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Goldman Raising $2B to Buy Distressed Celsius Assets
- deleted 4y ago[deleted]
- jonathan-adly 4y agoSmart move.. best time to buy, and even if the ethos/price of crypto dies - the infrastructure is still extremely valuable to a bank.
- social_quotient 4y agoWhat part of this does a bank need if the crypto dies?
- quantified 4y agoDoesn't say how much of their own money they'll risk.
- HFguy 4y agoExactly...
- KMag 4y agoThe Volker Rule legally limits them to holding zero dollars on their own books beyond what they can reasonably expect (RENTD) to quickly turn around and sell to potential clients.
- pixelpoet 4y agoThey're risking their name, for a start.
- SturgeonsLaw 4y agoThe good name of Goldman Sachs, lol. The only people who don't find the vampire squid's name toxic, are those who only care about money to the point that these sorts of things never would have bothered them.
- marcosdumay 4y agoExcept for #4, 5, 6, and 17, everything on this list is a con against their own clients' money: https://en.wikipedia.org/wiki/Goldman_Sachs_controversies https://en.wikipedia.org/wiki/Goldman_Sachs_controversies So, no, there is no "only care about money" exception for distrusting them. Interestingly, in 2008 there was somebody recommending their clients buy shares that they were selling themselves. I misremembered and looks like it wasn't them. Now I'm curious what investment bank was it.
- MrCellophane 4y agoIt was Citigroup. From the opinion: This was accomplished by Citigroup's misrepresenting that the Fund's assets were attractive investments rigorously selected by an independent investment adviser, whereas in fact Citigroup had arranged to include in the portfolio a substantial percentage of negative projected assets and had then taken a short position in those very assets it had helped select. Opinion: https://casetext.com/case/us-securities-exchange-commission-v-citigroup-global-markets-inc https://casetext.com/case/us-securities-exchange-commission-...
- deleted 4y ago[deleted]
- moneywoes 4y agoCough imdb cough
- quantified 4y agoThey'll make money screwing their customers. That's what their name means as much as turning winners into superwinners.
- WheelsAtLarge 4y agoIt's taken me a while to understand this but a very common cycle for tech is: 1)Startup founder gets and idea and develops it. 2)The startup develops the tech and finds a market for it 3)The Startup becomes successful 4)The market falls apart and the founder can't guide the startup thru the difficulties 5)Start up is in distress or fails 6)An MBA type comes along buys everything at a deep discount 7)The new manager restarts the company. This time with much more discipline and a plan on how to sell the product. 8)Company becomes successful enough to be sold or go public. 9)MBA guy multiplies his investment. Startup guy gets the shaft. We are going to see this cycle in crypto. Right now, MBA types are looking for any companies that are falling apart but have a future. Looks like Celsius is one of them.
- mirntyfirty 4y agoI’ve seen a couple examples of a somewhat opposite scenario where founder does well, sells to MBA for a lot, business struggles, founder repurchases for much less, then brings business back to profitability
- tialaramex 4y agoI remember some of the founders of the first startup I worked for commenting after its acquisition that before being acquired they had been terrified that the huge acquirer would just go "Oh, we should do that" and assign a dozen software engineers to design, implement and ship a rival product, but after acquisition from inside the huge corporation they could see they had nothing to worry about, assigning a dozen software engineers to go ship a rival product would have needed board level determination and nobody in the board knows the first thing about the actual product so that's not going to happen.
- WheelsAtLarge 4y agoDELL and Apple are a good example of your scenario. And Microsoft and Google are examples where the founders handed the company to an MBA and the companies profits greatly increased. But I've seen these happen much less.
- mupuff1234 4y agoHonestly I am surprised we are not seeing violent acts against people running these companies (Celsius, terra, etc). I would be beyond furious if I couldn't withdraw my assets from this scam.
- ghaff 4y agoBecause people trying to commit violent acts will go to prison etc. and, assuming they're at least vaguely rational, will realize that (and that it won't actually return their money).
- nathanvanfleet 4y agoThat must be why violent acts never happen. Go figure.
- Judgmentality 4y agoEconomists figured this out long ago. Every person is 100% efficient and rational, and this is why we can predict the future.
- deleted 4y ago[deleted]
- astrange 4y agoRational expectations/efficient market hypothesis is the explanation for why we can't predict the future. Predicting it would mean something isn't "priced in". https://someunpleasant.substack.com/p/economists-do-they-know-things-what https://someunpleasant.substack.com/p/economists-do-they-kno...
- Judgmentality 4y agoWell obviously everything is priced in. https://i.redd.it/pd0s2ysxnm791.jpg https://i.redd.it/pd0s2ysxnm791.jpg
- SilasX 4y agoHah, we just had a comment in the other thread where someone suggested this would happen and someone else was skeptical. https://news.ycombinator.com/item?id=31869856 https://news.ycombinator.com/item?id=31869856 But what's Goldman's play here? To pump crypto after buying?
- WheelsAtLarge 4y agoWall street is in on the crypto idea. They see a future. Soon (a few years?) we will see the crypto craze back on. Maybe not as crazy and better regulated but it will be there. The "Turn a $1000 into a $million craze" is probably no more. But crypto is here to stay. A few wall street firms have started to recommend Crypto as an investment. Goldman probably sees a future where their clients will have crypto assets so they see a future in controlling some of the infrastructure. We'll see more of these types of deals. I'm sure they would love to control Coinbase but it's too expensive to own, now.
- LegitShady 4y agothey see everyone else cheating people for millions and millions while not going to jail and want in on the game
- ceeplusplus 4y agoThe one thing of value that crypto actually delivers (and which will never be replicated in tradfi because of incentives of existing players) is atomic multi-party transactions across unrelated parties. Something like a flash loan would never exist in tradfi. Being able to borrow billions with _no_ risk of loss due to execution delays between borrowing money and executing a trade means more liquidity and lower risk for market makers which translates to a better experience for everyone else. It's too bad it's attached to scams and grifters.
- pixelpoet 4y agoIt's so rare that I see people who actually understand the problem crypto solves; essentially everyone is either balls deep on the clueless hype train, or full of vitriol that there's a real thing happening they don't like or really understand. IMO you said it perfectly and it's worth emphasizing for programmer types: > The one thing of value that crypto actually delivers [...] is atomic multi-party transactions across unrelated parties. I wouldn't say it's the one/only thing though: Ethereum builds a trustless computation platform on top this core primitive, which I think is pretty fundamental and impressive (especially when you consider Vitalik Buterin was 21 when he created it, and already had a long career of writing for Bitcoin Magazine; in particular this article from 2014 criticising Bitcoin's centralisation: https://bitcoinmagazine.com/business/opinion-on-mining-1403298609 https://bitcoinmagazine.com/business/opinion-on-mining-14032...).
- Havoc 4y agoInteresting move in light of current "crypto is dead" sentiment in many corners - hn included
- frays 4y agoGoldman is also buying the dip.
- HFguy 4y agoThey don't seem to be buying anything. They are raising other peoples money to buy it. They then charge those people. So unless they retain some portion of it, they will make money regardless of whether the investment makes money.
- ramesh31 4y ago>They are raising other peoples money to buy it. They then charge those people. So unless they retain some portion of it, they will make money regardless of whether the investment makes money. Yes, that is indeed how Goldman makes money.
- Finnucane 4y agoGoldman is buying scrap for recycling.
- aliswe 4y agoI think that the title sounds kind of funny because (according to crypto detractors) there are no assets.
- adrr 4y agoThey have investments that are probably worth pennys on the dollar from what was invested. They still have some value.
- pclmulqdq 4y agoWith FTX and now Goldman buying up assets from dying crypto companies, it looks like a bigger crypto crash will now start to hit the rest of the financial markets. Interesting times coming if there are more issues with USDD and/or tether.
- olalonde 4y ago> With FTX and now Goldman buying up assets from dying crypto companies, it looks like a bigger crypto crash will now start to hit the rest of the financial markets. Why?
- pclmulqdq 4y agoThose companies have connections to the broader financial markets. The traditional thought was that crypto could do what it wants because it's a fairly insulated silo. If it fails, nothing of value fails with it. If it is going to contaminate the rest of the financial system, we are going to need to shut down the shenanigans very fast.
- danieltanfh95 4y agoThat has never been the modus operandi for Centralised Exchanges for Crypto. This is like saying the Internet could do what it wants because it's insulated from the real world. FYI most funds have always been holding crypto, bitcoin in particular gives a better yield over any traditional asset in the world over a 10 year period, consistently over 30 years.
- ntoskrnl 4y agoWhat 30 years are you referring to?
- bitxbitxbitcoin 4y agoBut Bitcoin hasn’t been around for 30 years?
- 4y ago
- kerblang 4y agoQuestion: Who owns the deposited assets? Don't the original owners have dibs? Or can Goldman just pull the rug and say "ours now". That would seem crazy.
- vageli 4y ago> Question: Who owns the deposited assets? Don't the original owners have dibs? Or can Goldman just pull the rug and say "ours now". That would seem crazy. Their terms have this language: > Eligible Digital Assets held in a Custody Wallet are subject to the other provisions of these Terms, unless where expressly stated otherwise. Celsius retains the right to set-off any Eligible Digital Assets in a Custody Wallet against any obligations you may have to us. > You understand and acknowledge that the legal treatment of Digital Assets remains unsettled and may vary depending on the jurisdiction in which you reside. In the event that you, Celsius or any Third Party Custodian becomes subject to an insolvency proceeding, it is unclear how your Digital Assets would be treated and what rights you would have to such Digital Assets. > Celsius does not make any representation as to the likely treatment of Digital Assets in your Celsius Account, including those in a Custody Wallet, in the event that you, Celsius or any Third Party Custodian becomes subject to an insolvency proceeding whether in the U.S. or in any other jurisdiction. You explicitly understand and acknowledge that the treatment of Digital Assets in the event of such an insolvency proceeding is unsettled, not guaranteed, and may result in a number of outcomes that are impossible to predict reliably, including but not limited to you being treated as an unsecured creditor and/or the total loss of any and all Digital Assets reflected in your Celsius Account, including those in a Custody Wallet. https://celsius.network/terms-of-use https://celsius.network/terms-of-use
- fisherjeff 4y agoI’d think they’re more interested in buying some loans from Celsius (at a discount), not their deposits. Celsius would obviously lose money on those but gain some much-needed liquidity
- insaneirish 4y ago> Question: Who owns the deposited assets? Don't the original owners have dibs? If you give your money to something that looks like a bank, walks like a bank, but is not actually a bank, don't expect them to be held to the same legal standards as a bank.
- fancyfredbot 4y agoIf Goldman are raising money from investors it's probably because they think they can charge those investors for advising on and structuring a deal. It doesn't mean Goldman are buying Celsius. It's only a vote of confidence in Celsius to the extent that it means Goldman think they can find people who want to buy it and who will pay an investment bank to do so.
- joshcryer 4y agoThey are raising money for liquidation, they will pay back users a fraction of what they originally deposited, and then play with some rows on an excel spreadsheet and walk with millions. Celsius can't go back live because the bank run would destroy the entire thing just like with Terra.
- dragontamer 4y agoNote that Terra/Luna was an algorithmic stablecoins, while the Celsius situation is kinda-sorta more like a proper bank run. Rumors of losses from exposure to 3 arrow capital causing a stampede of users forcing Celsius to shut down. There is a Celsius coin that kinda is like terra but really is quite different. They seem to have completely different mechanics, aside from failing within a month of each other there is almost no other mechanical similarity between these situations.
- lolc 4y agoAnother similarity is that both are too complicated to explain.
- adrr 4y ago$2B for what was suppose to be $12B of AUM. Doesn’t sound like a vote of confidence. Question is what priority are funds distributed. Depositors are unsecured creditors. Are there secured creditors that would be before them?
- metacritic12 4y ago
- yieldcrv 4y agoAnybody trading the Celsius token? I had been expecting steeper dips so I missed that 600% flip. Not exactly my perfect storm for buying a dip, I usually wait for an information asymmetry in my favor, but shoulda just taken a slightly smaller position.
- vageli 4y agoThere will always be shouldas, just as there will always be more opportunities.
- yieldcrv 4y agoAbsolutely, that’s my philosophy too! I was just watching this one so closely to begin with
- moneywoes 4y agoWhere can you speculate on it?
- yieldcrv 4y agoI usually opt for an AMM like Uniswap, but I check for liquidity pools elsewhere too Just be sure to check liquidity depth and current network transaction fees beforehand
- henning 4y agoWouldn't be the first time Goldman made money off assets they knew were worthless dog shit that will eventually go to zero.
- mekster 4y agoIsn't their business to make assets look too expensive or cheap and earn the fee while spreading FUD both ways?
- jt2190 4y agoFull Story: https://www.coindesk.com/business/2022/06/24/goldman-sachs-raising-funds-to-buy-celsius-assets-sources/ https://www.coindesk.com/business/2022/06/24/goldman-sachs-r...
- dubswithus 4y agoWhat sort of assets? Why wouldn't investors just buy the same assets from an exchange?
- djbusby 4y agoThey doin Business assets (IP and shit) not crypto "assets"
- jkrubin 4y agoKey take away (IMO) is that Goldman has found a way to make money for Goldman doing this. Not a vote of confidence in crypto/Celsius.
- MrYellowP 4y agoThat's probably not a good thing for everyone else.
- vishnugupta 4y agoI don't have formal education in economics/finance; it took me a while to understand their language. Here's an attempt to explain it. Assets in this context means loan contracts between Celsius and its borrowers. When a finance company GLC (Great Lending Company) makes a loan of $100K to a borrower Joe it deposits $100K in Joe's account in exchange for Joe signing a contract (lets call it LC) that stipulates interest rate, repayment terms etc., On GLC's book the deposit of $100K becomes its liability and LC becomes asset. Now, GLC could also offer deposit services with attractive interest rates. The deposits needn't (and often do not) equal loans made. If inflows into GLC's reserves match outflows it typically works OK. In an economic up-cycle (low interest rate, positive consumer sentiment etc.,) everyone is happy. But when those assumptions change (usually high interest rate) some of GLC's borrower's begin to default. And it take just a fraction of borrowers to default for GLC to become insolvent. At the first sign of trouble GLC's depositors take their money out, popularly called a bank run. It thus depletes GLC's reserves making them take measures such as pausing withdrawals. At this point GLC has 3 options. 1. Borrow; they could use their assets (i.e., LCs) as collateral. 2. Sell their assets at a discount. 3. Go bust. As you can guess #1 and #2 are short term measures to tide over short-term down-cycle. But the current macro situation is in no way short-term. High interest rates are going to be here for a long time. If anything fed is pondering to raise interest rates as high and 5%. So for GLC #3 is the only option. This is where companies like Goldman come in. In a bankruptcy firesale they scoop up GLC's assets at steep discount. GLC could have assets worth $10B (i.e., it has made loan contracts worth $10B). A big chunk of those loans could be bad. But even if say 70% of them are bad Goldman could make a hefty profit of $1B by buying $3B of assets by paying $2B. The risk is at this point no one knows what those loan contracts are really worth. It takes quite a bit of time and effort to untangle these loan contracts that were made during boom time. GLC won't have neither of those resources in times of distress. So GLC and Goldman make rough calculations and agree on $2B price. It may turn out to be worth 0 (highly unlikely) or $5B or somewhere between. But either way it's highly likely that Goldman stands to make good profit out of this firesale. Because they have a robust balance sheet and resources they could wait out for years to recover from borrowers.
- hackernudes 4y agoThe loans that Celsius gave out to random people were over-collateralized with cryptocurrencies. I don't understand how they could have become insolvent from that. I guess they made bad investments with customer deposits or made uncollateralized loans to other parties.
- drumhead 4y agoIf I was a Goldman shareholder I'd be quite alarmed by this. What productive assets will they be getting for this money? Hard assets or just more coins?
- dereg 4y agoThat's not how it works. Goldman is soliciting money from private clients to buy the distressed assets. They will receive a fee for this. Goldman is not putting their own capital at risk. The assets are likely coins or stablecoins at a deep discount to market (80%+).
- deleted 4y ago[deleted]