said, two other people knew about the arrangement: Mr. Singh and Mr. Wang.
[0] https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankma...
No, they're different situations.
The current details trickling out of FTX scandal is that CEO Samuel Bankman-Fried secretly used customer funds to prop up Alameda which is unethical and criminal. This is fraud.
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.
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.
A bunch of PhD traders lost their wealth and got their reputations tarnished but it wasn't criminal activity.