5 ms·

So if I'm understanding this correctly, a trader managed to: 1. Buy a bunch of mobilecoin, a thinly traded coin, below $10. 2. Single handedly pump the coin pri

by s17n 4y ago

So if I'm understanding this correctly, a trader managed to: 1. Buy a bunch of mobilecoin, a thinly traded coin, below $10. 2. Single handedly pump the coin price to $60, due to the market's illiquidity 3. Instead of trying to sell at $60 (which wouldn't work because there wasn't actually a market for the coin), the trader simply borrowed dollars from FTX at the $60 value 4. The coin price eventually returned to $10 but the trader had effectively cashed out at a higher price by borrowing from ftx against the (now worthless) collateral 5. Presumably, the trader then simply defaulted on his loans to FTX and kept the money. Is this right? Crazy if true.

TuringNYC 4y ago
Sounds right, but there is also point 5 5. Trader who borrowed ("cashed out") is now being margin called by lawyers who are managing the FTX bankruptcy. 6. Investigation of whether this was an insider deal to funnel away money from FTX, because no legitimate margin desk, CVA or MVA process would allow such a thing.
- notch656a 4y ago
  Just a guess for possible other steps: -1. They acquired fake/stolen KYC credential 0 . Their collateral was anonymized 7. The investigation fails to uncover who it was.
- super256 4y ago
  I mean, it wasn't even FTX who bought the bankrupt position, but Alameda. (since Alameda was the backstop provider) Bankrupt positions were usually sold for 1% under market price to backstops, so if mobile coin traded at 60 dollars and trader goes bankrupt, Alameda bought the position for 59.4 dollars per mobile coin (what a sweet deal!). The trade is done for trader. I am not convinced that if you go bankrupt, because you bought some GME at $120, you can go after the counter party who sold you GME at that price. (You can try, but it's some bad faith stuff). This trade underlines again why the commodities exchange act is so vital to the whole country, and shows just how crappy FTX liquidation model is. [1] Also, I really like trade because it's smart and funny. [1] CME Group CEO Terrence Duffy said it too! Here: https://youtu.be/V4SWraem1e0?t=2963 https://youtu.be/V4SWraem1e0?t=2963
  - shorthistory 4y ago
    Would you even need to take anonymization steps for this as another commenter has suggested (fake/stolen KYC and anonymized collateral)? It seems to me that whomever was making these trades knew (suspected/or had actual inside operational information-but possibly from prior trades) that Alameda would buy the position and he would not be liable for the subsequent deflation of price. If you knew that Alameda were going to backstop at 1% under the market price, this seems like an obvious trade to make. But how would you know that Alameda were going to do that without inside information?
    - super256 4y ago
      1) No, no need for fake KYC. It's a fair trade. 2) The information that backstop providers buy the position once your margin fraction is >= 1.5% is public info from documentation [1][2]. 3) It is an obvious trade and theoretically still possible on exchanges which have backstop providers and/or "insurance funds" to prevent clawbacks. (It depends on their risk model whether they allow you to open such a position in the first place, though. I don't know about their models at all!) But just because it is obvious, it doesn't mean it is easy to pull off. Most people fail at the first step, which is that you have initial margin to open a position and then actually move the price in your favour. Then you have people, who will try to bet against you, hunt your stops etc. [1] Backstops: https://help.ftx.com/hc/en-us/articles/360024479392-Backstop-Liquidity-Provider-Program https://help.ftx.com/hc/en-us/articles/360024479392-Backstop... [2] Cashing out: https://youtu.be/0ms7u__Gbys?t=87 https://youtu.be/0ms7u__Gbys?t=87
      - super256 4y ago
        Oh, btw. This trade is similar to the mango trade as described by Matt Levine. https://www.bloomberg.com/opinion/articles/2022-10-12/defi-discovers-new-market-manipulations?leadSource=uverify%20wall https://www.bloomberg.com/opinion/articles/2022-10-12/defi-d... Also a very funny trade!
      - super256 4y ago
        Also, it's supposed to say "<= 1.5%". Sorry!
TylerE 4y ago
He could even pay them back and keep 5:6ths of the loot free and clear.
- shorthistory 4y ago
  How would that work? He would still be liable for the full amount and the cost of servicing the margin loan. Or are you suggesting the bankruptcy proceedings will settle for a lower figure?
  - 0cf8612b2e1e 4y ago
    Depending on how the margin was setup, the thinking is that the trader could surrender the (now valued at $10 coins).
    - hgsgm 4y ago
throw389274 4y ago
Here's a personal anecdote which may have served as a warning to their collapse. I bought ~1000 mobile coins when they were a couple dollars, sold most of them at $60 and bought BTC, however it was at precisely that time FTX refused to let me withdraw them. They claimed it was because my country was introducing new legislation to regulate cryptocurrencies and it was to prepare for the new rules. They however jumped the gun and just blocked my country the moment it was announced, which was a couple months before the new rules were actually set to go into effect. I tried logging in from other countries with a VPN, but my account was already flagged, and their customer support said I had to show a valid passport or government issued ID from another country to prove I was not in the country where I was, which was obviously not possible. I was never able to withdraw my BTC. I suspect this was the start and they were already short funds (which may already be a known fact now, I just haven't been following too closely), and they were just looking for excuses to take whatever they could from their users.
- hayd 4y ago
  Thieves.
mrep 4y ago
Can't read the article but how did they cash out? Use the mobilecoin as collateral to buy btc and transfer the btc out? Example: take $6 in mobile coin and pump to 60, then borrow $30 using the $60 as collateral and buy $30 worth of bitcoin and finally transfer that bitcoin out. You then have a 5x return ignoring cost to pump?
deleted 4y ago
[deleted]

by s17n 4y ago

TuringNYC 4y ago

Sounds right, but there is also point 5 5. Trader who borrowed ("cashed out") is now being margin called by lawyers who are managing the FTX bankruptcy. 6. Investigation of whether this was an insider deal to funnel away money from FTX, because no legitimate margin desk, CVA or MVA process would allow such a thing.

notch656a 4y ago
Just a guess for possible other steps: -1. They acquired fake/stolen KYC credential 0 . Their collateral was anonymized 7. The investigation fails to uncover who it was.
super256 4y ago
I mean, it wasn't even FTX who bought the bankrupt position, but Alameda. (since Alameda was the backstop provider) Bankrupt positions were usually sold for 1% under market price to backstops, so if mobile coin traded at 60 dollars and trader goes bankrupt, Alameda bought the position for 59.4 dollars per mobile coin (what a sweet deal!). The trade is done for trader. I am not convinced that if you go bankrupt, because you bought some GME at $120, you can go after the counter party who sold you GME at that price. (You can try, but it's some bad faith stuff). This trade underlines again why the commodities exchange act is so vital to the whole country, and shows just how crappy FTX liquidation model is. [1] Also, I really like trade because it's smart and funny. [1] CME Group CEO Terrence Duffy said it too! Here: https://youtu.be/V4SWraem1e0?t=2963 https://youtu.be/V4SWraem1e0?t=2963
- shorthistory 4y ago
  Would you even need to take anonymization steps for this as another commenter has suggested (fake/stolen KYC and anonymized collateral)? It seems to me that whomever was making these trades knew (suspected/or had actual inside operational information-but possibly from prior trades) that Alameda would buy the position and he would not be liable for the subsequent deflation of price. If you knew that Alameda were going to backstop at 1% under the market price, this seems like an obvious trade to make. But how would you know that Alameda were going to do that without inside information?
  - super256 4y ago
    1) No, no need for fake KYC. It's a fair trade. 2) The information that backstop providers buy the position once your margin fraction is >= 1.5% is public info from documentation [1][2]. 3) It is an obvious trade and theoretically still possible on exchanges which have backstop providers and/or "insurance funds" to prevent clawbacks. (It depends on their risk model whether they allow you to open such a position in the first place, though. I don't know about their models at all!) But just because it is obvious, it doesn't mean it is easy to pull off. Most people fail at the first step, which is that you have initial margin to open a position and then actually move the price in your favour. Then you have people, who will try to bet against you, hunt your stops etc. [1] Backstops: https://help.ftx.com/hc/en-us/articles/360024479392-Backstop-Liquidity-Provider-Program https://help.ftx.com/hc/en-us/articles/360024479392-Backstop... [2] Cashing out: https://youtu.be/0ms7u__Gbys?t=87 https://youtu.be/0ms7u__Gbys?t=87
    - super256 4y ago
      Oh, btw. This trade is similar to the mango trade as described by Matt Levine. https://www.bloomberg.com/opinion/articles/2022-10-12/defi-discovers-new-market-manipulations?leadSource=uverify%20wall https://www.bloomberg.com/opinion/articles/2022-10-12/defi-d... Also a very funny trade!
    - super256 4y ago
      Also, it's supposed to say "<= 1.5%". Sorry!

TylerE 4y ago

He could even pay them back and keep 5:6ths of the loot free and clear.

shorthistory 4y ago
How would that work? He would still be liable for the full amount and the cost of servicing the margin loan. Or are you suggesting the bankruptcy proceedings will settle for a lower figure?
- 0cf8612b2e1e 4y ago
  Depending on how the margin was setup, the thinking is that the trader could surrender the (now valued at $10 coins).
  - hgsgm 4y ago

throw389274 4y ago

Here's a personal anecdote which may have served as a warning to their collapse. I bought ~1000 mobile coins when they were a couple dollars, sold most of them at $60 and bought BTC, however it was at precisely that time FTX refused to let me withdraw them. They claimed it was because my country was introducing new legislation to regulate cryptocurrencies and it was to prepare for the new rules. They however jumped the gun and just blocked my country the moment it was announced, which was a couple months before the new rules were actually set to go into effect. I tried logging in from other countries with a VPN, but my account was already flagged, and their customer support said I had to show a valid passport or government issued ID from another country to prove I was not in the country where I was, which was obviously not possible. I was never able to withdraw my BTC. I suspect this was the start and they were already short funds (which may already be a known fact now, I just haven't been following too closely), and they were just looking for excuses to take whatever they could from their users.

hayd 4y ago
Thieves.

mrep 4y ago

Can't read the article but how did they cash out? Use the mobilecoin as collateral to buy btc and transfer the btc out? Example: take $6 in mobile coin and pump to 60, then borrow $30 using the $60 as collateral and buy $30 worth of bitcoin and finally transfer that bitcoin out. You then have a 5x return ignoring cost to pump?

deleted 4y ago

[deleted]