The FTX debacle was a significant thing, and records indicate that it was one of the biggest losses in the financial sector in a long time.
Sam Bankman-Fried (SBF), a co-founder of FTX, and Caroline Ellison, CEO of Alameda Research, have really been added to the top of the list for allegedly losing $51 billion, according to the “List of Trading Losses” page on Wikipedia.
The alleged trading loss associated with SBF and Ellison surpassed the previous greatest trading loss, which occurred in 2021.
According to reports, Bill Hwang, the founder of Archegos Capital Management, lost all $10 billion in total return exchanges before the FTX collapse.
Morgan Stanley and bond broker Howie Hubler lost $9 billion in 2008 as a result of losing money on credit default swaps.
This loss was lower than the trading losses for FTX and Archegos. Four years later, credit default swaps also cost JPMorgan Chase and Bruno Iksil $9 billion in losses.
Tsingshan Holding Group, a Chinese company, attempted to short the nickel commodity this year but failed, incurring losses of $8 billion.
Jérôme Kerviel and Société Générale, who are beneath China’s Tsingshan, suffered losses of $6.12 billion in 2008.
Wikipedia editors state that the list includes “both illegal and legal losses,” but that FTX’s losses much outweigh the singly listed trading losses.
It’s interesting to note that according to Wikipedia’s editors, the money from Bernie Madoff’s Ponzi scheme was excluded.
According to Wikipedia editors, Madoff did not lose the majority of this money in trading despite that his operation had a $50 billion or so valuation, equivalent to FTX. A few people have recently drawn numerous parallels between SBF and Bernie Madoff.
The curious thing about Wikipedia’s entry is that its editors decided not to add Madoff’s collapse because it was a Ponzi scheme, but they did include the FTX disaster. Even though FTX investigations are still underway and the issue has not yet been resolved in court, this is still the case.
A lot of information suggests that the executives at FTX and Alameda were “unsophisticated persons,” and another study suggests that Alameda Research CEO Caroline Ellison may have been a terrible margin trader.
Furthermore, there is a lot of conjecture that the business models used by FTX and Alameda were similar to Ponzi schemes.
Alameda, according to some, “‘invested’ $8 billion across 448 venture-stage firms, the majority of which have ‘1-10’ employees and minimal documentation,” rather than trading cryptocurrency.
Furthermore, no one from the press has reportedly inquired as to what occurred to the $3.3 billion that Alameda is said to have lent to SBF, according to Yves Smith of nakedcapitalism.com.
According to the FT research, SBF received a personal loan for $1 billion, and $2.3 billion was transferred to a Paper Bird-related SBF firm.
An FTX company list made by former Mt Gox CEO Mark Karpelès reveals that Paper Bird is among the top businesses managed by SBF.
According to Smith of nakedcapitalism.com, no reporters have so far questioned SBF about the whereabouts of the $3.3 billion.
Top FTX and Alameda executives were given such “huge personal lines of credit,” but SBF never truly explains this in his interviews.
Instead, according to SBF’s description of the peculiar margin trading method used by FTX, top executives or “certain accounts” did not need to borrow money or put up security to take part.
It’s highly probable that Wikipedia’s decision to include FTX’s purported “trading error” in the greatest trading losses list may be incorrect, given that an investigation into the FTX scandal is still continuing and the courts have only recently become involved.
It’s possible that Wikipedia writers will need to reclassify the FTX case in a similar way to how Madoff’s $50 billion mistake was done.
The key point is that as it stands, there is insufficient proof to support claims that the FTX and Alameda catastrophe was a true “trading loss” or that the majority of the $51 billion mentioned in Wikipedia’s article was lost due to trading errors.
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