Following the collapse of FTX at the beginning of November, two top executives from FTX and Alameda Research — Sam Bankman-Fried and Caroline Ellison — have been listed among traders with the top trading losses worldwide on Wikipedia. According to the Wiki page, Bankman-Fried’s and Ellison’s so-called ‘trading loss’ of 51 billion nominal U.S. dollars is at the top of the list in terms of the highest nominal amount of funds lost by trading.
Wiki article calls premature FTX fiasco $51B ‘trade loss’ despite ongoing investigation
The FTX fiasco has been a big deal and according to statistics, it was one of the biggest losses in the financial world in quite some time. In fact, according to Wikipedia’s page titled “List of trading losses”, FTX co-founder Sam Bankman-Fried (SBF) and Alameda Research CEO Carolyn Ellison are added to the top of the list for reportedly losing $51 billion. Is. The so-called trading losses tied to SBF and Ellison eclipsed the previous largest trading losses in 2021. Archegos Capital Management reportedly lost $10 billion on total return swaps before the collapse of FTX, and Archegos founder Bill Hwang reportedly lost it. All in two days.
Below the FTX and Archegos trading losses was Morgan Stanley’s and bond trader Howie Hubler’s loss of $9 billion in 2008, as the company and trader lost the money from credit default swaps. Four years later, JPMorgan Chase and Bruno Iksil lost $9 billion as well from credit default swaps. This year, the Chinese firm Tsingshan Holding Group tried to short the commodity nickel and lost $8 billion from the bad bets. Below China’s Tsingshan, Société Générale and Jérôme Kerviel lost $6.12 billion in 2008. FTX’s losses, however, surpass the individually listed trading losses by a long shot, and Wikipedia editors explain that the list includes “both fraudulent and non-fraudulent losses.”
Interestingly, Wikipedia editors detailed that funds linked to Bernie Madoff’s Ponzi scheme were not included. Madoff’s scheme reached the same $50 billion mark as FTX, but Wikipedia editors state that “Madoff did not lose most of this money in trading.” In recent times, some have drawn many parallels between Bernie Madoff and the SBF. The interesting thing about the Wikipedia article is that the editors decide not to include the Madoff fall because it was a Ponzi scheme, but the FTX fiasco is included in the list. This is despite the fact that the FTX investigation is still ongoing, and the matter has not been settled in court.
Did FTX Really Lose $51 Billion in Bad Trades?
There’s a slew of information that claims FTX’s and Alameda’s executives were “inexperienced and unsophisticated individuals,” and another report that shows it was possible that Alameda Research CEO Caroline Ellison was allegedly a horrible margin trader. Further, there’s a lot of speculation that FTX’s and Alameda’s operations were Ponzi-like systems. Some have remarked that Alameda didn’t even really trade crypto, but rather “‘invested’ $8B across 448 venture-stage startups, most of which have ‘1-10’ employees and zero documentation.” Furthermore, according to nakedcapitalism.com’s Yves Smith, no one from the media has asked what happened to the $3.3 billion reportedly lent to SBF by Alameda. The alleged loans Alameda Research made totaled $4.1 billion, with most going to SBF, and the data was disclosed in a report published by the Financial Times (FT).
The FT report says that SBF received $1 billion in personal loans, and $2.3 billion was given to an SBF entity called Paper Bird. Mark Karpeles, former CEO of Mt Gox, put together an FTX entity listing that shows Paper Bird is one of the top companies under the SBF’s wing. So far, Smith of Navycapitalism.com says reporters interviewing SBF haven’t asked him where the $3.3 billion went. Furthermore, SBF never really explains in its interviews why top FTX and Almeida execs were given “large personal lines of credit”. Instead, SBF describes a strange margin trading process, and reports claim Top executives or “certain accounts” were not required to borrow or provide collateral to participate in FTX’s asymmetrical margin trading system.
With an ongoing investigation and the courts just getting involved in the FTX fiasco, it’s quite possible that Wikipedia’s judgment call to include FTX’s alleged ‘trading error’ in the top trading losses list may be wrong. There’s a possibility that Wikipedia editors may have to re-categorize the FTX case, in the same manner that was applied to Madoff’s $50 billion blunder. The point is, as of right now, there’s not enough evidence to say the FTX and Alameda fiasco was in fact a legitimate “trading loss,” or that most of the $51 billion cited in Wikipedia’s article was lost in trading mistakes.
