Babel Finance Lost Over $280 Million in Proprietary Trading With Customer Funds (theblock.co) 35
Babel Finance, the troubled Asian crypto lender that abruptly halted client withdrawals last month, suffered heavy losses due to proprietary trading with customer funds, according to its restructuring proposal deck obtained by The Block. From a report: The deck, dated July 2022, reveals that Babel Finance lost more than $280 million in bitcoin (BTC) and ether (ETH) due to its proprietary trading failure. Specifically, it lost around 8,000 BTC and 56,000 ETH in June after facing liquidation due to a significant market downturn. "In that volatile week of June when BTC fell precipitously from 30k to 20k, unhedged positions in [proprietary trading] accounts chalked up significant losses, directly leading to forced liquidation of multiple Trading Accounts and wiped out ~8,000 BTC and ~56,000 ETH," reads the deck. Due to these massive losses, Babel's lending and trading departments were unable to meet margin calls from counterparties.
"Conclusion: Single point of failure - The Proprietary Trading team's failed operation falls outside of the company's normal business which has otherwise been running smoothly with proper management and control," according to the deck. Babel Finance describes its proprietary trading business as a "risky" business yet it failed to hedge its positions. "A Proprietary Trading team operates several Trading Accounts not controlled or monitored by Trading Department; no trading mandate or risk controls were implemented for these accounts; no PnL [profit and loss] was reported," per the deck.
"Conclusion: Single point of failure - The Proprietary Trading team's failed operation falls outside of the company's normal business which has otherwise been running smoothly with proper management and control," according to the deck. Babel Finance describes its proprietary trading business as a "risky" business yet it failed to hedge its positions. "A Proprietary Trading team operates several Trading Accounts not controlled or monitored by Trading Department; no trading mandate or risk controls were implemented for these accounts; no PnL [profit and loss] was reported," per the deck.
Proprietary trading with customer funds (Score:3)
Always invest other peoples' money... (Score:2)
He doesn't follow his own advice (Score:3)
He came close to going bust, but his creditors thought they could recover more money from him if they let him keep some of his money and use his "brand", aka scam the rubes. This is where stuff like Trump Steaks, Trump University, Trump Vodka, etc came from. The whole gilded toilet thing that creates an air of fake high class living. Laundering money for the R
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Take away his birthright and he's be the night manager at a quicky mart and a failed used car salesmen.
He might have been a successful used car salesman, at least in the right market.
I don't think so (Score:2)
Trump is an absolutely terrible negotiator. Folks who can't tell the difference between reality and TV don't get that, and our media didn't run the stories needed to show how bad a negotiator he was because, well, they wanted a horserace in 2016 for the ratings.
It's legit terrifying that our entir
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What Trump did well was public relations. He made sure he was always out there in the media. He made his name a household word in New York, then in the US in general. He had television and movie cameos. He's just one of those people who were famous for being famous. He was always a blowhard too; from his full page ads claiming the Central Park Five kids should be executed (he never apologized) to his earlier failed attempts to run for president (even before he was famouse outside of NYC), he had a problem
It's a bit more than just that (Score:2)
There will never be another Trump, because nobody can stay in the public eye like that anymore. There's too much competing for attention now.
Odd (Score:1)
That's Trump's Art o' The Deal 101.
One thing about politics I never understood, is why people who dislike Trump think about him way more often than any of Trump's supporters.
Get a room already.
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That's Trump's Art o' The Deal 101.
One thing about politics I never understood, is why people who dislike Trump think about him way more often than any of Trump's supporters.
Get a room already.
Well, there is all the criminal damage caused to The Nation, plus the grievance of a most-solid loss of democracy, which affects our global leadership.
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One thing about politics I never understood, is why people who dislike Trump think about him way more often than any of Trump's supporters.
Standard ad hominem: if you can't attack the argument, attack the arguers. Yawn.
If the topic is "bankruptcy" or "scamming gullible people" or "no regulation leads to economic problems for other people", Trump is on topic. In this case we have a hat trick.
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One thing about politics I never understood, is why people who dislike Trump think about him way more often than any of Trump's supporters.
Because the question why people who would like the US to be governed like a well run, profitable and properly managed corporation would think that a two bit New York real estate swindler like Donald Trump is qualified for the role of Supreme CEO of the USA is one of the great mysteries of our time. That and the question why you people worship him like a god.
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You mean the supporters who go around and attend all of his rallies? Had a friend who went to one and he was publishing selfies of himself standing in a huge line, with a big shit eating grin on his face like he won the lottery. The guy was obsessed.
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There is a certain percentage of any population that are receptive to the Big Lie. The sold-out rallies attest to that. Many other people are aware of what the Big Lie leads to.
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Proprietary trading with customer funds ... Isn't that standard practice in the business and financial world?
Source https://en.wikipedia.org/wiki/... [wikipedia.org] :
Proprietary trading (also known as "prop trading") occurs when a trader trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments with the firm's own money, aka the nostro account, contrary to depositors' money, in order to make a profit for itself. Proprietary trading can create potential conflicts of interest such as insider trading and front running.
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Proprietary trading (also known as "prop trading") occurs when a trader trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments with the firm's own money
That still does not answer the question whether proprietary trading with customer money is common place in the financial industry which generally seems to not give a shit about laws and regulations.
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That still does not answer the question whether proprietary trading with customer money is common place in the financial industry which generally seems to not give a shit about laws and regulations.
It would be quite easy to discover by compliance, auditors and if nothing else like in this case, failure to cover their losses. How much criminal activity goes undetected is of course anyone's guess (the wiki article lists some more common ways to screw customers under conflicts of interests that are not as easy to discover and more of a sure thing).
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That still does not answer the question whether proprietary trading with customer money is common place in the financial industry which generally seems to not give a shit about laws and regulations.
It would be quite easy to discover by compliance, auditors and if nothing else like in this case, failure to cover their losses. How much criminal activity goes undetected is of course anyone's guess (the wiki article lists some more common ways to screw customers under conflicts of interests that are not as easy to discover and more of a sure thing).
Well, there's reason I assume anybody connected with the financial industry in any way what so ever is a criminal until proven otherwise.
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Well, there's reason I assume anybody connected with the financial industry in any way what so ever is a criminal until proven otherwise.
Money corrupts so it's not an unreasonable principle.
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What financial firms usually *do* get right, though, is that they have controls to ensure that the prop trading doesn't make them insolvent.
Strictly speaking a "good" control is one that ensures that the total amount at risk is less than the amount of money that belongs to the firm.
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And here you go [nytimes.com]. "We weren't betting against our customers. We were just betting differently."
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I think it is... when you put your money in a checking account, it doesn't sit there, they loan it out. And if they make a very good return on your money, you don't keep the profit, they do, is that not 'proprietary'?
However retail banking is supposed to be safe because it requires deposits to be backed by some percentage of cash on hand and put into investments that get a high safety rating.
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I think it is... when you put your money in a checking account, it doesn't sit there, they loan it out.
That used to be illegal. It was only savings accounts that counted towards reserve.
This was changed recently, so now banks are counting your checking account money as their reserve, which makes little sense since its common for there to be as much in outstanding checks as there is money in the account.
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"Proprietary" is an odd word. I think someone is trying to make it sound like proprietary means risky and experiemental, but any bank with a low risk certificate of deposit uses proprietary methods.
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I get it now. Proprietary means trading by the "proprietor", ie making a direct profit from trading rather than from fees from customers. It's just that the word has other connotations, especially as there are algorithms for trading which are also "proprietary".
I think that Regulations in the stock market stop (Score:2)
I think that Regulations in the stock market stop stuff like this from happen or at the very least they can't stop client withdrawals
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I think that Regulations in the stock market stop stuff like this from happen or at the very least they can't stop client withdrawals
This is an Asian firm trading crypto. https://en.wikipedia.org/wiki/... [wikipedia.org] is a good summary of prop trading.
Anyone that invests in this stuff deserves to lose (Score:2)
I am shocked... Shocked! (Score:2)
"A Proprietary Trading team operates several Trading Accounts not controlled or monitored by Trading Department."
Gee... that sounds like SUCH a good idea, huh?
Shenanigans in the crypto world... Shocked I say!
l = ["Scam", "Ponzi", "crash", "unprecedented", (Score:4, Insightful)
"a", "fledging", "Ponzi", "finance", "a", "bullshit", "NFT", "rich", "quick", "the", "million", "billion", "trillion", "trading", "FTC", "evasion", "sucker"]
from random import shuffle
for _ in range(100):
random.shuffle(l)
print(" ".join(l))
If your internet goes down, run this script to generate a fresh cryptocurrently news story.
Inevitable (Score:5, Insightful)
The dream of crypto was to have a financial system free of all the overhead of governments and traditional banks.
As it turns out those regulations and overhead existed for a reason.