Month: November 2024

LONDON (Reuters) – Collapsed cryptocurrency company FTX is suing Binance and its former CEO Changpeng Zhao, alleging that $1.8 billion was “fraudulently transferred” by FTX management to Binance and its executives.

The lawsuit relates to Binance’s sale of its stake in Sam Bankman-Fried’s FTX, which it acquired in 2019 but then negotiated to sell back to FTX in July 2021.

According to the lawsuit, FTX’s Alameda Research division directly funded the share repurchase using tokens which had a then fair market value of $1.76 billion. Alameda, the lawsuit alleges, was insolvent at the time of buying the shares and could not therefore afford to fund the transaction and it should not have been allowed to proceed.

“By this lawsuit, the Plaintiffs seek to recover, for the benefit of FTX’s creditors, at least $1.76 billion that was fraudulently transferred to Binance and its executives at the FTX creditors’ expense, as well as compensatory and punitive damages to be determined at trial,” the administrators for the FTX estate said in a filing made on Sunday in the U.S. state of Delaware.

A Binance spokesperson said: “The claims are meritless, and we will vigorously defend ourselves.”

Zhao, known as “CZ”, could not immediately be reached for comment.

The lawsuit is the latest battle between FTX and Binance.

FTX was one of the largest cryptocurrency firms in the world before it collapsed in late 2022.

Arch-rival Binance, then led by Zhao, was set to come to its rescue and buy FTX’s non-U.S. unit as it struggled to stay afloat in November 2022, before Binance withdrew its offer.

FTX founder Bankman-Fried was sentenced in March this year to 25 years in prison for stealing $8 billion from customers. He has appealed the conviction.

Zhao was sentenced to four months in prison earlier this year, after pleading guilty to violating U.S. laws against money laundering at the world’s largest cryptocurrency exchange.

(Reuters) – Vanguard Group, the largest U.S. manager of mutual fund assets, agreed to pay $40 million to settle a lawsuit claiming it stuck ordinary investors in its popular target-date retirement funds with surprisingly large tax bills.

A preliminary settlement of the proposed class action was filed on Wednesday in Philadelphia federal court, and requires a judge’s approval. Vanguard denied wrongdoing.

The lawsuit stemmed from Vanguard’s December 2020 decision to reduce the minimum investment in lower-cost funds meant for institutional clients to $5 million from $100 million.

Investors said this caused a “stampede” into the lower-cost funds, forced higher-cost retail funds to sell assets to meet redemptions, and saddled investors who did not qualify for the lower-cost funds with large capital gains in their taxable brokerage accounts.

In one example, the Vanguard Target Retirement 2040 Fund threw off an estimated 15.1% of its net asset value as capital gains in 2021, up from 0.4% in 2020.

Vanguard’s target-date funds contain mixes of stocks, bonds and cash that are designed to become less risky as investors age, and also be tax-efficient.

The Valley Forge, Pennsylvania-based company had $9.9 trillion of assets under management as of Aug. 31.

“Vanguard is committed to supporting everyday investors and retirement savers and is happy to have reached an agreement that allows us to put this litigation behind us,” Vanguard said in a statement.

In July 2022, Vanguard agreed to pay $6.25 million to resolve similar claims by Massachusetts Secretary of State William Galvin.

The investors’ lawyers may seek up to $13.33 million for fees, $985,000 for expenses and $240,000 for the 12 named plaintiffs, leaving about $25.4 million for other investors.

The lawyers said the “best case” scenario for damages was $259.5 million, and the $40 million recovery was an “excellent result.”

The case is In re Vanguard Chester Funds Litigation, U.S. District Court, Eastern District of Pennsylvania, No. 22-00955.

LONDON (Reuters) – The CEOs of Goldman Sachs and Morgan Stanley said on Tuesday they expected corporate dealmaking to pick up in 2025, while the CEO of Apollo Global Management said he expected a presidential victory by Donald Trump would spur more deals.

Ted Pick, CEO, Morgan Stanley, told a panel debate at the Future Investment Initiative (FII) conference in Riyadh that the increase in activity would “be a global phenomenon”, with bigger companies going public. Goldman boss David Solomon said on the same panel he also expected more robust activity next year.

Apollo Global Management CEO Marc Rowan said a Donald Trump victory in the upcoming U.S. presidential election would free up merger and acquisition activity and lead to investment liberalisation.

(Reuters) – A former longtime general counsel to Moody’s was sentenced by a New Jersey federal judge on Thursday to 8 months in prison for willfully failing to file personal federal income tax returns.

Federal prosecutors said John Goggins earned $54 million between 2018 and 2021 and failed to file federal income taxes during those years. Goggins stepped down as Moody’s senior vice president and general counsel last fall.

In addition to his prison term, U.S. Magistrate Judge Andre Espinosa sentenced Goggins to one year of supervised release and fined him $40,000, a spokesperson for the New Jersey U.S. attorney’s office said.

Goggins has also paid more than $3.1 million in restitution to the U.S. Internal Revenue Service, the U.S. spokesperson said.

A spokesperson for Goggins said he regretted and accepted full responsibility for failing to file his returns, and was grateful “to the Court for considering the comprehensive measures of accountability and restitution he has taken in connection with his misdemeanor offenses.”

Goggins pleaded guilty in April to four counts of willful failure to file tax returns.

The criminal charges against Goggins had nothing to do with his work at investment analytics giant Moody’s, Goggins’ lawyer Christopher Ferguson and a company spokesperson have said.

Goggins retired from the company in September 2023 after more than two decades and was replaced as general counsel by Richard Steele.

The case is United States of America v. John Goggins, U.S. District Court for the District of New Jersey, 2:24-mj-11108.

(CryptoSlate) Hong Kong authorities expect to license more crypto exchanges before the end of this year, according to Financial Secretary Paul Chan.

At the ongoing Hong Kong FinTech Week, Chan stated that the Securities and Futures Commission (SFC) is actively reviewing more platforms for potential licensing. The news indicates that more virtual asset service providers could receive licenses, joining recent licensees like OSL Exchange, Hashkey Exchange, and HKVAX.

He stated:

“We have issued three licenses so far. Meanwhile, the SFC (Securities and Futures Commission) is assessing the legal and regulatory compliance of those deemed service providers. We expect more licences will be issued in the next couple of months.”

Chan also highlighted further regulatory efforts underway, including plans to regulate stablecoins and establish guidelines for over-the-counter (OTC) trading. He added:

“The HKMA has already launched a stablecoin issuer sandbox in March to allow interested parties to conduct testing and to facilitate two-way communication on the proposed regulatory requirements, ensuring that such requirements are fit for purpose. It is our plan to introduce the legislation this year.”

Further, Chan pointed out that the Hong Kong government was not solely looking to reap the benefits of AI but also seeking to “address the potential challenges, such as cybersecurity, data privacy, the protection of intellectual property rights, and concerns about its impact on jobs and ethics.”

Due to this, the government will launch a policy statement that reflects its policy stance and regulatory approach to the responsible application of AI in financial services.

Tax incentives

Meanwhile, Hong Kong is also exploring new tax incentives that could extend current breaks for traditional funds and family offices to crypto investments.

Christopher Hui, Secretary for Financial Services and the Treasury shared this update during Hong Kong FinTech Week, noting that tax concessions for crypto and other investments could be implemented by year-end.

Hui believes these incentives will stimulate investment and accelerate growth in the sector.

NEW YORK (Reuters) -Former cryptocurrency executive Nishad Singh, who once shared a $35 million Bahamas penthouse with FTX founder Sam Bankman-Fried, was spared prison time by a judge on Wednesday for his role in the theft by his imprisoned former boss of about $8 billion in customer funds from the now-bankrupt exchange.

During a hearing in Manhattan federal court, U.S. District Judge Lewis Kaplan imposed no prison time but ordered three years of supervised release. Kaplan credited Singh for cooperating with prosecutors and coming clean about his actions in what the judge said “may have been the greatest financial fraud in American history.”

Singh, who had pleaded guilty to six felony counts of fraud and conspiracy, testified last year as a prosecution witness in the trial that led to Bankman-Fried’s conviction on fraud and other charges. Singh in a plea deal with prosecutors admitted to his role in the fraud and to serving as a “straw donor” in some of Bankman-Fried’s millions of dollars in political donations.

“I am overwhelmed with remorse for the harm that I participated in and that I caused to so many innocent people,” Singh told the judge at the hearing. “I strayed so far from my values.”

Prosecutors had urged leniency for the 29-year-old Singh, FTX’s former chief engineer, in light of his cooperation. His defense lawyers had recommended he serve no prison time.

Bankman-Fried, 32, is serving a 25-year prison sentence imposed by Kaplan stemming from FTX’s November 2022 collapse.

Kaplan last month sentenced Caroline Ellison, Bankman-Fried’s former girlfriend and an executive at FTX’s sister hedge fund Alameda Research, to two years in prison. The judge also had praised her cooperation, but said that such assistance was not a “get out of jail free card” considering her role in a case this serious.

The judge told Singh that his involvement “was much more limited than, certainly, Bankman-Fried and Ellison.”

Gary Wang, a third former FTX executive who cooperated with prosecutors, is scheduled to be sentenced on Nov. 20.

During the hearing, Singh said he looked up to and supported Bankman-Fried even after coming to see him as deceptive and self-serving.

“I still have an enormous debt to society,” Singh added.

“You did the right thing,” Kaplan told Singh. “You immediately and truthfully – as far as I can see – fully unburdened yourself to the government about wrongdoing about which you were aware and which they quite clearly were not.”

Prosecutor Nicolas Roos told the judge that Singh deserved credit for coming forward and implicating himself by describing conversations that were not otherwise documented.

“It could have been very easy for Mr. Singh to have denied everything,” Roos said.

“He wanted to right a wrong, or at least start to make that effort, and do the right thing,” Roos added.

‘A MONUMENTAL CRIME’

Singh’s lawyer Andrew Goldstein told the judge that nearly all of the billions of dollars in customer funds were stolen before his client learned of the scheme.

“The overwhelming majority of the conduct that made it such a monumental crime took place before Nishad ever became involved,” Goldstein said, arguing that Bankman-Fried and Ellison were responsible for the decision to steal funds from FTX customers to pay Alameda’s lenders. “That was their crime. It was not Nishad’s crime.”

Goldstein said Singh’s brother, parents and fiancée, among other family members, were present in court.

A 2017 graduate of the University of California, Berkeley, Singh lived with Bankman-Fried and seven other employees of FTX and its sister firm Alameda Research in a waterfront penthouse in the Bahamas, where the exchange was based.

Singh said he owned an equity stake of around 6-7% in FTX. He said that made him a billionaire on paper during a boom in cryptocurrency prices during the COVID pandemic. By October 2021, Bankman-Fried was worth $26 billion, according to Forbes magazine, and gained prominence as a prolific donor to philanthropic causes and Democratic politicians.

Singh testified during the trial that he became suicidal as FTX unraveled amid a flurry of customer withdrawals. He returned to the United States shortly before the exchange declared bankruptcy on Nov. 12, 2022, and had his first meeting with federal prosecutors later that month.

Singh testified that he had confronted Bankman-Fried about a massive shortfall of customer funds during an hourlong conversation held in September 2022 on the balcony of their penthouse. Singh said Bankman-Fried assured him he would raise more funds and cut costs.

Bankman-Fried is appealing his conviction and sentence.