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

Jul 12
THE BERKSHIRE CORRECTION

Berkshire Hathaway topped out the day Buffett announced his retirement.

It’s dropped non stop since then.

Look, it doesn’t make sense to pay 22x forward earnings on a portfolio loaded with T-Bills.

Here’s the opportunity though.

It’s a nice one, and no one has connected the dots here.

The decline of Berkshire Hathaway’s stock has dragged down the prices of all sorts of insurance companies.

Berkshire is the largest insurance company out there.

The others are dragging down due to correlation effects.

But, other insurance companies are growing earnings.

Their stock price decline has nothing to do with earnings expectations.

They are just getting cheaper because Berkshire is getting cheaper.

I see insurance companies with sub-10X PE and double digit EPS growth.

Plenty of them.

The way to approach this:

Wait for Berkshire to base and stop sliding.

Then load up on the other insurance companies.

$BRKB $BRKA $PGR $ALL $KBWPImage
2/ AI tools don’t yet have the ability to reason this way. Partly b/c this is a straightforward concept - but the CF- curriculum and wall street research doesn’t look at asset prices this way.

We’re training to look for anomalies like this.lumidaai.com
3/ I wager we can pick 3 stocks in the insurance category and at least one will generate a 50% return and outrun bitcoin

Let’s see. Want to see how this earnings season plays out.
Read 4 tweets
Jul 12
INVESTOR TIP: Free Cashflow Yield vs. ROE

ROE is a favorite of Warren Buffett.

ROE (and its realted cousing ROIC) is a great metric to look for in an investment.

These metrics are the cornerstones of all true quality compounders.

A quality compounder can 'invest in itself' -- utilizes its own free cashflow into invest in NPV+ opportunities and generate future returns.

But, it's not the only metric.

Free Cashflow Yield is another one.

High Free Cashflow yield means:

(1) You can buy back your stock
(2) PE firms can buy your stock with your own FCF
(3) Outside investors see FCF Yield and know that both (1) and (2) are possible so they step in and buy.

Also, there are some gaps with ROE.

For example, a business that had a capex splurge may have negative ROE due to the marking down of asset acquired at peak valuations.

But, that's a problem for legacy shareholders. After equity prices have dropped, the negative ROE is old news.

The assets are still there generating cashflow.

The negative ROE is better off ignored now (provided the return on those assets is higher than the cost of financing them).

The points is -- high FCF Yield is a sign that there is value even if ROE is negative.

FCF Yield may uncover 'mean reversion' opportunities, as often high ROE businesses are pricey

(Mag 4 stocks are high ROE for example.)

ROE is not the end all be all.

You can profit from the the mistakes of others by focusing on high free cashflow yield after asset prices have corrected.

Sometimes you can find high FCF Yield AND high ROE.

That's a beautiful thing provided those metrics aren't artifically high due to high levels of debt.

An example of that in the energy space would be Riley Exploration $REPX.

It has a 20% ROE and a 20%+ Free Cashflow yield.

tl;dr there is no single decisive metric or formula.
2/ Take a look at this chart of $REPX for example.

Looks like it hasn't gone anywhere since 2021 right?

But... look under the hood at FCF Yield Image
3/ Now you haver a very different story. In 2021, it was very expensive, and now it's dirt cheap.

I look at this and say 'this has a lot of potential energy'

Then the technical overlay is the observation that 'the lows are behind us'

FCF Yield can uncover a dimension that is not obvs at the surface level.Image
Read 5 tweets
Apr 15
TAIWAN, TRUMP, AND LEFT RISING TAIL RISK

Trump recently said he wouldn’t use military force if China invaded Taiwan.

He’d respond with tariffs.

But tariffs on Chinese goods are already at 145%.

If that’s the full response, China may see limited downside to acting.
2/ Deterrence depends on the threat of escalation.

If China believes that Trump will avoid military action and that tariffs are already in place.

The potential consequences of invading Taiwan look lower than before.
3/ This hinges on Trump’s public position: no military intervention, tariffs only.

If that’s what China expects from the current U.S. administration, it increases the risk of China testing boundaries.
Read 6 tweets
Apr 3
TARIFF POLICY: FAFO

There a many conflicting statements in the tariff policy.

It also means @SecScottBessent wasn't forceful enough with @howardlutnick.

None of this inspires market confidence, and at the very least we should expect, sadly, a heightened probability of a bear market.

A thread.Image
1/ Trump's stated goal is to bring back manufacturing to the United States via Tariffs.

However, he also states tariffs are 'reciprocal' and will drop if other countries drop theirs.

But, how does that bring back manufacturing then?
2/ @SecScottBessent wants to lower the 10-year. That's a great idea.

However, foreign investors buy bonds with American dollars they receive from exports.

Stop trade and you stop enabling foreigners to buy bonds.
Read 21 tweets
Mar 4
1/ COREWAVE S1 DROPPED

CoreWeave is backed by Blackstone, Magnetar and Nvidia

(@LumidaWealth has a poker chip is somewhere on the cap table too :)

First, revenue surged 800% in 2024... Image
Image
2/ Cost of Revenue as demand surges

Cost of Revenue relative to Revenue is 25% now and continues to decline Image
3/ There are 3 co-leads: JP Morgan, Morgan Stanley, and Goldman Sachs.

That's a rare sight.

CoreWeave is the first IPO out of the gate.

They signals confidence in the new issue.

Galaxy in there too. Image
Read 11 tweets
Jan 28
IT’s OVER > WE’RE SO BACK

We are back to 100% net long and bought $NVDA this morning

The Peak Sentiment events of last week are in the rear view mirror

I expect $MSFT and $META earnings to reiterate their capex spend on Nvidia

The forward PE on Nvidia will drop significantly after Nvidia reports

Thats the headline I am front running now

We have a typical relief bounce today

We also snapped up a number of names in the Datcenter theme that went on sale

This Monday we saw record margin debt combined with 3x levered long Nvidia and Semiconductors get wiped out

This was a margin call correction. A technical correction, not a fundamentals correction

That created a panic and a washout…

lumidaetf.comImage
The VCs and Podcasts are talking about DeepSeek 😂

Buy time :)

Check out this lil tweet from last Friday

the warning signals were everywhere

👇
Nvidia is discussed in detail at 55:30 mins here
Read 4 tweets

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