Tag: Hedge Funds (Page 1 of 6)

“The Game is Rigged” Says Ex-Citadel Data Scientist

Ex-Citadel employee Patrick McConlogue says the market is rigged.
Market News Daily: Ex-Citadel employee Patrick McConlogue says the market is rigged.

Patrick McConlogue, an ex-Citadel Data Scientist said during the ‘meme stock’ frenzy that the stock market is rigged, claiming he helped design it.

“The game is not fair and it never has been. Individual investors, even when operating in a swarm, are destined to lose. How do I know? I helped design the game.”

Not many investors know this, but Patrick actually breaks down how Citadel and other hedge funds were able to make billions back in only weeks from halts.

In this article, I’m going to share his words and knowledge in the industry directly with you.

Share this article to raise awareness of the market injustices ‘experts’ have claimed were never true.

Your voice matters.

Let’s get started.

Ex-Citadel Employee Reveals Rigged Trading Game

Ex-Citadel employee Patrick McConlogue says the market is rigged.

Patrick McConlogue appeared on Fox Business during the ‘meme stock’ frenzy of 2021 when retail investors created one of the biggest scares in Wall Street history.

GameStop and AMC shareholders were able to create panic on Wall Street by heavily buying shares of the overleveraged shorted stocks.

As share prices soared, short sellers experienced massive losses.

GameStop was able to put Melvin Capital out of business, but Patrick McConlogue says other hedge funds were able to make back billions in losses during the halt.

The halts allowed hedge funds to enter AMC and GameStop knowing shares would plummet, allowing them to capitalize on the deflation of the price.

Patrick says the rules of the game also heavily favor hedge funds, something retail investors have urged SEC Chairman Gary Gensler for years to change.

“I respect many of my colleagues, the problem isn’t the people, it’s the rules of the game which heavily favor the funds.”

Below is ex-Citadel Data Scientist Patrick McConlogue’s story.

Related: Citadel, Charles Schwab Team Up to Destroy SEC Proposals

Patrick McConlogue Says the Stock Market is Rigged

Ex-Citadel employee Patrick McConlogue says the market is rigged.
Ex-Citadel employee Patrick McConlogue says the market is rigged.

“The game is not fair and it never has been. Individual investors, even when operating in a swarm, are destined to lose.

How do I know? I helped design the game.

A few years ago, I worked at the massive hedge fund Citadel. The multi-billion dollar fund was caught up in this week’s scandal for bailing out hedge fund Melvin Capital after everyday traders on Robinhood appeared close to liquidating the fund through mass buying of the GameStop stock $GME.

My role at Citadel was as an engineer in Long Term Quantitative Strategies. The entire department, filled with programmers and compliance officers, is dedicated to something called ‘alpha’ which determines the buying strategy of the fund.

I was responsible for innovative proprietary technology that capitalizes on public data faster than any other hedge fund. It’s a classic situation of machines against humans. I respect many of my colleagues, the problem isn’t the people, it’s the rules of the game which heavily favor the funds.

A group of traders on the r/WallStreetBets Reddit thread, now consisting of over 8.6M members, noticed that someone had overly “shorted” the GameStop $GME stock.

They decided it was the perfect time to buy. It was only around $18 per share and easily affordable for the common investor who kept buying, driving up the price of the stock.

As the buying frenzy continued the hedge funds who had taken the opposite position started to hemorrhage money.. BIG money.

The small investors celebrated their success online as news broke that the hedge fund Melvin Capital Management had lost so much on the $GME short position that they had to be bailed out by bigger hedge funds.

While the markets were closed Melvin Capital’s sinking battleship received an emergency infusion of $2.75 billion from Citadel and Point72.”

‘Meme Stock’ Halts

Ex-Citadel employee Patrick McConlogue says the market is rigged.

“On Thursday morning, Robinhood — the commission-free stock trading app used by small investors — suddenly shut down buys on $GME and a few other stocks that were under siege.

Only sell orders went through, reversing the trend, driving the stock prices back down and shoring up the hedge funds’ sinking ships. Remember, when the stock price goes down, the people who hold the “shorts” make money.

This started a chain reaction. Other retail trading platforms like E*Trade and TD AmeriTrade began freezing the stock for individual investors. But hedge funds own supercomputers.

They have direct access to stock markets. While small investors were frozen the hedge funds traded massive positions and quickly earned back the billions in losses from the past few days.

The rules of the game had been exposed, in broad daylight no less.

Robinhood users, when signing up for the popular trading app that offered “free trading” were likely unaware of their role in the hedge funds’ ability to reap huge profits.

The system is broken.”

Patrick McConlogue left Citadel for decentralized finance and co-founded a new technology called Overline that takes the philosophy of DeFi to the extreme.

Not only is Overline unable to freeze any of your assets but it can’t even turn off the exchange; it’s not possible.

You can read Patrick’s full write-up here.

Related: Ken Griffin Thanks Redditors for ‘Meme Stocks’

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Market News Today - Ex-Citadel data scientist says the market is rigged.
Market News Today – Ex-Citadel Data Scientist says the market is rigged.

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Steve Cohen’s Point72 Buys 606,000 Shares of GameStop

Market News: Steve Cohen's Point72 Buys 606,000 shares of $GME stock.
Market News: Steve Cohen’s Point72 Buys 606,000 shares of $GME stock.

(Business Insider) Steve Cohen’s Point72 supersized its bet on Elon Musk’s Tesla last quarter and made an unexpected wager on GameStop (NYSE:GME) stock.

The billionaire investor’s hedge fund purchased nearly 878,000 Tesla shares, worth $108 million as of December 31.

It also held bullish call options on another 60,500 shares of the automaker at the year’s end, a Securities and Exchange Commission filing revealed earlier this week.

Cohen and his team scooped up 606,000 shares of the video-game retailer, a stake worth $11 million as of December 31.

In 2021, the New York Mets owner deactivated his Twitter account after receiving several threats from users during the ‘meme stock’ rally.

“I’ve really enjoyed the back and forth with Mets fans on Twitter which was unfortunately overtaken this week by misinformation unrelated to the Mets that led to our family getting personal threats,” Cohen said in a statement.

Cohen’s hedge fund, which managed nearly $19 billion in assets at the time, lost nearly 15% after retail investors caused shares of videogame retailer GameStop to surge in 2021.

The losses at Point72 are mainly due to the company’s investment in hedge fund Melvin Capital, which bet against GameStop and had to receive nearly $3 billion in emergency cash from two outside investors, one of which was Point72.

Melvin Capital shut its doors in June of 2022.

GameStop News Today

Market News: Latest GME stock news.
Market News: Latest GME stock news.

Today, GameStop shareholders are looking to recreate the events that occurred in 2021 when stocks soared to all-time highs.

One creative way ‘apes’ are fighting Wall Street in 2023 is by registering their shares via a Direct Registration System, or DRS.

The company says at least 30% of its shareholders have registered their shares with the Direct Registration System (DRS) which equates to approximately 71.3 million shares.

The efforts from retail investors come as a means to prevent manipulative short seller attacks.

By registering their shares, company stock can no longer be lent out to short sellers.

$GME stock is up more than +25% this year-to-date.

Related: Will DRS Trigger a GameStop Short Squeeze?

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Market News: Latest GME stock news.

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Hedge Funds Lost $208 Billion in 2022 for Clients

How much money did hedge funds lose last year
Market News: Hedge Fund losses in 2022.

(Reuters) In 2022, when fears of rising interest rates and geopolitical uncertainty weighed on markets, investment firms that focused on trading strategies and bet on macroeconomic trends reaped gains.

Those with strategies linked to market moves stumbled.

Last year will mostly be remembered as a tough one, with the broader S&P 500 (.SPX) index losing 20% and blue chip hedge fund managers like Tiger Global and Third Point nursing losses.

Tiger Global was on the brink of collapsing all last year as it struggled to stay afloat.

Overall, hedge funds lost $208 billion in 2022 for clients, marking the biggest single-year decline since 2008, when they lost $565 billion, LCH data showed.

Hedge funds, which were jointly managing $3.3 trillion on Dec. 31, 2022, according to eVestment data, often promise to outperform, especially when markets are stumbling.

And according to WSJ, short sellers were down $81 billion by the end of January this new year after stocks rallied.

Goldman says bigger short squeezes are coming since the ‘meme stock’ frenzy.

Still, the direction of the market in 2023 is uncertain as recession talks loom.

Few Hedge Funds Survived 2022

Hedge Fund Losses 2022 - Citadel Securities Ken Griffin thanks Redditors.
Hedge Fund Losses 2022 – Citadel Securities Ken Griffin thanks Redditors.

The 20 best performing hedge fund managers earned $22.4 billion for investors in 2022, marking their slimmest gains since 2016 as many firms, including Tiger Global Management, struggled with slumping financial markets, LCH Investments data show.

Citadel’s gain of $16 billion last year was the largest annual gain ever made by a hedge fund manager, LCH said.

The top 20 managers, led by Ken Griffin’s Citadel, Bridgewater Associates and D.E. Shaw Group, made less than half of the $65.4 billion the group returned in 2021 when rising stock prices led to a record return.

In comparison, they made $63.5 billion in 2020 and $59.3 billion in 2019.

“Redditors, thank you so much for helping create the best pipeline we’ve ever had”, said Ken Griffin on Business Insider.

Ken Griffin, on how the GameStop frenzy helped raise Citadel’s profile with potential hires.

The GameStop affair, in an odd twist, actually helped boost Citadel’s clout with potential recruits, Griffin said.

“For a lot of people this was a wake-up call that this firm Citadel is actually one of the most important players in the world’s financial markets,” he told Business Insider.

“Redditors, thank you so much for helping create the best pipeline we’ve ever had.”

Citadel Securities had to receive a $1.2 billion lifeline from partners Sequoia and Paradigm in the beginning of 2022.

In March, the hedge fund froze customers from being able to withdraw their money.

Read: Disney Lays Off 7,000 as Streaming Services Tank

Market News Published Daily

Market News Today - Hedge Fund losses 2022 report.
Market News Today – Hedge Fund losses 2022 report.

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How Do Hedge Funds Manipulate The Stock Market?

how do hedge funds manipulate the stock market.
Market News: How hedge funds manipulate the stock market.

Hedge funds have been manipulating the stock market for decades.

But it wasn’t until now that a community has risen to raise awareness of market injustices.

The shorting of both AMC and GameStop stock have uncovered a number of nefarious strategies used against retail investors.

What is the SEC doing to regulate these financial entities?

We’re here to find out.

Franknez.com

Let’s get started!

Overleveraging Borrowed Shares

Hedge funds have an incredible supply of short shares available to borrow.

This advantage has allowed them to manipulate a stock’s share price by initiating short-ladder attacks.

While supply and demand are pushing a stock’s price up, hedge funds short the stock using an insane amount of leverage.

This predatorial strategy has yet to be announced as illegal nor has it been addressed by the SEC.

Off Exchange Trading

Hedge funds and market makers are getting away with being able to trade and swap stock in foreign exchanges where the stock’s price isn’t required to be disclosed.

They’re taking retail orders and, in a way, manipulating the circulating supply by not reporting accurate transactions.

We’ve seen this happen with Barclays.

Stock market manipulation
Barclays CEO, Jes Staley – Hedge fund manipulation

Reports by Finra have been made public detailing multiple fines on Barclays for inaccurate books and records.

Barclays is one of Citadel’s clearing houses.

Off exchange trading where transactions aren’t displayed on the list market such as the NYSE is a massive problem the SEC is still trying to figure out.

Though the SEC is trying to implement the D-Limit order that will allow stocks to trade under IEX, they’re having trouble from hedge funds and market makers.

Citadel has sued the SEC on this matter, we have yet to receive a public update on the case.

Related: 95% of Retail Orders Don’t Go Through the Lit Exchange

Naked Shorting

AMC and GameStop have had an incredible amount of FTDs, or failure-to-delivers.

These are orders that have not been executed in options, and are usually a result of a ‘short party’ not owning or not having all of the underlying asset.

This has led retail investors to the educated assessment that synthetic shares are floating in the market; shares known as naked shares used to short a stock.

According to Investopedia, “Despite being made illegal after the 2008–09 financial crisis, naked shorting continues to happen because of loopholes in rules and discrepancies between paper and electronic trading systems.”

Naked shorting has gone mainstream with CNBC’s Melissa Lee and Fox Business’s Charles Payne bringing light to this predatorial practice in the market.

Retail investors must use their voice to address these issues to the SEC.

Related: GTII Pursues Legal Action Against Naked Shorts

The Use of Mainstream Media Outlets

According to The Fool, you should invest in this or that “instead”.

We’ve seen the headlines countless times.

The Motley Fool is a source that provides its subscribers with hand-picked stocks with potential gains.

With tremendous respect, stick to what you do.

The integrity of this company is to help investors pick winning stocks, not to divert them from a stock due to its potential upside that can cause hedge fund partners to lose billions of dollars.

And that’s exactly what happened.

No matter how many times mainstream media outlets tried to divert retail investors from buying AMC stock, it cost hedge funds a lot of money all year.

And at the same time, a lot of retail investors have a lot of unrealized gains.

This ladies and gentlemen is how the media has tried to manipulate the performance of a stock.

This influence can sway a new retail investor from adding to the surging volume of shares being purchased in the market.

To the new retail investor – make your financial decisions based on your own due diligence.

Not on what media sources get paid to write about.

Yahoo Finance & InvestorPlace

Platforms such as Yahoo Finance & InvestorPlace have also had their fair share of negative headlines to try and divert the public from skyrocketing AMC to the moon.

With InvestorPlace even throwing a jab at GME investors saying, “If You’ve Made Money On GameStop, You’re Not An Investing Genius”.

Perhaps not, but I’m pretty certain these investors are wealthier than the person who came up with that punchline.

These media sources have been discouraging new retail investors from investing in AMC since the beginning of the year although the stock is up year-to-date!

Manipulation In the Stock Market

robinhood stock market manipulation
Robing Hood? Stock market manipulation

I’m sure you’ve all heard of the Robinhood scandal.

This is another form of manipulation in the stock market caused by the halt of buying power.

Robinhood prevented its users from buying stocks such as AMC and GME (GameStop) during GME’s bull run.

Although restrictions aren’t as tight anymore, we’re beginning to see trusted and beloved companies get exposed as hedge funds worst nightmares become a reality.

Today we’re seeing more people learn about how the stock market moves.

If more of the public is to understand how hedge funds pose a risk to our economy and businesses, we must expose these financial institutions for who they really are.

Read: Why new retail investors investing in AMC should avoid Robinhood

A House of Cards, r/superstonks (Reddit Post)

A Redditor just posted an insane amount of DD on Reddit.

This long form post discusses the transition from paper filled orders in the stock market to the use of computers going tracing back to the mid 80s.

The post reveals the beginning of issuing naked shares.

We’re also learning that a lot of transaction are being held by the actual institutions that are shorting these stocks.

Robinhood routes more than half of it’s customers to Citadel.

This information has now been disclosed via the Washington Post.

You can read the full Reddit post here.

Trey’s Trades does a quick breakdown on this DD as well.

The video is embedded for your viewing pleasure.

It costs retail investors nothing to hold, but it costs shorts and hedge funds money every day.

It’s only a matter of time before a squeeze occurs, no matter how manipulated the stock market gets.

Related: Citadel loses billions: Hedge funds are getting dragged down

Franknez.com fights The Fool, Yahoo Finance, and InvestorPlace

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Franknez.com is fighting for the community against malpractice from all news media shunning AMC, GameStop, and other retail favorites.

This platform will serve as a positive media outlet for the community and only spread factual documentation, and news related cited-sources.

I will not encourage retail investors to take a position in any stock.

However, I will outline the facts and evidence to help you make your own personal financial decision.

How can retail investors bring awareness to the community?

Retail investors can expose false information on social media to shine light on manipulation tactics driven by hedge fund partners.

Sharing factual and positive articles relating to the performance or analytics of a particular stock is another way the investing community can stay united.

Franknez.com is a platform for the community.

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For more stock market, business news and updates, join the newsletter to receive weekly market news and notifications straight to your inbox.

Franknez.com is the media blog that keeps retail investors informed.

You can also follow me on TwitterInstagramFacebook, or LinkedIn for daily posts.


Franknez.com

You can now read exclusive FrankNez articles for only $1/mo.

  • Gain access to EXCLUSIVE FrankNez articles you won’t find here.
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How Bloomberg’s Beloved Citadel Securities Manipulates the Market

Market News: Here's how Bloomberg's beloved Citadel Securities manipulates the stock market.
Market News: Here’s how Bloomberg’s beloved Citadel Securities manipulates the stock market.

Citadel Securities is a leading financial institution known for its expertise in electronic trading and market making.

However, the company has also been embroiled in controversy surrounding allegations of manipulation in the markets.

In this article, we will explore the history of Citadel Securities and the accusations of market manipulation that have been levied against the company.

We will also examine the potential consequences of such behavior, both for Citadel Securities and for the broader financial industry.

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We are providing analysis on the biggest stories in the industry, so you can stay informed and make smart decisions for your finances.

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How Does Citadel Securities Manipulate the Stock Market?

How does Citadel Securities manipulate the stock market?
How does Citadel Securities manipulate the stock market?

Citadel LLC was founded in 1990 while Citadel Securities was founded in 2002 by Ken Griffin.

Citadel Securities is a leading global market maker that provides liquidity to financial markets.

The company is known for its use of advanced technology and quantitative strategies to facilitate price discovery and drive market efficiency.

However, Citadel Securities has also been accused of manipulating financial markets in order to gain an unfair advantage.

Here are 5 ways Citadel Securities manipulates the stock market.

#1. High Frequency Trading (HFT)

One example of Citadel Securities’ alleged market manipulation is its use of high-frequency trading (HFT) algorithms.

HFT algorithms are designed to execute trades at extremely high speeds, often in fractions of a second.

This allows Citadel Securities to react to market movements faster than other traders and potentially gain an unfair advantage.

Critics argue that the use of HFT algorithms allows Citadel Securities to manipulate prices by quickly buying or selling large volumes of securities, which can create artificial demand or supply and move prices in their favor.

#2. Dark Pools

Another area where Citadel Securities has faced accusations of manipulation is in the realm of dark pools.

Dark pools are private stock exchanges that allow traders to buy and sell securities without revealing their identities or the details of their trades.

This can create a lack of transparency, making it difficult for regulators to monitor market activity and prevent manipulation.

Citadel Securities operates a number of dark pools and has been accused of using these platforms to engage in insider trading and other forms of market manipulation.

In addition to its use of HFT algorithms and dark pools, Citadel Securities has also been criticized for its role in the flash crash of 2010.

On May 6, 2010, the Dow Jones Industrial Average plunged nearly 1,000 points in a matter of minutes, before quickly recovering.

The cause of the flash crash was traced to a large sell order that was executed by Citadel Securities, which many believe was done intentionally to trigger a market panic.

Critics argue that Citadel Securities exploited the vulnerabilities of the market in order to profit from the flash crash.

#3. Spoofing

Another tactic that Citadel has been accused of using is spoofing, which involves placing a large number of fake orders in the market with the intention of tricking other traders into thinking there is more demand or supply than there actually is.

This can cause prices to move in the desired direction, allowing Citadel to profit from the manipulation.

In 2015, Citadel was one of several firms that were fined by the U.S. Commodity Futures Trading Commission for engaging in spoofing.

In December of 2022, a Biotech company researching cancer has decided to sue Citadel Securities for spoofing their stock.

#4. “Front Running”

Citadel has also been accused of engaging in “front-running” – a practice in which traders use inside information to gain an unfair advantage in the market.

In 2013, the company was sued by the New York Attorney General for front-running, but the case was later settled out of court.

Despite these controversies, Citadel remains a major player in the financial world.

Its use of algorithms and high-frequency trading has made it incredibly successful, but it has also raised concerns about the potential for market manipulation.

One of the key reasons for Citadel’s success is its ability to manipulate the markets to its advantage.

This is done through a variety of strategies, including high-frequency trading, where the firm uses powerful computer algorithms to make trades at incredibly fast speeds.

This allows Citadel to take advantage of even the slightest market movements and make a profit.

Related: Biotech Company Suing Citadel Over Market Manipulation

#5. Derivatives

Another way in which Citadel manipulates the markets is through the use of complex financial instruments known as derivatives.

These are financial contracts that derive their value from an underlying asset, such as a stock or a bond.

Citadel uses derivatives to speculate on the future value of these assets, and to hedge against potential losses.

This allows the firm to make huge profits even in volatile market conditions.

Despite its impressive track record and reputation, Citadel Securities has faced allegations of manipulation in recent years.

In particular, the company has been accused of using its dominant market position to manipulate prices and engage in other forms of misconduct.

These allegations have led to significant scrutiny from regulators, authorities, but primarily by retail investors who are concerned about the impact of such practices on the integrity of financial markets.

Related: Here’s How FINRA Has Failed Retail Investors

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Here’s How FINRA Has Failed Retail Investors

FINRA has failed retail investors
Market News: How FINRA has failed the retail investor community.

FINRA, or the Financial Industry Regulatory Authority, is a non-governmental organization that oversees the securities industry in the United States.

It is responsible for regulating broker-dealers, issuing and enforcing rules for the industry, and protecting investors from fraud and other unethical practices.

While FINRA plays a crucial role in ensuring the integrity of the financial markets, it has been criticized for its handling of certain cases and its failure to adequately protect investors.

One of the main criticisms of FINRA is its arbitration process, which is often used to resolve disputes between investors and broker-dealers.

Critics argue that the arbitration process is biased in favor of the broker-dealers and does not provide investors with a fair and impartial hearing.

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Ways FINRA Has Been Complicit

How FINRA has been part of the problem.
How FINRA has been part of the problem | FINRA fraud – Franknez.com.

Investors have reported that they were not allowed to present certain evidence or witnesses during arbitration, and that the arbitrators were not neutral and impartial.

Additionally, the arbitration process is often confidential, which means that investors are unable to share their experiences or warn others about potential issues.

Another criticism of FINRA is its failure to adequately police the securities industry and to hold broker-dealers accountable for their actions.

In some cases, FINRA has been criticized for not taking action against broker-dealers who have engaged in unethical or illegal practices, such as insider trading or fraud.

Additionally, some investors have reported that FINRA did not respond to their complaints or take action against the broker-dealers involved.

This has led to a lack of trust in FINRA’s ability to protect investors and to maintain the integrity of the financial markets.

Also Read: Retail Investors Say FINRA Abused Its Power by Halting MMTLP

Transparency and Accountability

In addition to these issues, FINRA has also been criticized for its lack of transparency and accountability.

For example, some critics argue that FINRA’s decision-making process is not transparent and that it is not accountable to investors or the public.

Additionally, FINRA’s funding model has also been criticized, as it is funded largely by the securities industry, which some argue creates a conflict of interest.

Overall, while FINRA plays a crucial role in regulating the securities industry and protecting investors, it has faced criticism for its handling of certain cases and its failure to adequately police the industry.

Critics argue that its arbitration process is biased, that it does not adequately hold broker-dealers accountable, and that it lacks transparency and accountability.

It is important for FINRA to address these concerns and to work to improve its processes and policies in order to better protect investors and maintain the integrity of the financial markets.

What Can Retail Investors Do?

FINRA market manipulation | Is FINRA corrupt?
FINRA market manipulation | Is FINRA corrupt?

Retail investors can voice their opinions and concerns on FINRA market injustices on social media in order to raise awareness. #FINRAFraud

Share this article if you found it valuable to the community.

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Ex-JPMorgan Gold Trader Faces 30 Years in Prison for Spoofing

Market News: Ex-JPMorgan Gold Trader faces time in prison after spoofing the market.
Market News: Ex-JPMorgan Gold Trader faces time in prison after spoofing the market.

An Ex-JPMorgan Gold trader was found guilty of fraud in the commodities market.

Christopher Jordan was convicted of wire fraud affecting a financial institution by a federal judge in Chicago, the latest win for U.S prosecutors in their crackdown of on illegal “spoofing” trades and market manipulation.

Jodan was found guilty Friday after a four-day trial in the same courthouse where two of his most senior colleagues on the JPMorgan precious metals desk were convicted in August of spoofing related charges for deceptive buy and sell orders.

Jordan worked at JPMorgan from 2006 to late 2009.

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Department of Justice Comments on JPMorgan Trader

DOJ report on Ex-JPMorgan Trader spoofing the gold market.
DOJ report on Ex-JPMorgan Trader spoofing the gold market.

Between 2008 and 2010, Jordan placed thousands of spoof orders, i.e., orders that he intended to cancel before execution, to drive prices in a direction more favorable to orders he intended to execute on the opposite side of the market. 

Jordan engaged in this deceptive spoofing strategy while trading gold and silver futures contracts on the Commodity Exchange (COMEX), which is a commodities exchange operated by the CME Group.

These deceptive orders were intended to inject false and misleading information about the genuine supply and demand for gold and silver futures contracts into the markets.

He is scheduled to be sentenced at a later date and faces a maximum penalty of 30 years in prison. 

Four other former JPMorgan precious metals traders were previously convicted in related cases.

In August 2022, Gregg Smith and Michael Nowak were convicted after trial in the Northern District of Illinois of wire fraud affecting a financial institution, commodities fraud, attempted price manipulation, and spoofing.

In September 2020, JPMorgan admitted to committing wire fraud in connection with (1) unlawful trading in the markets for precious metals futures contracts and (2) unlawful trading in the markets for U.S. Treasury futures contracts and in the secondary (cash) market for U.S. Treasury notes and bonds.

JPMorgan entered into a three-year deferred prosecution agreement pursuant to which it paid more than $920 million in criminal monetary penalties, criminal disgorgement, and victim compensation, with parallel resolutions by the Commodity Futures Trading Commission and the Securities Exchange Commission announced on the same day.

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Source(s): Bloomberg, Justice.Gov.


These Hedge Funds Have Been Wiped Out in 2022

Market News: These Hedge Funds have been underperforming all year | Frankenz.com.
Market News: These Hedge Funds have been underperforming all year | Frankenz.com.

Which hedge funds have been underperforming in 2022?

Hedge fund Tiger Global Management is down -54% for the year despite gaining 1.4% in November according to Bloomberg sources.

Persons familiar with the matter say the firm’s long-only fund rose 5.1% in November.

The hedge fund has been on a steady decline all year.

In April, the firm sunk -34% after a bad run that was fueled by massive bets on stocks that have been hammered, such as fast-growing tech companies in the U.S and China.

Tiger Global lost -7% last year, its first annual drop since 2016 and its third total.

Tiger Global Losses 2007-2021 | Sources: Bloomberg News, Curated by Franknez.com.
Tiger Global Losses 2007-2021 | List of Underperforming Hedge Funds – Sources: Bloomberg News, Curated by Franknez.com.

CEO Chase Coleman’s personal wealth dropped by $1.3 billion early this year, according to calculations by the Bloomberg Billionaires Index. 

But Tiger Global isn’t the only hedge fund that is underperforming in 2022.

Here are other hedge funds facing significant losses in 2022.

Which hedge funds have been losing money this year?

List of worst performing hedge funds in 2022 | Franknez.com.
List of worst performing hedge funds in 2022 – Underperforming Hedge Funds | Franknez.com.

Tiger Global Management and Whale Rock Capital Management were among stock-picking hedge funds to report significant losses in 2022.

In September, Tiger Global saw losses as high as -66.5%, per Bloomberg.

Whale Rock widened its losses to -41%.

A report conducted in March concluded that almost 80% of active hedge fund managers are underperforming major indexes such as the S&P 500.

Which hedge funds have been underperforming?

Below is a list of other hedge funds underperforming in 2022.

Other hedge funds include:

  • Light Street Capital Management -50%
  • Maverick Capital -27%
  • Third Point -21.10%

Melvin Capital closed its doors in June of 2022 after it failed to make up for significant losses after it had bet against GameStop.

Anchorage Capital is another hedge fund that closed after betting against another ‘meme stock’, AMC Entertainment Holdings, Inc.

It closed its doors after 18 years when it could no longer provide their clients with the ability to withdraw their capital.

Hedge funds are heading for one of their worst years of performance on record, leaving investors frustrated with how many managers have failed to offset sharp falls in equity and bond markets,” says Financial Times.

It’s only a matter of time before we begin to see more hedge funds close their doors leading into 2023.

But I’d love to hear your thoughts.

Leave a comment down below.

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Phase 6 Margin Call Requirements on The Way

Phase 6 Margin Call Requirements
Market News: Phase 6 Margin Call Requirements on the way | ISDA

Market News: Phase 6 margin call requirements are on the way.

Institutions under UMR who had not previously been affected by these specific margin requirements will be as of September 1st, 2022.

Uncleared Margin Rules (or UMR) were created to address the OTC derivatives market–and its participants– in the wake of the global financial crisis (GFC) of 2008-2009.

It implemented new margin requirements for non-centrally cleared derivatives to avoid further systemic risk.

For this reason, they were ‘phased in’, or broken down by phases.

Institutions affected by phase 6 margin call requirements could find themselves in a sticky situation and I’m going to discuss why down below.

Let’s get started!

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Preparing for margin calls

The requirement to exchange initial margin for over-the-counter (OTC) derivatives is one of the last remaining pillars of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that remains to be fully implemented.

The five-year implementation period began in 2016.

UMR Phases - Phase 6 Margin Requirements
UMR Phases – Phase 6 margin requirements

The chart above depicts the number of counterparties affected throughout each phase.

Phase 5 occurred in September of 2021 where 319 counterparties were affected.

We will be entering Phase 6 in September of 2022, where 775/990 counterparties with more than the $8 billion scope detailed on the graph, or gross amount across all uncleared OTC trades, will be affected.

Phase 5 of UMR touched a mix of sellside and buyside firms, especially medium-sized banks and larger buyside firms.

However, Phase 6 is almost exclusively buyside-focused meaning we could potentially see a massive market rebound, per Bloomberg.

Institutions affected by Phase 6 margin call requirements may include asset managers, banks, hedge funds, and private family offices.

The entire process is extremely challenging according to Bloomberg.

But while it may seem complex in nature, it’s the results that truly matter.

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How long will it take for margin calls to happen?

Although Phase 6 margin call requirements are going into effect on September 1st, 2022, it’s important to note that this is going to take some time.

The derivatives market is massive, now boasting approximately 1 quadrillion derivatives as of May 2022, per Investopedia.

The Senior Principal at BNY Mellon has said in the past that even after Phase 6 there will be margin calls that will still have to be processed.

That’s how massive this event will be.

Phase 6 margin call requirements will begin to margin a variety of sized banks, hedge funds, market makers, and family offices.

The bottom line, the markets need this reset, and its coming.

For a much greater and in-depth walkthrough of what this event means, check out AMCBIGGUM’s video below.

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Phase 6 Margin Call Requirements meaning

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