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The Morning Risk Report: Ex-Cryptocurrency Fund Manager Sentenced to 7½ Years in Prison
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Stefan Qin, who pleaded guilty in February to one count of securities fraud, was sentenced to 7½ years in prison Wednesday.
PHOTO: BILLY H.C. KWOK FOR THE WALL STREET JOURNAL
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Good morning. A cryptocurrency hedge-fund manager who lied about returns on his $90 million fund and siphoned money from its accounts to cover a lavish lifestyle was sentenced to 7½ years in prison Wednesday.
Stefan Qin, 24 years old, pleaded guilty in February to one count of securities fraud after prosecutors said he ran the fund, Virgil Sigma Fund LP, like a Ponzi scheme for three years until its implosion in late 2020. The U.S. attorney’s office for the Southern District of New York said many of the more than 100 investors in the fund were scammed.
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Federal sentencing guidelines called for 15½ to nearly 20 years in prison, but U.S. District Judge Valerie Caproni said at a hearing Wednesday in federal court in New York that those recommendations were draconian.
Mr. Qin’s fraud highlights the growing number of scams in cryptocurrency markets operating with little regulation and as bitcoin’s value soars. The Federal Trade Commission said consumers reported losing nearly $82 million to crypto-related fraud in the fourth quarter of 2020 and first quarter of 2021. It was more than 10 times the amount during the same six-month period a year earlier.
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WSJ Risk & Compliance Forum
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Join us on Oct. 12 for the WSJ Risk & Compliance Forum. The virtual program includes sessions on anti-money laundering laws, emerging risks, compliance and cryptocurrencies, lessons from Wirecard and workshops on ESG reporting and responding to ransomware. You can register here.
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From Risk & Compliance Journal
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SEC Issues $114 Million to Two Whistleblowers
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The U.S. Securities and Exchange Commission awarded about $114 million in total to two whistleblowers, including one who provided independent analysis to the regulator that helped substantially advance investigations, the SEC said.
With the latest awards, the SEC whistleblower program has paid out more than $1 billion to 207 whistleblowers since issuing its first award in 2012, the agency said. That marks a milestone for the SEC whistleblower program created by the 2010 Dodd-Frank Act.
Reaching the $1 billion mark is significant for a whistleblower award program that was only implemented in 2011, said Erika Kelton, a partner at law firm Phillips & Cohen LLP who represents whistleblowers. “Because it is that kind of headline-grabbing number, I do think that would generate and encourage more people to step forward,” she said.
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More Financial Institutions Take Steps to Manage Climate Risk
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Financial institutions are staffing up and adopting new methods to manage climate risk, but a lack of reliable models and regulatory uncertainty continue to pose challenges, according to a survey by the Global Association of Risk Professionals, a nonprofit group that promotes risk management practices.
More firms—around 70% of those surveyed by GARP’s Risk Institute—are embracing scenario-modeling, a key tool for quantifying the financial risks associated with climate change, up from just under 60% of respondents in last year’s survey. They are also using quantitative analyses to assess the risks posed by counterparties, according to the survey.
Climate-risk staff levels have increased at 91% of firms over the past two years and nearly 90% of respondents expect those levels to rise in the next two years, the survey said.
Increased regulation around climate-risk management was another trend identified by GRI. Nearly 80% of the firms reported that their regulators had released formal expectations around climate-risk management, with 65% saying that regulators are requiring them to report climate-related risks, the survey said.
GRI surveyed 71 institutions world-wide, including banks, asset managers and insurers, with around $46 trillion in collective assets.
—Dylan Tokar
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President Biden hosted a meeting on Wednesday in Washington, D.C., with business leaders and CEOs on efforts to control the Covid-19 pandemic.
PHOTO: OLIVER CONTRERAS/PRESS POOL
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President Biden met Wednesday with executives from companies including Walt Disney Co., Microsoft Corp. and Walgreens Boots Alliance Inc. to advance his Covid-19 vaccination requirements for the private sector.
The White House meeting comes after a plan Mr. Biden announced last week designed to bring the coronavirus pandemic under control, which includes vaccine requirements affecting roughly 100 million workers.
Mr. Biden has defended a more robust approach to Covid-19 that includes an anticipated rule under which all employers with 100 or more employees would have to require that their workers be vaccinated or undergo at least weekly Covid-19 testing.
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Elizabeth Holmes arriving with her mother, Noel Holmes, at the courthouse in San Jose, Calif., on Wednesday. PHOTO: SARA RANDAZZO/THE WALL STREET JOURNAL
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In the more than seven years since Erika Cheung quit Theranos Inc. over her concerns about the blood-testing company’s practices, she has spoken out widely about her experiences.
Now, she is telling her story again, this time at the criminal trial of Theranos founder Elizabeth Holmes, who is battling accusations that she defrauded patients and investors with promises that her technology could test for a wide range of health conditions using just a few drops of blood from a finger prick.
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A divided Federal Trade Commission on Wednesday withdrew guidelines adopted just last year on how the government reviews so-called vertical mergers of companies that don’t directly compete with one another, the latest signal the agency is looking to escalate antitrust scrutiny of deal-making.
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Few consumers realize how much information their phones, cars and other connected devices broadcast to commercial brokers and how widely it is used in finance, real-estate planning and advertising. While such data has been quietly used for years in intelligence, espionage and military operations, its increasing use in criminal law raises a host of potential constitutional questions.
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When Republicans made sweeping changes to corporate taxes in their 2017 tax overhaul, executives and tax professionals worried that a Democratic Congress could roll back the legislation’s rate cuts without reinstating the many tax breaks the law tightened or eliminated. Based on this week’s congressional tax proposal, it looks as if they were right.
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Democratic divisions spilled into the open Wednesday over how to lower prescription-drug prices as part of a broader $3.5 trillion budget package, signaling the challenge Democratic leaders face ironing out internal disagreements over a marquee component of the legislation.
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Microsoft Corp.’s board approved a plan to buy back as much as $60 billion of its stock, extending the tech giant’s extensive repurchase program at a time when Congressional Democrats have proposed taxing companies that do buybacks.
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An employee at a factory in Wuhan being tested for Covid-19 in early August after a fresh outbreak emerged in China.
PHOTO: CHINA DAILY/REUTERS
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Growth across a range of Chinese economic indicators pulled back sharply in August, as a new outbreak of the Covid-19 Delta variant and tighter government regulations on the property market hit consumer spending and the housing sector.
Retail sales, a key gauge of China’s consumption, rose just 2.5% in August from a year earlier, down sharply from July’s 8.5% year-over-year growth, according to data released Wednesday by China’s National Bureau of Statistics. The result marked the lowest pace of growth in a year and missed by a large margin the 6.3% increase expected by economists polled by The Wall Street Journal.
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Manufacturers are facing the highest steel and aluminum prices in years, another hurdle for U.S. companies already struggling to make enough cars, cans and other products.
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A woman receiving a booster shot of the Pfizer vaccine in Pennsylvania last month.
PHOTO: HANNAH BEIER/REUTERS
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The Food and Drug Administration said vaccines cleared in the U.S. currently provide sufficient protection against severe disease and death from Covid-19 without additional doses, potentially complicating the Biden administration’s deliberations over the need for booster shots.
The FDA released the findings Wednesday in a report analyzing data submitted by Pfizer Inc. and BioNTech SE as part of their request for authorization for their vaccine to be given as a booster shot in people 16 years and older.
An outside panel of scientific advisers will review the FDA report on Friday, along with a companion analysis from Pfizer and other information, as part of a discussion over who needs booster shots and when.
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DoorDash argues that a New York City law requiring food-delivery companies to share more data with restaurants would allow them to use its trade secrets to compete with it.
PHOTO: CARLO ALLEGRI/REUTERS
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DoorDash Inc. is doubling down in its legal battle with New York City, suing it over a law that would require food-delivery companies to share more data with restaurants.
It’s the latest legal front in a growing clash between apps and U.S. regulators.
In a lawsuit filed in federal court in New York on Wednesday, DoorDash called the requirement “a shocking and invasive intrusion of consumers’ privacy.” The largest food-delivery app by market share in the U.S. argued that the law imposes no restrictions on what restaurants can do with the data, nor outlines requirements on storing and safeguarding it.
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A change by the U.S. accounting standard-setter is aimed at reducing the costs associated with implementing a new leasing standard.
PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS
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The Financial Accounting Standards Board is giving private companies and nonprofits more flexibility in determining the rate they use when classifying and measuring their leases.
The move approved by the U.S. accounting standard-setter on Wednesday is aimed at reducing the costs associated with implementing a new leasing standard. The rule, called Topic 842, requires businesses to put operating leases on their balance sheets—instead of in footnote disclosures—and is set to go into effect for private companies and nonprofits early next year.
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Artificial christmas trees for sale at The Balsam Hill Outlet store in Burlingame, Calif., in 2018.
PHOTO: ASSOCIATED PRESS
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Supply-chain disruptions will make decking the halls more expensive than ever for consumers looking for artificial trees this Christmas.
Some U.S. retailers are raising prices by 20% to 25% to keep pace with skyrocketing shipping costs and they are warning that certain trees could sell out early because deliveries from overseas producers have been hit by the congestion that has tied up distribution networks from ports in China to freight yards in Chicago.
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CREDIT: SIUNG TIJA/WSJ
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Facebook Inc.’s chief executive, Mark Zuckerberg, said the aim of a change to its algorithm in 2018 was to strengthen bonds between users and to improve their well-being. Facebook would encourage people to interact more with friends and family and spend less time passively consuming professionally produced content, which research suggested was harmful to their mental health.
Within the company, though, staffers warned the change was having the opposite effect, the documents show. It was making Facebook’s platform an angrier place.
“Our approach has had unhealthy side effects on important slices of public content, such as politics and news,” wrote a team of data scientists, in a memo reviewed by The Wall Street Journal. “This is an increasing liability,” one of them wrote in a later memo.
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BlackRock Inc. has vaulted from fourth to first place in socially responsible fund assets in the past 18 months with a barrage of 29 launches of mutual funds and exchange-traded funds.
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