4x levered hedge fund blowup reveals prime broker liquidation mechanics
A 4x levered long-only fund faced forced liquidation when a 25% GMV drop wiped 85% of equity; prime brokers seized the portfolio and ran a closed auction (Citadel, Millennium, Jane Street), with the buyer (Citadel) capturing a $3-4B instant markup by holding illiquid positions for years — illustrating how leverage compresses multi-year cycles into weeks.