😎 Why Ken Griffin from CITADEL has nothing to do with it 😎

We propose looking at the other side of this event and why you can't specifically claim that CITADEL was involved.

The algorithm is fairly simple - we'll need just 6 steps to prove the opposite:

2 LEGAL ENTITIES.

On July 27, the note saying the market was underpricing the Fed's hawkish shift was published by Citadel Securities - the market maker.

Author - Frank Flight, head of macro strategies.

The fund's public portfolio was bought on July 30 by Citadel - the hedge fund.

These are 2 different companies with separate P&Ls, separate teams and information barriers that exist not out of Griffin's goodwill but by regulatory requirement.

Their presence is the subject of constant SEC and FINRA examinations.

The whole "scheme" falls apart on the very first thesis: who exactly passed what to whom across a barrier that gets audited professionally and regularly.

Neither WSJ / nor FT / nor Reuters draws a causal link between these 2 events.

They were linked by a post on X:

Shkreli - CONVICTED IN 2017 OF SECURITIES FRAUD (2 counts of securities fraud + conspiracy, tied to his hedge funds MSMB and Retrophin / 7-year sentence).

Shay Boloor - A TABLOID GUY.

MALICIOUS INTENT?

• On July 29 the FOMC left rates unchanged, 3.5-3.75%, vote 9-3.
• Meaning Citadel Securities' forecast didn't pan out.

IF THIS WERE REALLY MANIPULATION - THEN IT WAS BUILT ON A PUBLICLY FAILED THESIS - THAT'S NOT HOW ACTUAL SCHEMES GET BUILT.

+ a detail everyone misses: before the note, the swap market was already pricing in ~40% probability of a hike. Citadel Securities didn't create that fear - they commented on it.

WHO SELLS THE FUND'S POSITION?

Margin calls were issued to the fund by Bank of America / Goldman Sachs / JPMorgan - THE FUND'S PRIME BROKERS. They were also the ones selling the positions.

Leverage up to 4x - the fund's own decision.
Concentration in an overcrowded trade = the fund's own decision.

The forced seller was created by leverage and the risk management of 3 banks = KEN HAS NOTHING TO DO WITH IT.

THE SELLOFF CALENDAR.

It started ~July 1 - with the signal that Meta might resell excess compute capacity.

That day Micron -10.6% / AMD -6.9%.
The two-year thesis of an "eternal GPU shortage" came to an end on those time.

SOX peaked on June 22 and by July 28 was in a bear market = -25-28%.

In parallel, retail leverage was collapsing in Korea:

margin debt fell from a record 38.63T won (June 24) to ~32.7T by July 23 / KOSPI -33% in a month.

The note came out July 27 - 4 weeks after the collapse began.
The chronology doesn't allow you to assign it as the cause.

WHY CITADEL?

When a $10-16B block gets dumped on the market, THERE ARE PHYSICALLY ABOUT 5 BUYERS IN THE WORLD:

CITADEL / MILLENNIUM / POINT72 / BALYASNY.

BEING THE BUYER IN A TRADE LIKE THAT IS A CONSEQUENCE OF BALANCE-SHEET SIZE, NOT PROOF OF A CONSPIRACY.
*at enormous risk you take on a book that just fell 30-50%, into a falling market, with no guarantee the bottom is in.

ASYMMETRY.

A firm with $69B under management is supposed to be believed to have gone, for the sake of one trade, into coordinated market manipulation - that is, into a criminal case that would cost it its license, its business and management's freedom.

For the sake of a portfolio that would have come to it through the prime brokers anyway.

WHAT DO WE ACTUALLY HAVE?

Confirmed:

1) losses
2) letter to investors July 24
3) margin calls
4) sale of the portfolio NOT CONFIRMED BY CITADEL around July 30.

• Both sides declined to comment.
• There is no official confirmation of the trade.
• It won't surface on the regulatory side until the Q3 13F, deadline ~November 16.

A fund at 4x leverage in the most overcrowded trade of the year caught a correction, got calls from 3 banks, and sold the book to the only party that could eat it whole.

• to whom?
• only the 13F will show

😎😎😎😎