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When FTX fell in November, its top rival Binance became the undisputed giant of the crypto world. It was so strong that it could offer to bail out other companies, including the collapsed broker Voyager Digital, and scolded Sam Bankman-Fried, FTX\u2019s founder, for shoddy business practices that jolted investor confidence in the sector and sank asset prices.<\/p>\n
But Binance has increasingly found itself under tighter scrutiny by U.S. regulators. And now, according to a new report, they may seek to examine new evidence that the exchange\u2019s U.S. and global arms were more interconnected than previously described. With negative headlines piling up, Binance Coin, the exchange\u2019s digital token, has fallen nearly 7 percent in the past week.<\/p>\n
Binance\u2019s two divisions were supposed to be independent of each other,<\/strong> allowing the firm \u2014 which claims to have no actual headquarters \u2014 to shield its vast overseas operation from U.S. oversight. But that may not have been the case, according to The Wall Street Journal:<\/p>\n Binance and Binance.US, have been much more intertwined than the companies have disclosed, mixing staff and finances and sharing an affiliated entity that bought and sold cryptocurrencies, according to the interviews and the messages and documents reviewed by The Journal. Binance developers in China maintained the software code supporting Binance.US users\u2019 digital wallets, potentially giving Binance access to U.S. customer data.<\/p>\n A spokeswoman for Binance acknowledged to The Journal that the company \u201cdid not have adequate compliance and controls in place during those early years\u201d and operated differently now.<\/p>\n Binance considered several ways to minimize its exposure to U.S. oversight,<\/strong> beyond creating the Binance.US entity just for American customers. One internal presentation suggested that Binance roll out \u201cmajor P.R. efforts\u201d to show its willingness to cooperate with U.S. regulators.<\/p>\n And in 2019 executives asked Gary Gensler \u2014 then a former C.F.T.C. chair turned M.I.T. professor who taught a class on crypto \u2014 to advise the company, <\/strong>according to The Journal. (Binance executives believed that if a Democrat won the White House in 2020, Mr. Gensler would again be a regulator.) Gensler declined \u2014 and has since gone on to lead the S.E.C.<\/p>\n That agency is now one of several U.S. authorities to closely examine Binance.<\/strong> Beyond a yearslong inquiry into the relationship between Binance and Binance.US, the S.E.C. is also seeking to stop Binance from buying Voyager Digital. (Changpeng Zhao, Binance\u2019s founder, briefly suggested on Friday that the company was thinking of walking away from the deal, before quickly affirming its commitment.)<\/p>\n Meanwhile, last week a bipartisan group of U.S. lawmakers demanded more information from Binance, citing potential evidence \u201cthat the exchange is a hotbed of illegal financial activity that has facilitated over $10 billion in payments to criminals and sanctions evaders.\u201d<\/p>\n A Binance spokesman told DealBook that the company was \u201cconfident in the strength\u201d of its internal compliance practices, and that it remained committed to dialogue with regulators and lawmakers.<\/p>\n Binance officials had fretted that such scrutiny was a risk hanging over the firm: One executive told colleagues in a 2019 message that a lawsuit by a U.S. regulator would lead to \u201cnuclear fallout.\u201d<\/p>\n In other crypto news, the Justice Department asked the judge overseeing the fraud trial of Bankman-Fried to drastically curtail his internet access.<\/p>\n Tesla cuts prices in the U.S. again.<\/strong> The electric vehicle maker announced a 4 percent discount for its Model S and a 9 percent cut for its more expensive Model X. The move, apparently driven by flagging demand, follows price cuts announced in January that appeared to revive sales.<\/p>\n Credit Suisse loses a longtime backer.<\/strong> Shares in the Swiss bank fell on Monday after the investment firm Harris Associates sold off its remaining stake, ending a decades-long investment in the beleaguered lender. \u201cThere is a question about the future of the franchise,\u201d David Herro, Harris\u2019s chief investment officer, told The Financial Times.<\/p>\n Altria officially ends its partnership with Juul.<\/strong> The Marlboro maker swapped its stake in the onetime vaping giant for the rights to the company\u2019s global I.P. The move concludes a disastrous bet by Altria, which bought a third of Juul in 2018 for $12.8 billion; it now values that holding at just $250 million.<\/p>\n A bipartisan push to ban TikTok is set to gain momentum. <\/strong>Senators Mark Warner, Democrat of Virginia, and John Thune, Republican of South Dakota, plan to introduce new legislation this week that would give President Biden the power to outlaw foreign technology like TikTok. It would escalate efforts to block the video app over fears that it puts users\u2019 data in the hands of the Chinese government.<\/p>\n China unveiled a modest 5 percent growth target on Sunday at the annual meeting of its compliant legislature, the National People\u2019s Congress. That underwhelming target \u2014 and the decision to not launch any economic stimulus measures \u2014 sent markets in two directions: Equities were up (following Friday\u2019s Wall Street rally) but commodities slid (owing to China\u2019s importance as a huge buyer of raw materials).<\/p>\n A post-Covid boost could be a blip. <\/strong>At 5 percent, <\/strong>the target is China\u2019s lowest in decades and reflects the serious challenges the economy faces despite a recent rebound in consumer spending and factory activity after Beijing ended its tough zero-Covid policy. But all that good news could be short-lived if structural challenges aren\u2019t addressed, economists say. These include an indebted property sector (a longtime growth engine), a crackdown on the tech sector that\u2019s put a chill on investment, and the impact of punishing Western sanctions in sensitive industries, such as chip making.<\/p>\n Xi Jinping, China\u2019s leader, is expected to cement his authority at the N.P.C., the most closely watched in years, with the appointment of loyalists to bolster his policies. \u201cIf the economy and radical reforms were seriously in focus, we\u2019d know and hear a lot more about them,\u201d George Magnus, an economist at Oxford University\u2019s China Center, told DealBook. \u201cAnd the fanfare of change would be louder. Instead, the economy is playing second fiddle to control, and Party primacy over state institutions,.\u201d<\/p>\n Here\u2019s what else happened:<\/p>\n China will increase military spending by 7.2 percent, the fastest pace in four years, amid growing tensions with the U.S.<\/p>\n The authorities want to double down on self-reliance, unveiling a \u201cwhole nation strategy\u201d to produce more tech at home. China also wants to raise grain production and produce more food domestically to reduce its reliance on overseas supply.<\/p>\n Arm, the British chip designer that SoftBank bought for $32 billion in 2016, is taking additional steps to return to the public markets. And its impending initial public offering will carry weighty expectations about what it would bring for its majority owner \u2014 and, perhaps, for I.P.O.s more broadly.<\/p>\n Arm reportedly aims to raise about $8 billion in its offering,<\/strong> at a potential valuation exceeding $50 billion, according to Reuters. The company is also said to have appointed Goldman Sachs, JPMorgan Chase and Mizuho as lead underwriters. (Banks have eagerly courted Arm, pitching valuations for the business that range from $30 billion to $70 billion.)<\/p>\n Hopes for a blockbuster Arm debut are coming from many quarters.<\/strong> SoftBank is striving for a stellar I.P.O., as the Japanese tech investor suffers from paper losses across its huge investment portfolio. (So important is Arm to SoftBank\u2019s fortunes that Masa Son, the Japanese company\u2019s outspoken founder, stepped back from most daily management duties to focus on that business.)<\/p>\n The public markets are also hoping Arm succeeds. The I.P.O. business in the U.S. has been all but frozen since markets began to whipsaw last year. Arm\u2019s debut, widely anticipated to come later this year, could help end those doldrums.<\/p>\n According to Moody\u2019s Analytics<\/em>, closing the gender pay gap would boost the global economy by 7 percent, or $7 trillion. At the pace employers are moving, it will take 132 years to achieve pay equity.<\/em><\/p>\n Jobs, inflation and earnings \u2014 here\u2019s what to watch this week.<\/p>\n Tomorrow:<\/strong> Jay Powell will deliver the Fed\u2019s monetary policy report to the Senate, the first of two days of testimony on Capitol Hill. Expect questions about the state of the economy and interest rates.<\/p>\n Wednesday:<\/strong> It\u2019s International Women\u2019s Day. On the earnings calendar: Adidas.<\/p>\n Thursday:<\/strong> The White House is expected to release a budget proposal for the 2024 fiscal year. China is set to release inflation data. Oracle reports fiscal third quarter results.<\/p>\n Friday:<\/strong> It\u2019s jobs day. Economists polled by Bloomberg forecast on average that an additional 215,000 jobs were created last month; another data point to watch is wage gains, an inflationary indicator. Apple holds its annual meeting: Usually a straightforward affair, this one will feature shareholder votes on executive pay and labor policies. The Bank of Japan wraps up its rate-setting meeting; it is expected to leave the principal borrowing rate untouched.<\/p>\n Deals<\/strong><\/p>\n Thomas Lee, the private equity pioneer who died last month, apparently of a self-inflicted gunshot wound, had struggled in recent years to match his earlier deal making successes. (WSJ)<\/p>\n GAM, the embattled Swiss asset management firm, is reportedly racing to sell itself within the next two months. (FT)<\/p>\n Stable Diffusion, a London-based rival to OpenAI, is reportedly seeking to raise new capital at a valuation of about $4 billion. (Bloomberg)<\/p>\n A bidding war has broken out over Telecom Italia\u2019s fixed-line network, with contenders, which include KKR, valuing the grid at roughly $19 billion. (Reuters)<\/p>\n Policy<\/strong><\/p>\n The Biden fight against \u201cjunk fees\u201d is unexpectedly winning corporate allies. (Politico)<\/p>\n A second Norfolk Southern train crashed in Ohio over the weekend, though no hazardous materials were on board. Meanwhile, Transportation Secretary Pete Buttigieg said he had made mistakes in his response to the first derailment. (NYT, CNN)<\/p>\n Conservatives criticized Big Tech at the CPAC political conference \u2014 but unlike in years past, acknowledged that they were struggling to build ideological alternatives. (NBC News)<\/p>\nHERE\u2019S WHAT\u2019S HAPPENING <\/span><\/h3>\n
China grows cautious <\/h2>\n
SoftBank\u2019s big I.P.O. moves ahead <\/h2>\n
$ 7 trillion <\/h2>\n
The week ahead <\/h2>\n
THE SPEED READ <\/span><\/h3>\n