Tag: Ken Griffin (Page 1 of 2)

Chicago Tribune Says Citadel Securities’ Dark Pool Targets Small Investors

Market News: Citadel Securities Dark Pools Exposed
Market News: Citadel Securities Dark Pools exposed

The Chicago Tribune just published a piece explaining exactly what retail investors have been warning the SEC about.

Citadel Securities’ dark pool dominates a big part of the financial world, accounting for as much as half of U.S. stock market activity.

The Chicago Tribune says this prominent dark pool is run by Chicago Billionaire Ken Griffin’s Citadel Securities and has been targeting small scale retail investors.

And they’re not wrong.

Dark pools are typically involved in payment for order flow (PFOF), where they pay broker firms to receive retail order flow.

Brokers such as Robinhood and TD Ameritrade accept payment for order flow.

But retail investors have now brought these nefarious practices in the market to light.

Let’s discuss it.

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Taking down Citadel’s dark pool

Citadel Securities Dark Pool
Citadel Securities Dark Pool

The Chicago Tribune has acknowledged investors’ orders almost never make it to the New York Stock Exchange (NYSE) or NASDAQ.

The editorial team say they get redirected to electronic platforms run by private market makers who match buyers with sellers at a price they determine, behind closed doors.

Citadel Securities’ dark pool is able to make money on the difference between bid and ask prices when trades are matched.

This creates major conflict of interest as the orders they fill are not competing against one another; therefore, the price is open for manipulation.

SEC Chairman Gary Gensler said himself 90% to 95% or retail’s orders do not get processed through the lit exchange.

And although light is shining on this very real problem, nothing is being done about it by our regulators yet.

“The U.S. Securities and Exchange Commission is responsible for revising its rules to keep up with technology and, here’s a surprise, the regulators have fallen behind.” – The Chicago Tribune.

But the editor says the problem is the SEC has too much on their hands and are spreading themselves thin.

They’re focused on crypto regulation, SPACs, and climate control.

It’s rather clear dark pools are not the SEC’s main priority.

Citadel Scandal

Citadel Scandal - Ken Griffin Lied
Ken Griffin – Citadel Scandal

Citadel has been heavily scrutinized by retail investors for not only heavily shorting ‘meme stocks’, but for suppressing the price driven by retail demand with its dark pool.

#KenGriffinLied began trending on Twitter earlier this year and again this month when the U.S. House Committee on Financial Services released a report confirming Robinhood and Citadel did indeed have blunt negotiations prior to trading restrictions on January 28th of 2021.

The “GameStopped” report documents in detail the events that lead to the halting of ‘meme stocks’.

Ken Griffin swore under oath that Citadel and Robinhood had no communication the day prior to the restrictions, but proof has now surfaced.

The question now is, will the case dismissed by Judge Cecilia Altonaga late last year get reopened?

The Miami district court judge admitted the Citadel and Robinhood transcripts were suspicious.

However, the federal court has dismissed the case due to a lack of evidence.

According to Business Insider, the court said that the evidence between Citadel Securities and Robinhood was not sufficient.

The retail community found Judge Cecilia Altonaga had ties to the defendant in the Robinhood and Citadel case, creating a major conflict of interest.

But mainstream media isn’t covering this.

What can be done about this corruption in the market?

Wall Street Corruption

If you’ve been one of my day-ones, you know I’ve always preached raising awareness.

Raising awareness is what gets people to learn, dive deep, and stand against market injustices.

People want to fight for a cause, people want to fight for freedom.

Instead of focusing on the things that are out of our control (SEC, market manipulation, etc.), we must focus on the things that are in our control.

And that is raising awareness to educate the population.

I truly believe this is the way to creating real change.

If this resonates with you, please be sure to give this article a social share.

It all starts with us, one by one, as individuals.

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Who is The DTCC and What Are Their Legal Duties?

Market News: DTCC
Market News: Who is the DTCC?

Retail investors have pulled up some information on the DTCC regarding the blockage of margin calls.

The Reddit community is calling the organization corrupt.

But what exactly is the DTCC and how do they play an important role in our markets?

In this article I’m going to explain the duties of this corporation in simple terms and also touch topic on questions retail investors might have when it comes to AMC and GameStop.

Let’s get started.

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Who is the DTCC?

who is the DTCC?
Depositary Trust and Clearing Corporation

The DTCC (Depositary Trust and Clearing Corporation) is an American post-trade financial services company providing clearing and settlement services to the financial markets.

The DTCC processes trillions of dollars of securities on a daily basis.

As the centralized clearinghouse for various exchanges and equity platforms, the DTCC settles transactions between buyers and sellers of securities.

The information is recorded by its subsidiary, the NSCC.

After the NSCC has processed and recorded a trade, they provide a report to the brokers and financial professionals involved.

This report includes their net securities positions after the trade and the money that is due to be settled between the two parties.

Conflict of interest

Clearing corporations such as the DTCC may receive cash from a buyer and securities or futures contracts from a seller.

The clearing corporation then manages the exchange and collects a fee for this service.

The size of the fee is dependent on the size of the transaction, the level of service required, and the type of security being traded. 

Investors who make several transactions in a day can generate significant fees.

This means every naked share that has been created on the ‘short side’ has been recorded and bypassed by the DTCC/NSCC, all for a fee.

And this is where retail investors begin to question the integrity of the financial market.

One of the DTCC’s bigger partners is Bloomberg LP, a privately held media and software company.

Retail investors are weary about Bloomberg due to having a dark pool where institutions can make unregulated trades.

Bloomberg also happens to be a media platform where Citadel’s Ken Griffin is made to feel at home.

The short seller remains to this date one of the top 10 institutions shorting AMC stock.

Related: Wall Street Journal is Indirectly Owned by Citadel's Ken Griffin

DTCC removing margin calls

There is information going around in the retail community of the DTCC removing margin calls and it’s creating somewhat of fear, uncertainty, and doubt.

After digging around for a while, it’s important to note that the DTCC did indeed remove margin calls, but on January 28th of 2021.

This isn’t necessarily occurring right this moment.

A press released was published advising of the circumstances that occurred during the time ‘meme stocks’ were halted.

The DTCC waived $9.7 billion of collateral deposit requirement on January 28th, 2021, limiting institutional losses and limiting retail profits.

Could the DTCC have been playing the middleman to prevent the market from completely collapsing?

Or was this blatant market manipulation?

The organization allowed several naked shares to flood the market but never stepped in to level the playfield for retail investors.

So why step in to minimize institutional losses?

I think it’s safe to say those client fees really make things happen.

The SEC is by law responsible for regulating the DTCC, but the DTCC is a company who caters to a wide range of institutions in the financial market.

And according to the SEC Chairman Gary Gensler, they need whistleblowers to really tackle the issues at hand.

Is the DTCC corrupt?

Most retail investors openly think so.

The corporation is a business that processes orders between buyers and sellers but caters to financial institutions – not retail investors.

The DTCC along with the NSCC are very well aware of the naked shorting issue in our market.

But they’ve failed to put a halt to it.

One can view this negligence as being complicit.

I’m curious to learn what you think.

Leave your thoughts in the comment section of the blog down below.

Also, be sure to stick around for the latest market news.

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Citadel Pushes Back on Possible SEC PFOF Ban

SEC PFOF Ban
Market News: SEC PFOF Ban threatens corrupt institutions

The SEC is addressing the possibility of banning PFOF (payment for order flow).

Citadel and other institutions are speaking out.

Gary Gensler said there may be a conflict of interest for brokers and that too much power is concentrated in a handful of market makers.

The SEC Chairman could be re-routing retail investors into an automated system that would provide a deep pool of liquidity.

If this goes through, it will be historic.

Let’s discuss it.

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SEC Payment For Order Flow ban

SEC PFOF Ban

Gary Gensler will be speaking on Wednesday in regard to best execution for market orders.

The SEC has been under heavy scrutiny by retail investors as the agency has not made any progress to level the playfield.

The government branch that’s supposed to protect retail investors has even gone as far as taunting investors for buying ‘meme stocks’ recently.

But industry participants have quietly been saying that Gensler will likely use a speech at the Piper Sandler Global Exchange Conference on Wednesday to float several proposals.

These may include best execution and payment for order flow according to CNBC.

Last year during the ‘meme stock’ frenzy, Citadel processed retail’s orders through Robinhood.

Citadel paid Robinhood to give them those orders (PFOF).

However, retail investors don’t want their orders going to Citadel since the market maker/hedge fund/dark pool are short on ‘meme stocks’.

90%-95% of retail’s orders are not processed though the lit exchange.

Citadel takes these orders and trades them at a bargain through foreign exchanges.

Although PFOF is an expense to them, they make a lot more money processing the orders.

If the SEC PFOF ban goes through, orders would not be processed by Virtu or Citadel.

Citadel fights back

A spokesperson for Citadel Securities released the following statement to CNBC:

“It is important to recognize that the current market structure has resulted in tighter spreads, greater transparency, and meaningfully reduced costs for retail investors. We look forward to reviewing the proposals and working with the SEC and the industry towards our longstanding objective of further improving competition and transparency.”

“You need to be very deliberate on that approach,” Ken Bentsen, president and CEO of the Securities Industry and Financial Markets Association (SIFMA) said.

“We have been calling for a review of market structure for some time, but let’s be careful not to try to fix things that may not be broken,” he said. “The retail investor is getting a better deal than they ever have.”

Would you pay small trading fee if it meant Citadel and Virtu no longer reroute your orders to benefit their pockets?

Leave a comment below.

The statement alone that retail is getting a better deal than ever before is such a dishonest thing to spew.

These institutions have been taking retail’s money, using it against them, all while taking no accountability for their actions.

It’s not clear yet whether the SEC PFOF ban will go through or not.

It is certainly something worth discussing though, don’t you think?

Leave your thoughts below.

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Hedge Fund Tiger Global on Brink of Shutting Down?

Hedge fund Tiger Global
Market News: Hedge Fund Tiger Global down more than 50% this year.

Hedge fund Tiger Global is on the brink of collapsing.

WSJ reports the hedge fund is lost 52% for the year up to May.

It was down 34% this year through March but the institution keeps sinking.

Melvin Capital threw in the towel after suffering several losses this year.

Is hedge fund Tiger Global the next one to go?

Let’s discuss it.

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Hedge fund empires crumble

Melvin Capital lost a staggering 20.6% the first quarter this year alone.

In 2021, they took a heavier hit with 50% in losses.

Now Gabe Plotkin’s Melvin Capital is shutting down end of June.

The Tiger Cubs, an alliance consisting of hedge fund Tiger Global Management, Lone Pine Capital, Coatue Management, Maverick Capital, Viking Global Investors and D1 Capital are facing massive losses this year too.

According to Bloomberg, majority of the Tiger Cubs stock picks are in tech stocks.

Which as we know, have been plummeting all year.

Tiger Global exited 83 positions depicted in the chart below and entered only 2 new positions.

Coatue Management is another hedge fund who has been struggling to keep its doors open this year.

Last year investors demanded to pull out $250 million from the hedge fund but Coatue was unable to meet demands.

Coatue said the money they could not deliver to their clients was being held in private companies, making it difficult to liquidate.

Today we see Coatue Management exited 35 stocks and only entered 12 so far.

The rest of the cubs aren’t doing so well with everyone exiting more positions than entering them.

Hence the reason why we’ve seen the market fall all year.

Will hedge fund Tiger Global close?

Tiger Global Hedge Fund

Although the hedge fund has wiped out more than $16 billion in assets under management, Tiger Global continues to hold on.

“We take very seriously that our recent performance does not live up to the standards we have set for ourselves over the last 21 years and that you rightfully expect. Our team remains maximally motivated to earn back recent losses,” the hedge fund wrote.

But even then, the hedge fund has struggled to find a winning strategy.

Tiger Global was down more than 34% the first quarter of 2022.

And instead of finding a solution, the hedge fund sank to a total of 52% halfway through Q2.

Things aren’t looking so good for the hedge fund.

What do you think?

Will hedge fund Tiger Global be the next institution to fall?

Leave your thoughts in the comment section of the blog down below.

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Related: Ken Griffin Attacks: "Pension Plans Destroyed by Retail Investors"

The Tiger Cubs Are on The Brink of Collapsing

Tiger Cubs Hedge Fund
Market News: Tiger Cubs face disturbing losses as tech stocks fall

(Bloomberg) Hedge fund managers known as Tiger Cubs are facing serious carnage in the market.

The alliance consists of Tiger Global Management, Lone Pine Capital, Coatue Management, Maverick Capital, Viking Global Investors and D1 Capital 

Billions were made in tech stocks, but gains have now evaporated.

Tech stocks have fallen the first quarter of 2022 and have bled into the second quarter this year.

Is it possible the Tiger Cubs are the next hedge fund managers to join Melvin Capital’s grand exit?

Let’s discuss it.

franknez.com

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NASDAQ plummets in 2022

The tech-heavy NASDAQ 100 has fallen more than 29% this year.

It’s down more than 11% from the S&P 500 (down 18.47% YTD).

According to Bloomberg, majority of the Tiger Cubs stock picks are in tech stocks.

Tiger Global exited 83 positions depicted in the chart below and entered only 2 new positions.

The hedge fund sank 34% the first quarter of 2022.

Tiger Cubs positions

Coatue Management is another hedge fund who has been struggling to keep its doors open this year.

Last year investors demanded to pull out $250 million from the hedge fund but Coatue was unable to meet demands.

Coatue said the money they could not deliver to their clients was being held in private companies, making it difficult to liquidate.

Today we see Coatue Management exited 35 stocks and only entered 12 so far.

The rest of the cubs aren’t doing so well with everyone exiting more positions than entering them.

Tiger Cubs cut their losses

Below you’ll find a chart showing the worst-performing stocks widely held by the Tiger Cubs.

Big name companies include Carvana, DoorDash, Netflix, and Shopify to name a few.

Tiger Cubs Losses
Source – Bloomberg

The Tiger Cubs have been known for piling into the same or similar stocks since they all had the same mentor.

These hedge funds are facing significant losses despite being in it together.

Melvin Capital saw a 50% loss in 2021 and another 20.6% during the first quarter of 2022 before throwing in the towel.

The hedge fund was destroyed by retail investors when it decided to bet against game retailer GameStop and other ‘meme stocks’.

Ken Griffin defended Gabe Plotkin’s Melvin Capital in a Bloomberg exclusive attacking retail investors.

The Citadel founders said retail investors wiped out teacher’s pension plans by bankrupting Melvin Capital.

And the retail community is biting back, speaking the truth.

CALPERS, the largest pension fund in America loaded up on AMC and GameStop and sold Netflix, though.

Ray Dalio’s Bridgewater sold Tesla this Q1 and bought AMC stock for the first time and increased their stake in GameStop.

These are two examples where conventional wisdom doesn’t always make sense (i.e., investing in fundamental tech stocks).

And we can see hedge funds who do follow this ‘conventional wisdom’ are suffering because of it.

Which hedge fund will be next to fall?

Some of you said on Twitter Tiger Global could be the next hedge fund to fall.

Coatue Management has been in deep waters too.

I’m curious to know what you think about where hedge funds are currently headed.

Leave your thoughts in the comment section of the blog below.

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Related: Ken Griffin Attacks: "Pension Plans Destroyed by Retail Investors"

Ken Griffin Attacks: “Pension Plans Destroyed by Retail Investors”

Ken Griffin on Retail Investors
Market News: Ken Griffin on retail investors

Ken Griffin accused the retail community of destroying teacher’s pension plans by taking down Gabe Plotkin’s Melvin Capital.

Melvin Capital is a hedge fund that was short on ‘meme stocks’ holding a large position in GameStop.

The company is scheduled to shut down in June after it had suffered a 50% loss in 2021, and an additional 20.6% in the first quarter of 2022.

Sources say Melvin Capital has already begun to liquidate its positions to pay back investors in cash.

In this Bloomberg exclusive, Ken Griffin plays a role of the victim, defending Mr. Plotkin and the hedge fund whose mission it was to bankrupt GameStop.

Ken Griffin’s Citadel is also short on AMC Entertainment – the hedge fund lost billions last year betting against retail.

Let’s discuss it.

franknez.com

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Let’s dive right into it!

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CNBC mourns the loss of Melvin Capital

CNBC says Melvin was one of the biggest victims from the meme stock frenzy last year due to its large short position in GameStop.

They say Citadel and Point72 had to provide Melvin Capital with a lifeline to stay above the water.

The hedge funds combined provided Gabe Plotkin with $2.75 billion in capital last year.

However, as things went south quick for Melvin, both hedge funds demanded the capital back.

Something Ken Griffin and his affiliates fail to mention.

Mainstream media has also danced around the fact that hedge funds planned to wipe American companies by overleveraging their short positions during the pandemic.

Success in doing so would delist AMC, GameStop, and other meme stocks from the stock market.

Betting against companies with intention to bankrupt them to the ground is no charity work.

It’s un-American and a nefarious practice that has dragged out for too long.

Ken Griffin blames retail investors

In the video below, Ken Griffin gives his thoughts on retail investors and the entire ‘meme stock’ phenomena.

Ken Griffin takes a jab at the retail community saying retail investors who aimed to bankrupt Melvin Capital also wiped-out pension funds from teachers.

But Ken, retail investors don’t get up in the morning and think to themselves, “let’s wipe out a multi-billion-dollar hedge fund.”

Melvin Capital lost because he went against retail – the first time in history the people fight back corruption in the stock market, and win.

Ken Griffin lost billions shorting AMC stock, the retail community is currently his biggest adversary.

AMC shareholders continue to buy and hold the stock until short sellers exit their positions, which will result in a short squeeze.

Today’s retail investors are armed with education, they understand what they hold and what it’s doing to hedge funds.

While Ken Griffin and affiliates might be pumping a narrative as victims, high profiles such as Elon Musk, Jon Stewart, and Ryan Cohen have stood up against short sellers.

For the first time in history, Wall Street is getting their a** kicked, and these hedge fund managers certainly do not like that.

Hedge funds should prepare for bigger losses

Institutions are about to lose a massive amount of collateral due to executive order 14032 in early June.

This presidential order is prohibiting Chinese securities to be used as collateral starting June 2nd, 2022.

It was responsible for initiating margin calls when AMC Entertainment stock rose to $20 per share in January, and $72 per share in June of last year.

With liquidity drying up in global markets, it’s going to be quite difficult for hedge funds to keep up with margin requirements on heavily shorted ‘meme stocks’.

Massive selloffs in the market have proved just how distressed financial institutions are.

We’re seeing for the first-time hedge funds begin to shut down as they take the lead in liquidity burn.

Retail investors have been the majority of buyers in today’s markets according to Bank of America.

Hedge funds are headed towards a larger train-wreck of disaster they cannot get off of.

As they continue to tank the markets, margin requirements go up thanks to DTCC B16845-22.

Hedge funds have lost control.

But I’m curious to know what you think.

Leave your thoughts in the comment section of the blog below.

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Hedge Fund Melvin Capital Is Shutting Down End of June

Hedge Fund Melvin Capital is Shutting Down End of June
GameStop short seller Melvin Capital is closing its doors this summer

Hedge fund Melvin Capital, notoriously known by the retail community for betting against GameStop is now closing its doors.

2022 marks the second year in a row the short seller underperforms.

Melvin Capital lost a staggering 20.6% the first quarter this year alone.

In 2021, they took a heavier hit with 50% in losses.

Now the hedge fund tells CNBC they will be shutting down by the end of June and starting a new company.

Let’s dive deeper.

franknez.com

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The apes were right

In March, I published a tweet asking the community whether Melvin Capital would be the next hedge fund to default.

We all saw this coming, but 90% of you voted YES.

Forward a month later and now the hedge fund is announcing it is closing this summer.

Earlier in March we saw another notorious hedge fund known for shorting GameStop pull $2 billion from Gabe Plotkin’s Melvin Capital.

That hedge fund was Citadel.

Citadel also lost billions last year shorting so called ‘meme stocks’, so it comes as no surprise as to why they pulled out from Gabe Plotkin’s Melvin Capital.

Ken Griffin’s Citadel also imposed tight restrictions on its clients leading into the new year.

Customers were given an ultimatum to either stay with the firm otherwise coming back would prove to be difficult.

Steve Cohen’s Point72 redeemed $750 million from Melvin Capital around the same time.

Ken Griffin received a $1.2 billion lifeline from partners Sequoia and Paradigm in January of this year.

This was the first time Citadel had ever received private funding.

Don’t bet against the apes

Mainstream media doesn’t give retail investors enough credit for shedding light on market injustices.

The ‘ape’ community has grown since last year as retail investors discover the short interest data that points towards a bigger AMC runup than that of January and May of last year.

In this video I go over patterns that are similar to those from last year’s runup and what we should keep a close eye out on.

The apes were right about naked shorting, dark pools, and the dangers of betting against retail.

Now hedge funds are dealing with the consequences of betting against the people.

Majority of the community continues to buy and hold ‘meme stocks’ such as AMC and GameStop in efforts to create a massive short squeeze.

Retail has said it many times, a short squeeze is inevitable.

While the SEC might be proposing rules that could wash naked short selling, yet avoid them in the future, it would take years to enforce if passed.

Will hedge funds survive?

Hedge funds are currently facing deep scrutiny from both retail investors and regulators.

The DOJ is taking Morgan Stanley, Goldman Sachs, and numerous other hedge funds to court.

Citadel is one of the short sellers currently being investigated by the Department of Justice according to a Bloomberg report.

The SEC and DOJ are looking into the following:

  • Communication between banks and hedge funds
  • Proof of ‘Bear Raids’
  • Spoofing
  • And several other market manipulation tactics

Hedge fund Muddy Waters was already raided by the FBI earlier this year for flooding the market with fake orders to drive stock prices down.

Melvin Capital is only one of many hedge funds that has closed down in the past year due to overleveraged short selling, and bad bets.

What are your thoughts on the Melvin Capital news?

Did you see it coming?

Leave a comment below.

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Archegos Founder Bill Hwang Has Been Arrested with 11 Criminal Counts

Bill Hwang has been arrested with 11 criminal counts
Market News: Bill Hwang has been arrested for market manipulation

Archegos founder Bill Hwang and CFO Patrick Halligan were arrested and charged with 11 criminal counts.

Federal prosecutors said Bill Hwang used Archegos as an “instrument of market manipulation and fraud.”

The hedge fund managed to inflate its portfolio from $1.5 billion to $35 billion before its collapse, causing massive losses for banks and investors.

Let’s break down everything that’s happening, together.

franknez.com

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Bill Hwang and Patrick Halligan arrested for market manipulation

Bill Hwang gets arrested

Before he lost it all, Bill Hwang was worth $20 billion and was known as one of the greatest traders you could have heard of.

Hwang’s $20 billion net worth was almost as liquid as a government stimulus check.

And then, in two short days, it was gone.

The sudden implosion of Hwang’s Archegos Capital Management in late March is one of the most spectacular failures in modern financial history.

No individual has lost so much money so quickly, via Bloomberg.

Bill Hwang’s wealth briefly peaked at $30 billion.

He used swaps, a type of derivative that gives an investor exposure to the gains or losses in an underlying asset without owning it directly. 

Another leverage tool hedge funds have access to, which concealed both his identity and size of his positions.

You’d think a regulatory agency would exist right?

Don’t count on the SEC.

On March 26th, investors learned that Archegos had defaulted on loans used to build a $100 billion portfolio.

Credit Suisse, one of Bill Hwang’s lenders, lost $4.7 billion.

How did Archegos manipulate the stock market?

Bill Hwang’s Archegos essentially used a ton of leverage to pump stock prices up.

As the price of stocks rose, they would buy more shares with those profits, and continue to borrow money from the bank to further pump the prices.

Archegos only held a small portfolio consisting of a few selected companies, of which whom they had many shares of.

When a few companies’ share prices began to plummet, Hwang’s entire empire crumbled almost instantaneously.

As the value of their portfolio sank, the hedge fund was forced to liquidate even more assets due to margin calls, further escalating the situation, and losses.

Archegos was forced to default, causing investors and banks billions of dollars.

Bill Hwang already had a troubled history with hedge fund Tiger Asia, who was shut down by the U.S. for insider trading and for manipulating Chinese stocks.

Still, Bloomberg vouches for Bill Hwang publishing an article he has done nothing wrong.

What was Bill Hwang charged with?

Hwang and Chief Financial Officer Patrick Halligan were charged with 11 criminal counts overall, including racketeering conspiracy, market manipulation, wire fraud and securities fraud. 

Hwang was arrested early Wednesday and was expected to appear in Manhattan federal court later in the day. 

This is a developing story.

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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.

franknez.com

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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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Melvin Capital Losses: Staggering 20.6% First Quarter of 2022

Melvin Capital Losses 2022
Gabe Plotkin – Melvin Capital Losses 2022 Q1

(Bloomberg) Gabe Plotkin’s Melvin Capital suffered a whopping 20.6% loss its first quarter of 2022.

The company short on AMC and GameStop continues to rollover its losses from last year’s bets on ‘meme stocks’.

The hedge fund also suffered a 50% loss its first quarter of 2021 last year.

We’ve seen hedge funds face massive adversity as retail investors buy stock in an illiquid market.

Let’s break it down together.

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Gabe Plotkin’s Melvin Capital starts shaky 2022

Melvin Capital Logo
Melvin Capital Losses first quarter 2022

The New-York based hedge fund ended 2021 with 39% in losses, via. Bloomberg and fell 3.8% in March of 2022.

It’s been another rough start for the ‘meme stock’ short seller as sources report Gabe Plotkin’s Melvin Capital ends its first quarter with a 20.6% loss.

The losses in March marked a consecutive streak of losses for three months in a row.

People asked Bloomberg not to be identified as the information has been private.

We saw Ken Griffin’s Citadel pull out $2 billion from Gabe Plotkin’s Melvin Capital earlier this year as the hedge fund struggled to surface from deep waters.

But Citadel wasn’t the only one who pulled its money from the struggling hedge fund.

Point72 Asset Management retrieved their initial investment of $750 million from Melvin.

Gabe Plotkin saw losses of 20.6% in his hedge fund and more than $2.7 billion in redemptions its first quarter of 2022.

Other hedge funds facing turmoil in 2022

In recent news we’ve seen several hedge funds and financial institutions face rocky valleys going into 2022.

Investors in Coatue Management have requested to pull out more than $250 million from the hedge fund.

However, they have not been able to meet their clients demands as clearing houses currently face a liquidity crisis.

The hedge fund said the money investors were asking for in redemptions was invested in ‘private companies’.

Due to the Russian-Ukraine conflict, more than 100 hedge funds have billions stranded in the Cayman Islands.

Hedge funds affected by these frozen accounts include Millennium Management, Sculptor, Apollo, and Citadel.

You can read more about that mess here.

Another hedge fund who saw more losses than Gabe Plotkin’s Melvin Capital entering 2022 was Chase Coleman’s Tiger Global Management.

The hedge fund sunk a massive 34% this year.

And the list goes on.

Read Market News for the latest news in the community.

Will hedge funds default this year?

90% of you said Melvin Capital will be the next hedge fund to default this year.

We saw Archegos, Anchorage Capital, and Mudrick default last year.

Is this a pattern we’re going to begin seeing again this year?

I’d love to hear your thoughts on this, leave a comment below.

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