A young CEO committed suicide. The story behind the tragedy of leverage

Author: Qin Xiaofeng, Xue Jiao

Editor | Mandy

Produced by | Odaily Planet Daily

On the afternoon of June 10, a piece of news spread in the cryptocurrency circle: Hui Yi, the founder of BitEasy, committed suicide on June 5 at the age of 42. Multiple sources confirmed to Odaily Planet Daily that Hui Yi had indeed passed away.

Hui Yi is a serial entrepreneur who started two businesses in the P2P field. In 2017, he switched to digital currency and founded BitEasy, a cryptocurrency data analysis platform.

According to a Weibo user named "TheMonero", the direct cause of Hui Yi's suicide was a loss of 2,000 BTC due to a futures liquidation. Upon hearing this, many blockchain practitioners lamented that they should stay away from futures. However, there is currently no solid evidence to confirm this rumor.

In addition, Odaily Planet Daily learned from many informed sources that there are many speculations about the reasons why Hui Yi chose to commit suicide: he suffered from depression and his emotions were always unstable; in addition, the P2P platform "Wanglibao" that was recently involved in a case of more than 3 billion yuan and collapsed was rumored to have a certain connection with BitEasy.

“2,000 BTC won’t bring him down, at most it’s the last straw that breaks the camel’s back,” an insider said.

There was a sentence written on the wall of Hui Yi’s office before his death: If you really like money, another name for money is freedom.

However, the freedom pass bought with money eventually shattered like a bubble.

Suspected suicide

In the early morning of June 5, Hui Yi ended his 42-year life by hanging himself in the new office of BitEasy. When the employees found out, it was too late to save him.

"After a few days, many people came to ask me about it, and I found out that he had an accident." Yuan Yun, a close friend of Hui Yi, told Odaily Planet Daily, "I called him, but his phone was off, and he didn't answer WeChat calls. Later, I asked around and found out that he was really 'gone.'"

Yuan Yun couldn't understand why Hui Yi suddenly committed suicide. Regarding the rumored loss of 2,000 BTC, Yuan Yun said it was "absolutely impossible".

Yuan Yun told Odaily Planet Daily that Hui Yi participated in the creation of the P2P platform "Huaguo Finance" in 2014 and retired in 2015 with a profit of hundreds of millions. Even if he really lost 2,000 BTC, Hui Yi, who has seen a lot of ups and downs, would not commit suicide.

"When he (Hui Yi) was at Huaguo, he handled billions of transactions a year. After he quit, he became a well-known entrepreneur. 2,000 BTC would not bring him down, but at most it would be the last straw that broke the camel's back," said Yuan Yun.

Hui Yi's classmates, two students from the 27th EMBA class of Cheung Kong Graduate School of Business, said that Hui Yi may have suffered from depression. Looking through Hui Yi's circle of friends, there has been no update in the past six months.

Regarding the claim of depression, a BitEasy employee revealed that Hui Yi had collected the book "Self-help for Mental Anxiety Disorder" on WeChat Reading, but it is not clear whether there is a connection between the two. "(Hui Yi) has no other abnormalities except working until 3 or 4 o'clock every night."

Another employee said: "Hui Yi has always been very thin and a heavy smoker."

Hui Yi, who made his fortune from P2P and had already retired successfully, was once again caught up in the whirlpool of P2P public opinion after his death.

Another speculation about his suicide is that BitEasy may be related to the collapse of the P2P financial platform "Wanglibao". A widely circulated screenshot with unknown origin shows that "BitEasy is responsible for the transfer of assets out of the country."

(Screenshot circulating on the Internet)

A person from an anonymous venture capital institution told Odaily Planet Daily that BitEasy and Wanglibao belong to the same team.

Both offices are located in the Hainan Airlines Building in Beijing. "As of February, BitEasy was still working on the 10th floor of HNA Building A, while Wanglibao's office was on the 7th floor below," Wang Tian, ​​a former BitEasy employee, told Odaily Planet Daily, but he did not think the two were related in business.

Wanglibao was launched in 2014 and was formally investigated by Chaoyang Economic Investigation Bureau on May 16 this year. The operating data disclosed on the official website showed that Wanglibao currently has more than 3,800 borrowers and more than 40,000 lenders, with an outstanding loan balance of about 3 billion yuan.

In addition, SoftBank China, one of the investors of BitEasy, issued a statement yesterday to distance itself from its investment relationship with BitEasy. Industry insiders believe that this may be because BitEasy is involved in P2P. Previously, two P2P companies invested by SoftBank China (Yidai.com and Furongbao) collapsed one after another.

In April last year, SoftBank China partner Zhou Ye also said that the reason for investing in BitEasy was its profitability, market demand and technical feasibility. Yesterday, the head of PR at SoftBank China said that SoftBank China had given up investing in BitEasy at the end of last year.

Mystery of liquidation

It is difficult to explain why Hui Yi chose to pass away, but perhaps it touched the nerves of the cryptocurrency circle. The simple and direct explanation of "a big investor committed suicide due to a margin call" was widely circulated in the cryptocurrency circle.

At 10:00 pm on June 10, Cai Shu, CEO of Rongke Blockchain, posted on Weibo that "BitEasy's boss committed suicide?". Later, a Weibo user named "TheMonero" broke the news that "a big investor committed suicide after losing 2,000 BTC."

"Hui Yi must be speculating in futures, everyone in the group knows it." A BitEasy user told Odaily Planet Daily. The group he was referring to is the "BitEasy-Blockchain Investment Group", which was established by BitEasy officials and has always been full of 500 people, making it very active.

On May 31, Hui Yi said in the group that he used 10 BTC to open a short order with a leverage of 100 times; before that, he had already opened a short order of 600 BTC, which was rumored to have a leverage of 20 times.

(BitEasy group chat screenshot)

After sorting out the information, Odaily Planet Daily found that the total amount of BTC currently known to be involved in Hui Yi is only 760 (about 38 million yuan), which is far from the rumored loss of 2,000 BTC.

Liu Zhen, founder of quantitative fund CCC, is skeptical about the 2,000 BTC figure. "When doing futures trading, you only lose your margin, and it is hard to imagine losing 2,000 BTC of margin. So I think this news may not be accurate."

In addition, there are rumors that the surge in the market caused Huiyi Futures to be liquidated.

Hui Yi predicted that the market would go down on May 31, and BTC would fall to $7,000, so he opened a short order at around $8,300. Although BTC rebounded after falling to $7,900, the rebound was not instantaneous, but slow, with an average increase of 0.5% per hour.

“For a veteran, there is room for ‘cutting losses’ and escaping, he (Hui Yi) will know that.” Futures trader Chen Feng said, “Even if the position is liquidated, it is only the part with 100 times leverage. External data shows that only 10 BTC have opened 100 times leverage, and the other parts with low leverage should be safe.”

Some quantitative experts also speculated: "What Mr. Hui did was manual leverage, not quantitative. Manual leverage is very risky."

Wang Tian refuted this statement: "Mr. Hui is responsible for testing strategies, and (he) is not stupid enough to operate manually." Wang Tian explained, "In the regular meeting, he said (the returns) were not bad. Quantitative strategies will not always be effective and need to be constantly debugged."

There are many speculations and rumors from all sides, but in fact, there is currently no reliable source to confirm Hui Yi's profit and loss situation.

Another rumor is that Huiyi uses clients’/users’ funds to leverage.

According to employees, BitEasy has indeed turned to quantitative business. "BitEasy used to focus on APP and provide market consulting services; later, it stopped doing APP and only focused on quantitative business."

As for the source of quantitative funds, Wang Tian said that the funds mainly come from institutional users. "BitEasy has been raising funds from institutions. Previously, Lou Jiyue's Tokenmania had funds here. Retail investors raise small amounts."

However, Yuan Yun said that Huiyi would not raise funds from retail investors. "In 2017, ICO was very popular. He said he did not want to do ICO and did not issue any tokens. We have a clear understanding of the risks: raising funds from retail investors is illegal fundraising. People who have retired after success will not do such a thing."

The Tragedy of Leverage

Hui Yi’s death triggered discussions among many cryptocurrency investors, and futures trading, where “risks and returns coexist,” was also pushed to the forefront of public opinion.

Minxin COO Mint said in his WeChat Moments: No one has a God's perspective when betting against the market. No matter how well you learn probability or how accurately you calculate the cycle, you can't beat the unpredictable changes in the market. No matter how beautifully you win in the past, as long as you lose the last bet, you lose everything. Perpetual motion machines, immortality and futures are the eternal scars of this era. A moment of silence, and encouragement.

Yi Lihua, founder of Lede Capital, reposted the news of Hui Yi's death and said: Don't use leverage when trading cryptocurrencies. I hope there will be fewer tragedies in the cryptocurrency circle.

The original intention of leverage is to increase liquidity in the market, especially in a bear market when liquidity is insufficient.

In October last year, the cryptocurrency market ushered in a cold winter. At that time, dozens of new futures contract exchanges were born, providing up to 100 times leverage.

For example, if an investor believes that the market will rise, he or she may choose to go long with a 20x leverage. Once the price rises by 1%, the investor will make a profit of 20%, otherwise he or she will lose 20%. Similarly, with a 100x leverage, when the market rises or falls by 1%, the profit or loss can reach 1x, which is a high-risk investment method.

Regarding leveraged trading, BitGlobal CEO Jack also gave a risk warning, and non-professionals should never use leverage.

In Jack's opinion, investors in the current market do not understand the difference between quantitative and gamblers. "All leverages above 4 times and only one-sided subjective operations have gambling elements, so such institutions or individuals cannot be called quantitative. Generally, the strict risk control leverage of quantitative will be controlled in the range of 0.2-1.5 times (trend strategy)."

Futures trader Gai Yun believes that when the leverage ratio reaches 20 times or more, investors have a strong sense of short-term trading. "Many people (futures traders) actually rely on luck, so risk control is the most important thing, otherwise they will die. Many people use high leverage and leave their fate to God. There is no risk control, so they will perish sooner or later."

postscript

Originally, Hui Yi seemed to have good luck. He started three businesses, and the first project was a success, while the second one was recognized by top institutions.

In 2008, after leaving his position as a senior product manager at Microsoft, Hui Yi founded Beijing Tutuo Technology Co., Ltd., which mainly engaged in technology development and promotion. In 2014, he co-founded Huaguo Finance and withdrew from it the following year with a lot of profit. After that, Hui Yi founded Shenxian Youcai and cashed out his shares in 2015, escaping the P2P industry crash caused by "Ezubao".

At the same time, in 2015, when the Shanghai Stock Exchange was at 4,800 points, he sold all his stocks and successfully avoided the "A-share crisis", which earned him the nickname "Top Escape Man". At that time, a conversation between Hui Yi and his friends was widely circulated:

"Call me when you run."

“Run away.”

"No way, at least 5,000 points before running."

"No gambling."

Unexpectedly, the saying “don’t gamble with your life” came true and happened to this entrepreneur four years later.

Note: Some of the interviewees in this article are pseudonyms.