Bankman-Fried’s ‘Epic’ Legal Battle | Big Indy News
Connect with us

Business

Bankman-Fried’s ‘Epic’ Legal Battle

Published

on

Sam Bankman-Fried, the fallen crypto mogul who told The Times last month that his personal fortune had dwindled to $100,000, won’t be spending the holidays behind bars. He and his defense team on Thursday negotiated a whopping $250 million bond deal that secured his release from federal custody.

The terms are highly restrictive. Mr. Bankman-Fried, 30, had to turn over his passport and will remain under house arrest at the California home of his parents, the Stanford Law School professors Joe Bankman and Barbara Fried. He’s been fitted with a bracelet that monitors his movements, must undergo a mental health evaluation, and will have to get government or court approval for any expenses above $1,000.

The bail deal was negotiated before Mr. Bankman-Fried boarded a plane on Wednesday night back to the U.S. If he misses a court date, or flees, his parents would be liable for that quarter-billion-dollar bond hit.

The legal case against him is moving swiftly. Mr. Bankman-Fried’s next court appearance is scheduled for Jan. 3. in Manhattan before U.S. District Judge Ronnie Abrams.

Prosecutors allege that Mr. Bankman-Fried masterminded “fraud of epic proportions,” saying he pilfered customer funds to prop up Alameda Research, the firm’s trading arm. FTX lost billions in the fallout of the crypto market collapse, leaving a global list of creditors. Bankman-Fried also faces federal charges of violating campaign finance rules.

Top associates have already turned on him. His former roommates — Caroline Ellison, who ran Alameda Research, and Gary Wang, FTX’s former chief technology officer — pleaded guilty this week and are cooperating with authorities. Prosecutors are urging more insiders to flip.

The S.E.C. pushed back against calls for new laws to protect crypto investors. In an interview with The Times on Thursday, S.E.C. Chair Gary Gensler said existing rules were adequate and that it was up to industry players to come into compliance. “The roadway is getting shorter,” he said, warning that crypto firms needed to register with his agency or could find themselves facing enforcement actions.

In other FTX news:

Donald Trump was the “central cause” of the Capitol riots. The former president carried out “a multipart plan to overturn the 2020 presidential election,” the Jan. 6 House committee said in its final report. The panel also issued a number of recommendations to ensure something similar could not happen again.

Winter storm blasts the middle of the U.S. Airlines canceled flights as white-out conditions and freezing temperatures hit vast parts of the country, upending holiday travel plans, causing power outages and forcing some governors to declare states of emergency. Airline stocks fell sharply Thursday.

The U.S. urges China to share information about its Covid outbreak. Secretary of State Antony Blinken called for “transparency for the international community” in a call with his Chinese counterpart amid concerns that Beijing may be playing down the number of deaths. China’s top health authority reportedly estimated that 37 million people were infected on a single day this week, which would make the outbreak the world’s largest by far.

TikTok’s owner admits to inappropriately obtaining data on U.S. users. The popular video app’s parent, ByteDance, said that an internal investigation found that employees had gained access to the I.P. addresses and other information of users, including two journalists. The revelation comes as more than two dozen states have banned TikTok from government-issued devices.

Microsoft hits back at the F.T.C.’s bid to block its $69 billion bid for Activision Blizzard. The tech giant said the deal, the largest in video-game history, wouldn’t harm competition. It pointed to concessions it had made, including keeping games accessible to rivals. British and European Union antitrust regulators are also scrutinizing the deal.

Tesla bulls, consider this a kind of Christmas gift and New Year’s resolution rolled into one: Elon Musk has vowed (again) not to sell any more Tesla shares, this time for at least two years.

Tesla shares plunged nearly 9 percent on Thursday, one of the worst performing stocks on the S&P 500. The electric carmaker’s stock is on track for its worst month ever, according to Reuters, as the company faces a whirlwind of challenges — from increasing competition to production woes — that go well beyond Musk’s preoccupation with Twitter.

Investors are restless with Mr. Musk. Shares have fallen 60 percent in the past year, wiping out roughly $600 billion from Tesla’s market cap. Adding to their grumbles: Mr. Musk has sold nearly $40 billion worth of Tesla shares, primarily to pay for his acquisition of Twitter.

Ross Gerber, the head of Gerber Kawasaki Wealth and Investment Management, and a large Tesla shareholder, has been pleading publicly with Mr. Musk to quit Twitter and return to Tesla full time. Mr. Musk himself blames the economy and the Fed’s policy of raising interest rates for Tesla’s share slump. Mr. Musk also said on Thursday that his personal Twitter account is “critical” to the performance of Tesla’s share price and was adamant that he wasn’t neglecting his responsibilities at the car company.

Investors this morning seem to be cheering his pronouncement. At 6:30 a.m. Eastern, Tesla was nearly 1.4 percent higher in premarket trading. Musk also said the company might buy back shares once the economy stabilizes.

Elsewhere in Mr. Musk news:


Business at Wall Street banks is down, and looking worse for next year. Companies are pulling back from deal-making, lending, and initial public offerings amid rising interest rates and fears of a recession. Investment banking revenue in the United States is expected to have fallen by more than half, to nearly $35 billion as of mid-December. And that will take a toll on banker bonuses, The Times reports.

The bonus pool at top banks has shrunk sharply. At Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America, Morgan Stanley and Barclays, it is expected to be 30 percent to 50 percent less than last year. “This is going to be a more difficult compensation season at Jefferies, just like it will be for every firm in our industry,” the bank’s chief executive, Richard Handler, and president, Brian Friedman, wrote in a memo to employees.

Top performers may see only a small dip in their bonuses, while a majority of employees may see cuts of 80 percent or more. Some bankers will receive no bonus. Banks expect some workers who receive the Wall Street equivalent of coal in their stocking to leave their jobs, which could reduce downsizing next year.


A lawyer for Neal Schon, the founding guitarist of the rock band Journey, wrote in a cease-and-desist letter to the band’s keyboard player, Jonathan Kane, insisting he stop performing at events for former President Donald Trump “as Journey,” and performing Journey songs at those functions.


Scott Minerd, the chief investment officer at Guggenheim Partners and a widely followed commentator on markets and the economy, died on Wednesday of a heart attack during his regular workout, the asset-management firm announced. He was 63.

Mr. Minerd was a towering presence at Guggenheim, both literally — he was a former competitive bodybuilder who frequented Gold’s Gym in Venice, Calif. — and intellectually, as an architect of the firm’s investing strategy. He joined what became Guggenheim in 1998 as a managing partner soon after its founding, having previously worked at Credit Suisse First Boston, Merrill Lynch and Morgan Stanley.

Mr. Minerd helped build Guggenheim into a major asset manager. Thanks in large part to his unconventional investing approach, the firm’s assets under management have grown to about $285 billion. He also became a frequent presence on CNBC and Bloomberg TV, commenting on bonds, markets, Bitcoin and more. Many of his responsibilities will be assumed on an interim basis by Anne Walsh, the chief investment officer of Guggenheim Partners Investment Management.

Mr. Minerd is survived by his husband, Eloy Mendez.

Here’s how he is being remembered on Wall Street:

  • “Scott was a key innovator and thought leader who was instrumental in building Guggenheim Investments into the global business it is today,” said Mark Walter, Guggenheim’s C.E.O.

  • “He was a brilliant man whom I got to know in the last five or so years. He was an old fashioned handshake businessman whose word was his bond,” tweeted Bill Ackman, the hedge fund mogul.

  • “Scott was a fixed-income master — brilliant at deciphering intermediate and long-term changes in interest rates. He was a dear friend and supporter. I will miss him,” tweeted Bill Gross, a co-founder of Pimco and Wall Street’s longtime “Bond King.”

Deals

Policy

Best of the rest

We’d like your feedback! Please email thoughts and suggestions to dealbook@nytimes.com.



Read the full article here

Business

Sister Patricia Daly, 66, Dies; Took On Corporate Giants on Social Justice

Published

on

For years, Sister Pat and other environmentalists had urged ExxonMobil to take significant steps to reduce greenhouse-gas emissions from its operations and products. In 2007, she proposed a resolution that called on that energy giant to set a firm date to report on its progress.

“We’re the most profitable company in the history of the planet,” she told Rex Tillerson, then the company’s chief executive (and later secretary of state in the Trump administration), at the company’s annual meeting, “but what will be our long-term health when we are really faced with the regulatory and other challenges around global warming?”

She added: “We are now, this company and every single one of us, challenged by one of the most profound moral concerns. And we have the wherewithal to respond to that.”

The proposal won 31 percent of the ballots, or about 1.4 billion shares, the largest tally for an ExxonMobil climate-change resolution. If not an outright victory, it was a page in a decades-long narrative that led ExxonMobil to put a climate scientist on its board in 2017. Three executives who recognized the urgency to address climate change joined the company’s board in 2021, nominated by a tiny activist hedge fund, Engine No. 1.

“The arc of her work led us to those victories by working from the inside and the outside,” John Passacantando, the founder of Ozone Action, an anti-global warming group, and a former executive director of Greenpeace, said in a phone interview.

In 1999, Vanity Fair named her to its Hall of Fame, applauding her as one who “translates belief into commitment and never backs down from a fight.”

Mary Beth Gallagher, who replaced Sister Pat as executive director of the Tri-State Coalition in 2017, said Sister Pat had not become frustrated when her resolutions were routinely voted down.

“She lived in hope,” Ms. Gallagher said. “We never talked about winning or losing. It was about raising consciousness and educating. If we’re not asking these questions, who will?”

Read the full article here

Continue Reading

Business

Families can make a tax-free rollover from 529 plans to Roth individual retirement accounts starting in 2024

Published

on

Maskot | Maskot | Getty Images

Americans who save for college in 529 plans will soon have a way to rescue unused funds while keeping their tax benefits intact.

A $1.7 trillion government funding package has a provision that lets savers roll money from 529 plans to Roth individual retirement accounts free of income tax or tax penalties.

related investing news

CNBC Pro

The House passed the measure Friday and the Senate did so Thursday. The bill heads to President Biden, who’s expected to sign it into law.

More from Personal Finance:
10 ways to avoid the early withdrawal penalty for IRAs
Retirement savers with lower incomes may be getting a federal ‘match’
‘Best’ ways to maximize your tax deduction for charitable gifts

The rollover measure — which takes effect in 2024 — has some limitations. Among the largest: There’s a $35,000 lifetime cap on transfers.

“It’s a good provision for people who have [529 accounts] and the money hasn’t been used,” said Ed Slott, a certified public accountant and IRA expert based in Rockville Centre, New York.

That might happen if a beneficiary — such as a child or grandchild — doesn’t attend a college, university, vocational or private K-12 school, or other qualifying institution, for example. Or, a student may receive scholarships that mean some 529 funds are left over.

Millions of 529 accounts hold billions in savings

There were nearly 15 million 529 accounts at the end of last year, holding a total $480 billion, according to the Investment Company Institute. That’s an average of about $30,600 per account.

529 plans carry tax advantages for college savers. Namely, investment earnings on account contributions grow tax-free and aren’t taxable if used for qualifying education expenses like tuition, fees, books, and room and board.

Retirement plan changes in the omnibus spending bill

However, that investment growth is generally subject to income tax and a 10% tax penalty if used for an ineligible expense.

This is where rollovers to a Roth IRA can benefit savers with stranded 529 money. A transfer would skirt income tax and penalties; investments would keep growing tax-free in a Roth account, and future retirement withdrawals would also be tax-free.  

Some think it’s a handout for the rich

However, some critics think the rollover policy largely amounts to a tax handout to wealthier families.

“You’re giving savings incentives to those who can save and leaving behind those who cannot save,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.

A 2012 analysis conducted by the Government Accountability Office found the typical American with a 529 account had “much more wealth” than someone without: $413,500 in total wealth for the median person, about 25 times the amount of a non-accountholder.

You’re giving savings incentives to those who can save and leaving behind those who cannot save.

Steve Rosenthal

senior fellow at the Urban-Brookings Tax Policy Center

Further, the typical owner had a roughly $142,000 annual income versus $45,000 for other families, the GAO report said. Almost half, 47%, had incomes over $150,000.

The new 529-to-Roth IRA transfer provision doesn’t carry income limits.

Limitations on 529-to-IRA transfers

While the new tax break primarily benefits wealthier families, there are “pretty significant” limitations on the rollovers that reduce the financial benefit, Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis, said in a tweet.

The restrictions include:

  • A $35,000 lifetime cap on transfers.
  • Rollovers are subject to the annual Roth IRA contribution limit. (The limit is $6,500 in 2023.)
  • The rollover can only be made to the beneficiary’s Roth IRA — not that of the account owner. (In other words, a 529 owned by a parent with the child as beneficiary would need to be rolled into the child’s IRA, not the parent’s.)
  • The 529 account must have been open for at least 15 years. (It seems changing account beneficiaries may restart that 15-year clock, Levine said.)
  • Accountholders can’t roll over contributions, or earnings on those contributions, made in the last five years.

In a summary document, the Senate Finance Committee said current 529 tax rules have “led to hesitating, delaying, or declining to fund 529s to levels needed to pay for the rising costs of education.”

“Families who sacrifice and save in 529 accounts should not be punished with tax and penalty years later if the beneficiary has found an alternative way to pay for their education,” it said.

Are 529 plans already flexible enough?

Some education savings experts think 529 accounts have adequate flexibility so as not to deter families from using them.

For example, owners with leftover account funds can change beneficiaries to another qualifying family member — thereby helping avoid a tax penalty for non-qualified withdrawals. Aside from a kid or grandkid, that family member might be you; a spouse; a son, daughter, brother, sister, father or mother-in-law; sibling or step-sibling; first cousin or their spouse; a niece, nephew or their spouse; or aunt and uncle, among others.

Owners can also keep funds in an account for a beneficiary’s graduate schooling or the education of a future grandchild, according to Savingforcollege.com. Funds can also be used to make up to $10,000 of student loan payments.

The tax penalty may also not be quite as bad as some think, according to education expert Mark Kantrowitz. For example, taxes are assessed at the beneficiary’s income-tax rate, which is generally lower than the parent’s tax rate by at least 10 percentage points.

In that case, the parent “is no worse off than they would have been had they saved in a taxable account,” depending on their tax rates on long-term capital gains, he said.



Read the full article here

Continue Reading

Business

Goldman grumbling grows for banking giant to sack CEO David Solomon

Published

on

The knives are out for Goldman Sachs CEO David Solomon, and this time the people brandishing them aren’t the usual suspects — his junior staffers annoyed that they have to work late or come into the office several times a week.

Solomon’s problems are more serious and existential, I am told, and how he handles what can best be described as a revolt in some quarters of Goldman’s middle and upper management ranks could determine how much longer he stays in his job.

Solomon, 60, took the job in 2018 and was always somewhat of an odd choice to run the white-shoe investment bank that usually cultivated its leaders from within. He cut his teeth at a decidedly un-Goldman-like venue: the scrappy investment bank Bear Stearns (ultimately one of the causalities of the 2008 financial crisis).

He joined Goldman in 1999, as a partner, no less, because his deal-making chops allowed him to skip layers of management.

In other words, Solomon is an outsider at a firm with a wickedly insular culture. He has a quirky side gig as a DJ in the summer Hamptons party circuit. He’s also not one for small talk, and doesn’t consult with a lot of people before handing down his edicts. 

“He doesn’t breed a lot of love,” said one former Goldman executive who knows Solomon well.

Lots of people at Goldman don’t like him, and they’re letting their views be heard both internally and with pals at rival firms.

Solomon as a DJ
Solomon is an outsider at a firm with a wickedly insular culture.
David Solomon/Instagram

For the record: I’ve met Solomon and like him for his no-BS style. And until pretty recently, the numbers show him doing a great job. Goldman was running on all cylinders in deals and trading. Even as the market corrects, shares are up about 60% since Solomon took over as CEO in 2018 compared to around a 44% rise in the S&P during that time.

Goldman is still the top M&A shop, even widening its market share over rivals in that important business line. Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.

Still, the grumbling about Solomon is spreading to the managing director and partner class. High-priced Wall Street talent don’t call all the shots at any firm, of course. But Goldman’s MDs and partners have historically been a powerful force when the board decides the fate of current management, which makes Solomon’s hold on his job increasingly precarious as more and more of them defect from his camp.

David Solomon as a DJ
Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.
David Solomon/Instagram

Here’s how they’re building a case against him: Goldman’s longtime archrival investment bank Morgan Stanley now easily dwarfs Goldman in market value, $144 billion to $116 billion, continuing a trend that predates Solomon. That comes amid a slowdown in banking deals, Goldman’s bread-and-butter business, and Solomon’s home turf.

Morgan’s CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues. Solomon’s effort to diversify was an overindulgence in something called Marcus, a digital retail bank launched by his predecessor Lloyd Bankfein that Solomon made his baby. So far, it’s been a disaster, so much so that Solomon has been forced to scale back, possibly on the way to winding it down.

Goldman, meanwhile, has missed targets in its recent earnings announcements, and more downward surprises could be in store as markets continue to wobble. Bonuses are down, in some places cut in half, albeit from the nosebleed levels of 2021.

Goldman Sachs headquarters
The grumbling about Solomon is spreading to the managing director and partner class.
AFP via Getty Images

Traders did well in 2022 because Goldman’s are particularly adept in profiting off turbulence, but part of their pool is being diverted to bankers to keep them in-house until the deal slowdown ends.

Since Solomon is a banker, he’s also being accused of favoritism, which in truth is a pretty lame charge, since bankers often subsidize trader bonuses when the markets aren’t profitable. Still, the Goldman trading department is powerful and can spark management change, as it has done in the past.

There’s also a question about Solomon’s allegiance to Goldman’s stand-alone culture. In its 153-year existence, Goldman has operated on the assumption that it would be the acquirer in any major strategic acquisition. Solomon’s experience at Bear, then one of the most transactional places on Wall Street, means he could be looking for a deal and not one that keeps Goldman in charge.

Morgan Stanley CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
Morgan Stanley’s James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
AFP via Getty Images

At a time when most Goldman insiders believe he needs to do a “transformational deal,” i.e., something big that allows it to better compete against Morgan Stanley and super banks like JP Morgan, there is speculation that Solomon might allow Goldman to be swallowed whole by, say, a big asset manager or bank if the price was right.

As best I can tell, this grumbling, though real, doesn’t immediately threaten Solomon’s job. Then again, there is something to be said for keeping your producers happy.

Jack Welch, the legendary CEO of General Electric, was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.

Former General Electric CEO Jack Welch
Jack Welch was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.
Getty Images

“Jack could chew your ass, then put his arm around you and make you feel great,” one of his longtime executives, Bob Nardelli, once told me.

It’s why so many other talented execs chose to stay around under Welch, abuse and all, and left when his successor took over, watching GE implode from the outside.

Maybe it’s a good time for Solomon to take a page from Welch and start hugging it out.

Read the full article here

Continue Reading

Trending