Ram Ahluwalia CFA, Lumida Profile picture
Oct 22, 2023 21 tweets 6 min read Read on X
1/ NY Attorney General vs. DCG @BarrySilbert:

FTX was worse than Madoff.

And, DCG was worse than Enron.

This thread will show how.

And why the NYAG's request will force a sale of Grayscale.
2/ The Enron fraud involved the use of off-balance sheet special purpose entities (SPEs) to hide debt and inflate profits.

Enron executives engaged in self-dealing transactions.

The NYAG alleges DCG did both of these...and more.
3/ Through complex financial structures, Enron was able to disguise its true financial state, misleading investors and analysts.

DCG did the same (later), but took it to another level
4/ While many of Enron's transactions were technically within the legal boundaries, the aggregate manipulation of these transactions was the fraud.

Enron exploitated accounting loopholes and got auditors and bankers to sign off.
5/ The difference is DCG flat out falsified their statements, withheld material information, withheld disclosure, and lied to its own staff and customers about its cutomer health.

There were no loopholes with the DCG fraud.
6/ DCG and Genesis knew the latter was insolvent. But both parties sought to portray 'business as usual' and a 'well capitalized status' Image
7/ Genesis "concealed disclosure" of financials for many months despite requests from customers and Gemini.

The CFO refused to join customer calls. Instead, the front-line was provided with talking points to perpetuate the deception Image
8/ DCG "raided the Genesis piggy bank using customer funds to finance itself.

DCG directed its subsidiary to re-finance its own loans multiple times and dictated terms.

This action deepened the Genesis negative equity hole. Image
9/ The NYAG complaint is Civil in nature. But the complaint alleges @BarrySilbert and execs broke multiple criminal laws, repeatedly. Image
10/ The NYAG shows thru multiple pieces of evidence that Silbert directed the fraud from DCG.

Silbert: "We can't allow people inside our outside to question Genesis solvency" Image
11/ Pair that note from DCG's CEO with the Genesis CEO saying: "If we're able to show our balance sheet after all of that happened and it still looks strong...people will care less about losses"

That’s not how it works.

You show the balance sheet as-is. Image
12/ Here's more evidence of Barry Silbert directing Genesis.

"We received guidance from [ Silbert ] to re-paper the $100 Loan...we will do what DCG needs us to do."

DCG also set the interest rate and terms. Image
13/ DCG's Head of Communications and COO were drafting tweets for Genesis CEO (Moro) - and advising that he send it off his personal twitter Image
14/ On the Promissory Note

DCG never "assumed the liability" contrary to public statements.

The Promissory Note was material, self-directed and concealed the truth - it was intended to deceive and mislead.

That’s fraud. Image
15\ DCG started talking about "Duration Mismatch" in its November letter to investors and 'crypto volatility' as the cause for its woes.

I called this deception out back in November after the DCG shareholder letter:

16/ Genesis front-line staff and account executives were kept in the dark.

Some asked good questions and suspected not all was well.

This is a story of bad leadership. Image
17/ Not only did Genesis defraud Gemini and conseal statements... when Gemini put in the redemption notice Genesis threatened bankruptcy.

Pause and imagine being placed in that pickle for a moment. Image
18/ Here's a sample of the human cost.

Gemini Earn : 232,000 investors and $1 Bn +

(That excludes Genesis direct creditors)

A 73 year-old grandmother and her husband, both retired, had her life savings in earn. Image
19/ What the NYAG ask?

(1) Prohibit DCG from running a securities & commodities business.

That forces DCG to spin-off Grayscale. DCG would not be able to raise VC money.

So DCG would turn into a zombie company with endless fines & settlements. Image
20/ The NYAG requests that Defendants pay damages, and Restitution, and Disgorgement of profits.

DCG doesn't have the money because of the Widowmaker trade.

So it will take years to make creditors whole.

DCG is done for. And the DCG fraud exceeded Enron.
21/ If you want to learn more about the 'Grayscale GBTC' Widowmaker trade at the center of these issues, this is ane excellent podcast overview

h/t @TheStalwart @tracyalloway

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More from @ramahluwalia

May 12
1/ Digital Assets & Bitcoin: Where Are We Now?

I believe we are mid-cycle on Digital Assets corresponding to the Genesis low on 11/16/2022 and the halving.

Bitcoin peaked on the day this tweet when 2,500 memcoins on Solana were created.

Here's the chart:
Image
2/ Solana has been the fastest horse in the race delivering momentum.

Crypto is a momentum asset. Relative strength matters.

Solana topped on the day of this excellent point by @joemccann.

(Markets are funny like that. Consensus.)

3/ All the major digital assets are consolidating and correcting.

That's also related to Biden's recent ascendany in the polls, and 'higher for longer' type CPI prints

The State of the Union was the top for risk assets - take a look at the Momentum ETF $MTUM Image
Read 16 tweets
Apr 1
I was wrong.

@CathieDWood is right.

Nvidia is a bubble, like Cisco.

The Apple Vision Pro will be a smashing success.

A recession is coming. It will start with a ‘credit event’

Inflation and interest rates will be lower for shorter.

60/40 is the future. Always was…

Trust whatever Goldman Sachs, Morgan Stanley, and JP Morgan call research.

Especially their conviction buys.

Tesla will be the most valuable company globally and dominate the EV market.

Cybersecurity investment is a fad.

Crypto is a scam.

The SEC has provided crystal clear regulations, firms should just go in and register.

SoFi will transform banking. Credit losses will be ‘contained’ because management said so.

X offers massive alpha. Just buy Snowflake and Palantir.

SoFi007girl is a real person and has genuine feelings for abstract corporate entities.

Stay single. You can get an AI girlfriend or boyfriend, and build a family in the metaverse.

Centralized power works. We just need enlightened leaders that are incorruptible and know better.

Tech firms should not be permitted to compete with JP Morgan and other big banks.

They can’t built banking apps or serve tens of millions of people without a branch network.

The future is in 3D printing and seed oil based meats.

The United States isn’t growing any more. Invest in Europe.

China will eclipse the United States. Robots will replace China’s shrinking population.

The SEC under Chair Gensler is neither capricious nor arbitrary.

There is nothing to learn from Buffett except his dietary choices: diet coke & burgers.

Investing in pre-revenue AI startups with $1 Bn+ valuations is a good idea.

The BRICs will create a currency that replaces the USD.

The peak for humanity was when Prince released ‘We’re going to party like its 1999’

We don’t need more nuclear energy. We need to reduce our energy demands.

Modern Monetary Theory (MMT) represents our best science.

We do not live in a simulation.

Stay Consensus.
@CathieDWood 2/ Governments bonds are a store of value.

You can park your hard earned wealth in bonds and preserve your purchasing power.
3/ Google's search business is over.

OpenAI is coming for their lunch.

The enterprise value of Youtube and Waymo are fully priced in.
Read 5 tweets
Jan 8
1/ Genesis Plan:

To Vote Yes, or Not, That is the Question

Here's my take on the Genesis Bankrtuptcy plan...

🧵
2/ Disclosure: I am not a lawyer, and I am not your advisor.

I am not a party to the dispute and have no commercial or customer relationship with Genesis, Gemini, or DCG.

You should retain legal counsel and an advisor to work thru this complex plan.
3/ There are a lot of brass knuckle threats at work here in this negative sum negotiation game.

Example: Genesis is saying they will waive 'preference claims' - meaning anyone that withdrew within 90 days of bankrtupcy will not be clawed back if they vote Yes.
Read 14 tweets
Jan 4
The @lumidawealth Top Ten List

While everyone was busy making '2024 Surprise Lists', we were feverishly researching and implementing ideas.

Goldman has an allocation to Apple and Tesla in their model portfolio. Apple is a 'Conviction Buy'

I've been consistent that this is a bad idea - and at the recent Apple highs said this is the time to get out.

Take a look at Apple and Tesla now.

I am long Google and Meta and short Apple and Tesla as part of my portfolio hedge.

Meanwhile, Google *closed up* yesterday.

Search for my post "LTEG" where I cycle thru the Mag 7 names one-by-one. Or better yet, subscribe to the @LumidaWealth newsletter.

1. Tech is prone for correction and underweight.

Everyone went bullish, we went to the other side of the boat.

Check.

2. Buy energy, it's a hedge for tech. Check

3. Don't own bonds at 3.8% - rates headed up now. Check

4. SoFi is a short. Check.

5. Buy Hersheys. Check.

6. Overweight Google. Check.

7. Underweight Apple (or short it). Check.

8. Underweight Tsla (or short it). Check

9. Rotate into Ethereum. ETH outperformed BTC and SOL. Check.

10. Tidewater, Beyond Meat, Palantir, The Trade Desk all over-valued and headed down.

Check, Check, Check, Check.

11. Healthcare - buy Elevance. Check.

12. Nvidia will outperform ASML and AVGO (short term).

Nvidia was the best performing semincondcuctor yesterday.

Check.Image
Image
2/ December 25th - "I do think tech stocks are overbought - market has 2 weeks left give or take"

3/ December 27th - Mean Reversion Ahead



‘Hello mean reversion my old friend, I’ve come to talk with you again’
Read 7 tweets
Nov 20, 2023
Non-Consensus View:

The visit of China’s premier js a symbolic bending of the knee.

China is capitulating.

@balajis is not reading this correctly

Why? China is hurting.

- China’s currency is under pressure as capital leaves at the fastest rate in 7 years

- FDI is down to 1998 levels

- Exports are down significantly due to friend-shoring

- Semiconductor export controls are not yet throttling China…but they have come up to the line

- China’s Ali Baba and tech leadership cannot get their hands on advanced GPU chips

- China’s birth rate continues a decline that spells industrial mediocrity

Why visit California?

And meet a ‘Provincial Governor’?

California is the state whose IP is most at risk of corporate espionage.

And China needs US semiconductor designs.

What about US Bonds?

Sec’y Yellen has ‘intensified’ talks with her finance counterpart.

The US needs to sell bonds at better rates. The US can then also import from China.

The capital account and current account worked together beautifully for decades.

And Semiconductors?

China imports more semis than Oil.

And the US is controlling exports, but not killing GPU exports. That would be the next escalation - it’s a clear threat.

China is pouring more money into semiconductor startups than the US.

But the US and Taiwan have the technical leadership and edge… too little too late.

China and US Relations?

Visits don’t often happen without some news announcements - trade deals, understandings, or a rapprochement.

Engagement is constructive.

They are bargaining on American soil.

The China Premier is making Nixon’s trip to China many decades ago a complete circle.

The symbolism is thick and my have substance.
2/ China has youth unemployment of 20%.

It’s so bad they stopped reporting.

The bargain between China leadership & its public is fraying.
3/ China imports IP from the US via corporate espionage & hacking.

China does not have a tech leadership position.

US tech stocks at ATH, China tech stocks have a forward PE of 10 and grow slower than Disney
Read 13 tweets
Nov 1, 2023
SoFi bulls miss a few points.

Let's cut to the heart of the matter - SoFi is a personal loan business.

It relies on capital markets for cashflow. That presents a structural flaw to the business model.

When a recession ultimately arrives, the losses will hit SoFi in 3 ways
🧵 Image
2/ SoFi loses about ~$9 Bn in negative Cash Flow from Operations each year.

This is also why Adjusted Ebitda numbers are deceiving. Image
3/ That flows to Net Income. In fact, SoFi has growing Negative Retained Earnings.

That's an usual feature in a business. You want to see compounding and reinvestment of Retained Earnings.

W/O "Additional Paid In Capital" in '21 and '22, SoFi would have negative equity
Read 20 tweets

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