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The Morning Risk Report: Early Alameda Staffers Quit After Battling Sam Bankman-Fried Over Risk, Compliance Concerns
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Good morning. Sam Bankman-Fried said that he didn’t intend to commit any fraud or use customer funds to back leveraged bets that went wrong at Alameda Research, a crypto hedge fund attached to FTX that pushed the exchange to bankruptcy.
Mr. Bankman-Fried, speaking at the New York Times DealBook Summit in New York, denied knowingly commingling customer funds to back his crypto trading operation and tried to deflect some of the blame for FTX’s collapse away from himself, saying he was surprised at the size of Alameda’s bets that went wrong.
Meanwhile, years before Sam Bankman-Fried’s crypto empire collapsed, a group of employees quit in a power struggle—after becoming concerned about what they say was his cavalier approach to risk, compliance and accounting.
The employees worked at his trading firm, Alameda Research, and were some of his earliest colleagues, including Alameda’s co-founder, Tara Mac Aulay. They left in 2018, well before the crypto exchange FTX grew out of Alameda. Both FTX and Alameda are now bankrupt.
Mr. Bankman-Fried placed huge bets on crypto assets but paid little heed to the risk of those bets, brushing off the staffers’ concerns, according to people familiar with the matter. The firm commingled trading capital with operating cash and had poor record-keeping that left its profits and losses unclear, they said.
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Federal prosecutors remain busy investigating bribery and fraud by companies and their executives, despite data showing a long decline in the number of cases against corporations, a senior Justice Department official said.
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The remarks by Glenn Leon, the new chief of the department’s criminal fraud section, at a legal conference on Wednesday come amid promises by Biden administration appointees to crack down on business crime. Mr. Leon’s section, which investigates bribery and market manipulation as well as healthcare and securities fraud, is one of the teams responsible for achieving that goal.
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European Union officials said the bloc can’t confiscate tens of billions of euros worth of frozen Russian central-bank funds to pay for Ukraine’s reconstruction, while its executive body sent proposals to member states on setting up an international court to prosecute Russian officials for this year’s invasion.
Pressure had been building up for months from some member states for Brussels to come up with ways to seize Russian assets and hold top Russian leaders accountable for the war.
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With the rise of sports betting, one playing field has become a dividing line in the U.S. gambling industry: college campuses.
Caesars Entertainment Inc. has signed marketing deals with the Louisiana State University and Michigan State University athletics programs, giving the Las Vegas-based sports-betting operator access to advertise in college stadiums and other sports facilities and in digital and broadcast sports content, among other rights, according to the company. Financial terms of the deals haven’t been disclosed.
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The U.S. isn’t seeking to decouple from China, Commerce Secretary Gina Raimondo said Wednesday, even as she emphasized steps the U.S. is taking to safeguard its technology to ensure its economic competitiveness.
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General Motors Co.’s driverless-car unit has requested approval from California regulators to begin public testing of a shuttle that has no steering wheel or manual controls, showing the auto maker’s determination to make progress on autonomous vehicles as rivals step back.
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Demonstrators gathered in enough numbers outside China’s New York consulate on Tuesday to disrupt traffic and force organizers to move to a nearby pier.
PHOTO: JOHN MINCHILLO/ASSOCIATED PRESS
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Antigovernment protests in China are stirring sympathetic activity near Chinese diplomatic missions and on university campuses around the world, adding an international dimension to a sensitive political moment.
The expressions of solidarity from Yale University to the streets of Istanbul are emanating from China’s vast diaspora, and specifically those frustrated with Xi Jinping’s authoritarian leadership of the country, participants say.
Meanwhile, Chinese health officials softened their messaging on the risks of Covid-19, urging local governments to avoid unnecessary and lengthy lockdowns, after protesters across the country denounced the strict controls.
The Omicron variant has caused fewer deaths and less severe sickness than previous Covid variants, a health official said at a press conference Tuesday.
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U.S. economic growth eased this fall with business activity in some parts of the country stalling or declining, the Federal Reserve said in a Wednesday report.
Businesses also expressed greater uncertainty and increased pessimism for the U.S. economy as prices and interest rates continue to rise, according to the central bank’s latest compilation of economic anecdotes from around the country, known as the Beige Book.
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Islamic State said Wednesday that its top leader died recently in fighting, less than a year after the terrorist group’s previous commander was killed during a U.S. military raid in Syria.
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The U.S. and Mexico are tangling over Mexico’s proposal to ban genetically modified corn, with a top U.S. official threatening to initiate a trade dispute if the two countries can’t find an agreement.
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Vessels linked to Russia’s largest grain trader shipped thousands of tons of stolen Ukrainian grain to global buyers, using a sophisticated system of feeder vessels and floating cranes, according to an investigation by The Wall Street Journal.
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The European Commission, the European Union’s executive body, has asked the bloc’s 27 member states to approve a price cap on Russian oil of $60 a barrel, according to people familiar with the matter.
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The company behind the tether stablecoin has increasingly been lending its own coins to customers rather than selling them for hard currency upfront. The shift adds to risks that the company may not have enough liquid assets to pay redemptions in a crisis.
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Verizon Communications is among the corporations that have criticized aspects of the FASB’s tax-disclosure proposals. PHOTO: ANDREW KELLY/REUTERS
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The Financial Accounting Standards Board on Wednesday said it wants companies to provide more information on their income taxes, the group’s latest attempt to give the public more detail on the companies they invest in.
At least once a year, public companies have to disclose the amount of cash taxes they pay. They must also provide their total pretax net income for U.S. and foreign operations, as well as their tax expense or benefit. But businesses don’t have to break out their tax and profit data by country. Companies must also disclose their effective tax rate, or the ratio between their tax expense and their pretax income.
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Elon Musk’s changes to Twitter include broad layoffs—sparking questions about its ability to comply with new EU rules on content moderation.
PHOTO: PATRICK PLEUL/PRESS POOL
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A top European official warned Elon Musk that Twitter Inc. would need to make significant changes to comply with a new European Union law governing social-media platforms and content moderation.
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Elon Musk said Wednesday he met with Apple Inc. Chief Executive Tim Cook at Apple’s headquarters, just days after the new Twitter Inc. boss launched attacks on the company’s App Store and advertising.
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Amazon.com Inc. CEO Andy Jassy said he doesn’t regret the hiring spree the company went on in recent years even as the tech giant is now conducting one of the largest rounds of corporate layoffs in its history.
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Salesforce Inc. said Bret Taylor will depart as co-CEO of the business-software company with co-founder and co-CEO Marc Benioff becoming the sole chief executive.
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Economists expect China’s growth this year to be the weakest in decades.
PHOTO: CFOTO/ZUMA PRESS
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Economic activity in China contracted further in November, adding pressure to a global economy already losing momentum as the war in Ukraine drags on and central banks raise interest rates to combat high inflation.
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Auto makers in China including Volkswagen AG and Honda Motor Co. have halted production at some plants as authorities persist in using strict measures to control Covid-19 outbreaks.
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The House approved a measure Wednesday to end a long-running railroad labor dispute while also backing a proposal to impose seven days of paid sick leave, as President Biden urged lawmakers to work quickly to head off a possible strike.
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H&M Hennes & Mauritz AB said it would cut around 1,500 jobs from its global workforce as retailers around the world face pressure from high inflation and weakening consumer demand.
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DoorDash Inc. is reducing its corporate staff by about 1,250, or 6% of the company, as the food-delivery platform works to rein in costs after a pandemic-fueled growth spurt, according to an internal memo from Chief Executive Tony Xu.
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CNN said it is laying off employees and paid contributors, the latest shake-up for the cable network after Warner Bros. Discovery Inc. took ownership of it from AT&T Inc. earlier this year.
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