by tyler | Oct 4, 2023 | CNN, investing
Sam Bankman-Fried is set to meet the jury that will decide his fate.
Lawyers for SBF’s fraud trial have selected 12 jurors and six alternates, set to be sworn in Wednesday morning. After a brief recess, federal prosecutors and defense lawyers are expected to make their opening statements.
The US government has charged Bankman-Fried with multiple counts of fraud and conspiracy, following the implosion of his crypto-trading platform, FTX, last year.
Lawyers will now lay out their cases to the court in closely watched statements that offer a preview of how the next several weeks will play out.
Prosecutors say Bankman-Fried, who is 31, stole roughly $8 billion worth of customer funds to cover risky bets by his crypto hedge fund, buy luxury real estate in the Bahamas and donate tens of millions of dollars to US political campaigns.
Bankman-Fried has pleaded not guilty to seven counts of fraud and conspiracy, and his defense is expected to echo statements he has made to the press and in blog posts since his arrest in December last year.
The former crypto billionaire has repeatedly cast himself as a clumsy businessman who made a series of errors of judgment though never knowingly committed fraud.
Legal experts say Bankman-Fried’s lawyers have their work cut out for them. The biggest obstacle: At least four former high-ranking business associates have pleaded guilty in cooperation with prosecutors and plan to testify against their former boss.
This story is developing and will be updated.
by tyler | Oct 3, 2023 | CNN, investing
There’s big money in trendy sandals.
German shoemaker Birkenstock could be valued at up to $10 billion when it lists its shares on the stock market for the first time.
The iconic footwear brand plans to sell shares for between $44 and $49 apiece when it debuts on the New York Stock Exchange, aiming to raise as much as $1.6 billion, it said in a filing Monday. It did not set a date for its initial public offering.
At the top of the price range, Birkenstock would have a market capitalization of $9.9 billion, once all shares in the company — including those held by existing investors and shares issued to employees — are taken into account.
The family-owned firm traces its origins back to 1774, when church archives mention Johannes Birkenstock, who worked as a cobbler in Langen-Bergheim, Germany.
In 2021, L Catterton, a private equity firm backed by French luxury giant LVMH — which owns brands such as Tiffany & Co. and Dior — bought a majority stake in Birkenstock. Brothers Christian and Alex Birkenstock retained a minority stake.
The company has ballooned in recent years, its revenues surging by 71% between the 2020 and 2022 financial years, according to Monday’s filing. In the nine months to the end of June this year, revenues grew 21% compared with the same period in 2022 to reach €1.12 billion ($1.17 billion). The firm made a pre-tax profit of €154.2 million ($161.7 million) in that period.
Birkenstock scored a major boost to its profile this summer when a pair of its sandals was featured in the wildly successful “Barbie” movie. (CNN and “Barbie” distributor Warner Bros. Pictures have the same parent company, Warner Bros. Discovery.)
The shoemaker’s upcoming listing is a coup for the US market, and another loss for stock exchanges in Europe. UK-based chip designer Arm (ARM) was lured to US shores last month, listing on the Nasdaq, and currently has a market capitalization of $54 billion.
Birkenstock’s IPO is also one of a number of high-profile listings this year that have raised hopes among investors of a revival in the global market for new share issues after an 18-month slump.
Listings in Europe and the United States in particular have been hamstrung by high interest rates, which have lifted returns on safe assets such as government bonds and dented investors’ appetite for riskier bets.
“Birkenstock’s step is another sign that the IPO engine is whirring back to life after an 18-month downturn,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said in a note Monday.
However, the volatility in share prices seen after recent listings, such as those of Arm and grocery delivery firm Instacart (CART), “highlights that investor sentiment is still highly sensitive, particularly given the realization that high interest rates are set to linger,” she added.
by tyler | Oct 3, 2023 | CNN, investing
The trial of Sam Bankman-Fried, a onetime crypto billionaire who stands accused of orchestrating a multibillion-dollar fraud, kicked off Tuesday in federal court in Manhattan.
The former crypto billionaire appeared in court in a suit and tie, his normally unkempt hair having recently been cut.
Judge Lewis Kaplan addressed the 31-year-old Bankman-Fried, known as SBF, before potential jurors arrived, telling the defendant that the decision to testify is “solely for you,” not his attorneys.
“They can’t make that decision for you. It’s your call… You need to understand that,” Kaplan said.
Jury selection is expected to take up most of the first day, with opening arguments to follow later in the week.
Over the next several weeks, lawyers will argue two dueling narratives about how FTX, Bankman-Fried’s now-bankrupt crypto platform, came unglued and left thousands of customers in limbo, with their deposits frozen.
SFB has pleaded not guilty to seven counts of fraud and conspiracy in connection with the collapse of FTX — a seismic event from which the entire crypto industry is still reeling.
SBF has maintained his innocence since his arrest last December and has sought to shift blame toward other players in his business empire, including FTX’s lawyers as well as his former business partner and on-and-off ex-girlfriend, Caroline Ellison.
Prosecutors have cast SBF as a Bernie Madoff-like mastermind who stole from FTX’s customers and lied to investors in a yearslong scheme to enrich himself and his associates with luxury real estate splurges and more than $100 million in US political donations.
Here are the key things to know about the case, and what we might see over the next several weeks at the trial.
SBF faces seven counts, including wire fraud and securities fraud.
Prosecutors alleged that SBF stole billions of dollars from FTX customer funds for his own personal use and to cover huge losses incurred by Alameda Research, a crypto hedge fund he also controlled.
They also say SBF defrauded investors in FTX by covering up the scheme.
Prosecutors opted in June to sever five other charges that were brought after Bankman-Fried’s extradition from the Bahamas, where FTX was based. A separate trial is scheduled to begin on those charges in March.
FTX marketed itself as an easy, safe portal into cryptocurrency trading. It made money by collecting fees on customers’ trades, much like a typical brokerage.
As digital asset valuations shot up in 2021, so did FTX’s profile. At its peak, the company fetched a private valuation of more than $30 billion. It plastered its name across a Miami basketball arena and won celebrity endorsements from Tom Brady and Larry David, both of whom starred in Super Bowl ads for FTX.
But crypto market turmoil took root in the spring of 2022, gutting the entire industry’s value down to $1 trillion from $3 trillion.
By November, cracks in FTX’s foundation were beginning to show, and it took just over a week for it all to come crashing down.
Investors and customers began to panic in response to a report from crypto news site Coindesk that raised serious questions about the financial links between FTX and Alameda, two ostensibly separate businesses founded by Bankman-Fried. Based on a document obtained by Coindesk, it appeared that much of Alameda’s assets consisted of FTT, a digital token created by FTX that was rapidly losing value, putting Alameda on shaky financial footing.
Customers rushed to withdraw their funds from FTX, exposing an $8 billion shortfall.
FTX filed for bankruptcy on November 11, and Bankman-Fried resigned as CEO.
He was arrested in December in the Bahamas on charges including fraud and conspiracy and extradited to the United States in January.
Since his arrest, SBF has repeatedly spoken and written about his view of the case: He was an inexperienced businessman who got out over his skis, and he never knowingly committed fraud.
His lawyers have hinted in court documents that they will invoke an “advice of counsel” defense. In other words, SBF didn’t know that his actions were illegal and he was following guidance from FTX’s lawyers.
In personal writings by Bankman-Fried published by the New York Times, he put the blame for Alameda’s losses on its CEO, Ellison, who is now 28.
Ellison, along with three other former high-level associates, has pleaded guilty in cooperation with prosecutors.
“SBF’s biggest challenge is going to be that his former colleagues are going to testify against him,” said Howard Fischer, a partner with Moses Singer and a former senior trial lawyer at the Securities and Exchange Commission. On top of that, FTX’s new management, led by a restructuring expert who oversaw the liquidation of Enron, have been openly hostile toward Bankman-Fried.
“This kind of cooperation is a godsend for the prosecution,” said Fischer.
Another issue, Fischer said, is that SBF, in his long-winded blog posts, tweet threads, TV media appearances and alleged document leaks, “has consistently failed to demonstrate an awareness of how serious his situation is.”
“Juries tend not to like know-it-alls who lack respect for the process … While a defendant in a case like this is well advised not to take the stand, it is possible that SBF’s apparently unwavering self-confidence will lead him to take that risk.”
The trial is expected to last up to six weeks.
During that time, SBF will remain in the Metropolitan Detention Center in Brooklyn, where he has been since Judge Lewis Kaplan revoked his bail on August 11 over SBF’s efforts to intimidate witnesses.
If he’s found guilty of all seven criminal counts and is given the maximum sentence, SBF would face the prospect of 110 years in prison.
by tyler | Oct 3, 2023 | CNN, investing
The Dow fell sharply Tuesday morning, turning negative for the year, as US Treasury yields surged to their highest levels in over a decade.
The Dow fell 408 points, or 1.2%, the benchmark S&P 500 declined 1.4% and the Nasdaq Composite lost 1.8%, extending the late summer selloff in stocks.
Stocks have marched higher for most of this year, as artificial intelligence excitement took hold on Wall Street and powered tech stocks to stratospheric heights.
But that rally petered out in August, as strong economic data had investors worried that a resilient economy and piping hot labor market would lead the Federal Reserve to hold interest rates higher for longer to tamp down inflation.
The Fed signaled last month that it could introduce one more hike this year and keep rates elevated through next year. Treasury yields have spiked and the US dollar has surged in the weeks since, continuing to chip away at the stock market’s gains from the spring. Stocks tend to suffer when government bond yields are elevated, since it means investors can get high returns on less risky assets.
Yields continued to rise on Tuesday, with their climb accelerating after fresh data from the Bureau of Labor Statistics showed that the number of US job openings unexpectedly soared to an estimated 9.61 million open jobs in August. That’s up from July’s upwardly revised estimate of 8.92 million openings and above the consensus 8.8 million estimate among economists.
The yield on the 10-year Treasury note on Tuesday climbed to 4.75%, its highest level since August 2007. The 2-year rose to 5.13%, around its highest level since July 2006.
CNN’s Fear & Greed Index fell to an “Extreme Fear” reading of 18, its lowest level since last October.
Later this week, the Bureau of Labor Statistics also releases August employment figures.
“Unless the [jobs] report comes in lower than expected, Wall Street will likely start to fully price in at least one more Fed rate hike before the end of the year,” said Ed Moya, senior market analyst at OANDA.
West Texas Intermediate crude futures, the US benchmark for oil, fell below $90 on Tuesday, cooling off from their climb in recent months as a series of output cuts announced by OPEC+ started to take hold on oil prices.
by tyler | Oct 2, 2023 | CNN, investing
JPMorgan Chase CEO Jamie Dimon issued a stark warning Monday to Wall Street: The Federal Reserve may be far from finished with its aggressive regimen of interest rate hikes in the fight against elevated inflation.
Most analysts say the central bank will raise interest rates just one more time, in November, by 0.25 percentage points from its current range of 5.25%-5.50%. However, Dimon told Bloomberg TV it’s possible the central bank will continue hiking rates by another 1.5 percentage points, to 7%.
That would be the highest federal funds rate since December 1990. In March 2022, when the current hiking regimen began, rates were at 0.25%-0.50%.
Dimon was doubling down on comments he made last week in an interview with the Times of India, when he said the world is not prepared for 7% rates.
It’s also a contrarian take. According to the latest Fed projections, officials forecast just one more interest rate hike this year — and rate cuts next year.
Still, Dimon, who leads the largest bank in the United States, says Americans need to be prepared for interest rates to surge.
When members of his board ask him whether interest rates could really go that high, his answer is always “yes,” he told Bloomberg.
Dimon added that he can’t predict the outcome of 7% interest rates on the economy: “We may have a soft landing, we may have a mild recession, we may have a harder recession,” he said.
A 7% rate could also dampen consumer spending and business investment and lead to a slowdown in economic growth.
There are a lot of “potential bad outcomes,” Dimon said, but the worst-case economic scenario would be stagflation, with low growth and high interest rates.
If that happens, he said, “you’re going to see a lot of people struggling.”
The Fed has spent the past 16 months raising rates in an attempt to quiet the booming US economy and bring down elevated prices, but so far the economy has been relatively resilient.
“The consumer is still in good shape,” Dimon told Bloomberg. “They’re still spending money and they still have more money than they did pre-Covid.”
Still, Dimon says, there are two “extraordinary” potential storm clouds on the horizon.
The first is government spending.
Spending by the US government is the highest it has ever been outside of wartime, and deficits are already very high.
“At a minimum I expect volatile markets,” he said. This long-term fiscal spending is also inflationary, he said, which could contribute to rising rates.
The second: Rising geopolitical tensions.
Russia’s war on Ukraine is a humanitarian crisis, he said, and will also impact all global relationships, including US trade with China.
“It’s very hard to see really positive outcomes with China until the Ukraine war is resolved,” he said.
by tyler | Sep 27, 2023 | CNN, investing
Shares of UBS plunged Wednesday following a Bloomberg report that the Swiss bank faces a widening probe by the US Department of Justice (DOJ) over suspected compliance failures that allowed Russian clients to evade sanctions.
The Swiss Stock Exchange said it had temporarily stopped trade in the stock, which had fallen as much as 8% before it was suspended. Trading resumed later and shares closed 2.9% lower.
Citing people familiar with the matter, Bloomberg reported that what began as a probe into several banks turned into a full-scale investigation focusing on Credit Suisse, which was bought by UBS earlier this year in an emergency rescue deal.
UBS has seen its shares gain 30% since the takeover was announced on March 19.
But news of the probe could renew investor concerns about the lender’s exposure to Credit Suisse’s legal woes and compliance failures, which ultimately played a key role in destroying clients’ confidence in the bank.
The DOJ has briefed lawyers for UBS (UBS), which absorbed its smaller rival in June, about Credit Suisse’s alleged involvement in sanctions violations, according to Bloomberg. Authorities are also looking into possible compliance failures at UBS.
UBS declined to comment. CNN has contacted the DOJ.
In its latest earnings statement in August, UBS said Credit Suisse offices in various locations, including the United Kingdom, the Netherlands, France and Belgium, had been contacted by regulatory and law enforcement authorities seeking information in relation to investigations into cross-border private banking services.
JPMorgan analysts said the Bloomberg report of the DOJ probe was a “headwind” for UBS.
“We have not seen a mention of [a] Russia related DOJ probe in the latest [quarterly] report of UBS Group and hence it is likely not covered by existing balance sheet provisions of $4.7 billion at the end of June,” they said in a note on Wednesday.
But they estimate that UBS has built up a much bigger buffer of nearly $10 billion in total to absorb litigation related expenses.
In bailing out Credit Suisse, UBS has taken on a bank in terrible shape.
Swiss taxpayers were originally on the hook for potential losses resulting from the deal, but UBS said last month that it would no longer need a government guarantee of 9 billion francs ($10.3 billion) for future potential losses arising from Credit Suisse assets.
The move suggested the assets are not as toxic as UBS feared.
Still, the parlous state of Credit Suisse presents an enormous challenge to UBS as it executes a first-of-its-kind merger of two global banks with combined assets of nearly $1.7 trillion.
Fully integrating the businesses will take three to four years, according to UBS chairman Colm Kelleher, who has warned of “huge” risks in merging the lenders.
