From https://www.reddit.com/r/DDintoGME/comments/oxvkwm/the_dd_into_gme_the_duplicate_glitch_trick_part_6/
TL;DR: It is possible to create spending cash out of thin air, as long as a person has enough starting capital, and a partner to share it with.
Let’s begin.
Person A has $2 million. Person B has $0. Person B has an asset. Person A buys the asset for $1 million.
Edit: (Let’s assume Person B’s asset is a painting they painted themselves)
Person A now has $1 million, and an asset valued at $1 million. Person B also now has $1 million.
Person A’s asset can be used as collateral for a loan. The loan borrowed against the asset could be used to invest towards receiving passive income, with higher payouts than the payments on the loan, such as something in real estate or stocks. Or, it can be used to repeat the process and collect more collateral for Person A, and more solid cash for Person B.
Let’s take a look at that transaction again, but by looking at just the concept, and stripping away all the unnecessary words.
Person A = $2 million
Person B = $0
–Trade occurs–
Person A = $2 million
Person B = $1 million
It’s a duplicate item glitch that exists in the real world.
It doesn’t have to be an imaginary asset for this formula to work. It can be anything with a subjective price. A Pokemon card, a video game, a NFT, or even a business.
Hedge Fund A has $20 billion. Hedge Fund B has $500 million. Hedge Fund B buys a startup company for $25 million. Hedge Fund A buys the startup company, from Hedge Fund B, for $5 billion.
Hedge Fund A now has $15 billion, and an asset worth $5 billion, that it can use as collateral for a potential loan. Hedge Fund B now has $5.475 billion.
Hedge Fund A = $20 billion
Hedge Fund B = $500 million
–Trade occurs–
Hedge Fund A = $20 billion
Hedge Fund B = $5.475 billion
Let’s take this one step further.
Hedge Fund B buys a business at $1 billion. Hedge Fund A buys that business for $10 billion. Hedge Fund B now has $10 billion.
Hedge Fund A could now use that business as collateral. Or, if another buyer is led to believe that the new established market value price is actually valid, Hedge Fund A could sell it at the new market value price they established to get their $10 billion back, or more. This is effectively using the duplicate glitch trick in tangent with a pump and dump scheme.
Businesses aren’t often sold out right though, they are sold by percentages of shares. So, let’s see if the same concept could happen, just through share prices instead.
Hedge Fund A = $10 billion
Hedge Fund B = 100 shares totalling $1 billion
–Trade occurs–
Hedge Fund A = 100 shares totalling $10 billion
Hedge Fund B = $10 billion
Okay, so doing trades like this might be illegal, but you get the idea, it could potentially still be done. This is how insider trading can create exponential growth that leads people to becoming billionaires.
As long as there is a bank to legitimize the collateral, which most hedge fund managers are able to find, then anyone wealthy enough can effectively work with a partner to create collateral, create that collateral’s cash value, and then create spending cash from that collateral, in the form of a loan.
A stock collateral loan is a loan against stock the borrower already owns, unlike short selling, which involves receiving a loan against stock they do not own. This type of stock collateral loan is also known as loan stock financing.
What does this all mean? It means as long as hedge fund managers are able to use subjectively priced items, such as stocks or art, as collateral, they will never run out of money. In fact, they can spontaneously create it, between themselves, whenever they want to, at will.
Obviously, real life is more dynamic than the examples above. However, I think the concept itself still holds true when applied to even broader scenarios. The major difference I see is that in a real world application, it would not be a 1:1 duplication, but rather maybe closer to a 1:½ duplication after factoring in taxes, interest rates, and loan-to-value ratios.
There is also debt created by the loan, but the idea would be to use the loan to purchase a returning investment that outpaces the payments on the loan.
The loan-to-value ratio is established based on the quality of the stock to be used as collateral, similar to how a home’s value is assessed when securing a home mortgage. This value is determined at the creation of the loan.
Since the price of a share can fluctuate with market demand, the value of the stock used to secure a loan is not guaranteed over the long term, but the value of the loan is. In situations where a stock loses value, the collateral associated with a loan may become insufficient to cover the outstanding amount. If the borrower defaults, the lender may experience losses that are not covered by the current value of the shares being held.
Since stock prices can drop to zero, or the company might go bankrupt, loans collateralized in this way can theoretically result in a completely uncovered loan. This can cause the lending institution to fail, if enough stock collateral loans default at the same time.
If the borrower defaults on the loan, the financial institution that issued the loan becomes the owner of the collateralized shares. By becoming a shareholder, the lending institution may obtain voting rights in regards to company affairs, and become a partial owner of the business whose shares it possesses. This is how a business can become partly owned by a bank, even if the bank didn’t outright purchase the business themselves.
With a stock loan, a borrower doesn’t have to say why they want the money. They just have to have qualifying stocks and find a lender willing to give it to them. How the borrower leverages or uses the borrowed money is up to them. If the loan defaults, unlike other loans, there is no negative hit to the borrower’s credit report. Yes, you read that right, there is no negative credit score incentive for not defaulting on these loans.
So, taking that all into consideration, it is possible to see how for every 1 dollar they have, they actually can use 1.5 dollars. That same concept does not apply to you, unless you have millions or billions of dollars.
In addition to loan stock financing, hedge fund managers can also get loans using collateral from securities such as U.S. Treasury bills, notes, and bonds. Also, known as securities based borrowing or non-purpose lending, securities based lending has been an area of strong growth for investment banks since the global financial crisis. In fact, securities based lending accounts and balances have surged since 2011, facilitated by the steady rise in equities and record-low interest rates. Such credit is popular because it tends to be easier to obtain and requires far less documentation than a traditional loan. It precludes the need to sell securities, thereby avoiding a taxable event for the investor and ensuring the continuation of the investor’s investment strategy.
Securities based lending provides ready access to capital that can be used for almost any purpose such as buying real estate, purchasing property like jewelry or a sports car, or investing in a business.
Securities based lending is not tracked by the SEC or FINRA.
A 2016 Morgan Stanley report stated security backed loan sales amounted to $36 billion, a 26% increase compared to the year before. In April 2017, Morgan Stanley settled a case in which Massachusetts’ top securities regulator accused the bank of encouraging brokers to push security in cases where it wasn’t needed, and ignoring the risks involved.
But businesses and stocks aren’t the only form of collateral possible. Art, NFTs, and other collectables, are all other potential forms of collateral to use the duplicate glitch trick on.
The value of privately held art is estimated at more than $2 trillion, and the potential market for art loans could easily top $400 billion soon.
The Fine Art Group, an art advisory and finance firm, said loan requests rose by 30% in 2020 as collectors sought to borrow against their collections to invest in more art or other businesses. Bank of America, a leading art lender, saw its art loan business grow 30% last year, while JPMorgan and Goldman Sachs also saw strong growth.
Banks typically charge 2% to 5% on art loans, depending on the client’s other assets and businesses, while art lending firms and auction houses often charge 6% to 9%. The term of an art backed loan is typically a year, and owners can usually borrow at least half of the appraised value of an artwork. This means an owner of a $10 million artwork could get a loan for $5 million, while still having that artwork hang on their wall. It’s basically just free fucking money, for owning something expensive.
Sotheby’s is making the biggest push among non-banks. The auction house recently formed a partnership with former hedge fund manager Alex Klabin to grow its lending business and develop alternative financing structures.
Sotheby’s says its expertise in art valuations and its deep knowledge about its clients reduce any risks of defaults on art loans.
“We really do think we have an actual edge because we are so attuned to both the auction and private market here in a way that really nobody else is. If at some point there is the need to add additional collateral or to sell something, we know how to do that quickly, effectively.” – Sotheby’s CEO Charles Stewart.
If you want to read why I believe Sotheby’s art expertise is actually market manipulation and fraud, I recommend this post:
If you haven’t already heard about Kenneth Griffins’ and Steven Cohen’s art market manipulation tactics, I recommend reading the post I just linked above, as well. After discovering the concept of the duplicate glitch trick, I now believe it is an additional piece being used in those tactics.
Consider that collectables and artwork can be created or bought for substantially less than what these hedge fund managers can pump their prices up to be. Watch how this concept allows 1 person to only lose out on $250,000 to spontaneously create $1.25 million for two of his friends. For this example, imagine the assets are inexpensive paintings already in the possession of each person, and each person can get a collateralized loan for half of the paintings’ last sale price.
Person A = $2 million
Person B = $0 + Asset1
Person C = $0
–Trade occurs: Asset1 = $1,000,000 purchase price–
Person A = $1 million + $500,000 loan from Asset1
Person B = $1 million
Person C = $0 + Asset2
–Trade occurs: Asset2 = $500,000 purchase price–
Person A = $1 million + $500,000 loan from Asset1 + Asset3
Person B = $500,000 + $250,000 loan from Asset2
Person C = $500,000
–Trade occurs: Asset3 = $250,000 purchase price–
Person A = $1.25 million + $500,000 loan from Asset1
Person B = $500,000 + $250,000 loan from Asset2 + Asset4
Person C = $250,000 + $175,000 loan from Asset3
–Trade occurs: Asset4 = $250,000 purchase price–
Person A = $1 million + $500,000 loan from Asset1 + $175,000 Asset4
Person B = $500,000 + $250,000 loan from Asset2 + 175,000 loan from Asset3
Person C = $500,000
–Trade occurs–
Person A = $1.25 million + $500,000 loan from Asset1
Person B = $750,000 + $250,000 loan from Asset2
Person C = $175,000 loan from Asset4 + $175,000 loan from Asset3
–Trade occurs–
Person A = $1.25 million + $500,000 investment with net positive returns against loan
Person B = $750,000 + $250,000 investment with net positive returns against loan
Person C = $250,000 investment with net positive returns against loan
Do you see it? Am I just fucking going crazy? If I am wrong on this please let me know.
As long as they are allowed to pull collateral from assets they can dictate the price of, they will always be able to duplicate their own money.
I think this is something Gary Gensler should be addressing. I think it’s something the entire global finance industry should be addressing.
This doesn’t even take into consideration all of the other stock trade options fuckery shitty hedge funds have at their disposal. They should not be allowed to spontaneously create their own net worth.
Consider what will happen when NFTs become more mainstream, as they can be minted for practically nothing, and bought and sold for extravagant prices.
NFTs are proof of ownership, just the same way a stock certificate is, except that they’re more secure. They’re also tradable in secondary markets. You can buy an NFT, and then treat it just like a stock, trading it across multiple exchanges, or simply hold on to it. You can ascribe any asset or group of assets to an NFT. They can facilitate loans, and the NFT loan can then be instrumentalized just like any other asset backed loan.
NFT loans are the most recent addition to a space that includes yield farming and high-speed multiple-token currency speculation, and has the ability to generate real yield for investors. NFT loans aren’t loans of NFTs, they’re loans based on the value of NFTs.
Launched in May 2020, NFTfi is a platform that lets its users deposit their NFTs as collateral and get a loan based on them, denominated in ETH. It’s indicative of where the use of NFTs may be headed.
The instability in prices of cryptocurrencies, particularly ETH and BTC, mandates higher collateralization than in the traditional financial system. NFT value is far more stable than crypto value, meaning a lower nominal value in assets can be staked as collateral.
An NFT loan platform recently issued a loan of 20,000 DAI, its largest loan ever as of March 2021. That’s interesting for two reasons. First, the loan was denominated in a stablecoin; DAI is pegged 1:1 with the U.S. dollar. Second, the collateral on the loan was an NFT, specifically real estate property from the online virtual reality game Decentraland, valued at $100,000.
But what if I tried to do this?
First, I probably wouldn’t be approved by the lending institutions, because I do not have a pre-established relationship with them. But if I did get approved, the debt I would encounter from this asset backed loan would be pooled with other asset backed loans, wrapped up in a CDO, and sold by the lending institutions.
If you haven’t caught what that means, it means they can do the duplicate glitch trick on the debt I owe for my own personal loan. They can use my debt to create more money for themselves.
If you do not know the concerns of CDO’s, I would highly recommend looking into their impact on the 2008 housing market crisis.
If I am missing something here and am wrong, please let me know. This shit is freaking me out. I need an adult. I feel like I’m getting played.