Tag Archives: Hedge funds

Short Sellers Down $81 Billion in 2023

Well, that was fast! With 2023 less than a month old, short sellers have already lost $81 billion.


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Many are running for the exits. From a new report from The Wall Street Journal:

Short sellers who have incurred hefty losses are actively trimming their positions, said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners. Investors betting against stocks have racked up $81 billion of mark-to-market losses on short positions this month through Thursday after accumulating $300 billion in gains in 2022, Mr. Dusaniwsky said.

Markets have rallied this year, with meme stocks leading the way. As short sellers race to close their positions, their losses are likely to grow:

Signs that inflation is cooling have stoked bets among investors that the Federal Reserve will pivot from raising interest rates to cutting them as soon as the second half of the year. That has helped risky assets across the board rise. Especially risky corners of the market, such as stocks with high short interest, have rallied even more. Analysts say that has likely forced short sellers to close out bearish positions to cut their losses—resulting in what is known on Wall Street as a short squeeze. 

Some of the most heavily shorted stocks have been among the best performers so far this year.

Meme stocks like AMC Entertainment Holdings, GameStop, and Bed Bath & Beyond are all up over 20%. The broader S&P 500 is up 6% for the year so far.

In addition to huge market losses, short sellers are also paying stratospheric interest rates to borrow shares. Rates to borrow AMC shares have ranged between 20% and over 100% per year in recent weeks.

It’s no wonder that some short sellers may be resorting to illegal tactics. There is evidence of widespread naked short selling in some heavily shorted stocks.

Common and preferred shares of AMC have seen millions of fails to deliver. These failed trades often occur when a short seller sells stock without borrowing it.

This is called naked short selling and it’s illegal under federal law. It’s also a powerful way to push down a stock’s price without paying any interest.

The coming months could push many short sellers to the brink.

A race to close out positions may cause heavily shorted stocks to rally further. Meanwhile, a more dovish Fed could cause a general market rally, adding to their losses.

Short sellers should avoid meme stocks like the plague. A heavily shorted stock with a passionate fan base is simply too hot to handle.

What do you think is next for short sellers? Leave a comment at the bottom and let me know!

More on markets:

Major Hedge Fund Down 54% — Survival in Doubt

Citadel’s Illegal Trades — The Tip of the Iceberg?

As Fed Rates Peak, Are Markets Ready to Take Off?

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Photo: AMC CEO Adam Aron

Citadel’s Illegal Trades — The Tip of the Iceberg?

South Korea has fined Citadel Securities for illegal stock trades made with high frequency algorithms. From a report out last night in Reuters:


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South Korea’s financial regulator has imposed a fine of 11.88 billion won ($9.66 million) on U.S.-based Citadel Securities, saying it disturbed the local stock market with high-frequency algorithm trading.

The Financial Services Commission (FSC) said in a statement released on Thursday the firm had distorted stock prices with artificial factors, such as orders on the condition of “immediate or cancel” and by filling gaps in bid prices.

These illegal trades were no isolated incident. Regulators found improper trades in thousands of stocks over a period of nearly a year:

The firm carried out such trading on an average of 1,422 stocks per day from Oct. 2017 to May 2018, totalling more than 500 billion won worth of trades, according to the statement.

Citadel’s illegal trades stand out as some of the most egregious ever in South Korea:

The Commission said it was the first time it had imposed fines on such high-frequency trading on the South Korean stock market, which has a high proportion of retail investors and little competition among algorithmic traders.


Citadel used strategies such as flash orders to gain an illegal advantage over other traders. This practice involves offering to buy or sell and then retracting the order in a fraction of a second.

Flash orders let you see the prices at which other traders are willing to buy or sell. This gives you an illegal edge over your competition.

In Korea, Citadel used these strategies to take advantage of mom and pop retail traders, which I find particularly heinous.

Citadel’s algos don’t stop in Korea.

The firm was recently fined by the US Financial Industry Regulatory Authority (FINRA) for frontrunning its customers. By placing trades ahead of customers, Citadel made money for its own account.

Breaking the law appears to be quite lucrative for Citadel.

Citadel Securities posted record revenues of $7.5 billion last year. Citadel’s hedge fund made even more, approximately $28 billion.

I think Citadel is using these illegal flash orders all over the world. They may also be using other illicit tactics we don’t know about yet.

After all, if you go to the trouble to create a program that can make you money, why not use it in as many places as possible?

The reality is that these speeding tickets will never stop Citadel. Fines in the millions are a cost of doing business for a multi-billion dollar operation.

Securities regulators worldwide should find out what exactly Citadel is doing in their markets. If they find more wrongdoing, they should simply ban the firm from trading for a period of years.

Nothing but a severe penalty will stop them.

Who says crime doesn’t pay?

What do you think is the future for Citadel? Leave a comment at the bottom and let me know!

More on markets:

Major Hedge Fund Down 54% — Survival in Doubt

Tiger Global Losing $185 Million a Day

As Fed Rates Peak, Are Markets Ready to Take Off?

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Photo: Citadel CEO Ken Griffin

Major Hedge Fund Down 54% — Survival in Doubt

In a brutal year for hedge funds, few have suffered more than Light Street Capital. The fund lost 54% in 2022, over $1 billion.


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From a report out last night in Bloomberg:

Light Street Capital Management’s hedge fund tumbled 54% in 2022, according to a person familiar with the matter, one of the industry’s worst performances last year. 

That drop rivals the 56% decline for Tiger Global Management, and is steeper than Lone Pine Capital’s 36% loss and Whale Rock Capital Management’s 45% slide.  

Light Street was the classic crossover hedge fund. It made big bets on technology companies, both public and private.

Many of those bets were at eyewatering valuations. Tech was crushed in 2022, pushing many such funds to the brink.

What strikes me is how simple Light Street’s strategy was. Its biggest holdings were a who’s who of growth stocks:

Anyone could’ve bought Tesla and hoped for the best. Why should investors pay Light Street 2% of assets and 20% of gains to do what they could do themselves?

Light Street’s 54% loss is abysmal even compared to benchmarks. The S&P 500 lost 18% last year, while the NASDAQ lost 33%.

Investors could’ve bought index funds and avoided hundreds of millions in losses, not to mention outrageous fees.

No wonder the California Public Employees Retirement System (Calpers), one of the most astute investors in the market, hasn’t invested in hedge funds since 2014.

The future for Light Street is bleak. It cannot charge a performance fee again until it more than doubles its fund.

That’s extremely hard to do. And without those juicy performance fees, the best traders will leave.

This is the kind of spiral that took down Melvin Capital. Light Street could be next.

I’m a huge bull on technology. But no stock is a good buy at any price.

What do you think the future holds for hedge funds? Leave a comment at the bottom and let me know!

More on markets:

Tiger Global Losing $185 Million a Day

As Fed Rates Peak, Are Markets Ready to Take Off?

Is SBF Laundering Money As We Speak?

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Photo: Glen Kacher, Founder of Light Street Capital

Hedge Funds Lose Billions as FTX Implodes

Hedge funds trusted crypto exchange FTX with billions of dollars. Now, they stand to lose it all.


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Some funds have lost most of their assets and may cease to exist. From a report out overnight in the Financial Times:

Hedge funds have billions of dollars stuck on failed cryptocurrency exchange FTX and could face years of waiting to recover anything at all from a marketplace they once believed to be one of the industry’s most reliable bets.

“I lost my investors’ money after they put faith in me to manage risk and I am truly sorry for that,” tweeted Travis Kling, founder of Ikigai Asset Management, which has a “large majority” of its hedge fund’s assets stuck on FTX. “I have publicly endorsed FTX many times,” he added. “I was wrong.”

Other funds, such as Galois Capital, had half or more of their assets on FTX. It could take years to recover those assets, if they’re recoverable at all.

Crypto exchanges typically hold customers’ money longer than stock brokers. This leaves customers more exposed to problems at the exchange.

To add insult to injury, hackers may be looting what little money FTX has left. A series of abnormal transactions have vacuumed hundreds of millions out of the bankrupt exchange.

Rather than place their trust in FTX, hedge funds should’ve used a service like Coinbase Custody.

Coinbase Custody puts customer assets in segregated cold storage. Its parent company is US-based.

As a public company, Coinbase has to make disclosures FTX would never dream of. And it even has SOC 2 security certification.

An exchange like Coinbase is a real, grown-up company. FTX was an amphetamine-fueled commune in a questionable jurisdiction.

But hey, why not trust them with billions in your investors’ money?

I expect to see a lot of the funds that did business with FTX shut down. It’s hard to trade when all your money’s gone.

Investors big and small should be careful about who they do business with. Stick to companies in reputable jurisdictions with the right controls in place.

It turns out the brave new world of crypto is a lot like the old world: full of scammers. Buyer beware.

After the implosion of FTX, who do you think is next? Leave a comment at the bottom and let me know!

More on tech:

How SBF’s Hedge Fund Imploded

Is SBF Headed to Prison?

FTX Blows A Massive Hole in Tiger’s Portfolio

Note: I have no affiliation with Coinbase.

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Photo: FTX CEO Sam Bankman-Fried

FTX Blows A Massive Hole in Tiger’s Portfolio

It’s going from bad to worse at Tiger Global Management. As crypto exchange FTX implodes, Tiger could lose hundreds of millions of dollars.


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From a new report in Forbes:

Tiger Global Management appears to have just taken another hit.

The hedge fund headed by billionaire Chase Coleman has been among the most prominent investors in Sam Bankman-Fried’s FTX crypto exchange.

On Tuesday, Binance CEO Changpeng Zhao tweeted that his firm was buying FTX’s non-U.S. businesses to rescue it from what he said was a “significant liquidity crunch.”

The hedge fund giant made multiple, huge investments in FTX:

Tiger was part of a group of investors in FTX’s January Series C round that valued the company at $32 billion. It previously also participated in a Series B round that valued FTX at $25 billion. During that raise, FTX took a page out of Elon Musk’s playbook by raising exactly $420.69 million.


Both the Series B and C raised about $400 million. A giant like Tiger would likely have written checks of at least $100 million in each of those rounds.

I’ve seen Tiger in numerous deals, and their typical check size was $100 million or more.

Now, Tiger will likely take a total loss on its FTX stake. Binance is expected to buy the exchange for essentially nothing, simply assuming its liabilities.

This means Tiger could be looking at hundreds of millions of dollars, up in smoke.

This comes at what’s already a terrible time for Tiger Global. Its fund is down 55% for the year, with losses accelerating last month.

Meanwhile, it has only marked down its private portfolio by 8%. That is far too little given the huge losses in the NASDAQ, which means more markdowns to come.

Could this be the straw that breaks the camel’s back? Only time will tell.

But even without the implosion of FTX, I expect Tiger to liquidate.

Its fund must more than double to get back to its high point and start charging performance fees again. Those fees make up most of a hedge fund manager’s pay.

Tiger has taken huge losses in both public and private markets. Why does anyone still trust them with their money?

Were I an investor in Tiger, I’d be dumping every cent of it yesterday.

What do you think the future holds for Tiger? Leave a comment at the bottom and let me know!

More on markets:

Hedge Fund Giant Losing $40 Million a Day

Tiger Global Down 52% — Losses Over $18 Billion

Hedge Fund Manager’s Arrest Shows How Market Manipulation Works

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Photo: FTX CEO Sam Bankman-Fried

Hedge Fund Giant Losing $40 Million a Day

The bloodletting continues at hedge fund giant Tiger Global Management. The fund lost approximately $40 million a day in October.


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From a new report in the Financial Times:

Losses at Tiger Global Management continued to mount in October after the New York-based hedge fund was buffeted by the whipsawing value of technology stocks in the US and a sell-off in China.

The firm’s flagship hedge fund lost 5.4 per cent in October, taking losses this year to a new low of 54.7 per cent, according to a person with knowledge of the figures.

Tiger managed about $17 billion in assets at midyear. With October’s 21 trading days, that 5% loss amounts to roughly $40 million per day or over $6,000,000 per hour.

The NASDAQ index of technology stocks rose slightly last month. This underscores Tiger’s abysmal stock picking.

Tiger’s losses may be even worse than they appear.

Its $40 billion portfolio of private tech startups dwarfs its public holdings. Tiger values those companies itself.

Has Tiger really taken markdowns commensurate with its huge losses in public stocks?

I doubt it. Why make a bad situation look even worse?

The end game for Tiger is liquidation.

Their fund would have to more than double just to get back to its high point. Only then could the partners start collecting that juicy 20% performance fee again.

That fat fee is the biggest prize in hedgefundland. You can bet these traders won’t want to give it up.

If Tiger liquidates and the partners start a new fund, they can start charging performance fees on day one. The slate is clean!

If I were an investor in Tiger, I’d be dumping my shares. These losses are huge and show no signs of improving.

Why pay Tiger’s fees when you can park your money in a low fee index fund instead?

What do you think the future holds for Tiger? Leave a comment at the bottom and let me know!

More on markets:

Tiger Global Down 52% — Losses Over $18 Billion

Hedge Fund Manager’s Arrest Shows How Market Manipulation Works

VC’s Sour on China — Funding Down 44%

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Photo: Tiger Global CEO Chase Coleman

Latest Report: AMC Fails to Deliver Hit Over 2 Million

Fails to deliver in shares of AMC Entertainment Holdings have hit over 2 million shares, according to a new SEC report released this week.


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Failed trades peaked at 2,161,808 shares on September 28th. Fails to deliver remained elevated through the end of September, the last day covered in the report.

AMC’s new preferred shares, trading under the symbol APE, also saw large numbers of failed trades. They peaked on the same day, at 466,507 shares.

I find it suspicious that fails to deliver in both shares would peak at the exact same time. My hunch is that hedge funds launch coordinated attacks on both share classes at once.

One powerful weapon in their arsenal is naked short selling. This involves selling short shares you never borrowed.

Naked shorting is a powerful way to push down a stock’s price. If you never have to find shares to borrow or pay interest, you can short as many as you want!

Naked short sales often leave a trail of failed trades. You can’t settle a trade when the shares never existed.

Naked short selling is illegal in most circumstances. But why let that trouble you?

Another key piece of evidence is how out of line AMC’s fails to deliver are compared to much larger stocks. Here’s a snapshot from September 28th:

Alphabet (Google): 92

Amazon: 21,012

Apple: 11,083

Microsoft: 60,869

AMC: 2,161,808

APE: 466,507

These tech giants are hundreds of times the size of AMC. So why does AMC have dramatically more trades failing to clear?

Perhaps the tech giants are too big for hedge funds to attack.

Our markets rely on the confidence of investors. But it’s hard to maintain that confidence when stocks see huge numbers of failed trades and no one investigates.

What do you think of the chaotic market in AMC shares? Leave a comment at the bottom and let me know!

More on markets:

New Report: Millions of Fails to Deliver in AMC and APE Shares

Tiger Global Down 52% — Losses Over $18 Billion

Hedge Fund Manager’s Arrest Shows How Market Manipulation Works

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Tiger Global Down 52% — Losses Over $18 Billion

Note: This is not financial advice.

Hedge fund giant Tiger Global Management has lost the majority of its capital in 2022. From a new Bloomberg report:


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Tiger Global Management and Whale Rock Capital Management were among stock-picking hedge funds to report September losses as equity markets tumbled.  

Chase Coleman’s Tiger Global fell 4.4% for the month, extending its decline for the year to 52%, according to people familiar with the matter who asked not to be identified discussing the results. The New York based firm’s long-only fund tumbled 9.6% in September to bring its year-to-date slide to 66.5%.

Tiger managed about $35 billion at the beginning of the year, putting its losses at over $18 billion.

Those losses could be far larger when Tiger’s startup investments are taken into account. Those bets on opaque private companies are hard to value.

What we do know is that tech startup valuations are down. This is especially true for the late stage companies Tiger favors, which closely track the public markets.

With losses like this, a brutal math sets in.

Tiger must more than double its capital just to get back where it was at the beginning of the year. Worse yet, it’s long-only fund has to triple!

That’s incredibly hard to do.

But until Tiger wins back its losses, it won’t be able to charge performance fees. These juicy 20% fees are the lifeblood of hedge funds.

Without those fees, bonuses will be slim to nonexistent.

The top performers will leave for greener pastures. Those that stay are likely to be demoralized.

I suspect Tiger will close the long-only fund, and perhaps the entire business. After all, starting fresh is an opportunity to earn juicy fees again.

Tiger’s abysmal performance trails many index funds with much lower fees.

I own Vanguard 500 Index Fund Admiral Shares, which are down just 23% this year. They have an expense ratio of 0.04% and no performance fee.

Tiger’s investors would do well to ditch the expensive and poorly performing fund and give Vanguard a call.

Do you think Tiger will survive? Leave a comment at the bottom and let me know!

More on markets:

Hedge Fund Giant Tiger Loses Over $18 Billion — Long Fund Down 64%

New Report: Millions of Fails to Deliver in AMC and APE Shares

Q3 Venture Funding Slows to a Crawl

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Photo: Tiger Global CEO Chase Coleman

Hedge Fund Manager’s Arrest Shows How Market Manipulation Works

Hedge fund manager Neil Phillips has been arrested in Spain this week.

He is charged with masterminding a market manipulation scheme that reached from the UK to Asia. His strategy shows how hedge funds manipulate markets from currencies to stocks.


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From a new report in Bloomberg:

Phillips was charged with conspiring to manipulate the US dollar-South African rand exchange rate in late 2017. The indictment, which was returned in March but previously sealed, describes at least two co-conspirators, raising the possibility of charges against more people.

Neil Phillips

Phillips faces up to 20 years in prison if convicted. His scheme involved buying an option on the dollar-rand exchange rate, then manipulating the exchange rate to make his option pay off:


With the option set to expire, Phillips began making spot trades in an effort to push the exchange rate lower late on Christmas Day, while directing a Singapore-based employee of an unidentified bank to sell $725 million in exchange for more than 9 billion rand, according to prosecutors. That pushed the exchange rate below the barrier, triggering the $20 million option. Phillips collected more than $15.6 million from the deal and also allocated $4.34 million to an unidentified client.

Phillips’ moves show us how market manipulation works.

He took advantage of thin trading late Christmas Day. Markets are easier to manipulate when trading is light.

He also used trades in an underlying asset to benefit an options position. The same approach is likely common in stocks.

Phillips even went as far as involving a co-conspirator on the other side of the world in the hopes of hiding his illegal trades. But he was foolish enough to discuss the whole thing in chat messages on his Bloomberg terminal.

Bloomberg routinely gives chat records to the government in subpoenas. Phillips might not be facing prison had he used an encrypted app like Signal.

I find the Phillips case fascinating for how it trains us to spot hedge fund manipulation of markets.

If we suspect price manipulation, we should look for big trades at odd times. Major sell order right before the close on the last trading day of the year?

It might be worth a look.

Where do you see signs of market manipulation? Leave a comment at the bottom and let me know!

There will be no post on Monday for the holiday. Have a great Labor Day weekend everyone! 👋🥳

More on markets:

AMC Fails to Deliver Pass 700,000 in New Report

Why Hedge Funds May Pile into APE Shares

Is Melvin’s Gabe Plotkin Headed to Prison?

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Photo: “prison fence” by Brad.K is licensed under CC BY 2.0.

AMC Fails to Deliver Pass 700,000 in New Report

Note: This is not financial advice.

Fails to deliver in shares of AMC Entertainment Holdings hit massive levels this month.

Failed trades peaked at over 700,000 shares, according to a report out this morning from the SEC. They remained in six figure territory for all but two days in the period, which covers the first half of August.


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This many failed trades is highly unusual for most stocks. Let’s zoom in on August 8th and compare AMC with some of the largest stocks in the market:

Alphabet (Google):: 22

Amazon: 533,744

Apple: 379,843

Microsoft: 0

Tesla: 49,705

AMC: 723,636

Keep in mind, these other companies are dramatically larger. But month after month, little old AMC has far more failed trades.

Fails to deliver can happen for benign reasons, like administrative errors. But why would such errors affect this stock way more than others, time and time again?

The more likely explanation is naked short selling. This involves selling short shares you never actually borrowed.

It’s a powerful weapon to push down a stock’s price.

You don’t have to find any shares to borrow. And you don’t have to pay any interest to borrow them!

This means you can sell short an unlimited number of shares. Awesome, right?

It’s illegal for a hedge fund to do this. But that may not stop them, especially given lax enforcement.

But perhaps the most incredible thing is that 723,636 may understate the number of trades that are failing.

The Depository Trust & Clearing Corporation (DTCC) puts failed trades that don’t resolve for a long period into an “obligation warehouse.” At that point, they essentially disappear.

Earlier this month, over 9 million shares worth of failed trades in AMC stock suddenly vanished.

Maybe the DTCC were busy beavers cleaning it all up. Or maybe they just swept them under the rug.

We won’t know until the DTCC and SEC offer transparency on what happens to failed trades.

Something tells me we’ll be waiting a while.

What do you think of the new SEC report? Leave a comment at the bottom and let me know!

More on markets:

AMC’s 9 Million Missing Shares

Morgan Stanley Investigation Spreads to Multiple Countries

Is Melvin’s Gabe Plotkin Headed to Prison?

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Photo: Melvin Capital founder Gabriel Plotkin