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The Morning Risk Report: FTX Founder Sam Bankman-Fried Says He Can’t Account for Billions Sent to Alameda
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Good morning. The drama around the collapse of cyptocurrency exchange FTX continues to dominate the headlines. FTX founder Sam Bankman-Fried, in an interview with The Wall Street Journal, said he couldn’t explain what happened to billions of dollars that customers of his failed cryptocurrency exchange sent to the bank accounts of his trading firm, Alameda Research.
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And he said he couldn’t rule out the possibility that money deposited by FTX customers who were told their money was theirs alone was in fact lent to Alameda.
Mr. Bankman-Fried distanced himself from Alameda, saying he had stepped back from running the firm and had little insight into its workings even though he owned 90% of it.
Mr. Bankman-Fried’s remarks suggest that FTX customer funds flowing into Alameda bank accounts could have been recorded in two places—both as FTX customer funds and as part of Alameda’s trading positions.
The collapse of FTX has opened a hornet’s nest of squabbles between foreign governments and its new U.S. chief executive, John J. Ray III. Such disputes reflect a disconnect between the global aspirations of cryptocurrencies and the hard facts of the law, whose powers often don’t extend beyond a nation’s borders.
Meanwhile, Former SEC Chairman Jay Clayton and former CFTC Chairman Timothy Massad wrote in a Journal Reports published this weekend that the collapse of FTX and of the TerraUSD stablecoin, along with the recent bankruptcy of crypto lenders and hedge funds, "provide ample evidence that digital assets should be regulated just like practically all other financial products and services."
They add a cautionary note, however, saying that "the road to compliance with basic regulatory principles, in the U.S. and globally, will be rough."
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ABB representatives appeared in an Alexandria, Va., courtroom Friday to formalize agreements with federal prosecutors. PHOTO: ARND WIEGMANN/REUTERS
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Global settlement with ABB announced. Swiss industrial company ABB Ltd. said it would pay $327 million as part of a global deal to resolve its liability in four countries for the role it played in a corruption scheme centering on the construction of a coal-fired power plant in South Africa, Risk & Compliance Journal's Dylan Tokar reports.
In the U.S., representatives for ABB appeared in an Alexandria, Va., courtroom Friday to formalize a series of agreements with federal prosecutors, under which the company admitted to violating a U.S. antibribery law. The company said it also had reached a parallel agreement with the U.S. Securities and Exchange Commission.
The U.S. court hearing was part of a globally coordinated deal that extends to authorities in South Africa, Switzerland and Germany, with the apparent bulk of the fines being collected in South Africa.
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British Police Raid London Home of Russian Oligarch. British police arrested a wealthy Russian businessman at his upscale London home, officials said Saturday, amid stepped-up pressure by the U.K. on Russian émigrés who are suspected of aiding the rule of President Vladimir Putin.
The U.K.’s National Crime Agency said more than 50 of its officers took part in the raid, seizing cash and digital devices. Police also arrested a man employed at the residence after he was seen leaving the building with a bag containing thousands of pounds in cash.
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Ukraine Says Price Cap Won’t Stop Russia. Ukraine denounced a price cap on Russian oil agreed to by the U.S. and its allies as a weak measure that would fail to deprive Russia’s military machine of funds, as Moscow said it could stop supplying consumers in response.
The Group of Seven agreed Friday to cap the price of Russian oil at $60 a barrel, moving forward with an unprecedented sanction against one of the world’s largest producers following its invasion of Ukraine.
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Four leading Chinese solar-cell manufacturers circumvented U.S. tariffs by routing some of their operations through Southeast Asia, a Commerce Department investigation found.
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More than a dozen states have created programs to give minorities who were disproportionately affected by the war on drugs a chance to participate in their legalized cannabis industries. So far, those efforts haven’t worked.
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Even before the latest labor strife, freight rail customers complained that low staffing levels had hampered rail service, leading to scrutiny from federal regulators. PHOTO: FREDERIC J. BROWN/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Threat of Rail Strike Reveals Supply-Chain Risks. The threat of a railroad strike this month exposed the vulnerability of U.S. transportation networks and revealed potential new risks of supply-chain disruptions just as pandemic-era bottlenecks were fading.
President Biden signed into law a bill Friday compelling freight railroads and their workers’ unions to accept a labor agreement, averting a strike that might have disrupted a logistical linchpin of the economy. Even with the dispute resolved, the episode brought about a heightened awareness that supply hiccups could become an ongoing feature of business life in America.
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U.S. and Europe Gird for Trade Spat. Europe is bracing for a confrontation with Washington over a new law that encourages businesses to invest more in the U.S., an initiative European officials say threatens the region’s economy as it teeters on the verge of a recession.
The trans-Atlantic split complicates the West’s efforts to find a common stance on confronting China. It also comes at a vulnerable time for the EU, which is facing high inflation, uncertainties about its energy supplies and an economic war with Russia.
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Russia Presses Assault in Eastern Ukraine. Russia pressed its assault against eastern Ukrainian city of Bakhmut, the U.K.’s Defense Ministry said Saturday, while Ukraine’s general staff said it was holding off Russian attacks in the region aimed at encircling Kyiv’s positions there.
Bakhmut has been a priority for Russia since the end of the summer, when Russian forces suffered a setback in the country’s south and the Russian paramilitary group Wagner began a push there.
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The Pentagon on Friday showed off its first new bomber in more than 30 years, lifting the veil on the secret long-range jet intended as a central element in Washington’s effort to keep China in check.
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Local authorities across China are paring back some of their strictest Covid-19 control measures, just days after public anger spilled over into rare protests against a zero-tolerance approach that has kept the country largely isolated for three years.
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The Cyber Safety Review Board is overseen by the Department of Homeland Security. PHOTO: MANUEL BALCE CENETA/ASSOCIATED PRESS
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U.S. to Probe Cyberattacks Linked to Lapsus$. The Biden administration on Friday said it would investigate recent hacks linked to an extortion-focused hacking collective known as Lapsus$ that over the past year has victimized some of the world’s biggest technology companies and broken into critical infrastructure systems.
The U.S. Cyber Safety Review Board, a panel of experts from various government agencies and the private sector, will examine the group’s recent high-profile hacks, which researchers say have sometimes included extortion demands but at other times seem motivated by a desire for notoriety.
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Saudi Arabian Crown Prince Mohammed bin Salman is considering investing, people familiar with the matter said. PHOTO: WILLY KURNIAWAN/ASSOCIATED PRESS
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Credit Suisse's Investment-Bank Spinoff Attracts Prominent Investors. Saudi Arabia’s crown prince and a U.S. private-equity firm run by Barclays PLC’s former chief executive are among investors preparing to invest $1 billion or more into Credit Suisse‘s new investment bank, people familiar with the matter said.
Crown Prince Mohammed bin Salman is considering an investment of around $500 million to back the new unit, CS First Boston, and its CEO-designate, Michael Klein, some of the people said. Additional financial backing could come from U.S. investors including veteran banker Bob Diamond‘s Atlas Merchant Capital, people familiar with that potential investment said. Credit Suisse previously said it had $500 million committed from an additional investor it hasn’t named.
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Manufacturing of top-of-the-line iPhone 14 Pro and Pro Max models has been hard-hit by supply-chain snafus caused by China’s Covid-19 measures. PHOTO: VCG/GETTY IMAGES
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Apple Makes Plans to Move Production Out of China. In recent weeks, Apple Inc. has accelerated plans to shift some of its production outside China, long the dominant country in the supply chain that built the world’s most valuable company, say people involved in the discussions.
It is telling suppliers to plan more actively for assembling Apple products elsewhere in Asia, particularly India and Vietnam, they say, and looking to reduce dependence on Taiwanese assemblers led by Foxconn Technology Group.
Foxconn's Zhengzhou factory was convulsed in late November by violent protests. In videos posted online, workers upset about wages and Covid-19 restrictions could be seen throwing items and shouting “Stand up for your rights!
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Chevron Corp. scored a reversal of fortunes in Venezuela last weekend after the U.S. government allowed it to pump oil there again, but its new license to operate carries considerable risk.
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Business-software companies say customers are being more cautious with their spending in response to a challenging economy, adding to the tech industry’s list of concerns.
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An advertising slowdown, economic worries and strains of the shift to streaming have many major media companies in cost-cutting and layoff mode.
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United Airlines Holdings Inc. is close to a deal to order dozens of Boeing Co. 787 Dreamliners, people familiar with the matter said.
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A screengrab from Sam Bankman-Fried’s interview with ‘Good Morning America’ on ABC. GOOD MORNING AMERICA/ABC NEWS via AP
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SBF chucks the crisis communications playbook. Sam Bankman-Fried sat for news interviews this week about the collapse of FTX, the cryptocurrency exchange he co-founded and once ran, even as investigators dug in and its new leaders scoured the globe for assets to salvage.
The interviews could be a case study in what not to do in a crisis, some communications executives said.
“He’s basically breaking every rule that somebody in the crisis communications field would advise,” said Andrew Gilman, president and chief executive at CommCore Consulting Group, a public relations and communications firm.
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Balenciaga rocketed to the heights of the fashion world with risqué designs and runway stunts, but now that edgy approach has backfired on the brand amid a public furor over the portrayal of children in its ads.
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