The scope of investigations into S.B.F. widens
Since the collapse of the crypto exchange FTX last month, its founder, Sam Bankman-Fried, has faced an array of investigations worldwide into how his empire imploded — and how billions of dollars’ worth of customer money disappeared.
Now the onetime crypto mogul, widely known as S.B.F., faces a broader inquiry into potential market manipulation, The Times reports: U.S. federal prosecutors are examining whether he illicitly influenced trading in two cryptocurrencies whose collapse contributed to the demise of FTX.
Manhattan prosecutors are looking at TerraUSD and Luna, which are linked. (In a nutshell, when TerraUSD fell in value, the supply of Luna would go up, as part of a mechanism that was supposed to keep the price of TerraUSD stable.) In May, a flood of sell orders for TerraUSD overwhelmed the market for the digital currency and depressed the price of Luna. The markets for the two coins eventually collapsed.
The bulk of the TerraUSD sell orders appeared to come from one place, according to The Times: S.B.F.’s trading firm, Alameda, which had also bet against Luna. If things had gone as expected, Alameda would have reaped a huge profit.
But the trade may have been S.B.F.’s undoing. The two coins’ meltdown unleashed wider chaos within crypto, including at Alameda. The firm, facing billions’ worth of loans being called in, used customer money at FTX to cover the payments. When FTX customers, worried about the exchange’s health, began rushing to withdraw their money, the company was unable to meet their demands and collapsed.
The investigation remains at an early stage and may not lead to charges against S.B.F. But it’s another sign of just how many legal issues he and his associates now face.
In other crypto news:
FTX held talks with Taylor Swift over a $100 million sponsorship deal, in part because S.B.F. was a fan, according to The Financial Times. Other FTX executives opposed the idea, and it never came to anything.
Just 8 percent of Americans view crypto positively, a poll for CNBC found.
HERE’S WHAT’S HAPPENING
Covid cases soar in China. Infections are rising rapidly after Beijing eased its “zero Covid” policy, putting pressure on the country’s health care system. That surge has raised new worries about the economy.
Republican states raise pressure on TikTok. Indiana’s attorney general sued the video platform, accusing it of deceiving users about the potential for China to access their data and children to find inappropriate content. Texas banned the app from government-issued devices, following the lead of several other Republican-led states.
Theranos’s former president is sentenced to nearly 13 years in prison. Sunny Balwani was convicted of defrauding investors and patients, receiving a longer sentence than the health care start-up’s boss, Elizabeth Holmes.
The United States suggests taxing metal from dirtier foundries. The White House sent the E.U. a proposal yesterday intertwining trade and climate policy. It suggests an international consortium promoting trade in steel and aluminum made with less carbon emissions — and imposing levies on metals, largely from China, that fail certain sustainability standards.
Twitter reportedly considers charging some Apple users more for subscriptions. The plan to price Twitter Blue higher via the iPhone app appears tied to the 30 percent commission Apple charges for in-app purchases, according to The Information.
A fraud trial for Germany’s record books begins
Today is the start of a criminal trial over Wirecard, the payments processor that, at the apex of its success in 2018, sat near the top of Germany’s blue-chip Dax stock index, with a market cap bigger than Deutsche Bank’s.
Two years later, it collapsed over an accounting imbroglio that the German newspaper Handelsblatt has called the “biggest economic scandal in German history.” Its downfall has served as inspiration for the “King of Stonks” series on Netflix, as well as the basis for the documentary “Skandal!”
Wirecard’s former C.E.O., Markus Braun, and two associates will stand trial in Munich, in a courtroom inside a massive prison complex. Prosecutors have accused Mr. Braun and his colleagues of concocting a gargantuan fraud that deceived auditors, customers and investors by funneling billions through a maze of sham accounts. The case is expected to run for more than a year.
“From a capital markets perspective, this is probably the biggest case ever in Germany, definitely the biggest in the last ten years,” Marc Schiefer, a securities lawyer at the German law firm TILP Rechtsanwaltsgesellschaft, told DealBook. “So much trust in the capital markets has been lost.”
Wirecard’s implosion sent shock waves through German investors, and catalyzed a sweeping overhaul of the country’s financial watchdog, BaFin. When activist investors and financial journalists, most notably at The Financial Times, first began reporting on allegations of wrongdoing at the company, BaFin threatened the whistle-blowers. The scandal has inspired calls across the E.U. for broader changes to securities law, and generated a mountain of investor lawsuits in Germany.
TILP is representing more than 15,000 Wirecard retail investors and 16 institutional investors in a separate civil lawsuit against Braun and EY, Wirecard’s auditor. EY says the investor lawsuit is without merit. “The collusive acts of fraud at Wirecard were implemented through a highly complex criminal network designed to deceive everyone,” a spokesman for the firm said in a statement to DealBook.
If the criminal trial returns a guilty verdict, Mr. Schiefer said, that could bolster investors’ civil case. But he’s not confident the trial will lead to greater investor protections: “It’s like the German national soccer team. We’ve lost again and again, and no lessons are learned.”
Exclusive: Serena Williams bets on more accessible health care
Serena Ventures, the venture capital firm founded by Serena Williams, is leading a $12 million funding round for Juno, a healthcare company focused on underserved communities.
The investment, which will help Juno expand from New York into Atlanta, Los Angeles and Tulsa, arose in part from the tennis star’s own well-documented health challenges after giving birth to her daughter five years ago.
Juno aims its services at families, including primary care, women’s health and pediatrics, and promises transparent and affordable prices while accepting a range of insurance plans, including Medicare and Medicaid. For additional membership fees that start at $20 a month, users can access extra benefits like weekend appointments.
The company was founded in Harlem two years ago by Dr. Akili Hinson, a physician and former consultant at McKinsey & Company, with the goal of focusing on communities that struggle to access adequate health care provision because of socioeconomic and racial disparities.
Ms. Williams’s own health care problems informed her investment. She has spoken of her frustration after the birth of her daughter five years ago, after she was forced to push medical professionals for help to deal with life-threatening medical complications. Black women are three times more likely than white women to die in childbirth or soon afterward, according to the Population Research Bureau.
“There is a serious need to address equity issues in health care, mental health and wellness services that many communities face,” Ms. Williams said in a statement.
The trade-offs of leadership
Last week at the DealBook Summit, Andrew interviewed some of the world’s most influential leaders, including U.S. Treasury Secretary Janet Yellen, President Volodymyr Zelensky of Ukraine, Mark Zuckerberg of Meta and Reed Hastings of Netflix.
One theme came up in just about all those conversations: Every decision is a trade-off — sometimes moral, sometimes economic and sometimes both. Here’s how some of the speakers said they handle those choices, as part of today’s special section on themes raised at the summit.
Benjamin Netanyahu: Asked why he has been reluctant to commit to providing air defense systems to Ukraine, Israel’s recently re-elected prime minister said that his relationship with Russia helped preserve Israel’s access to Syrian airspace, which he considers existentially important to Israel. “Foreign policy and democracy is a combination of moral principles and expediency,” Mr. Netanyahu told Andrew. “What assumes primacy? Interests or values? The answer is neither. You balance the two.”
Janet Yellen: Some of the Biden administration’s biggest concerns revolve around China’s policies and their effects on global supply chains, Taiwan and human rights. And yet the Treasury secretary appeared to acknowledge that U.S. policy toward Beijing was built on a trade-off framework: While she is worried about over-dependence on China for critical supplies, “I expect and hope that there will be strong ties between China and the United States when it comes to mutually beneficial trade and investment.”
Laurence D. Fink: BlackRock’s C.E.O. sees climate change as the biggest existential crisis around, and his firm’s investment approach has pushed corporate America to curb emissions. But when asked about Republican criticism of his focus on climate-minded investing, he admitted: “I actually believe we’re going to need hydrocarbons for 70 years.”
Read more about some of the big questions raised at the Summit, from the future of the news industry to sustainability in fashion and how leaders balance the views of workers with business imperatives.
THE SPEED READ
Deals
SoftBank’s C.E.O., Masayoshi Son, has quietly increased his stake in the Japanese tech investor above 33 percent, giving him more control over the company. (Bloomberg)
Blackstone’s C.E.O., Stephen A. Schwarzman, downplayed concerns about the firm’s giant real-estate fund, which has faced a spate of investor withdrawals. (FT)
The embattled used-car marketplace Carvana has held talks with restructuring advisers, as some of its major creditors agreed to team up in negotiations. (Bloomberg)
Policy
The Pentagon gave split its cloud-computing contracts four ways — among Amazon, Google, Microsoft and Oracle — after years of legal disputes. (NYT)
Ticketmaster’s mishandling of Taylor Swift concert sales has “converted more Gen Z’ers into antimonopolists” than anything the F.T.C. could have done, according to the agency’s chair, Lina Khan. (Insider)
Best of the rest
Stock purchases by retail investors have hit a low for the year as traders worry about the Fed’s next move. (Insider)
Meet the last Boeing 747. (CNN)
“How to Actually Enjoy the Holidays” (NYT)
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