The Uncontained Spark

There is an uncontained spark in the financial world today.

It's a spark that emerged from the unlikeliest of places, a federal courthouse in Florida.

It's a spark that has the potential to light a fire under one of the most prominent financial institutions in the world - Robinhood - and one of the most powerful financial institutions in the world - Citadel.

It's a spark that might well sputter out, but for the first time in a long time I have hope for a searing change in the obscenity that is our oligarchic status quo. And not just a little hope, but a giant arc welder's spark of hope that can become a bonfire of hope.


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Comments

  1. And watching it play out on Twitter, fascinating with some stupidity thrown in. Feels like there’s a clock counting down, everybody’s waiting on the oxygen to light it up. Only in our bizarro world that is 2021, it hasn’t happened already.

    Vlad , from my vantage point, looks to have boxed himself in. If I had to guess, I’d say Robin Hood’s next move is to play the Kaplan, Rosengren card for Mr. Swartwout, where he retires on Monday so he can spend more time with his family. Then there’s probably an LSU card to play, we will hire independent auditors to verify/confirm our policies and procedures for future events. Probably self impose a bowl ban for next year too.

  2. Avatar for glarri glarri says:
    1. Awesome post Ben, thank you. As I always say or think when someone is accused of something horrible and I have no way of knowing if the accused is guilty, “I hope that justice is served”, which includes exonerating the innocent. Although the evidence presented here really does look like a smoking gun, I will wait and see what emerges.

    2. I totally get why you are angry. The more this is allowed to continue, the more we are creating hell on earth. My reaction is strangely not anger, it is just the question: What can I do to help fix this, even if it is something small, like living as honestly as I can in a fallen world, while working out how to get into a position to do something that is a bigger contribution.

    3. We have to get back to holding people to high standards of ethics in public life. As the story is told by Jordan Peterson (I have not read the original source) when Nietzsche said “God is dead” it was not with triumph, it was with terror, because Nietzsche saw that the entire moral/ethical framework of Western society was resting on a foundation of Christian teaching instilled by 1000+ years of almost tyrannical rule by the Catholic Church and its Protestant children, and that if that foundation is taken away, you can’t expect the entire structure to stay suspended in the air; it will come crashing down. The power of the church to instill into people a personal fear of immoral behavior has diminished substantially, and we have not replaced it with another education system that instills that deep personal fear of getting it wrong. The result is that while I believe the church was wrong that bad behavior takes you to another place called Hell, they were kind of right because it creates Hell on Earth. Throw in a bit of reincarnation; or the Hindu belief that we are all incarnations of the same consciousness (we are all one); or just that we live on through our children, then the Christians are right: Behave badly and you will go to Hell for eternity, and it will be Hell right here. on planet Earth. That is what we are seeing right now, and we have to wake people up to this, and the basic responsibility to look after each other, the old Biblical “look after the widows and the orphans”.

    4. David Miliband wrote an article published in Foreign Affairs on May 13, 2021 called " The Age of Impunity" which is exactly what Ben has been railing against - people taking hundreds of millions of dollars, harming hundreds of millions of people, and just walking away with a smile on their face when their 100 year old bank goes bankrupt. The subtitle of Miliband’s article is " And How to Fight It". I will read it this weekend. I’m hoping that he has something useful to say (he often does).
      The Age of Impunity

    I can’t thank Ben, Rusty, and the entire Epsilon Theory team enough. The education you have been providing for the last several years is truly amazing.

  3. “Everyone is talking about crime,
    Tell me who are the criminals?
    I don’t want no peace,
    I need equal rights and justice”

    Peter Tosh

  4. *Checks headlines… *chirp *chirp *chirp

    Ever since I randomly stumbled across the Epsilon Theory note “This is Water”, I have been a regular reader. Thank you for providing this valuable oasis of wisdom in our desert of media renfields.

  5. DISCLAIMER: I wish I could post this anonymously, but hopefully this helps from sounding like virtue signaling.

    The following is a lesson from my ‘fun’ over the prior decade of getting caught as a pawn in the crossfire of corruptible elites scheming against each other. Generally, the lawyers / officials appear to have ran a confidence trick (blend of protection racket, and badger game) against a young, fast growing RIA firm > $1B AUM with substantial allocations to muni issues / PE-- very attractive to those appearing to have a history of seeking out lesser marks.

    My involvement is a direct result of me not trusting my wife’s discernment (I hope to never do that again) and my lack of faith that God / providence / the universe / karma was going to provide, especially given my personal weaknesses, and failures. It was my own foolishness, arrogance, pride, compounding bad choices, poor stewardship, inability to put my head down and do the daily hard work necessary, and other professional failings that led to this. So I am not the good guy while the others are the criminals. Well, I mean they are, but me being the means was my own fault.

    Rebalance social inequity right in front of you for just one moment:
    I started driving through the lower-end parts of town and looking for someone that appeared to have less than me. I then give them whatever cash I had in my wallet. I don’t ever carry much ($20 - $40). I often say “God wants you to have this more than me” or “you deserve this more than me.”

    I will still have more in the bank (maybe), more capacity to earn income, a decent home, more stuff. But for that one small instant, that person has more than I do. Yes, it could be enabling an addiction. Or they might use it to feel human, or to get something nice for themselves or someone else. And they will be treated as an adult - capable of deciding what to do with it.

    I started this when I was at an emotional bottom, even though facing possible ruin from the lawsuit. But then I started getting connected with people who had lost everything because of systemic injustice. A former FDIC bank examiner and law school grad challenged robosigning after refinancing, just because he knew it was an issue and decided to expose it. He’s now divorced and evicted anyway. Thankfully his lawsuit led to saving others. The lawyer defending the bank and the robosigning person that didn’t work there at the time was just appointed to the Indiana Appellate Court. Another in a moment of frustration during a divorce hearing, threatened a judge. After a grand jury hearing, he was imprisoned and lost custody of daughters. The two recordings and two transcripts of the hearing he’s been provided are incomplete or don’t match. He now lives across the state border, has lost everything, missed his daughters’ childhoods, and still hasn’t been provided the recording even after a court ruled it must be provided. There is no doubt that he’s the best litigation attorney without a law degree.

    My favorite so far was a lady who clearly didn’t have many resources, planting flowers and plants around her house in a lower class neighborhood (across the road from one of the busiest railroads in the country), and where kids walk by on the way to elementary school:


    616 McDonald St

    Plants and flowers cost money obviously. Of course five blocks away Main Street has tax funded beautiful hanging flowers on every light post.

    On the days I do this, Noraa Setaoc (wow, that’s painful Neb @bhunt) acts, thinks, and feels more like the man he wishes he was all the time, but fails to be on most days. On those days I am not a product of white, upper-middle class, college educated, high IQ, well respected parents that led to a decent college degree, no student debt and some early professional cred. I need to do a better job of getting back in the habit post critical covid, which has been a Noraa excuse.

    Consciously acknowledging that I won the lottery of systemic inequity to another who won less or lost, even for just one moment in time, helps me avoid becoming blind to my advantage. My wife, who’s entire career has been righting social inequity with teen moms, agreed to adjust the budget so that I do this weekly.

  6. Ben, just reread the note and specifically the judge’s order, how did you catch it? The order is dated July 27, 2021, guess I’m asking why am I reading this now? I haven’t looked, but would litigation have to be noted in SEC filing?

  7. Why? Why do a majority of the actions from mainstream media show they have generally lost interest in pursuing investigative journalism for hard topics such as this? Incompetence in their ranks? Or more nefarious explanations?

  8. Media (generally) exists for one reason: to sell you laundry detergent and car insurance. CNN and Fox have the same goal, after all. Ratings mean eyeballs can be sold by the 30 second sliver and the higher they are the more those precious seconds are worth. Nobody wants long form, thoughtful investigations and commentary, right? Well we do, which is why we pay to be here. It’s why Substack is slowly but surely eating up journalists and commentators. It’s why podcasts have become the behemoth that will finally kill off radio (maybe). Traditional media has not responded to the new market, a market that incentivizes authenticity and free expression. The Brian Stelters of the world still think that it’s 1991 and we can’t get our Gulf War coverage anywhere other than CNN. But people are wising up.

  9. I may be a little dramatic here, but I think this is Gary Gensler’s one clean shot at the king and if he misses…

    Gensler rode in to the SEC with a lot of gusto, but if he and his people can’t find their way to at least attempt to go after Swartwout (I’m not holding out any hope of Griffin being pursued) then it becomes another in a long line of failed institutions that the public, specifically the less scrupulous members of the public, will fear no longer. I think a lot of us in the business already roll our eyes when we read an SEC enforcement statement because we know it’s just another low level dude (and it is almost always a dude) who made $43,000 trading short dated, out-of-the-money calls on a company he knew was being acquired. BFD. It seems like they have no time for the biggest crooks, but for the little guys who are trying to score a few years worth of salary in one shot they have an inexhaustible supply of manpower. If this Robinhood/Citadel situation doesn’t result in a very public investigation then what’s the SEC even there for?

  10. It gets a little mention in the 10 Q filed on August 18, 2021. I guess Mr. Swartout is “whether any employee trading in the securities may have occurred in advance of the public announcement”. The problem with the SEC, may take forever for this to actually see the light of day.

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