The 24-year-old founder of 2 crypto hedge funds overseeing $100 million admits to fraud

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  • A 24-year old founder of two cryptocurrency hedge funds pleaded guilty to securities fraud on Thursday.
  • The two hedge funds had more than $100 million in assets, according to a Department of Justice statement.
  • The founder embezzled almost all of the capital to pay for personal expenses, including a penthouse apartment.
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The founder of a cryptocurrency hedge fund that claimed to use a trading algorithm to capitalize on price differences in a number of crypto assets plead guilty to securities fraud on Thursday.

Stefan He Qin, a 24-year old Australian national, admitted in court that he embezzled nearly all of the assets raised in his two hedge funds, Virgil Sigma Fund LP and VQR Multistrategy Fund LP. The combined assets of the two funds were more than $100 million, according to a Department of Justice statement.

Qin used the assets raised in his two hedge funds to pay for his own personal expenses, including a penthouse apartment.

Prosecutors said that Qin stole investor money from his Virgil Sigma Fund and tried to pay back investors in his first fund with the assets raised from investors in his second multistrategy fund.

“The whole house of cards has been revealed, and Qin now awaits sentencing for his brazen thievery,” Audrey Strauss, the acting US Attorney for Manhattan, said in the statement.

The house of cards lasted for years as Qin made misrepresentations and false promises to lure new investors into his funds. 

Marketing materials for Virgil Sigma claimed that the strategy was profitable in every single month from August of 2016 to today, except for March of 2017. 

Qin ultimately faces a prison sentence of as long as 20 years. 

In a statement, Qin’s lawyers said, “Mr. Qin has accepted full responsibility for his actions and is committed to doing what he can to make amends.”

Read more: Market wizard Michael Kean has averaged a 29% annual compounded return since starting his company 10 years ago. He shares his unique stock-picking strategy and 4 pieces of advice for anyone who wants to become a trader.

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A hedge fund made $700 million on its GameStop investment but bailed after Elon Musk’s ‘Gamestonk’ tweet

The Bull of Wall Street
r/WallStreetBets weren’t the only ones to make money off of GameStop.

The Reddit-fueled market mania that sent GameStop and other heavily-shorted stocks soaring last month has often been described as a perfect example of retail investors sticking it to the Wall Street establishment.

But not everyone on Wall Street was betting against GameStop.

New York-based hedge fund Senvest Management started investing in GameStop before it caught fire with much of the r/WallStreetBets crowd, and by October 2020, it owned more than 5% of the company, The Wall Street Journal reported Wednesday.

Senvest paid under $10 for most of its shares, and after GameStop stock peaked at more than $400, the hedge fund walked away with a $700 million profit, one of the biggest winners, according to The Journal.

By contrast, Reddit user r/DeepF—ingValue, who has largely been credited with igniting the GameStop rally, claims to have made a $48 million profit.

Read more: The investing chief at a $200 million hedge fund that earned 300% on its Bed Bath & Beyond trade says the GameStop mania is ‘just the beginning’ – and shares another stock that he believes will similarly spike

While Senvest got in on GameStop after a compelling presentation by its new CEO George Sherman and the involvement of investor and Chewy founder Ryan Cohen, it got out because of a tweet fired off by Elon Musk, The Journal reported.

On January 26, after the market closed, Musk simply tweeted “Gamestonk!!

Musk’s tweet helped extend the short-squeeze, sending GameStop’s stock surging another 157% when the market reopened the following morning.

Read more: One chart shows how Elon Musk can create a huge amount of wealth with just his Twitter

“Given what was going on, it was hard to imagine it getting crazier,” Senvest CEO and fund manager Robert Mashaal told The Journal.

Many hedge funds have been hit hard by the recent market frenzy. But even GameStop short-seller Melvin Capital, one of the biggest losers with losses of 53% in January, eventually got a $2.8 billion bailout from other hedge funds.

Meanwhile, GameStop’s stock had already dipped back down to around $92 on Wednesday, and reports are emerging of retail investors who bought in late and have already lost massive sums.

 

Read the original article on Business Insider

These were among the biggest hedge-fund winners and losers in January as GameStop mania upended markets

Wall Street NYSE Bull
A man sits on the Wall street bull near the New York Stock Exchange (NYSE) on November 24, 2020 in New York City.


Hedge funds have been thrown into the spotlight this month after a Reddit forum called WallStreetBets sparked a massive short-squeeze rally in shares of GameStop and AMC Entertainment.

The move in GameStop upended hedge funds that were short shares of the video-game retailer. The short trade proved to be a popular bet given the high short position in the stock at the start of the year.

Melvin Capital was one hedge fund that suffered extreme losses stemming from a short bet on GameStop, with the fund losing 53% in the month of January. Melvin ultimately received a $2.8 billion emergency investment from hedge fund billionaires Steve Cohen of Point72 and Ken Griffin of Citadel. 

Maplelane Capital, another hedge fund that was short shares of GameStop, fell 45% through January 27.

Here are the winning and losing hedge funds amid the GameStop mania in the month of January, according to Bloomberg.

Read More: Jefferies says to buy these 24 stocks that represent its analysts’ highest-conviction picks for 2021

Winners

1. Glenview Capital Management

January Gain: 6.4%
AUM: $3.5 billion

2. Falcon Edge Capital

January Gain: 4.2%
AUM: $4 billion

3. Heard Capital

January Gain: 3.2%
AUM: $325 million

4. ExodusPoint

January Gain: 1.2%
AUM: $13.3 billion

5. Verition

January Gain: 1.2%
AUM: $3 billion

6. Schonfeld Strategic Advisors

January Gain: 0.9%

Read More: Buy these 4 stocks poised benefit from a spike in silver prices, says RBC Capital Markets – including 2 set to soar 73%

Losers

1. Citadel

January Loss: 3%

2. Greenlight Capital

January Loss: 11.1%

3. Honeycomb Asset Management

January Loss: 4%
AUM: $1.2 billion

4. Renaissance Quant Fund

January Loss: 9.5%

5. Maplelane Capital

January Loss (through January 27): 45%

6. Melvin Capital

January Loss: 53%

Read More: A chief investment strategist breaks down how the GameStop saga could upend long-standing practices on Wall Street – and shares her 4-part advice for navigating the frenzied trading environment

Read the original article on Business Insider

Goldman Sachs: Biggest ‘short squeeze’ in 25 years caused hedge funds to ‘de-gross’ at fastest rate since 2009

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Goldman Sachs said the GameStop saga had hit the wider market, with hedge funds rapidly cutting their positions

The US stock market is witnessing the biggest “short squeeze” in 25 years, forcing hedge funds to withdraw from their positions on stocks at the fastest rate since 2009, according to Goldman Sachs.

Last month saw GameStop shares rise more than 1,700%, “squeezing” hedge funds and others who had “shorted” the stock, costing them billions of dollars. A short position is a bet that a share price will fall.

The surge in GameStop and other heavily shorted stocks was driven by users of the Reddit forum Wall Street Bets, who forced up the price in an effort to make themselves money but also to hammer hedge funds such as Melvin Capital.

Read More: A chief investment strategist breaks down how the GameStop saga could upend long-standing practices on Wall Street – and shares her 4-part advice for navigating the frenzied trading environment

Goldman Sachs analysts this weekend shed some light on the situation in a note. “The past 25 years have witnessed a number of sharp short squeezes in the US equity market, but none as extreme as has occurred recently,” they said.

The equity analysts said a basket of the most-shorted US stocks has rallied 98% in the last three months. Estimates by data provider Ortex on Friday showed that short-sellers were sitting on losses of around $19 billion just on GameStop in 2021 so far.

Hedge funds and short-sellers who had made losing bets were forced to withdraw from the market rapidly at the fastest pace since 2009, in what is known as “de-grossing”.

They had to buy shares in companies such as GameStop and movie theater chain AMC to close their short positions, and sell other stocks to cover their losses.

“This week represented the largest active hedge fund de-grossing since February 2009,” Goldman analysts including David Kostin and Ben Snider said. “Funds in their coverage sold long positions and covered shorts in every sector.”

Kostin and his colleagues said regulations, limits put in place by trading platforms, or sharp losses could bring the amateur trading frenzy to a halt.

“Otherwise, an abundance of US household cash should continue to fuel the trading boom,” they said.

Read More: As Redditors flood the stock market, UBS breaks down 6 options strategies investors can use right now to protect their portfolios 

Goldman said retail investing was thriving because of the large amount of savings built up during the coronavirus period, as well as government stimulus.

“During 2020 credit card debt declined by more than 10%, checking deposits grew by $4 trillion, and savings grew by $5 trillion,” the investment bank’s analysts said.

“On top of these savings, our economists expect more than $1 trillion in additional fiscal support in coming months, including another round of direct checks.”

Read the original article on Business Insider

Short-sellers are nursing estimated losses of $19 billion in 2021 after betting on GameStop’s share price to fall

gamestop store

Hedge funds and other institutions shorting GameStop stock were sitting on losses of about $19 billion as of Friday, new data shared exclusively with Insider indicates.

Figures from the data provider Ortex suggested that investors who had bet that the share price would fall had been massively squeezed, with losses topping $10 billion on Wednesday alone, when GameStop soared 135%.

Members of the Reddit forum Wall Street Bets have gone to war with hedge funds such as Melvin Capital this week over the US video-game retailer.

Forum members banded together to help drive up GameStop stock by more than 1,500% over the past month, with seemingly little business basis.

The rise has dramatically “squeezed” investors who were betting that the price would fall. As the price has soared, short-sellers have been forced to “cover” their positions by buying back stock at a huge loss.

“The long and the short of it hedge funds are hurting,” said Eleanor Creagh, a market strategist at Saxo Bank, adding that “the problem from here” is “whether the initial bout of deleveraging causes a chain reaction of squeezed positioning.”

When the GameStop stock price soared on Wednesday, investors’ losses on paper rose by about $10.2 billion, Ortex’s data showed. But as the price tumbled on Thursday, short-sellers regained some ground, with estimated gains of $5.95 billion.

Read more: MORGAN STANLEY: Buy these 17 stocks with strong earnings that are expected to outperform into 2022 even if the broader market sinks

Overall, Ortex estimated that short-sellers were on track for losses of about $19.04 billion as of Friday, with GameStop’s share price up by 78%, to about $345, just before 11 a.m. ET.

The losses haven’t been realized – they’re estimates based on data provided by lenders, brokers, and dealers. But they give a sense of the scale of the hit to hedge funds and other short-sellers.

Melvin Capital and Citron Research both said this week that they had closed their short positions, but they did not disclose any losses incurred.

Ortex estimated that the number of GameStop shares being shorted had fallen from about 79,000 on January 13 to fewer than 39,000 as of Thursday.

Steve Cohen’s $19 billion hedge fund, Point72, has lost nearly 15% this year during the GameStop frenzy, a source told The New York Times. And Bloomberg reported that $20 billion D1 Capital Partners had lost about 20% in January.

Data from Ortex released on Thursday indicated that short-sellers were sitting on losses of about $70 billion because of their overall short positions on US firms so far this month.

Read more: Billionaire investor Mario Gabelli started investing when Eisenhower was president. He told us how he leverages almost 5 decades of experience to identify winning stocks – and shared 5 of his favorite picks.

Read the original article on Business Insider

Short-sellers are nursing estimated losses of $19 billion in 2021 after betting GameStop’s share price would fall

gamestop store

Hedge funds and other institutions shorting GameStop stock were sitting on losses of about $19 billion as of Friday, new data shared exclusively with Insider indicates.

Figures from the data provider Ortex suggested that investors who had bet that the share price would fall had been massively squeezed, with losses topping $10 billion on Wednesday alone, when GameStop soared 135%.

Members of the Reddit forum Wall Street Bets have gone to war with hedge funds such as Melvin Capital this week over the US video-game retailer.

Forum members banded together to help drive up GameStop stock by more than 1,500% over the past month, with seemingly little business basis.

The rise has dramatically “squeezed” investors who were betting that the price would fall. As the price has soared, short-sellers have been forced to “cover” their positions by buying back stock at a huge loss.

“The long and the short of it hedge funds are hurting,” said Eleanor Creagh, a market strategist at Saxo Bank, adding that “the problem from here” is “whether the initial bout of deleveraging causes a chain reaction of squeezed positioning.”

When the GameStop stock price soared on Wednesday, investors’ losses on paper rose by about $10.2 billion, Ortex’s data showed. But as the price tumbled on Thursday, short-sellers regained some ground, with estimated gains of $5.95 billion.

Read more: MORGAN STANLEY: Buy these 17 stocks with strong earnings that are expected to outperform into 2022 even if the broader market sinks

Overall, Ortex estimated that short-sellers were on track for losses of about $19.04 billion as of Friday, with GameStop’s share price up by 78%, to about $345, just before 11 a.m. ET.

The losses haven’t been realized – they’re estimates based on data provided by lenders, brokers, and dealers. But they give a sense of the scale of the hit to hedge funds and other short-sellers.

Melvin Capital and Citron Research both said this week that they had closed their short positions, but they did not disclose any losses incurred.

Ortex estimated that the number of GameStop shares being shorted had fallen from about 79,000 on January 13 to fewer than 39,000 as of Thursday.

Steve Cohen’s $19 billion hedge fund, Point72, has lost nearly 15% this year during the GameStop frenzy, a source told The New York Times. And Bloomberg reported that $20 billion D1 Capital Partners had lost about 20% in January.

Data from Ortex released on Thursday indicated that short-sellers were sitting on losses of about $70 billion because of their overall short positions on US firms so far this month.

Read more: Billionaire investor Mario Gabelli started investing when Eisenhower was president. He told us how he leverages almost 5 decades of experience to identify winning stocks – and shared 5 of his favorite picks.

Read the original article on Business Insider

Reddit-driven GameStop rises as much as 40% in volatile pre-market trading

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GameStop stock soared 135% yesterday as Reddit users did battle with hedge funds

The GameStop stock price rose as much as 40% in pre-market trading on Thursday after more than doubling the previous day and captivating the financial world.

A battle between hedge funds who had been shorting the company’s shares and day traders on Wall Street Bets on Wednesday pushed the GameStop stock price 134.84% to $347.51. GameStop stock has risen more than 700% in the last 5 days.

The video-game store’s stock up 29.64% to $450.50 in pre-market trading by 6.27am ET.

Day traders, organizing their efforts on Reddit and alternative platform Discord, also drove up the prices of heavily-shorted stocks such as cinema chain AMC, hammering short-sellers. The resulting “loss porn” has caused glee among Wall Street Bets members.

Read More: ‘We’re very surprised we didn’t underperform in the 4th quarter’: Cathie Wood and her analysts break down their stock-selection process and the top 10 picks that contributed to the outperformance of ARK ETFs in Q4 2020

Trading was highly volatile, however, with the stock up around 40% at one point before slipping back. It was set for a less explosive start than on Wednesday, when the price more than doubled at the opening bell.

“Bought at pre-market. Buying more at open. It’s not over til the fat lady sings,” one Reddit user said on the Wall Street Bets forum. Many members rejoiced in the price passing $420 in pre-market, in reference to weed-culture meme.

Other Wall Street Bets targets – many of which have been heavily shorted by hedge funds – fared less well in pre-market trading. A short is a bet that the share price will fall. AMC was roughly flat, Bed Bath & Beyond was down 6.09% and BlackBerry slipped 5.98%.

Nonetheless, said David Madden, market analyst at trading platform CMC Markets, an array of shorted companies “could be in for high volatility again as the short-squeeze tactics might be in play”.

Read More: A Wall Street firm tweaked the Shiller PE ratio to create a superior gauge of the strongest stock-market returns – and broke down why the beloved metric won’t cut it anymore

Madden said he thought the GameStop phenomenon was having wider implications in the markets. US stocks were set to open lower after their biggest fall since October the day before, with short-term economic worries and concerns over vaccine shortages hitting confidence.

“Equity markets are lower again as fears that some hedge funds are scrambling to close out positions in a bid to offset painful losses they incurred when shorting certain stocks that underwent enormous rallies,” Madden said.

Read the original article on Business Insider

A billionaire New York hedge-fund CEO just dropped $20 million on a Miami Beach mansion as Wall Street firms plan moves to Florida

dan loeb miami beach
A Google Maps street view of Loeb’s new Miami Beach home.

New York hedge-fund executive Dan Loeb has picked up a Miami Beach mansion for $20 million, Katherine Kallergis reported for The Real Deal. 

Loeb, the founder and CEO of New York-based hedge fund Third Point, is worth about $3 billion, according to Forbes.

His new waterfront home has seven bedrooms and nearly 14,000 square feet of living space, according to the listing. It features a home theater, a rooftop deck, a private boat dock, and separate guest quarters. Loeb bought the house from developer Peter Fine, per the Real Deal.

dan loeb
Dan Loeb, left, speaks onstage alongside CNN’s Van Jones at the launch of a criminal justice initiative in NYC in 2019.

The waterfront home sits on North Bay Road, a coveted residential area that millionaires and celebrities. Luxury real-estate agent Nelson Gonzalez, who calls it “the Park Avenue of Miami Beach,” told Insider in 2019 that he’s sold homes on the road to the likes of Cher and Billy Joel. Last summer, Karlie Kloss and Joshua Kushner paid $23.5 million for a home on North Bay Road. At the end of December, supermodel Cindy Crawford and husband Rande Gerber paid $10 million for a teardown.

Jills Zeder Group, who brokered the deal, declined to comment or share any photos of the property.

A spokesperson for Loeb’s company, Third Point, also declined to comment.

Everyone is moving to Florida

South Florida has seen a flurry of real-estate activity during the pandemic, as politicians, celebrities, executives, and financial firms move to the Sunshine State.

Former President Trump and his wife Melania are reportedly moving to his Mar-a-Lago Club now that his term has ended. In December, Ivanka Trump and Jared Kushner bought a $32 million lot on Indian Creek, the private island known as Miami’s “Billionaire Bunker.” That same week, it was reported that Kushner’s brother, Joshua Kushner, had bought a home in Miami Beach with wife Karlie Kloss earlier in the year. In January, Tom Brady and Gisele Bündchen joined Trump and Kushner as homeowners on Indian Creek, paying $17 million for a home they plan on demolishing.

Loeb’s reported purchase, which is about a 15-minute drive from Indian Creek, is the latest sign of an apparent finance migration from New York to Florida. 

As Insider recently reported, recent moves by finance industry giants indicate that a big chunk of Wall Street could be moving to Florida.

Manhattan-based hedge fund Elliott Management plans to move its headquarters from Manhattan to West Palm Beach, Bloomberg and the Financial Times reported in October. And last month it was reported that Goldman Sachs was considering shifting its asset management operations to Florida. Blackstone, the world’s largest private equity firm, also plans to open an office near Miami. 

In December, an unnamed private equity executive from New York dropped $33 million on a Miami Beach penthouse, and a former Goldman Sachs executive paid $11 million for a Miami Beach home.

Read the original article on Business Insider