Category: World News (Page 1 of 2)

Goldman Sachs’ Dark Pools Are Under Federal Investigation

Goldman Sachs dark pool under investigation
BREAKING: Goldman Sachs dark pool is under investigation

Goldman Sach’s dark pools are under investigation according to an SEC report.

The SEC published a report highlighting what essentially seems to be a deep audit.

This is not the first time Goldman Sachs has been fined or investigated for abusing its power.

Dark pools played a massive part in the recession of 2008, but dark pools were never banned.

Will something finally be done about it this time around?

In this article I’m going to break down everything they’re looking into, starting with Goldman Sachs’ dark pools.

Let’s break it down together.

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Feds crack down on Goldman Sachs dark pools

The fed is looking into various matters relating to Goldman Sachs’ businesses and operations.

One of which stands out to retail investors as being its dark pools.

The fed is investigating the supervision and controls relating to Goldman’s high frequency trading (HFTs) and its alternative trading systems (ATSs), also known as dark pools.

Dark Pools (also benignly called Alternative Trading Systems or ATS) are effectively unregulated stock exchanges being run by the same megabanks on Wall Street that blew up the U.S. financial system in 2008 and received the largest taxpayer bailout in U.S. history. – Wall Street On Parade.

The name of Goldman Sachs’ Dark Pool that trades in the U.S. is called Sigma X2.

It used to be called simply Sigma X.

According to a publicly-available document, Sigma X is now used by Goldman Sachs to designate the Dark Pools it operates in foreign jurisdictions, which include Europe, Japan, Hong Kong and Australia.

Dark pools are the gateway that allow financial institutions to manipulate the stock market without any regulation.

Now the fed is cracking down on Goldman Sachs and it comes as no surprise since the bank has been criminally charged on many occasions before.

In October of 2020, Goldman Sachs admitted to the charges of a bribery scandal where they were fined $2.9 billion.

Other operations being looked into

The fed is looking into the institution’s advisory services and conflicts of interest.

They are also tackling the following:

  • Research practices, including research independence and interactions between research analysts and other firm personnel, including investment banking personnel, as well as third parties.
  • Transactions involving government-related financings and other matters.
  • The offering, auction, sales, trading and clearance of corporate and government securities, currencies, commodities and other financial products and related sales and other communications and activities.
  • As well as the firm’s supervision and controls relating to such activities, including compliance with applicable short sale rules, algorithmic, high-frequency and quantitative trading, the firm’s U.S. alternative trading system (dark pool), futures trading, options trading.
  • And finally, insider trading.

The SEC said in past years they were tackling dark pools but failed to competently execute the plan.

The issue was brought to the light by the ‘meme stock’ crowd who also exposed naked short selling and received attention by mainstream media.

Dark pools have been able to suppress stock prices across the market from reaching full demand potential.

Gary Gensler said 90%-95% of retails orders do not get processed through the lit exchange (NYSE) but rather through these dark pools.

Goldman Sachs and others have essentially stolen from retail investors as only 5%-10% of retails money actually creates demand for a stock.

For every dollar retail puts in the market, only this small percentage is reflected on a security.

That’s what happens when financial institutions like Goldman Sachs redirects orders through its dark pools.

This is a developing story.

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View the SEC report here.

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Related: Here's Why It's Taking AMC So Long to Skyrocket

Hedge Fund Co-Founder Sentenced to Prison Avoids Jail Time

hedge fund avoids jail time
Corruption: Hedge fund avoids jail time – pleads guilty of fraud

(Bloomberg) The co-founder of Premium Point Investments and a former trader pleaded guilty to charges they overstated asset values at the now-defunct hedge fund, but they won’t serve any time behind bars.

Anilesh Ahuja, the fund’s co-founder, and trader Jeremy Shor were found guilty of conspiring to overvalue the hedge fund’s assets by more than $100 million and sentenced to prison in 2019.

However, U.S. District Judge Katherine Polk Failla in Manhattan overturned their convictions in December due to errors and misleading statements by prosecutors.

The pair had faced a new trial but reached a deal with the government allowing them to plead guilty to a single securities fraud count.

Under the deal, which was approved by Failla in a hearing on Friday, the two men won’t serve any prison time, pay a fine or serve probation.

Let’s talk about it.

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Hedge Fund gets away with prison time and fees

hedge fund pledges guilty and gets away with prison time

Before their convictions were overturned, Ahuja was sentenced to more than four years in prison and Shor, almost 3.5.

But their surrender dates were delayed, initially due to the Covid pandemic and later because the judge was considering throwing out the verdict.

As a result, neither man served any part of his sentence.

“We are pleased that Mr. Ahuja can finally put this ordeal behind him without having to spend a day in jail,” his lawyers, Richard Tarlowe and Roberto Finzi, said in a statement.

“After years of litigation, we are pleased to put this matter behind us with no additional punishment beyond the punishment already inflicted by the process,” Shor’s lawyer, Justin Weddle, said in an email.

Federal prosecutor Daniel Gitner defended the deal before the judge on Friday, saying Ahuja and Shor had already made “substantial restitution” to investors. 

“Today’s guilty pleas to securities fraud bring to a close the defendants’ scheme to mismark their funds’ books,” U.S. Attorney Damian Williams said in a statement.

“This office stands by this prosecution, and is pleased that this matter has resolved with the defendants’ acceptance of responsibility.”

“Unacceptable errors”

Hedge fund avoids jail time after being sentences to prison – hedge fund pledges guilty

“I tried my hardest to conduct a fair trial,” Failla said in overturning the verdict.

“I no longer have confidence in the fairness of the trial.”

She declined to dismiss the charges against Ahuja and Shor though, saying that the errors made by the government — while “unacceptable” — were not severe enough to warrant throwing out the case.

Ahuja was a senior mortgage bond trader at Lehman Brothers, RBS Greenwich Capital and Deutsche Bank AG for four years before co-founding Premium Point in 2008.

The firm initially focused on the U.S. residential loan market and began amassing bonds backed by distressed assets in the wake of the global financial crisis.

It later expanded into the jumbo loan and home rental businesses and managed about $2 billion of assets at its peak.

Premium Point began winding down in late 2016 after posting large losses.

The fund revealed the following year that federal securities regulators were examining the way it valued its assets.

Its mortgage credit funds filed for bankruptcy protection in March 2018, and Ahuja, Majidi and Shor were charged two months later.

Former Chief Risk Officer Ashish Dole also pleaded guilty and testified for the prosecution at the trial.

The case is U.S. v. Ahuja, 18-cr-00328, U.S. District Court, Southern District of New York (Manhattan), via Bloomberg.

Should hedge funds be allowed to get away with fraud?

It’s curious how these hedge fund co-founders were sentenced to prison but managed to get away with jail time.

What does this tell us about our system?

Why do you think this happened?

Was the government paid out?

I’m interested to know what you think; leave a comment below.

[Sources]

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Tiger Global Hedge Fund Sinks a Massive 34% This Year

Tiger Global Hedge Fund Sings 34%
From left, Chase Coleman III, Scott Shleifer, and John Curtius. Photos by Bloomberg. Art by Mike Sullivan, Edited by Frank Nez

Tiger Global has an AUM of $95 billion, that’s $57 billion more than Citadel’s AUM of approximately $38 billion.

The monster hedge fund is managed by Chase Coleman, 46, who was up until now considered to be a hedge fund legend.

Tiger Global Management had a rough 2021 according to sources and losses are piling up in 2022.

Hedge funds seem to be in a lot of distress recently.

Let’s break it down together.

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Hedge funds face turbulence in 2022

Tiger Global

This year we’ve seen many hedge funds face massive adversity.

Hedge funds have been dealing with significant losses this year, probes from the DOJ, and scrutiny from retail investors.

Hedge fund managers once deemed leaders in their industry now have their reputation on the line.

Gabe Plotkin was named a great trader by Citadel’s Ken Griffin although the hedge fund had to bail Melvin Capital out due to the ‘meme stock’ frenzy.

Citadel pulled $2 billion from Melvin Capital in recent months.

Chase Coleman is in a sticky situation too.

Tiger Global Management is down 34% this year through March.

The speed of the reversal has shocked just about everyone, considering that Coleman is celebrated as one of his generation’s brightest stars, a standout among the elite money managers mentored by the famed Julian Robertson, Bloomberg.

Tiger Global Management treads rocky waters

The bad run has been fueled by massive bets on stocks that have been hammered, such as fast-growing tech companies in the U.S and China.

Tiger Global hedge fund lost 7% last year, its first annual drop since 2016 and its third total, according to Bloomberg.

Tiger Global told clients in a letter that it’s opening up both its hedge and long funds to a limited amount of capital from existing investors to bolster positions in stocks that underperformed

However, we see the results in the first quarter of 2022 has not been what the hedge fund anticipated.

Built by Coleman and his partner Scott Shleifer, Tiger Global has long been seen as a throwback to the industry’s glory years, when double-digit returns were the norm and ‘hotshot managers’ unerringly backed winning companies and shorted the losers.

Across the firm’s $35 billion in funds focused on public companies, this year’s losses have triggered a more than $10 billion hit to investors that include foundations, endowments and pension funds, as well as Tiger Global insiders.

Coleman’s personal wealth has dropped by $1.3 billion, according to calculations by the Bloomberg Billionaires Index. 

Coleman’s hedge fund headed towards worst year

Tiger Global hedge fund may be on track for one of its worst years yet.

Tiger Global Hedge Fund

The blue in this chart indicates the hedge fund’s losses in 2008, 2016, 2021, and 2022.

The firm’s first serious bump was during the 2008 financial crisis, when it lost 26%, followed by a 1% gain the next year.

While markets were already jittery this year due to high inflation and expectations of rate hikes, Russia’s war against Ukraine triggered a flight from risk. 

The Russia-Ukraine conflict has affected every corner of the financial sector.

Earlier we saw Citadel and other hedge funds faced default on Russian bonds from tech company Yandex.

But Tiger Global Management isn’t the only hedge fund struggling.

Investors are pulling out $250 million from Coatue Management and the hedge fund cannot meet its investors demands.

We’re beginning to see this domino effect of losses begin to catch up to even the biggest hedge funds in the world.

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I’d love to hear your thoughts on the matter.

Leave a comment in the comment section down below.

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More Than 100 Hedge Funds Stranded in Cayman Islands

More than 100 hedge funds stranded in Cayman Islands
More than 100 hedge funds have a collected $6 billion sanctioned in the Cayman Islands

(Bloomberg) Sanctions against Russian Billionaire have left more than 100 hedge funds and private equity firms’ money stranded in the Cayman Islands.

Concord Management has $6 billion at its disposal, most of which pertains to Oligarch Abramovich.

The firm is said to have handed out checks of millions of dollars to more than 100 hedge funds.

Now these hedge funds have a collected amount of $6 billion stranded in the Cayman Islands.

I’ll get to the names of some of the biggest hedge funds below.

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Firms trapped with Russian cash

Bloomberg’s Anna Edwards says sanctions prohibit hedge funds from getting rid of tainted money.

The restrictions also put a hold on the collection of fees.

The Russian-Ukraine war has made it impossible for Russian oligarchs to accept new cash or redeem their stakes.

More than 100 hedge funds are caught up in sanctions trapped with Russian cash according to Bloomberg sources.

Firms with Abramovich’s money can continue to manage it, but what they can’t do is redeem the oligarch’s stake, accept new cash from him or allow him to sell his shares to another investor, according to Cayman Island rules, where many of the funds have offshore entities.

If a firm owns the billionaire money due to the sale of an asset, the proceeds must go into a blocked account.

Firms can also charge fees but cannot collect them until restrictions are lifted.

Millennium Management and other big hedge funds have been affected

Citadel Cayman Islands
Citadel Cayman Islands

Michael Matlin, who founded Concord in 1999, mostly steered money to the biggest and best-known funds.

Over more than two decades, Brevan Howard Asset Management, Millennium Management, Carlyle Group Inc., D.E. Shaw & Co., Sculptor Capital Management Inc. and Apollo Global Management Inc. — as well as smaller firms including Sarissa Capital Management and Ratan Capital Management.

Some of you might recognize Millennium Management from the list of top 10 financial institutions shorting AMC stock.

Sculptor is one of the hedge funds along with Citadel who are facing potential default on Russian bonds.

This SEC report also shows Citadel has funds in the Cayman Islands while this SG 13 form shows the relationship to Concord.

Representatives from the firms declined to comment on the matter.

Russian sanctions cripple Abramovich

Abramovich Chelsea

Abramovich, 55, with a net worth of $13.7 billion according to the Bloomberg Billionaires Index, amassed his fortune from the sale of privatized assets acquired from the former Soviet Union, including oil giant Sibneft and Aeroflot.

He sold his aluminum assets to fellow oligarch Oleg Deripaska, but retains stakes in companies including Russian steelmaker Evraz.

He’s been reinvesting the proceeds in trophy assets for two decades, including purchasing Chelsea Football Club, London properties and private jets.

He’s being forced to sell Chelsea and has moved his superyachts to Turkey out of the reach of European sanctions.

CNN says Citadel’s Ken Griffin is joining the Ricketts family, the owners of Major League Baseball’s Chicago Cubs, in a formal bid for Chelsea Football Club.

Interesting.

I’d love to hear your thoughts in the comment section below.

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Clearing Houses Could Face a Liquidity Crisis of Historic Proportions

Clearing houses could face a liquidity crisis
The stock market will mirror the commodity sector’s liquidity issue

The CFO of Trafigura just said clearing houses will collapse as “margin call doom loop” goes global.

Last week the commodities sector (oil, petroleum, metals and minerals) saw margin calls worth billions of dollars.

Trafigura Group is one of the world’s top oil and metal traders.

Trafigura has in recent weeks stepped up efforts to seek new funding from beyond its traditional group of bank lenders, according to people familiar with the matter. 

And no one is able to meet equity demands.

Let’s break it down together.

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Welcome to Franknez.com – we’re seeing something very interesting unfold here as margin calls are triggered and short sellers brace for short squeezes.

Let’s dive right into it!

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“Margin call doom loop” goes global, Trafigura CFO warns

Trafigura CEO Margin Call Doom Loop
Clearing houses face liquidity issues – Trafigura CFO warns of ‘margin call doom loop’

Trafigura Group, one of the world’s top oil and metals traders, has been holding talks with private equity groups to secure additional financing as soaring prices trigger giant margin calls across the commodities industry.

The trader held talks with Blackstone Inc. for an investment of around $2 billion to $3 billion but those talks ended without a deal.

Trafigura has also approached Apollo Global Management Inc.BlackRock Inc. and KKR & Co.,.

The discussions have been based on raising funding due to several margin calls the commodity industry has been facing recently.

There’s no certainty any of the discussions will progress to a deal, they said. (Bloomberg)

These large companies facing margin calls are having a very big problem meeting demand.

Now, the increase in IM (initial margin) created demands on hedge funds and other investors.

Prepare for short squeezes

Studies have looked at the connection between margin calls and market stress, and most have focused on a margin call doom loop” in which higher margin requirements force fire sales into an already illiquid market.

This process then triggers more margin calls.

Financial institutions are going to be forced to sell assets, triggering short squeezes in heavily shorted stock.

The Dow Jones and NASDAQ are down today as ‘meme stocks’ are soaring.

AMC is up more than 24%, GME stock 11%, and HYMC more than 45%.

The price runups on AMC and GameStop shows us the stocks are merely getting warmed up.

We know this because of the short interest data (updated daily here).

As more market stress begins to settle, hedge funds will be required to keep up with their margin requirements or be forced to liquidate their positions.

clearing houses cash in margin

Globally, cash IM (in margin) is typically held by banks.

A bigger short squeeze than Nickel?

Nickel short squeeze

Analysts are expecting a bigger short squeeze than nickel to occur which soared more than 250%.

Although nickel is in the commodities sector, the financial system goes full circle.

The banks distribute cash and even bailout companies despite the industry.

“Expect much more commodity volatility, and many more multi-billion margin calls, until eventually the big one is triggered, one which leads to a near default not of the LME but of a far bigger clearinghouse.” ZeroHedge.

The liquidity issue in the commodity sector could threaten broader financial stability and create broad liquidity squeezes.

Trafigura’s chief financial officer warned that the spike in capital needed to keep commodities flowing around the world since Russia invaded Ukraine would squeeze smaller trading houses out of the market.

Bloomberg reported that trading houses have been seeking funds to maintain their physical and derivative positions as prices of everything from natural gas to metals soar.

Since commodities represent the basic building blocks of all products in an economy, the prices of commodities affect the operational costs of corporations.

This in turn affects prices in the stock market, further sparking margin calls in this sector.

What will happen as clearing houses require more liquidity?

Leave a comment below.

Stick around for more market news

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Citadel Faces Potential Default on Russian Tech Company

Citadel Default on Russian bonds
Market News: Citadel faces potential default on Russian bonds

Citadel is facing potential default on convertible bonds from Russia’s Yandex NV.

Yandex NV is an internet and technology company that provides an internet search engine in Russia and other international markets.

Tigran Khudaverdyan has stepped down from his roles as Executive Director and Deputy CEO at Yandex.

Citadel could default on convertible bonds worth billions.

Here’s how Russia is affecting the hedge fund.

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(Bloomberg) Tech company suspension could lead to Citadel default in Russian bonds

Yandex Russian Bonds

The Russian tech company’s U.S. shares have been suspended for more than five days, enabling bondholders to ask for repayment in full. 

Citadel just happens to be one of those bondholders who wants their money back.

The firm said it does not have the money to redeem the $1.25 billion bonds, which are meant to be exchangeable for common stock.

Yandex is one of few Russian companies with convertible bonds issued from foreign financial institutions.

And because restrictions complicate the transfer of money out of Russia, access to capital markets to raise funds any time soon seems highly unlikely.

This significantly increases the odds of Citadel having to default on their Russian bonds.

If Citadel defaults on these bonds, the hedge fund would have accrued additional losses its first quarter of 2022.

Representatives from Citadel declined to comment on the matter, according to Bloomberg.

JP Morgan Chase & Co. turns down advisory role

JP Morgan turns down advisory role
Citadel and bondholders seek advisory – JP Morgan declines

Bondholders have the right to ask to be repaid in full if the company’s shares stop trading for over five days.

However, Yandex only has $615 million in cash with only 60% of that money located outside of Russia.

This means Yandex only has approximately $369 million in liquidity.

That’s a massive difference from the $1.25 billion they owe to Citadel and other institutions affected.

Because sanctions are preventing money from leaving Russia, it’s impossible Citadel will obtain cash from the country.

Bondholders are struggling to find advisors to navigate the process.

JPMorgan Chase & Co. turned down an advisory role on the situation after participating in initial discussions.

The bank simply does not want to get involved.

Will Citadel default on these bonds?

The chances are very likely.

Margin call tension rises

Credit Suisse has been margin calling clients exposed to Russia.

In the coal industry, Peabody received a $534 million margin call.

We’ve recently seen Citadel pull back $2 billion from Gabe Plotkin’s Melvin Capital as they too have been experiencing losses.

Even as Citadel faces default on Russian bonds, the hedge fund has sent signals of distress in the past few months.

Events include from receiving a $1.2 billion lifeline from Paradigm and Sequoia to restricting customers from cashing out.

The Russia-Ukraine conflict is creating losses even for short sellers during a time they would usually profit.

It seems it’s only a matter of time before hedge funds start receiving margin calls too.

But will big banks be able to bail everyone out?

What do you think?

Leave a comment below.

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Read: Ukraine: These famous brands have pulled out from Russia


Breaking: The Moscow Exchange Bans Short Selling

Moscow bans short selling

(Bloomberg) Moscow bans short selling, indicating officials are preparing to reopen the market.

Russia is banning short selling in some of the country’s biggest companies.

The power to ban a strategy used by hedge funds to inflict damage on a company’s stock raises curiosity.

Is this Russia’s way of raising capital?

And should more countries like the U.S. also ban short selling?

Let’s break it down together.

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Welcome to Franknez.com – if you haven’t already joined the newsletter be sure to do that below. I’m publishing daily market news to keep you informed.

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Moscow bans short selling in some of Russia’s biggest companies

Moscow exchange bans short selling
Moscow exchange bans short selling

Investors won’t be allowed to bet on declines in about 30 Russian companies, according to Bloomberg sources.

Most of which are petroleum and coal companies.

The decision went into effect on Tuesday.

Russia’s stock market has been closed since February28th, the longest shutdown in Russia’s modern history.

There has not been any confirmation as to when stocks will begin to trade in the Moscow Exchange.

The head of portfolio strategy at Toronto Dominion Bank in London says the Russians might want to remove residual risk on falling prices.

Other exchanges have used short-selling bans to limit volatility during a crisis.

Back in March 2020, at the peak of the Covid pandemic-fueled selloff, Italy, France and Belgium also banned shorting selling.

In other places such as mainland China, investors have limited ability to short stocks.

In the United States investors have what seems like an unlimited ability to short company stock, which in some cases results in bankruptcy.

Let’s use Hong Kong as another example.

Only stocks specified by the lit exchange in Hong Kong may be eligible for shorting.

Investors say its near certainty that stocks will tumble when Russia’s stock market opens.

Should the U.S. ban or limit short selling?

The U.S. on the other hand has a real issue with abusive short selling practices.

A collective of institutions such as banks and hedge funds collude to drive the share price of a company’s stock down for profit.

Financial institutions will even go as far as to bankrupting a company to avoid paying taxes on the bets.

The Justice Department is currently investigating banks and hedge funds relating to market manipulation and other injustices in the market.

If Moscow can ban short selling, and other countries can too, do you feel the U.S. should as well?

Due to the capitalistic nature, banning short selling in the U.S could prove to be difficult, which raises the question; should it be limited?

I’d love to hear your thoughts below.

Is this ban temporary?

Moscow exchange short selling
Moscow exchange bans short selling

It seems like Moscow’s short selling ban may only be a temporary strategy for the country to begin stabilizing again after its economic turmoil.

Russia was removed from the SWIFT system in February when it invaded Ukraine.

This escalated tension worldwide as Russia was no longer able to access money outside the country.

The biggest companies in the world also pulled out from Russia which further crippled its economy.

What the ban on short selling in Moscow shows us is that governments have the power to remove the same predatorial short selling that we see happening in recovering companies such as AMC and GameStop.

While short selling has its use in the market to balance volatility, limiting the use of short selling on a group of companies wouldn’t be such a bad idea.

I’d love to hear what you think.

Leave your thoughts in the comment section below.

Stick around for more market news

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Chinese Tycoon Gets Bailed Out From $8 Billion Margin Call

Chinese Tycoon gets bailed out from $8 billion margin call
JP Morgan bails out Chinese tycoon Xiang Guangda after receiving an $8 billion margin call for sorting Nickel – Long Metal Exchange halts continue

Chinese tycoon Xiang Guangda has been bailed out by JP Morgan after receiving a whopping $8 billion margin call.

The margin call came about as he was shorting Nickel.

The commodity short squeezed leaving the Chinese tycoon with an $8 billion margin call.

Xiang told banks he wanted to keep shorting Nickel and shrugged off suggestions to reduce his short positions, Bloomberg.

Should this even be allowed?

Let’s discuss it.

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Chinese tycoon gets away with $8 billion margin call

London Metal Exchange
London Metal Exchange

The tycoon whose big short bet on nickel helped trigger one of the most dramatic price spikes in history has told his banks and brokers that he doesn’t intend to reduce his position, according to Bloomberg.

The London Metal Exchange halted trading in nickel after prices spiked as much as 250% in two days.

 Xiang has told the roughly 10 banks that he still believes prices will fall and that he would like to keep his short position.

The LME acknowledged that short sellers weren’t going to voluntarily reduce their short positions.

It said there were “considerable differences in view on the appropriate price.”

Apparently big net worth short sellers make the rules.

They Chinese Tycoon secured a deal with JP Morgan and China Construction Bank that would allow it to avoid defaulting on its $8 billion margin call.

LME halts Nickel trades

The LME cancelled $4 billion in transactions as Nickel prices began to surge.

The exchange said: “Nickel will be deemed a disrupted session and all agreed trades during this session will be null and void.”

In other words, they took away the ‘buy’ button and are allowing short sellers to either close their positions or profit on the way down.

Dave Lauer says the exchange is ruining their credibility by protecting very wealthy and powerful people/firms.

“You can’t run a market like this, busting trades at someone’s whim.”

The halts are similar to those that occurred last year during the ‘meme stock’ frenzy when Robinhood froze the purchasing of GameStop, AMC, and other heavily shorted stock.

At some point, the people will cause an uproar.

What are your thoughts on the matter?

Big banks are beginning to bail out wealthy people and firms.

What can be done about it and what should be done about it?

The Chinese tycoon is only one example, but what will happen when heavily shorted stock begin to squeeze again?

Leave your thoughts in the comment section below and share this article to raise awareness to the injustices in the markets.

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Evergrande Gets Suspended from Trading in Hong Kong

Evergrande halts trading in Hong Kong
Evergrande halts trading in Hong Kong

(Bloomberg) China Evergrande Group was suspended from trading in Hong Kong pending an announcement containing “insider information”.

The developer is said to be holding a call this week to brief investors on its debt restructuring plan.

Here we have yet again another global suspension that may potentially affect the entire markets and we’re going to discuss it today.

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Welcome to Franknez.com – Evergrande is being suspended from trading in Hong Kong as investors push for their money. This is crazy!

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Hong Kong halts trading of Evergrande

Hong Kong Stock Market
Hong Kong Stock Market

Evergrande and its other units suspended stock trading in Hong Kong (3/21).

The company’s offshore bonds were also halted in the process.

Evergrande has been at the center of a crisis among Chinese property developers following Beijing’s crackdown on borrowing.

It said in January that it aimed to present a preliminary restructuring proposal in the next six months.

Evergrande has been on the brink of default for months now since last year.

Its bondholders approved a payment plan regarding overdue yuan-bond interest, so investors aren’t giving up.

Massive selloff of Nanjing unit

Evergrande Group’s onshore unit will sell its 30% stake in Nanjing property company for an undisclosed sum.

The Nanjing property company, focused on valuation and management services, was set up in June 2020 with registered capital of 66.7 million yuan.

Chinese property firms listed in Hong Kong face a March 31 deadline to file annual results and an auditor resigned to delay the Evergrande’s report.

Transparency and governance concerns have grown alongside worries about Evergrande’s ability to repay debt despite a record number of defaults last year.

Investors are still looking to squeeze the company from its debts.

Who is largely affected by Evergrande in the U.S.?

BlackRock Evergrande Holdings
BlackRock Evergrande Holdings

BlackRock, HSBC, and UBS are the largest institutions holding Evergrande in their portfolios.

BlackRock added 31.3 million notes of Evergrande’s debt between January and August 2021 alone.

That pushed its stake to 1% of the assets in its $1.7 billion Asian High Yield Bond Fund.

HSBC increased its positions in the company by 40% through July, while UBS increased its position by 25% through May.

BlackRock was recently hit by a $17 billion loss due to its exposure in Russia.

While these numbers don’t compare to the giant’s overall AUM of $9.46 trillion, they are still relatively large losses.

We can see how these global investments affect our stock market too.

The DOW is currently down -152% and the NASDAQ -49%.

The SPY is just keeping up despite breaking its monthly downtrend.

What are your thoughts on the scale of Evergrande’s losses?

How long do you think the developer will be leading its investors around?

Leave your thoughts below.

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Peabody Receives a $534 Million Margin Call: Goldman Steps In

Peabody Margin Call
Peabody Margin Call – Global margin calls will happen in every corner of the financial sector

Leading global pure-play and Fortune 500 company Peabody received a $534 million margin call.

The Australian benchmark coal price is up more than 400% in the past 12 months, hitting $425.

Peabody was not prepared and got slammed with a $534 million margin call.

The sum is more than half the cash the company had at the end of December 2021.

Margin calls are beginning to happen left and right and we’re going to discuss it.

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Margin calls in the coming weeks

The Russian-Ukraine conflict is affecting global markets sparking margin calls in every corner of the finance sector.

Russia’s war in Ukraine has further fueled a rally in coal driven by a squeeze on global energy supplies.

Chinese tycoon Xiang Guangda is currently facing an $8 billion margin call after Nickel prices skyrocketed to $100,000 per ton.

Nickel surges to $100,000 per ton

Xiang Guangda tells banks he has no intention in reducing his positions.

The short seller is requiring a coordinated bank bailout including the participation of JP Morgan.

The London Metal Exchange halted trading in nickel on Tuesday morning after prices spiked as much as 250% in two days, driven by brokers rushing to close out short positions after holders of bearish bets struggled to make margin calls.

Credit Suisse News: Margin call tension rises

Credit Suisse margin call

The Swiss bank Credit Suisse is also imposing margin calls on investors exposed to Russia.

The invasion of Ukraine has left wealthy individuals invested in Russian assets with frozen accounts and demands for more collateral.

Tension really began to pick up when Russia was removed from SWIFT.

Banks in the United States are losing cash quick.

Citigroup disclosed in its annual report that it has nearly $10 billion in exposures to Russian counterparties, including loans, reverse repo agreements and cash deposits. 

Morgan Stanley’s next gen emerging markets fund (MFMIX) has also been exposed to Russia with nearly $16.6 million frozen due to Russian sanctions.

Schwab’s fundamental emerging markets large company index ETF (FNDE) has also been affected with 12.7% being exposed to the Russian stock market.

Peabody receives a 10% loan from Goldman

Peabody receives a 10% loan from Goldman Sachs
Goldman Sachs steps in with 10% loan – Peabody Margin Call

Peabody shares plunged 17% after announcing the margin call, taking a chunk out of the gains they had made in recent months as the coal market boomed.

Margin calls could increase if the coal market moves higher.

Senior VP for coal markets at Rystad Energy Steve Hulton says prices could reach $500 per ton.

Peabody arranged a $150 million credit line with Goldman Sachs although the bank announced in 2019 that it would phase out financing for coal.

Peabody’s margin call is only a glimpse of what’s coming to various institutions in the markets worldwide.

And in the states, retail investors are waiting for hedge funds’ number to be called.

Will banks be able to inject liquidity into hedge funds?

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As banks and hedge funds’ assets continue to lose their value, will banks be able to inject liquidity into hedge funds when they need it?

Leave a comment below with your thoughts.

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