Good morning. The U.S. last year sanctioned a Moscow-based crypto exchange to stymie Russian efforts to evade the financial blockade imposed after the invasion of Ukraine.

A year on, the exchange is booming.

• Sanctions evasion: Despite its place on the U.S. blacklist, which restricts transactions with sanctioned entities, Garantex has become a major channel through which Russians move funds into and out of the country, according to trading data and people familiar with the firm. It has also been a vehicle for Russian cybercriminals to launder their earnings, U.S. authorities say.
   
• Links to Hamas funds: Garantex’s growing role as a global conduit for illicit funds was underscored this month by evidence that Palestinian militants in part financed their operations through crypto in the lead-up to the Oct. 7 attacks in Israel. Digital wallets controlled by Palestinian Islamic Jihad, which joined Hamas in the attacks, received a portion of $93 million via Garantex, according to analysis by researcher Elliptic, which said Hamas also used a similar financing strategy.
   
• The limits of sanctions: Garantex’s expansion raises questions about the effectiveness of U.S. sanctions when targeted at entities that are financially insulated in a hostile territory, said Juan Zarate, a former senior Treasury and White House counterterrorism official. “It does suggest the limits of what OFAC can do,” said Zarate, referring to Treasury’s Office of Foreign Assets Control. “OFAC tools, though powerful, aren’t a silver bullet.”

Hedge funds must tell SEC which companies they sell short under new rules.

Traders will get a broader look at which public companies are being targeted by short sellers under rules the Securities and Exchange Commission adopted Friday as part of its response to the 2021 GameStop trading frenzy.

What happened with GameStop? The final rules come more than two years after that drama, when thousands of investors coordinated on Reddit to buy shares of GameStop and others—and punish hedge funds that had bet against the stocks. The turmoil captured headlines and left some traders with huge gains while others lost eye-popping sums.

Houston bankruptcy Judge David Jones resigns under misconduct investigation.

Houston bankruptcy judge David R. Jones resigned from the bench while under a misconduct investigation by a federal appeals court over his failure to disclose his yearslong romantic relationship with a bankruptcy lawyer who had business before his court.

Jones’s resignation from the U.S. Bankruptcy Court in Houston comes after the appellate court that appointed him found probable cause that he committed misconduct by failing to disclose his romantic relationship with bankruptcy lawyer Elizabeth Freeman. Jones told The Wall Street Journal earlier this month that he and Freeman have been in a relationship for years and live together at a home in the Houston area..

• A London hedge fund’s big bet on the outcome of a South African party’s leadership vote earned it more than $20 million. Six years later, the trader who placed the wager faces criminal charges in Manhattan, where prosecutors claim he manipulated the foreign-exchange market to achieve his payday.
   
• The Biden administration’s relationship with the European Union, a vital geopolitical ally in a time of crisis, is being tested by a Trump-era policy on metals tariffs that the White House had sought to unwind.
   
• Long-struggling satellite company Ligado Networks sued the U.S. over spectrum rights it has been unable to use.
   
• The second week of Sam Bankman-Fried’s trial wrapped up with the testimony of Zac Prince, the founder of BlockFi, a crypto lender that filed for bankruptcy shortly after FTX’s collapse.
   
• Former President Donald Trump’s online tirades have already landed him with a gag order from a state judge in New York. Now he faces the prospect of similar restrictions from a federal court in Washington.

Israel ams to destroy Hamas. What comes next for Gaza is unclear.

Israel is preparing a ground invasion of the Gaza Strip with one clear goal: to destroy the ability of Hamas to rule there. But Israel hasn’t offered any indication of what could happen next, and there are no good options.

“We will destroy the rule of Hamas,” Israeli Defense Minister Yoav Gallant said Friday after meeting U.S. Defense Secretary Lloyd Austin in Tel Aviv. But Israeli leaders have yet to answer another important question: What comes after Hamas?

U.S. officials, meanwhile, are urging Arab leaders to take steps to prevent or contain any escalation triggered by a potential Israeli invasion of Gaza.

For more coverage of the Israel-Hamas war and its wider impact:

• Clashes Intensify as Israel Prepares Gaza Invasion
• Inside Gaza, People Desperately Seek Safety
• America’s Middle East Imperative: Contain Iran
• U.S. Push to Evacuate Americans From Gaza Falters Amid Egyptian Demands
• Democrats Are at Odds on Israel. Republicans Can’t Agree on Ukraine. Here’s What It Means for America’s Allies.
• Dozens of Countries Scramble to Identify More Than 150 Citizens Held Hostage in Gaza

A soft landing in the U.S. could be hard for everyone else.

The U.S. economy might be heading for a soft landing. But the rest of the world could be in for a jolt.

What the global economy faces. Global financial officials say they are grappling with an increasingly fractured economic outlook, as many countries struggle with the lasting scars of the Covid-19 pandemic while others power ahead.

• A Recession Is No Longer the Consensus

• Robust economic growth propelled earnings at the nation’s largest banks, but their executives warned the good times may be coming to an end.
   
• The fusion of inexpensive, high-tech weapons and low-tech brute force that Palestinian militant group Hamas used to attack Israel on Oct. 7 echoed tactics used on the battlefields of Ukraine that could transform the future of warfare.
   
• As a fractious week at the Capitol came to a close with the position of speaker of the House still vacant, a sense of fatalism descended on the Republican majority after the ejection of the post’s previous occupant, Rep. Kevin McCarthy, without a plan or successor in place to follow him.
   
• Soaring interest expenses are turning the bottom line red at an increasing number of companies with low credit ratings, a problem that is expected to worsen as the rates on their loans reset.
   
• The highest mortgage rates in 23 years are dragging down home sales to their lowest levels since the subprime crisis period.
   
• Gasoline markets have shifted into reverse.

Climate advocates fighting Exxon were hacked in far-flung scheme, prosecutors say.

Federal prosecutors said private documents stolen during an extensive hacking-for-hire scheme appear to have been used to undermine investigations into Exxon Mobil’s knowledge of climate change.

The documents, taken from people involved in climate change advocacy, were among the intelligence collected as part of a five-year hacking campaign targeting thousands of individual victims and companies, according to sentencing documents filed Thursday by the Justice Department.

• Technology embedded in our phones and computers to serve up ads can also end up serving government surveillance.

• The auto industry’s push to boost sales of electric vehicles is running into a cold, hard reality: Buyers’ interest in these models is proving shallower than expected.
   
• President Biden has established an early advantage over former President Donald Trump in their competing quest for campaign cash.
   
• Starboard Value has built a stake in News Corp and the activist shareholder plans to push for strategic and governance changes at the Wall Street Journal parent.
   
• Michigan's Soo Locks help move nearly 90% of the nation's iron ore for automakers and manufacturers. Now, construction crews are working to complete a modernization of the locks.
   
• The U.S. government is one of the world’s biggest holders of bitcoin, but unlike other crypto whales, it doesn’t care if the digital currency goes up or down in value.

Follow us on X at @WSJRisk. Follow Risk & Compliance editor David Smagalla @DSmagalla_DJ and reporters Mengqi Sun @_MengqiSun, Dylan Tokar @dgtokar and Richard Vanderford @VanderfordRich.

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