Comments by "seneca983" (@seneca983) on "How Was Bill Hwang Able To Get So Much Leverage?" video.

2:45 "So if Bill Hwang wanted five times leverage he could potentially just go five different brokers and max out the leverage ratio at each one." I don't think you can increase your leverage by just using multiple brokers. Surely a broker only allows you to borrow against shares the broker is holding for you. Using the same set of shares as collateral for multiple loans from multiple brokers would likely be against the agreement with the brokers if it's even possible. Similarly, any contracts for difference (a.k.a. total return swaps) with different brokers are separate. You can't chain them to increase your leverage.
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@kazedcat "Gorky D Leverage swap is not debt. The bank owns the underlying stock so theoretically the bank could recover their money by selling the stock." It is debt. The potential for loss comes if the underlying stock goes down in value. The bank/broker should theoretically suffer no losses from that because the other party, i.e. Hwang in this case, is obligated to pay for the amount the stock went down (+ interest). The problem is that if the losses are big enough Hwang won't have enough capital to pay off all his liabilities.
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@kazedcat "If I buy call option from a broker it does not mean I owe them money" But in this case call options weren't used. What were used were total return swaps. This "total return" includes the potentially negative return if the stock falls enough. "The potential losses of them owning the stock is their risk on doing business." Not quite. Hwang is supposed to pay them if the stock falls. So they don't have a long position in the sense that they shouldn't suffer a loss even if the stock falls in value as long as Hwang stays solvent and can pay whatever he owes (but in this case Hwang became insolvent and couldn't pay). "The difference is that debt the value flows towards you first then in the future cash flow out from you." I'm not going to argue the precise definition of "debt" but functionally there's no difference. The result from a total return swap is basically the same as if Hwang had just directly bought the stock with some of his own cash + a loan from the broker. (There are differences like that a total return swap doesn't give him voting rights in the company or trigger any disclosure requirements if his position exceeds 10% of the company's stock, but those are not relevant to what we discussed here.)
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@GE B Yeah, but that's quite not what I was talking about. In this video WSM said basically that a single broker might only give Hwang 2x leverage but he could get 5x leverage by going to multiple brokers. However, that makes no sense. You can't multiply the leverage ratio by using multiple brokers. By using multiple brokers Hwang was able to hide from his brokers how large portions of several companies he owned (well, not technically "owned" but you know what I mean). However, that's quite different from somehow increasing the leverage ratio.
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