Layoff architect begins layoffs; CDS contamination redux; Jeff Gundlach is itching for a recession; and more!

McKinsey Starts Eliminating 1,400 Roles This Week in a Rare Round of Job Cuts [Bloomberg]
McKinsey rarely carries out job cuts in its own ranks. Even underperforming employees in client-facing roles tend to depart after being “counseled to leave….” The firm — known for devising workforce-reduction plans for its clients — had been looking at eliminating about 2,000 jobs….

Top ECB official claims CDS market ‘contaminates’ bank stocks and deposit flows [FT]
“With a few million you can move the CDS spread of a trillion-euro-asset bank and contaminate of course stock prices and possibly also deposit outflows,” [European Central Bank supervisory board chair Andrea] Enria told a conference in Frankfurt. “So that is something that concerned me a lot….” Enria said the CDS market was “very opaque, very shallow and very illiquid”. He said there should be “more transparency” in the CDS market by shifting trading to central counterparty clearing and it should be examined by the Financial Stability Board, a global regulatory body.

Gundlach Predicts a US Recession Will Start in a Few Months [Bloomberg via Yahoo!]
“The economic headwinds are building, we’ve been talking about this for a while, and I think the recession is here in a few months,” Gundlach said Monday. “All we really need is the unemployment rate to go higher.”
The Doubleline Capital founder also said he anticipates the Fed will cut interest rates “a couple of times” this year. The overall state of the economy is “clearly weak,” he said.

EY Breakup Plan’s Fate May Rest on Executive Showdown This Week [WSJ]
The U.S. demands to strengthen the audit-focused firm, at the expense of the new consulting company, could affect the amount raised by the split. That in turn could reduce the windfalls for partners, making the deal less attractive to the U.K. and other overseas EY firms that lined up behind the original blueprint.

Netanyahu Delays Plan to Overhaul Top Court [NYT]
“When there is a possibility of preventing a civil war through dialogue, I, as the Prime Minister, take a time out for dialogue,” Mr. Netanyahu said…. The measure has ignited bitter debate, setting off months of mass protests and prompting business leaders to begin divesting from Israel. It has also caused unease among soldiers and provoked rising criticism from influential Jewish Americans and the Biden administration.

Meatballs made with mammoth DNA created by Australian food startup [CNN]
The meatballs aren’t intended for human consumption. Even calling the creation mammoth meat is a bit of a stretch. It’s more like lab-made lamb mingled with a tiny amount of mammoth DNA…. “Normally, we would taste our products and play around with them. But we were hesitant to immediately try and taste because we’re talking about a protein that hasn’t existed for 5,000 years. I’ve got no idea what the potential allergenicity might be of this particular protein,” [Vow chief scientific officer James] Ryall said.

Even in the NHL, (alleged) domestic violence puts a minority shareholder in the penalty box.

This weekend, readers of The New York Times were treated to a heart-warming redemption story: how a reclusive, awkward and very nearly criminal billionaire, after trials both literal and figurative, buys the baseball team he loved as a child and brings them to the promised land. Or, near enough, anyway, and if it weren’t for the goddamned World Baseball Classic… A true hero’s journey for one Steven A. Cohen.

Alas, not all hedge-fund-manager-buys-sports-team stories have such a happy ending. Take that of the Arizona Coyotes and Andrew Barroway. The Merion Investment Management chief bought the former Winnipeg Jets five years after it filed for bankruptcy and changed its name from Phoenix Coyotes, perhaps in an attempt to be more inclusive of sunburned ice hockey fans from outside the Valley of the Sun. Unlike Cohen’s Mets, who went to the playoffs in the new owner’s second season, Barroway’s Coyotes never went to the postseason and he sold all but 5% of the team in 2019, after which the ‘Yotes not only immediately qualified for them but actually won a playoff series. (Things haven’t been all fun and games since Barroway sold: The team was essentially evicted from its home ice last year and now play in a college arena.) And rather than seek to launder a sullied reputation through sporting ownership and success, Barroway left the infamy for later.

Arizona Coyotes minority owner Andrew Barroway was suspended indefinitely by the NHL on Friday following his arrest for domestic violence in Colorado.

Barroway spent Thursday night in Pitkin County Jail after police arrested him at an Aspen hotel on a felony strangulation charge….

Not to prejudge matters, but if anyone wants to own 5% of a perennially-underachieving, desert-based ice-hockey team, now may be your chance.

NHL bans Coyotes minority owner Barroway following domestic violence arrest [ESPN]
Steve Cohen’s Amazin’, Maddening, Money-Losing Bid to Own New York [NYT]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

This time, Bobby Axelrod’s goodbye is permanent.

“The goodbyes on ‘Billions’ and the hellos on ‘Billions’ are never permanent,” the show’s co-creator Brian Koppelman said when announcing the temporary exit of its chief antagonist, the exiled hedge-fund boss Bobby Axelrod. But that’s not how television works, and also no one told the guy who plays the show’s resident tree-hugging woke investor about the metaphysics of permanence.

In an appearance on NBC Sports Chicago's Football Night in Chicago, actor and comedian Dan Soder, who plays Mafee, told Mike Berman, "Season seven, the final season of 'Billions,' on its way."

Then, he briefly paused.

"You know... am I not supposed to say that? I don't know if I'm supposed to say that. I think so. It's fine," he said.

"It doesn't matter. You just said it," Berman said in response.

"It's the final season," Soder replied.

And so one scorned hedge-fund performance coach can safely shop for new duds without looking over her shoulder to see Andrew Ross Sorkin carrying the same items to check-out with a devilish grin on his face.

Star of Showtime's 'Billions' Dan Soder reveals fate of the show [NBC Sports via Yahoo!]

Salesforce sates Singer; how to immolate $24 billion; Gasparino wants Janet Yellen fired yesterday; and more!

Salesforce Averts Elliott Proxy Fight After Share Gains [Bloomberg via Yahoo!]
Elliott won’t proceed with its planned director nominations following Salesforce’s “strong” 2023 fiscal year report, transformation initiatives and “clear focus on value reaction,” the companies said in a joint statement on Monday…. Elliott released a positive statement after Salesforce’s blockbuster earnings, though said more work remains. The investor had earlier suggested some of the changes that Salesforce eventually made, though others, including further board director changes and succession planning, weren’t accepted at the time of earnings earlier this month.

Musk’s Stock Grants Value Twitter at $20 Billion: Information [Bloomberg]
The $20 billion valuation is less than half the $44 billion Musk paid to buy the social media platform last year, which in theory would offer workers a big upside if the company’s value recovers…. The move could be seen as an attempt to stem an exodus of talent. During his stewardship, Musk has laid off thousands of employees in a series of job cuts that then led to mass resignations, as workers fled growing uncertainty about the company’s direction.

Thousands of Retirees Can’t Withdraw Savings Invested in Firms Controlled by Indicted Financier Greg Lindberg [WSJ]
What rankles [investor Mark] Zintel and others is that they believe Mr. Lindberg is using their money to fight his legal entanglements, allowing him to continue living extravagantly even as they cut back. Among the alleged extravagances: The divorced executive has spent millions of dollars on gifts for women, according to court documents, including paying some women to produce offspring for him.

White House worried over Janet Yellen’s fumbling of US bank crisis: sources [Gaspo/N.Y. Post]
They need to put Yellen out of her misery and end ours by handing her job to someone who knows how to deal with the very real possibility of banks failing on a scale not seen since the 2008 financial crisis and a possible deep recession…. Yellen’s response to this has been bewildering from a messaging standpoint. White House advisers are pointing to her multiple flip-flops on whether the government will back up all deposits in a failed bank — even those well past the FDIC insurance threshold of $250,000.

Work-From-Home Era Ends for Millions of Americans [WSJ]
Some 72.5% of business establishments said their employees teleworked rarely or not at all last year, according to a Labor Department report released this week. That figure climbed from 60.1% in 2021. The survey showed about 21 million more workers on-site full time in 2022, compared with the prior year…. The new number is also close to the share of establishments—76.7%—that said they had no employees teleworking before the Covid-19 pandemic….

Steve Cohen’s Amazin’, Maddening, Money-Losing Bid to Own New York [NYT]
“A lot of these guys get paid well, right? And they’re looking for advice,” [Cohen] said. “Kind of in my wheelhouse, right?”…
Cohen, 66, has carried off a remarkable reversal in public standing, migrating over the past decade from a reclusive avatar of scofflaw capitalism to an avuncular Twitterer who could probably be elected Queens borough president by acclamation…. “He will revolutionize this game,” Chris Christie, the former New Jersey governor and a close friend who sits on the Mets’ board, said, comparing Cohen to Jerry Jones, the revenue-minded Dallas Cowboys owner.

If we ever were a proper country, we aren't right now.

As of this writing, Manhattan District Attorney Alvin Bragg has not yet indicted Donald Trump in connection with the 2016 hush money payment to Stormy Daniels. But that hasn’t stopped the former president’s pals in Congress from riding to the rescue like a pack of howler monkeys.

On Monday, the chairs of the House Judiciary, Oversight, and Administration Committees sent the New York prosecutor a letter demanding that he account for himself.

“You are reportedly about to engage in an unprecedented abuse of prosecutorial authority,” they inveighed, demanding that Bragg “testify about what plainly appears to be a politically motivated prosecutorial decision.” Then they quoted a “legal scholar” accusing the New York DA of “attempting to ‘shoehorn[]’ the same case with identical facts into a new prosecution, resurrecting a so-called ‘zombie’ case against President Trump.” And if you’re guessing that this “scholar” is one Jonathan Turley, then you are correct, of course.

“The legal theory underlying your reported prosecution appears to be tenuous and untested,” write the politicians, despite having zero visibility on the inner workings of the grand jury. They end with a token effort to connect the prosecutorial decisions of a local elected official to Congress’s oversight role of the executive branch

“Congressional scrutiny about how public safety funds appropriated by Congress are implemented by local law-enforcement agencies” entitles them to subpoena every piece of paper in the DA’s office with the word “Trump” on it, they harrumph.

Because local control is a core GOP value, except when local officials do stuff Republicans don’t like.

DA Bragg pulled no punches in his response. A letter from the desk of his general counsel Leslie Dubeck chided the politicians for “an unprecedented inquiry into a pending local prosecution,” and noted that the apparent impetus for their demands was Trump’s false prediction that he would be arrested Tuesday and urging by his lawyer Joseph Tacopina that congressional Republicans do … something.

The DA rebuked the committee chairs for intruding on “quintessential police powers belonging to the State” and attempting “an unlawful incursion into New York’s sovereignty.” The letter cites decades of Supreme Court cases holding that the federal legislative branch really does not get to interfere in local prosecutorial decisions. See also: Tenth Amendment.

“While the DA’s Office will not allow a Congressional investigation to impede the exercise of New York’s sovereign police power, this Office will always treat a fellow government entity with due respect,” the letter concludes, offering to meet with the legislators to figure out exactly what legitimate legislative purpose they are advancing by harassing local law enforcement officials.

Over in the Senate, the response was marginally more measured. When asked by Axios about his Republican House colleagues’ demands of Bragg, Senator John Cornyn sighed that he would “personally prefer to see them work on the agenda they ran on and that got them the majority.”

“I think you’ve got to fall short of getting involved in the legal process,” said Senator Thom Tillis agreed.

But the usual suspects were up to their regularly scheduled murder of irony.

Meanwhile Trump himself is over on Truth Social calling Bragg, who is Black, an “animal” being controlled by Jewish philanthropist George Soros. He also reposted a graphic which depicts him appearing to swing a baseball bat at Bragg’s head.

“EVERYBODY KNOWS I’M 100% INNOCENT, INCLUDING BRAGG, BUT HE DOESN’T CARE. HE IS JUST CARRYING OUT THE PLANS OF THE RADICAL LEFT LUNATICS. OUR COUNTRY IS BEING DESTROYED, AS THEY TELL US TO BE PEACEFUL!” he screeched into the ether this morning.

Luckily Trump’s supporters would never take his calls for violence seriously … oh, wait.

Senate Republicans cool on House plans to question Manhattan DA [Axios]

Liz Dye lives in Baltimore where she writes about law and politics and appears on the Opening Arguments podcast.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Ax-centure; just check “unknown;” pervasive pessimism; ARK sinking; and more!

Accenture slashes 19,000 jobs worldwide [CNN]
The Irish-American professional services company said in a Thursday filing that it would spend $1.2 billion in severance to cut 2.5% of its workforce over the next 18 months, and another $300 million to consolidate its office space…. Shares in Accenture rose 3.9% to hit $263 apiece in early trade after its announcement. The New York-listed stock is down by more than 5% over the past 12 months.

FinCEN’s Efforts to Implement Shell-Company Law Draw Criticism [WSJ]
Lawmakers, bankers and advocacy groups have written to the Treasury about several recent proposals around the database that they say would defeat the purposes of creating it. In letters this week, the various groups criticized a proposed reporting form that would give companies the option to say that they were unable to identify their owners, and to mark “unknown” with respect to key information about any owners…. One flashpoint over the access rule is the steps that banks would have to take to consult the ownership database. Another is a lack of any plans by the Treasury to ensure that the ownership information it collects is accurate.

Republicans Say Spending Is Fueling Inflation. The Fed Chair Disagrees. [NYT]
“Fiscal impulse is actually not what’s driving inflation right now. It was at the beginning perhaps, but that’s not the story right now…..” But the Fed chair’s position has not swayed congressional Republicans, who continue to press Mr. Biden to accept sharp spending reductions in exchange for raising the legal limit on how much the federal government can borrow.

Most Americans Doubt Their Children Will Be Better Off, WSJ-NORC Poll Finds [WSJ]
Four in five respondents described the state of the economy as not so good or poor, and nearly half said they expect it will get worse in the next year…. Roughly 4 in 10 cited healthcare and housing costs as big worries, and nearly two-thirds said inflation is a major concern….
Fewer than 3 in 10 agreed that people like them and their family have a good chance of improving their standard of living.

Cathie Wood Suffers Double Blow as Drama Hits Coinbase and Block [Bloomberg]
As recently as Wednesday, the ARK Innovation ETF bought more shares of Jack Dorsey-led Block…. Block fell 15% Thursday after Hindenburg Research — the short seller that rattled the shares of billionaire Gautam Adani’s business empire earlier this year — said it’s betting on a decline in the stock, alleging the payments company facilitated fraudsters who took advantage of government stimulus programs during the pandemic. Meanwhile, the biggest US crypto exchange Coinbase tumbled 14% after disclosing it received a warning notice from the Securities and Exchange Commission about potential violation of securities law.

FX Traders Ousted From Morgan Stanley Thrive at Brazilian Funds [Bloomberg]
Thiago Melzer and Rodrigo Jolig helped oversee FX options at Morgan Stanley, a business that generated hundreds of millions of dollars for the New York-based bank, until the two were suspended in 2019. They left in 2021 and founded hedge funds in their native Brazil that are generating double-digit returns….

And the guy who brought Adani Group to its knees is trying to bring Jack Dorsey to his.

You might think that Nate Anderson’s got enough on his plate. He and other short-sellers are fighting an existential battle against Washington. He’s still (probably) making plenty betting against aspiring electric-vehicle maker Nikola. Oh yea, and he’s busy shaking the markets of the second-largest country on earth to their core, wiping some $135 billion from the market value of one of India’s biggest conglomerates, Adani Group, which Anderson’s Hindenburg Group says is as filled with fraud as his own firm’s namesake was with highly-combustible hydrogen.

But no: The one-time Ponzi-seeking hobbyist is always on the lookout for scams big and small; “there are just so many outrageous companies,” he once said excitedly. And one of them just happens to have been founded by the same guy who launched Twitter—and both are about equally good for the world, sayeth Hindenburg.

Hindenburg spoke with multiple former employees who described how internal concerns were suppressed and user concerns were ignored, even as alleged “criminal activity and fraud ran rampant on its platform….”

“CEO Jack Dorsey Tweeted that users could get government payments through Cash App ‘immediately’ with ‘no bank account needed’ due to its frictionless technology,” the report said…. Citing interviews with former employees, Hindenburg alleged that “pressure from management has resulted in a pattern of disregard for Anti-Money Laundering (AML) and Know Your Customer (KYC) laws….”

To test the theory, the short seller opened accounts in the name of former President Donald Trump and Tesla CEO Elon Musk, and then obtained a Cash App card, called the Cash Card, under the “obviously fake Donald Trump account,” the report said.

That sounds bad, Nate. But how bad?

“In sum, we think Block has misled investors on key metrics, and embraced predatory offerings and compliance worst-practices in order to fuel growth and profit from facilitation of fraud against consumers and the government,” Hindenburg wrote.

Ah. And that’s not even mentioning the SEC probe into Block’s alleged use of small banks to skirt the rules which may or may not be happening.

“A Freedom of Information Act (FOIA) request we filed with the SEC indicates that Block may be part of a similar investigation [to PayPal],” Hindenburg wrote.

Seems Jack’s got bigger problems than branding.

Block shares plunge 19% after short seller Hindenburg says Jack Dorsey’s company facilitates fraud [CNBC]
Nikola Corporation Posted a New All-Time Low in Q4 [Yahoo!]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

This flavor of misrepresentation by churches and politicians is not going to be prosecuted.

Believe it or not, I was an altar boy for many years (they now call them “altar servers” and girls can do it too — hey, even the Catholic Church progresses somewhat over time). However, unless you count going into the woods to kill my own food as a form of pagan nature worship (which I sort of do), I am not very religious these days.

Which is among the reasons it perturbed me to hear that my parents, who still attend the same church I was brought up in, were being hit up by the priest to help fund an $8 million building project to connect a couple of already existing buildings on the church’s already too-large campus. The whole population of the town is only about 3,000, and that figure represents many people of many different faiths (or no faith at all) along with a bunch of income-less children, and it’s not a particularly successful community economically. But let’s pretend for a moment that 3,000 people there did come up with $2,000 apiece and gave it to the church for this project: there would nonetheless be a $2 million shortfall.

Not that that would stop the church from keeping whatever money was collected, I’m sure. My folks gave a rather generous donation for some other theoretical project not that long ago which never materialized. Of course, this supposedly earmarked money was never returned to them.

Kind of has a ring of the “Build the Wall” scams, doesn’t it? At least a few criminal charges resulted from that debacle. Might even wind up being a real legal problem for Steve Bannon.

Even so, more typical political types routinely get away with the rhetorical equivalent of murder when it comes to lying to people to get their money. I somehow wound up on the Tom Emmer mailing list and haven’t found an unsubscribe link yet or been able to get anyone to respond to my reply emails asking to be removed. At least there is some entertainment value in it. According to this Republican House member, scary Democrats like me are coming to inflict some truly alarming things on constituents if he cannot practically single-handedly hold back the onrushing tide of volcanic wokeness.

Emmer is far from alone on this sort of thing. Extreme hyperbole has been widely used as a fundraising tool across the entire political spectrum. That being said, deceptive fundraising tactics, with the proceeds not necessarily being judiciously applied to whatever the solicitor was saying they’d be applied to, have been far more associated with the political right in recent years.

Free speech is obviously important. But free speech does not mean you can say anything you want at any time without consequence. You may not incite violence through speech, for instance, or lie to obtain something of value.

The exact elements of a fraud cause of action vary by jurisdiction. Generally, though, fraud involves an intentional or negligent factual misrepresentation, reasonable reliance by the victim on the untruthful statement, and harm because of the reliance (in other words, losing money).

There are all kinds of exceptions to liability for fraud — like opinions, as opposed to representations of fact, generally not giving rise to actionable fraud. Churches and politicians are usually careful enough with misleading statements to avoid language to the effect of, “You give me X amount of dollars and in return I will give you Y specific deliverables.” Still, regardless of how carefully phrased, the real-world impact of a lot of these sorts of statements is that something that is ultimately untrue is told to people in order to induce them to turn over their money.

In addition to freedom of speech, we also have the free exercise of religion in this country. I don’t even want to get into the scam which can basically be summed up as give the church money and God will reward you in this life or the next in return (many religious groups do express abhorrence to the voicing of such a direct quid pro quo, though their adherents probably aren’t turning down too many donations either or being any less assured of the righteousness of their own particular beliefs).

But if I, as a private citizen, told you I was raising funds for a community center then decided to buy myself a jet ski with your donation instead, well, I’d be in trouble for committing fraud. Yet many of our supposed moral and political leaders do a pretty similar thing all the time as a matter of course.

This flavor of misrepresentation by churches and politicians is not going to be prosecuted. So, if you have loved ones who are getting a bit older, try to keep an eye on things. More than 5.4% of older Americans fall victim to some sort of financial fraud or scam every year. I bet that number would be a whole lot higher if it included slightly more subtle forms of exploitation, like donations obtained under false — albeit artfully false — pretenses.

Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

And gives the NYPD’s crack abseiling team something to do.

Not for the first time, the authorities wanted to have a word with Ian Mitchell. Back in 2017, it was over a matter of grand larceny. A year later, they wanted a chat with him about some restauranteur-ing and/or hedge fund fraud involving the name-dropping of a Jamaican businessman to whom Mitchell was not related but claimed to be, scams that were allegedly ongoing before, during and after the grand larceny thing was being adjudicated. (Mitchell pleaded guilty in that case and avoided jail by promising to pay everyone back and be a very good boy.)

So it was probably no surprise to the FBI that it would be arresting Mitchell on “white-collar crime” allegations. But he managed to surprise them, all the same: When the Feds knocked on the door of his girlfriend’s tony 31^st-floor apartment across the street from Carnegie Hall yesterday morning, they were greeted by the unmistakable sound of shattering glass.

Video from the scene shows Mitchell with his legs dangling from the window as people stand outside watching and filming.

One photo shows his upper body covered in a white curtain or sheet as he sits in the window frame, with the glass clearly shattered around him…. The barricaded man repeatedly told officials, “I’ll jump” each time he thought they were moving in on the apartment.

Things went on like this for more than eight hours, with broken glass falling onto West 56th Street every time Mitchell went back to the window, a giant inflatable upon the same to catch him should he make good on his threat (he didn't), and, eventually, the very exciting spectacle of a cop rappelling down the 72-story CitySpire to kick Mitchell back into the apartment and apply the cuffs.

The stealthy officer crawled down a rope from the apartment above Mitchell’s 31st-floor home.

Another ESU cop held the rope steady as the descending officer went down the building and leaped through the already broken window, where Mitchell was dangling on the ledge.

The officer kicked the surprised man, forcing him inside, before climbing into the apartment after him…. Mitchell was ushered out of the building covered in a white sheet. He was put in an ambulance and taken to a hospital for a psychiatric evaluation.

NYC man threatens to jump from high-rise window after FBI brings search warrant [N.Y. Post]
Man who threatened to hurl himself out 31st floor of NYC apartment during FBI bust is suspected CONMAN 'who posed as Jamaican heir to defraud victims out of $200,000 [Daily Mail]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

At least soon-to-be-former employees of the job-search site know where to look for a new gig.

With its bigger tech bros slashing (another) 20,000 so workers, Indeed.com is joining in the layoffs game. The job-listing website is axing some 15% of its employees—more than 2,000 people. And while those folks will be joining an exceedingly tight labor market, their soon-to-be-former employer isn’t especially bullish on their prospects.

“Last quarter, US total job openings were down 3.5% year-over-year, while sponsored job volume fell 33%. In the US, we are expecting job openings will likely decrease to pre-pandemic levels of about 7.5 million, or even lower over the next two to three years,” [CEO Chris] Hyams [said].

On the bright side, Indeed did manage to make the cuts in a slightly less humiliating and dehumanizing way than those thought up by its fellow (and allegedly seriously mis-named) dot-com, Better.

Employees who will keep their jobs will receive an email with a subject line of “Your Position Has Not Been Impacted.” For the ones laid off, the email subject line will be “Your Position Has Been Impacted.”

Job-listing company Indeed to lay off 2,200 employees [CNN]
Amazon to lay off 9,000 more workers in addition to earlier cuts [CNBC]

It is unclear why the IRS is making this announcement.

Yesterday, the IRS announced that it is soliciting comments on how to treat nonfungible tokens for tax purposes. More specifically, it is contemplating whether to treat NFTs as “collectibles.”

For tax purposes, a collectible is treated similarly to that of a capital asset except that when it is sold after more than one year of ownership, any gain realized has a maximum long-term capital gains tax rate of 28%. This does not apply to people who held their NFTs for less than one year who would be taxed at ordinary income tax rates. Also, full-time NFT dealers will not only be taxed at ordinary income rates but may also be subject to self-employment tax as well.

In its announcement, the IRS defines an NFT as a unique digital identifier that is recorded using distributed ledger technology and may be used to certify authenticity and ownership of an associated right or asset. Owning an NFT may provide the holder with rights, privileges, and ownership of other assets.

Under the tax code, a “collectible” is any one of the following:

• A work of art
• A rug or antique
• A metal or gem
• A stamp or coin
• An alcoholic beverage
• Any other tangible property specified by the Treasury secretary.

Until further guidance is issued, the IRS intends to determine whether an NFT is a collectible by using a “look-through” analysis. This means that the IRS will deem an NFT to be a collectible if its associated right or asset is also a collectible. For example, an NFT will be treated as a collectible for tax purposes if its owner has ownership rights to one of the items listed above.

The IRS seeks comments on the following:

1. Whether there are more accurate definitions of NFTs.
2. The pros and cons of using its “look-through” analysis to determine whether an NFT is a collectible.
3. Whether there are other factors to consider when determining whether an NFT is a collectible. For example, how can an NFT be considered a work of art? Or whether an NFT is tangible personal property in the context of digital files.
4. What other guidance relating to NFTs would be helpful.

It is unclear why the IRS is making this announcement. From an investment perspective, most NFT owners obviously do not want “collectibles” treatment for tax purposes as it would increase their tax bill if they sold it for a profit. But others may welcome this development as it may bring legitimacy to NFTs and differentiate them from cryptocurrencies.

But are NFTs similar to other collectibles such as works of art, antiques, gems, coins, or the 100-year-old cognac from a totalitarian dictator’s private collection? Collectibles tend to be rare or unique, are considered very valuable and expensive, have a history, and have some form of aesthetic or functional value. Since they tend to be grown-up toys for the wealthy, Congress thought a higher tax rate for their sales would be justified. It is too early to tell whether NFTs will reach that status or disappear as last year’s fad or get-rich-quick scheme.

It appears that the IRS will get more involved in the digital asset scene. To their credit, they are seeking public comment on how to treat NFTs, which will hopefully attract a wide variety of perspectives. Comments will be accepted until June 19.

Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at stevenchungatl@gmail.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Fed, B of E move; China not happy about TikTok talk; oil hedge fund manager did not expect oil to lose this much money; and more!

Investors bet Fed has finished raising interest rates [FT]
The Fed has jacked up interest rates in the world’s largest economy from near zero at the start of last year to a range of 4.75 to 5 per cent after its latest policy announcement on Wednesday — the highest rate since 2007…. Markets are not excluding the possibility of one more quarter-point rise in May, but a hold followed by a series of cuts later in the year is now seen as the most likely scenario.

Bank of England raises interest rate to highest for 14 years [BBC]
The Bank of England's decision to lift rates to 4.25% from 4% comes after inflation rose unexpectedly last month.
It also follows the collapse of two US banks and the rescue of Swiss lender Credit Suisse, but the Bank said the UK financial system was "resilient".

China criticizes possible US plan to force TikTok sale [AP via WTNH]
“If the news is true, China will resolutely oppose it,” said a Ministry of Commerce spokeswoman, Shu Jueting. She gave no indication what Beijing might do…. Shu’s comments on Thursday came hours before the CEO of TikTok, Shou Zi Chew, is due to make a high-profile appearance Thursday before a U.S. Congressional committee to make the case for why the hugely popular video-sharing app shouldn’t be banned.

FTX reaches deal to recover over $400 million from hedge fund Modulo [Reuters via Yahoo!]
Bahamas-based Modulo agreed to pay $404 million in cash and give up its claim to $56 million in assets held on FTX's crypto exchange, according to a filing in U.S. bankruptcy court in Delaware…. FTX's affiliated hedge fund Alameda Research sent $475 million to Modulo in a series of transfers beginning in May 2022, a time when FTX was losing money and heading toward bankruptcy, according to the court filings.

Andurand’s Oil Hedge Fund Slumps 40% as Commodities Retrench [Bloomberg]
Most of the losses have occurred in March, with the fund declining 23% this month through Friday…. Oil slumped to its lowest price since 2021 last week…. Andurand, who runs the fund with a high-conviction strategy with no set risk limits, has predicted that oil prices may exceed $140 a barrel this year. He has said the recent fall was not backed by fundamentals and all the indicators he uses were getting more bullish.

Toshiba Announces $15 Billion Plan to Be Taken Private [WSJ]
Toshiba said the buyout would be led by Japan Industrial Partners Inc., a Tokyo-based investment fund. It said the buyers were offering ¥4,620 a share, about 10% above the closing price of ¥4,213 in Tokyo Stock Exchange trading Thursday. That values the company at about ¥2 trillion…. In March 2022, Toshiba shareholders rejected a management plan to split the company into two parts, reflecting opposition from foreign shareholders including some who wanted the company to be auctioned to the highest bidder.

Joseph Tacopina 2023 would like a word with that Tacopina 2018 guy.

How is Joseph Tacopina for real?

Donald Trump’s newest lawyer, who represents him in the E. Jean Carroll defamation case, as well as the supposedly imminent indictment for the Stormy Daniels hush money payment, can’t stop, won’t stop flapping his yap on TV about Trump’s case.

“I believe this will catapult him into the White House,” he vamped to NBC’s Ari Melber last Tuesday.

Tacopina, a defense lawyer with a heretofore good reputation, has spent the past two weeks making increasingly manic appearances to insist that his client wasn’t lying when he falsely claimed not to know about the 2016 hush money payout to keep Daniels quiet about a sexual encounter with the presidential candidate.

“Here’s why it’s not a lie,” he told Melber. “Because it was a confidential settlement. So if he acknowledged that, he would be violating the confidential settlement. So, is it the truth? Of course it’s not the truth. Was he supposed to tell the truth? He would be in violation of the agreement if he told the truth. So by him doing that, he was abiding by, not only his rights, but Stormy Daniels’s rights.”

On Friday, it emerged that Tacopina had met with Daniels in 2018 about that very agreement, and he admitted to CNN’s Don Lemon that he had an attorney-client relationship with her. This put rather a different spin on his claim Monday to ABC’s George Stephanopoulos that Daniels was an extortionist.

And now yet another tape has surfaced with the lawyer trashing the very claims he’s now making on Trump’s behalf.

“If there’s an issue with that payment to Stormy Daniels being that it was made on behalf of the candidate, okay, and it was not declared, that’s fair game,” he told Don Lemon back in 2018.

Last week, Tacopina was calling Michael Cohen, the president’s former lawyer who pleaded guilty to a campaign finance violation for his role in the scheme, a liar. But five years ago, he had a different take:

Quite frankly, Michael Cohen, again, has made statements that would give rise to suspicion for any prosecutor to say ‘That doesn’t make sense, that a lawyer took out a home equity loan with his own money, paid somebody that he didn’t even know, on behalf of a client who, by the way, had the wherewithal and the money to afford $130,000. And by the way, didn’t tell the client about the settlement agreement.’ It’s an illegal agreement, it’s fraud, if that’s in fact the case.

It’s kind of a bad fact to have said on air that your client’s legal position “doesn’t pass the straight face test, and quite frankly, if that is what happened, we have potential campaign finance issues.” As is Tacopina’s promise of “all out war” if Trump is indicted.

He made the prediction in an interview with Kimberly Guilfoyle, Donald Trump Jr.’s fiancée, whom he represented before the January 6 Committee. You’d think that these two would have better judgment than to threaten violence if the former president doesn’t get what he wants.

But then again … maybe not.

Liz Dye lives in Baltimore where she writes about law and politics and appears on the Opening Arguments podcast.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Why is Dershowitz mad about a potential Trump indictment? The Bible, of course.

Donald Trump hasn’t even been arrested, yet, but that doesn’t mean we’ve been spared from the outrage news cycle. Trump himself is stirring it up, claiming his arrest is scheduled for today and using that to ask for donations from his supporters. But just because we don’t know what the indictment will contain (because it hasn’t happened yet), doesn’t stop legal commentators from commenting on it.

The once-respected legal mind of Alan Dershowitz went on the Charlie Kirk YouTube show yesterday comparing the Manhattan District Attorney’s office to the KGB, claiming a potential arrest is a violation of “core American values,” that is “actually a violation of the Bible”:

ALAN DERSHOWITZ (GUEST): Without a doubt. There was the South American dictator who said, for my friends, everything, for my enemies, the law. You can use the law to get anybody as Justice Jackson said. Or as the KGB head said, show me the man and I’ll find you the crime. This is the worst example in my 60 years of practicing criminal law, of targeting somebody for prosecution and then rummaging through the books, giving people immunity and trying to concoct a crime that doesn’t exist. And if this is allowed to succeed, none of our liberties is safe. You know, today it’s a Republican who’s a target, tomorrow it’s a Democrat. And the day after tomorrow, it’s your Uncle Charlie or your nephew or your niece. There’d be no limits on what prosecutors can do to their political enemies. They’re going to do it to people who are running against them for DA next. And it’s just such a violation, not only a violation of American law and civil liberties, it’s actually a violation of the Bible. The Bible instructs judges two things: don’t take bribes, that’s obvious. But the number one thing is don’t recognize faces. And that’s —

KIRK: That’s exactly right. Yes, yes. Do not favor anyone in a court. Yes, that’s exactly right. Yes. Continue. Sorry.

DERSHOWITZ: No, that’s — and that’s why it violates every core of American values. So, I — this is one of the worst prosecutions I have ever seen. Believe me, I’ve seen some bad prosecutions, some good ones. I’ve seen guilty people acquitted and innocent people convicted. But I’ve never quite seen a prosecution like this, where you had to staple together two unrelated statutes, one federal, one state, violate the statute of limitations, violate the rule of law, and concoct a crime.

Sigh. It seems Dershowitz has his often-discussed underwear in a knot over the whole matter. And while it’s entertaining to ponder what charges Manhattan DA Alvin Bragg may be cooking up for the former president (Asha Rangappa’s chart on this is excellent, btw), we are still stuck in a waiting game.

Kathryn Rubino is a Senior Editor at Above the Law, host of The Jabot podcast, and co-host of Thinking Like A Lawyer. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter @Kathryn1 or Mastodon 

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Delay, delay, delay.

Over on Truth Social, Donald Trump has been all-caps fulminating about Manhattan District Attorney Alvin Bragg’s reportedly imminent indictment on charges stemming from the 2016 hush money payment to Stormy Daniels. In the meantime, his lawyers in Georgia seem to have been more productively occupied in crafting a motion to quash the report on election interference compiled back in January by the Fulton County special purpose grand under the aegis of District Attorney Fani Willis.

As Trump legal motions go, this one is less patently ridiculous than most — and it manages not to refer to Hillary Clinton or RUSSIA HOAX even once! And, although it appears to be somewhat legally dubious, there’s a fair prospect that it will succeed in gumming up the works as DA Willis seeks to issue indictments in the case.

Trump’s lawyers Drew Findling, Jennifer Little, and Marissa Goldberg argue in support of standing that “President Trump was inextricably intertwined with this investigation since its inception.” This admission may come back to haunt their client if he later tries to distance himself from the actions of other parties, particularly if the reporting is correct that Willis is considering charging a RICO conspiracy. But the concession was probably necessary here where Trump was not interviewed and where he relies so heavily on vindicating the rights of other witnesses before the panel. For instance, he argues that prosecutors differentiated inconsistently between subjects and targets when issuing subpoenas, so recipients were unsure “how to conduct themselves in the public sphere as well as what key constitutional decisions needed to be made regarding the ability to answer questions while under oath.”

The document is a prototypical “kitchen sink” pleading, but the main thrust is that the Georgia special purpose grand jury statute is somehow defective. Trump’s lawyers argue that the law is unconstitutionally vague, both as written and as applied, because it doesn’t specify whether special purpose grand juries are by nature civil or criminal. This argument failed to persuade multiple state courts, such as the ones in South Carolina and Florida, which ordered Lindsey Graham, Mark Meadows, and Mike Flynn to show up and testify. But it did work in Texas, where the court characterized the DA’s subpoena as civil and refused to enforce it for talk show host Jacki Pick. This then emboldened Sidney Powell to blow off her own subpoena, depriving the jurors of the opportunity to hear her theories on Hugo Chávez’s dastardly interference in the 2020 election.

Georgia Governor Brian Kemp made a similar argument in support of an attempt to quash his summons, citing a 2011 ruling by the Court of Appeals of Georgia which in turn interpreted a 1996 decision by the same body as restricting special purpose grand juries to civil inquiries. Kemp argued that the subpoena was barred by sovereign immunity, since the state itself is immune from civil process. But presiding Judge Robert McBurney had little patience for this argument, noting that the instant panel’s “purpose is unquestionably and exclusively to conduct a criminal investigation: its convening was sought by the elected official who investigates, lodges, and prosecutes criminal charges in this Circuit; its convening Order specifies its purpose as the investigation of possible criminal activities; and its final output is a report recommending whether criminal charges should be brought.”

Trump’s lawyers point out that the court failed to grapple with the one-off sentence in the 2011 case which suggests that special purpose grand juries are inherently civil. But a cursory Google search reveals that special purpose grand juries in Georgia do in fact conduct criminal inquiries, suggesting that the 2011 holding has not been so interpreted.

The rest of the pleading is taken up with the usual Trump blather: the judge was biased against him, as was the prosecutor, and both should be removed from the case; the jury forewoman tainted the proceeding by talking about them afterwards on television; the jury violated Mike Flynn’s rights by improperly considering his Fifth Amendment invocation as squirrelly, even though prosecutors explicitly told them not to; blah blah blah WITCH HUNT.

Trump wants the entire report expunged and “all evidence derived from [it] suppressed as unconstitutionally derived and any prosecuting body be prevented from its use.” He does not, however, seek an injunction or explain why he waited more than ten weeks to move to suppress the report — although perhaps those two things are related, since the former president can hardly claim irreparable injury after sitting on his hands since the special purpose grand jury wrapped up in the first week of January. He’d also like Fulton County Superior Court Chief Judge Ural Glanville to consider the motion, rather than Judge McBurney.

The whole thing is probably doomed, for any one of several reasons, including Trump’s lack of standing. There’s also the minor matter of a 2015 ruling by the Supreme Court of Georgia holding that the remedy for overreach by a special purpose grand jury is not suppression of its findings. But that doesn’t mean this motion won’t throw a wrench in the works if the appellate court decides to spend a little time considering whether the former president is entitled to file an interlocutory appeal if/when Judge McBurney and/or Judge Glanville tell him to go pound sand.

And when you’re staring down four pending grand juries — two state, and two federal — a delay is almost as good as a win.

Liz Dye lives in Baltimore where she writes about law and politics and appears on the Opening Arguments podcast.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Whether JPMorgan Chase and Deutsche Bank should have done anything about it is a question for a jury.

JPMorgan Chase says it can’t possibly have been expected to know that its client, Jeffrey Epstein, was a sex pest on an outrageously criminal level, even if they did continue to accept his custom after—indeed, during—his home incarceration for other highly-publicized sex crimes. And even if they did know—perhaps it came up during the review of Epstein’s accounts at the bank that may or may not have been conducted by no less a personage than Jamie Dimon himself; perhaps someone in compliance might have had a look through former JPMC private-banking chief Jes Staley’s voluminous and icky correspondence with the now-dead Epstein on his work e-mail account—it can’t possibly have been expected to protect the teenagers Epstein was trafficking, allegedly with the help of his dozens of JPMorgan accounts. And speaking of Staley, it’s all his goddamned fault anyway.

To which U.S. District Judge Jed Rakoff says, “that’ll all be up to a jury.” And not just the jury that’s going to hear the bank’s case against Staley.

In a six-paragraph order, Rakoff said JPMorgan must face a lawsuit by the US Virgin Islands accusing it of missing red flags about Epstein’s abuse of women on Little St. James, a private island he owned there.

The judge also ruled that [JPMorgan and Deutsche Bank] must face proposed class actions by women who said Epstein sexually abused them. He said he would explain his reasoning in due course.

Rakoff’s decision gives the plaintiffs a chance to prove another claim: that JPMorgan and Deutsche Bank knowingly benefited from involvement in Epstein’s sex trafficking. The women can now also try to show that the banks were negligent and obstructed enforcement of a federal anti-trafficking law.

For its part, JPMorgan will take a bit more of its revenge on Staley by really ruining his weekend, although Epstein's victims' lawyer is also reminding the bank that two can play at that game.

JPMorgan lawyers are expected to question Staley under oath on Thursday and Friday, and [Brad] Edwards said he has asked Dimon to submit to questioning.

JPMorgan, Deutsche Bank must face lawsuits over Jeffrey Epstein ties, judge says [CNN]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Beware Swiss central bankers bearing gifts; is Jay Clayton feeling lucky; public pensions pooh-pooh p.e.; and more!

Credit Suisse’s Fate Was Sealed by Regulators Days Before UBS Deal [Bloomberg]
As it turns out, the [$54 billion lifeline] was designed to buy time for the financial regulator Finma and the Swiss National Bank to secure a sale — not for Credit Suisse to rescue itself…. [CEO Ulrich] Koerner and the rest of the Credit Suisse management team were marginalized as emergency weekend talks — led by Swiss National Bank President Thomas Jordan — to sell the group to UBS gathered pace.

Fed Meets as Bank Chaos Collides With Inflation [NYT]
In addition to announcing a rate decision this week, Fed officials will release a set of quarterly economic projections that will indicate how high they expect borrowing costs to climb this year. Central bankers had expected to lift them to roughly 5 percent in 2023 and, before the market volatility, had hinted that they might adjust that anticipated peak even higher in their new projections….
Investors were putting 60 percent odds on a quarter-point increase and 40 percent odds on no move at all.

Millennium, ExodusPoint Post Small Losses Amid March Tumult [Bloomberg]
Michael Gelband’s ExodusPoint fell almost 2% in March through Wednesday, leaving it up about 0.5% this year, according to people familiar with the results. Much of the firm’s focus is on fixed-income trades. Izzy Englander’s Millennium, meanwhile, lost 1.3% this month through Thursday, bringing declines for the year to 0.8%, other people said…. Graham Capital Management’s biggest hedge fund slumped 8.4% this month through March 13. Rokos Capital Management fell about 12.5% so far in March, the FT reported Friday.

Amazon to lay off 9,000 more workers in addition to earlier cuts [CNBC]
The cuts are on top of the previously announced layoffs that began in November and extended into January. That round totaled more than 18,000 employees, and primarily affected staffers in its retail, devices, recruiting and human resources groups…. The latest round will primarily impact Amazon’s cloud computing, human resources, advertising and Twitch livestreaming businesses, [CEO Andy] Jassy said in the memo.

Some Public Pension Funds Are Pulling Back on Private Equity [WSJ]
“We think you can get to the same destination with just public market assets and your real estate and infrastructure portfolios,” Greg DeForrest, a senior vice president with investment consultant Callan, told the fund’s board. “Without private equity, you don’t have to deal with the costs, the fees, the administrative headache and the reporting headache associated with it.”

Bombardier must face hedge funds' lawsuit over bond transaction -New York judge [Reuters via Yahoo!]
Justice Andrew Borrok of the Manhattan Supreme Court said the hedge funds did not waive their right to declare Bombardier in default on their bonds, part of a $250 million issuance maturing in 2034, when it sold the businesses, including its commercial aircraft program…. The hedge funds Antara Capital Master Fund, Corbin ERISA Opportunity Fund and Corbin Opportunity Fund sued Bombardier last January, after the company sold an additional $260 million of the bonds to another investor.
That sale gave the investor a majority of the now $510 million issuance, and it voted to waive the default.

Mexico has the necessary experience, natural resources, and work force to become one of the largest producers of cannabis in the region.

Last week, a significant milestone occurred in the cannabis space: Mexico’s Department of Health, known as Comisión Federal para la Protección contra Riesgos Sanitarios (COFEPRIS), issued the first-ever authorization for the cultivation, processing, and commercialization of hemp.

Mexico’s cannabis laws and regulations are rather complex and convoluted — at least for this American attorney — so here is an overly simplified summary of hemp’s legal status.

While not expressly addressed in any of the country’s cannabis bills, which strictly legalized the individual adult use and medical use of cannabis, hemp became legal in 2017 when Mexican lawmakers passed an amendment to the General Health Law (GHL). Article 245 stipulates that cannabis products containing 1% THC or less, with ample industrial uses, can be lawfully commercialized, imported, and exported “pursuant to applicable sanitary regulations.”

Although COFEPRIS has yet to adopt hemp-specific regulations, stakeholders interested in engaging in hemp-related activities have had the right to apply for authorizations, which are generally described as “licenses” in GHL and matching regulations (i.e., medical use regulations).

Desart MX, S.A. de C.V. (Xebra Mexico), a Mexican company wholly owned by Xebra Brands Ltd. (Xebra), a Canadian cannabis company, tried to exercise that right in 2018 but saw its applications for authorization to cultivate, process, commercialize, import, and export hemp denied by COFEPRIS on the grounds that GHL does not expressly allow the cultivation and processing of hemp, only its commercialization and import/export.

In response, Xebra Mexico filed an amparo action with the Mexican Supreme Court to contest the COFEPRIS decision. Having successfully shown that hemp is safe for human consumption, and thus should be treated as any other agricultural commodity, Xebra Mexico was awarded a favorable judgment in July 2022. In its ruling, the court concluded that prohibiting the cultivation and processing of cannabis containing less than 1% THC for industrial uses, violates the constitutional right of freedom to work. In addition, the court held that since the commercialization and import/export of hemp are expressly allowed under Mexican law, all other necessary activities leading up to those production phases must also be allowed.

The court’s ruling was soon after ratified by a federal court that then ordered COFEPRIS to issue Xebra Mexico’s authorizations — a step that COFEPRIS reluctantly took eight months following the federal court’s order. In fact, last week COFEPRIS issued a public statement in which the agency emphasized it was forced by judicial decree to issue these authorizations and strongly disagrees with the court’s ruling given the fact that COFEPRIS has yet to determine the safest regulatory scheme for the entire chain of hemp production.

This ruling along with the recent issuance of Xebra Mexico’s authorizations are significant for the hemp industry. First, they formally legalized the entire hemp production line in Mexico. Second, they opened the door for other companies to benefit from the same authorizations provided certain conditions concerning safety protocols, security measures, phyto-sanitation processes, pest management procedures, and customary inspection and reporting provisions are met. The ruling obtained by Xebra Mexico is binding caselaw (jurisprudencia). This, in turn, has the potential to increase Mexico’s revenues and position the Latin American country as one of the global leaders in this space. That being said, Mexican stakeholders, including international attorney Adrián Cisneros Aguilar, are skeptical a cannabis bill that regulates the entire chain of recreational and industrial uses of cannabis will be enacted by the end of this legislative term (2024).

Indeed, Mexico has the necessary experience, natural resources, and work force to become one of the largest producers of cannabis in the region. This means that U.S. companies interested in entering this space should apply for authorizations now in order to hit the ground running once COFEPRIS releases its matching regulations.

Other preliminary steps foreign companies should take include:

• Forming a Mexican company with a specific cannabis undertaking (i.e., industrial hemp, hemp-CBD, and/or medical).
• Establishing strong relationship with local stakeholders, including experienced farmers, processors, and distributors.
• Securing land. There are many ways of doing so, but land ownership or entering into a lease agreement for the land where the company plans on conducting its business operations would be most advisable.
• Becoming acquainted with Mexico’s GHL and matching regulations.
• Consult with U.S. and Mexican attorneys specializing in cannabis and international law.

Nathalie Bougenies focuses her practice on health and wellness, in addition to corporate transactions and regulatory compliance. For the past four years, Nathalie has helped clients navigate the complex regulatory landscape of hemp products intended for human consumption and advises domestic and international clients on the sale, distribution, marketing, labeling, and importation of these products. Nathalie frequently speaks on these issues and has made national media appearances, including on NPR’s “Marketplace.” She also authors a weekly column for “Above the Law” that features content on cannabis policy and regulation. For four consecutive years, Nathalie has been named Rising Star by Super Lawyers.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Recession risks; layoffs lag; Tiger tumbles; California cuts hedge funds; and more!

Bank Failures, Like Earlier Shocks, Raise Odds of Recession [WSJ]
Recessions in 1990, 2001, 2008 and 2020 were all accompanied by shocks, including, respectively, Iraq’s invasion of Kuwait, the Sept. 11 terrorist attacks, the collapse of Lehman Brothers and Covid-19. For the first three of those recessions, the economy was already weak and the shock was the final straw that removed all doubt about whether a downturn was at hand…. “I don’t think of this as being equivalent to Lehman, or 9/11, or Iraq invading Kuwait,” Richard Clarida, global economic adviser at Pimco and a former Fed vice chair, said of SVB’s collapse. “But whatever your views were on the odds of a recession before this, they’ve probably gone up.”

Goldman Raises US Recession Probability to 35% on Banking Stress [Bloomberg]
The new estimate is still below the 60% median of economists surveyed by Bloomberg…. Goldman’s proprietary indicators of activity growth still remain positive, with its business survey trackers averaging a slightly-expansionary 52 in February, with the dividing line at 50, [economist Jan] Hatzius said in a research note.

US jobless aid claims fell last week as layoffs remain low [ABC News]
Applications for jobless claims in the U.S. for the week ending March 11 fell by 20,000 to 192,000 from 212,000 the previous week, the Labor Department said Thursday…. “Many announced layoffs don’t end up happening, and those that have been laid off are quickly finding work elsewhere, reflecting the ongoing imbalance between labor demand and supply,” the analysts wrote.

Tiger Global Writes Down Venture Funds’ Bets by 33% in 2022 [WSJ]
The markdowns erased $23 billion in value from Tiger’s giant holdings of startups around the globe, one of the people said. Its private portfolio includes big bets on hundreds of companies including TikTok parent ByteDance and payments company Stripe. In the fourth quarter, Tiger’s newest venture funds lost between 9% and 25%.

Former Bridgewater Exec Sees Hedge Funds Driving Odd Stock Moves [Bloomberg]
“What we’ve seen very clearly over the course of the last five days is significant adjustments in their perceptions of market risk,” said [Bob] Elliott, who worked for Bridgewater Associates for 13 years, in a telephone interview. “What you have is a bunch of risk managers pointing at their traders saying, absent of anything else, we have to start to bring portfolio risk down and that’s happened in the context of pretty sizeable positions coming into this.”

University of California to Dump Hedge Funds for Private Credit [Bloomberg]
“Within two or three years, whenever we can get liquidity from our hedge funds, we will be primarily all out,” Chief Investment Officer Jagdeep Bachher said in a meeting on Thursday. “Once we’re out, we’ll replace that obviously with private credit — which has been a better place to be….”
“For 20 years, there are three times we needed hedge funds to work for us — 2000, 2008 and 2020,” Bachher said, referring to years when the stock market fared poorly. “They didn’t really help us tremendously in our portfolio.” 

The feds have been very careful not to call these bailouts.

I love the Coen Brothers. “The Ballad of Buster Scruggs,” for instance, is an underrated modern classic. Remember the scene where James Franco is going to rob the lonely Tucumcari bank and the deranged teller, played wonderfully by Stephen Root, is jabbering on about having to jump up on the counter with his scattergun one time to prevent a run on the bank?

That is kind of what you think of when you hear the phrase “bank run.” It seems like something from the deep past, something our ancestors had to worry about long before the days of FDIC insurance.

As Silicon Valley Bank depositors recently proved, we’re not so different from our forebears. A modern-day bank run swiftly ended the 40-year history of Silicon Valley Bank, with regulators swooping in to seize its deposits on March 10.

Late on March 8, Silicon Valley Bank disclosed to investors that it was short on capital. The bank was selling off bonds at a loss, and said it needed to raise $2.25 billion. Reportedly, fearing a bank run, certain members of the venture capital community then told their portfolio managers to move funds — funds Silicon Valley Bank didn’t necessarily have if the withdrawals came all at once. These communications, which spread to social media, perhaps not so surprisingly, caused a bank run.

On March 9, customers pulled more than $42 billion from their accounts. That’s “billion” with a “b,” over the course of a single day. In comparison, the 2008 bank run that led to the failure of Washington Mutual took place over 10 days and involved only $16.7 billion worth of withdrawals. Silicon Valley Bank ended the day with a negative cash balance of $958 million.

Silicon Valley Bank had long been a favorite of tech startups. Since its customers were overwhelmingly corporations with more than $250,000 in their accounts, very few of Silicon Valley Bank’s deposits were FDIC insured.

However, federal officials were apparently working over the weekend, and late on Sunday, March 12, Federal Reserve Chair Jerome Powell, U.S. Treasury Secretary Janet Yellen, and FDIC Chair Martin Gruenberg released a joint statement saying that all Silicon Valley Bank depositors will be made whole anyway. Officials promised that this will not lead to losses for U.S. taxpayers.

Banking regulators also indicated that Signature Bank depositors would be made whole. You may have noticed that New York-based Signature Bank also just failed. This institution was notable for having almost a quarter of its deposits come from the cryptocurrency sector as of the not-too-distant past.

The feds have been very careful not to call these bailouts, and to emphasize that no costs will be borne by taxpayers. Officials say their aim is to bolster public confidence in the U.S. banking system.

They will have a tough row to hoe there. I think the nuance as to whether this is or is not a bailout is going to be lost on a lot of people. Plus, in most parts of the country, it would be hard to find less sympathetic depositors than tech companies in Silicon Valley and those relying on a New York-based crypto industry bank. Talk about a public relations nightmare.

People are going to look at where these two bank failures happened, and make some assumptions. In this day and age, it’s pretty easy to imagine some conspiracy theory floating around on TikTok about Bank of America or whatever causing everyday average Americans to run out and pull their deposits. That isn’t what happened though. Normal Americans are going to wonder why they can manage not to cause their banks to collapse when apparently Silicon Valley cannot.

Unfortunately, Silicon Valley Bank didn’t have Stephen Root to jump up on the counter with a shotgun and prevent this whole mess. What’s left of the bank will probably find a buyer and everything will be more or less fine (unless you’re a Silicon Valley Bank equity investor or bondholder, in which case you will be losing a lot of money). Still, it has to mean something that the first financial institutions to succumb to panic stemming from rising interest rates were a tech industry bank and a crypto industry bank. It’s going to leave a lot of Middle Americans shaking their heads.

Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.