Author: josecarlos

(American Banker) A consumer advocacy group is calling for regulators to publicly release investigations into executives and directors of the three regional banks that collapsed last year: Silicon Valley Bank, Signature Bank and First Republic Bank.

Americans for Financial Reform is calling for executives and directors of the failed regional banks to be held accountable through potential fines, penalties and bans for misconduct. AFR sent an emailed solicitation to consumers calling for the Federal Deposit Insurance Corp. to publicly release its findings before the change in administrations.

“If the Biden administration’s FDIC doesn’t act by January 19, there’s every chance the Trump administration will sweep this under the rug,” said Annie Norman, campaign manager for Americans for Financial Reform. “The people responsible haven’t faced consequences. That’s outrageous.”

An FDIC spokesman said that any reports on SVB would have to come from the Federal Reserve, the bank’s primary federal regulator. Still, regulators typically do not release reports on bank investigations.

The FDIC’s chief risk officer issued reports on the agency’s supervision of Signature Bank and First Republic , while the agency’s inspector general released material loss reports on the twofailed banks .

The FDIC stopped deposit runs in March 2023 at Silicon Valley Bank and Signature Bank by declaring a so-called systemic risk exception to ensure that uninsured depositors at those failed banks were covered. First Republic Bank collapsed in May and JPMorgan Chase assumed all of the bank’s deposits.

While several post-mortems of the bank failures have been released, Americans for Financial Reform is making a last-ditch effort for probes into misconduct by executives and board members. SVB in particular offered its executives generous compensation packages and paid out bonuses to employees hours before being taken over.

Separately, the Department of Justice and the Securities and Exchange Commission also have probes into insider sales and disclosures made by the banks about their financial health before they failed.

The FDIC’s Deposit Insurance Fund took a massive $31.5 billion-dollar hit for the three failures, which includes coverage of uninsured depositors, losses on assessments and discounts on the purchase prices of the banks. Some industry experts have called into question the FDIC’s credibility because the agency initially low-balled the cost of resolving the banks.

Individual bank executives have not been critical of the FDIC, but bank lobbying groups have questioned the FDIC’s decision last year to charge more than 100 large banks a higher-than-expected special assessment to replenish the Deposit Insurance Fund.

Last year the Congressional Research Service described ways in which Congress and the federal government could recoup bonuses and other forms of compensation from former officers and directors at SVB, as well as ways to hold executives personally accountable.

AFR’s Norman expressed frustration that after nearly two years, no executives have yet been held accountable, and may never face accountability.

“The collapse of Silicon Valley Bank, Signature Bank and First Republic wasn’t just a fluke,” Norman said. “It came from high-risk practices, weak oversight and negligence at the highest levels. Yet to this day, the public hasn’t seen the findings. We can’t let these investigations disappear into bureaucratic limbo.”

(JD Supra) A recent decision by the United States Bankruptcy Court for the Southern District of New York may have significant implications for digital asset holders and users. The decision, issued on October 24, 2024, granted a motion for alternative service of process by airdropping non-fungible tokens (NFTs) to the cryptocurrency wallet addresses of defendants whose identities and locations are unknown. The decision is one of the first of its kind to squarely address the challenges posed by digital blockchain technology in civil litigation and to authorize the use of NFTs as a means of service.

The decision arose from three adversary proceedings related to the bankruptcy case of Celsius Network LLC, a cryptocurrency lending platform that filed for Chapter 11 protection in 2022. The plaintiff in the adversary proceedings is the litigation administrator for the post-effective date debtors, who seeks to avoid fraudulent transfers and recover estate property allegedly misappropriated from Celsius by a former employee and a related entity. The defendants in the adversary proceedings are the owners of cryptocurrency wallets to which the plaintiff traced asset transfers from the former employee and the related entity. The plaintiff settled its case against the former employee and the related entity, but could not identify or locate the defendants who received the transfers. The only information the plaintiff had about the defendants was their wallet addresses on the Ethereum and Bitcoin blockchains.

NEW YORK (Reuters) – General Electric, doing business as GE Aerospace, will pay $362.5 million in cash to resolve a long-running shareholder lawsuit accusing it of hiding risks at its power business, court papers show.

A preliminary settlement of the proposed class action was filed on Monday night in federal court in Manhattan.

It requires approval by U.S. District Judge Jesse Furman, who in September 2023 refused to dismiss the case while warning a trial would be “expensive and risky” for both sides.

Filed in 2017, the lawsuit concerned GE’s reliance on factoring, or the sale of future revenue for cash, in connection with long-term service agreements at its GE Power unit.

Shareholders led by two pension funds — the Cleveland Bakers and Teamsters Pension Fund and Sweden’s Sjunde AP-Fonden — said the power unit grew increasingly reliant on factoring to boost revenue, while sacrificing future cash flows.

They said the unit did not have enough contracts to factor, and GE’s stock price fell after the company “blindsided” investors with billions of dollars of unexpected exposure.

The case covered alleged misleading disclosures between February 2016 and January 2018 by GE and former Chief Financial Officer Jeffrey Bornstein. Both denied wrongdoing in agreeing to settle.

Lawyers for the plaintiffs did not immediately respond to requests for comment on Tuesday. GE and defense lawyers did not immediately respond to similar requests. The plaintiffs’ lawyers may seek up to 25% of the settlement fund in fees.

In January 2021, Furman dismissed separate fraud claims concerning a GE insurance portfolio, and dismissed former Chief Executive Jeffrey Immelt as a defendant.

A month earlier, GE paid $200 million to settle U.S. Securities and Exchange Commission charges it misled investors about its power and insurance businesses.

GE, based in Evendale, Ohio, set aside funds for Monday’s settlement in the third quarter.

It spun off its healthcare business GE Healthcare in January 2023 and its renewable energy and power business GE Vernova in April 2024.

The case is Sjunde AP Fonden et al v General Electric Co et al, U.S. District Court, Southern District of New York, No. 17-08457.

(Reuters) – Citigroup has completed the separation of Banamex from its institutional banking business in Mexico as it prepares to list the retail bank, the Wall Street giant said on Monday.

The move to split Grupo Financiero Citi México from Grupo Financiero Banamex is part of Citi’s sweeping overhaul under CEO Jane Fraser aimed at simplifying its sprawling structure as it looks to improve the bank’s performance.

The New York-based bank is continuing to work on the proposed initial public offering of Banamex, the timing of which will depend on regulatory approvals and market conditions, Citi said.

“This separation represents an important milestone in our simplification,” Fraser said. “We will now prepare for the Banamex IPO.”

Citi has weighed a dual stock listing for the Banamex unit, possibly in Mexico City and New York, Reuters has reported.

The bank had previously said it planned to list its Banamex unit, which caters to nearly 20 million clients and has a network of 1,300 branches in Mexico, in 2025.

Citi was close to a $7 billion deal to sell Banamex to Mexican billionaire German Larrea’s conglomerate Grupo Mexico last year.

But tensions between the conglomerate and Mexican President Andres Manuel Lopez Obrador led to the two sides abandoning the deal, with Citi deciding to pursue an IPO instead.

Citi México will maintain a “significant” presence in the country and continue to serve the bank’s institutional clients with a team of roughly 3,000 employees.

The bank has closed its consumer banking divisions in nine markets since announcing its intention to exit the business across 14 markets in Asia, Europe, the Middle East, and Mexico, it said. Citi currently has a sale process underway in Poland.

Citi said its previously announced wind-downs of consumer businesses in China and Korea and overall presence in Russia are also nearly complete.

(Reuters) -U.S. lender JPMorgan Chase agreed on Friday to drop its lawsuit against Tesla that accused the electric vehicle maker of “flagrantly” breaching a contract between the two companies in 2014 relating to warrants Tesla sold to the bank.

The move to drop the lawsuit was announced in a one-page court filing by both companies in a Manhattan court, where they said they will drop their claims against each other.

Bloomberg News reported the settlement earlier on Friday.

Neither company disclosed settlement terms, according to the court filings.

Tesla did not respond to Reuters’ requests for comment.

“JPMorgan and Tesla have decided to enter into a new commercial relationship and settle the outstanding disputes between the companies,” a JPMorgan spokesperson said in a statement on Saturday.

“This is a good outcome for all and we look forward to working together,” the spokesperson added.

JPMorgan sued Tesla in November 2021, seeking $162.2 million, alleging that Tesla breached a 2014 contract related to stock warrants it sold to the bank, and which the bank believes became more valuable because of a 2018 tweet by Tesla CEO Elon Musk.

Warrants give the holder the right to buy a company’s stock at a set “strike” price and date.

Musk’s Aug. 7, 2018 tweet that he might take Tesla private at $420 per share and had “funding secured,” and his subsequent announcement 17 days later that he was abandoning the plan, created significant volatility in the share price, the bank said. On both occasions, JPMorgan adjusted the strike price “to maintain the same fair market value” as prior to the tweets, the bank said.

JPMorgan said it was obligated to reprice the warrants after Musk’s tweet, and that a subsequent 10-fold increase in Tesla’s stock price required that company to make payments, which it had not done.

Tesla countersued JPMorgan in January 2023, accusing the bank of seeking a “windfall” when it repriced the warrants.

Musk, who bought Twitter for $44 billion in 2022, agreed in a 2018 deal with the U.S. Securities and Exchange Commission to get pre-approval from a Tesla lawyer for some tweets.

WASHINGTON (Reuters) -The U.S. Supreme Court examined on Monday the U.S. Food and Drug Administration’s refusal to let two e-cigarette companies sell flavored vape products that regulators consider a health risk to youths, while the lawyer for the businesses suggested President-elect Donald Trump could steer a different course.

The justices heard arguments in an appeal filed by the FDA under outgoing Democratic President Joe Biden’s administration of a lower court’s decision that the agency had failed to follow proper legal procedures under federal law when it rejected the applications to sell these nicotine-containing products.

This is the latest case in which the justices are scrutinizing actions by a U.S. regulatory agency, with the Republican Trump due to take office on Jan. 20 with a promise of broad deregulation.

Eric Heyer, the lawyer for e-cigarette liquid makers Triton Distribution and Vapetasia, suggested that Trump’s return could prompt a shift in the U.S. government’s approach to flavored vape products. Heyer alluded to Trump’s vow during his campaign to “save vaping,” despite having supported a ban on flavored vaping products during his first presidential administration.

“We have a new administration coming in. The president-elect is on record saying, I’m going to save flavored vapes,” Heyer said. “We don’t know exactly what that’s going to look like.”

E-cigarettes of various flavors are still easily available despite being illegal.

Triton and Vapetasia filed FDA applications in 2020 for products with flavors including sour grape, pink lemonade and crème brulee, and names including “Jimmy The Juice Man Peachy Strawberry” and “Suicide Bunny Mother’s Milk and Cookies” – offerings that critics have said were designed to appeal to minors.

Some of the justices appeared skeptical of the contention by Triton and Vapetasia that the FDA improperly assessed their applications under a regulatory standard that differed from published guidance that the companies had relied upon.

Liberal Justice Elena Kagan told Heyer that the FDA had been “completely upfront” about its regulatory approach.

“So I guess I’m not really seeing what the surprise is here, or what the change is here,” Kagan said. “Everybody basically knows that flavors are particularly dangerous in terms of kids starting the use of smoking products.”

Conservative Justice Amy Coney Barrett expressed concern to Heyer that his position could require courts to defer to an applicant’s interpretation of FDA guidance when a company is in a dispute with the agency.

“Can you walk me through how that can possibly be?” Barrett asked.

An FDA rule that took effect in 2016 under Democratic President Barack Obama deemed e-cigarettes to be tobacco products that, like traditional cigarettes, are subject to agency review under a 2009 federal law called the Tobacco Control Act. The law requires manufacturers of e-cigarette products to apply for authorization to sell nicotine vaping devices and e-liquids.

The Triton and Vapetasia applications were denied, as were hundreds of others by various companies involving more than a million flavored vape products.

To secure regulatory approval, e-cigarette companies must show their product would be “appropriate for the protection of the public health,” meaning any health benefits – like helping traditional cigarette smokers transition to generally less-harmful vaping – must outweigh the risks of bringing the new product to market.

‘ATTRACTIVE TO YOUTH’

Conservative Justice Clarence Thomas asked Curtis Gannon, the Justice Department lawyer arguing for the FDA, to address the claim by the companies that the FDA’s requirements were “actually a moving target.”

“They knew throughout that FDA was concerned about the fact that flavors are attractive to youth,” Gannon said.

“The concern would be that they’re getting addicted to … nicotine at a time when nicotine is dangerous to their developing brains and may be, you know, sentencing them to a long life of needing to satisfy that addiction,” Gannon added later in the arguments.

The FDA found that nearly one in five high school students and one in 20 middle school students used e-cigarettes in 2020.

The FDA has approved only 34 flavored e-cigarette varieties, all tobacco or menthol flavored. The agency maintains that it has not categorically banned flavored e-cigarette products. But companies face a particularly demanding health benefits-versus-risk legal test due to the FDA’s finding that flavored e-cigarettes pose a “known and substantial risk” to youth.

Triton and Vapetasia in 2021 asked the New Orleans-based 5th U.S. Circuit Court of Appeals to review the FDA’s denial of their applications.

In January, the 5th Circuit ruled that the FDA had been arbitrary and capricious, in violation of the Administrative Procedure Act, by denying the applications without considering plans by the companies to prevent underage access and use. Seven other federal appellate courts had sided with the FDA in similar cases.

The Supreme Court’s ruling is expected by the end of June.

(Reporting by John Kruzel; Editing by Will Dunham)

NEW DELHI (Reuters) -India’s antitrust body has turned down a request from Apple to put a hold on an investigation report which found the company breached competition laws, allowing the case to continue, an internal order from the regulator seen by Reuters showed.

The Competition Commission of India (CCI) in August ordered a recall of investigation reports after Apple said the watchdog had disclosed commercial secrets to competitors in the case dating back to 2021, including Tinder-owner Match. These elements should have been redacted.

The CCI had asked parties to return the reports and destroy any copies. The regulator then issued new reports.

The CCI internal order showed that Apple in November alleged that the main complainant in the antitrust investigation – Indian non-profit Together We Fight Society (TWFS) – had not complied with the directives to give an assurance that the old investigation reports had been destroyed.

Apple asked the CCI “to take action against TWFS for non-compliance with its order” and “to withhold the revised” report, the CCI order, dated Nov. 13, seen by Reuters showed.

“Apple’s request to hold the investigation report in abeyance was deemed untenable,” the CCI said in the order.

Apple did not respond to Reuters queries.

The CCI did not respond outside regular business hours on Sunday. Calls to representatives of TWFS went unanswered.

A CCI investigation had found that Apple exploited its dominant position in the market for app stores on its iOS operating system to the detriment of app developers, users and other payment processors.

Apple has denied wrongdoing and said it is a small player in India where phones that use Google’s Android system are dominant.

The CCI internal order also showed that Apple has been asked to submit its audited financial statements for fiscal years 2021-22, 2022-23 and 2023-24 under regulatory guidelines aimed at determining possible monetary penalties in the case.

The CCI’s senior officials will review the investigation report and make a final ruling on the case.

WASHINGTON (Reuters) – The United Parcel Service will pay up to a $45 million penalty for improperly valuing a business unit, the U.S. Securities and Exchange Commission (SEC) said on Friday.

The SEC said UPS misrepresented “its earnings because it failed to follow generally accepted accounting principles (GAAP) in valuing one of its worst performing businesses.”

(Reuters) -A federal judge on Friday rejected the U.S. Securities and Exchange Commission’s request to sanction Elon Musk after he failed to appear for court-ordered testimony for the regulator’s probe into his $44 billion takeover of Twitter.

U.S. District Judge Jacqueline Scott Corley in San Francisco said sanctions over Musk’s Sept. 10 absence were unnecessary, after the world’s richest person testified on Oct. 3 and agreed to pay the SEC’s $2,923 of travel costs.

“Because the present circumstances forestall any occasion for meaningful relief that the court could grant, the SEC’s request is moot,” Corley wrote.

The SEC had sought a declaration that Musk violated a May 31 court order to provide testimony.

It said having only to repay travel costs would not deter many other people from ignoring court orders, “much less someone of Musk’s extraordinary means.”

Musk said he complied with the order by testifying on Oct. 3. He is worth $321.7 billion according to Forbes magazine.

The SEC did not immediately respond to a request for comment after business hours. Lawyers for Musk did not immediately respond to similar requests.

Musk, whose businesses include electric car maker Tesla and rocket company SpaceX and who is the world’s richest person, went to Florida’s Cape Canaveral on Sept. 10 to oversee the launch of SpaceX’s Polaris Dawn mission.

The SEC is investigating whether Musk violated securities laws in early 2022 by waiting at least 10 days too long to disclose he had begun accumulating Twitter stock.

Critics and some investors have said this let him buy shares cheaply before he eventually disclosed a 9.2% Twitter stake, and shortly thereafter offered to buy the whole company.

In July, Musk said he misunderstood SEC disclosure rules and that “all indications” suggested he made a “mistake.”

The SEC also sued Musk in 2018 over his Twitter posts about taking Tesla private. He settled that lawsuit by paying a $20 million fine, agreeing to let Tesla lawyers review some posts in advance and stepping down as Tesla’s chairman.

(Reuters) -The U.S. Department of Justice made its final argument on Monday that Google illegally dominated online advertising technology, seeking a second antitrust win against the company.

The closing arguments in Alexandria, Virginia, cap a 15-day trial held in September where prosecutors sought to show Google monopolized markets for publisher ad servers and advertiser ad networks, and tried to dominate the market for ad exchanges which sit between buyers and sellers.

“Google rigged the rules of the road,” said DOJ lawyer Aaron Teitelbaum, who asked the judge to hold Google accountable for anticompetitive conduct.

Google has argued prosecutors are bending U.S. antitrust law to force it to accommodate competitors’ services, and that the case is focused on incidents from years past when Google was still building and improving its offerings.

Publishers testified at trial that they could not switch away from Google, even when it rolled out features they disliked, since there was no other way to access the huge advertising demand within Google’s ad network.

News Corp in 2017 estimated losing at least $9 million in ad revenue that year if it had switched away, one witness said.

If U.S. District Judge Leonie Brinkema finds that Google broke the law, she would consider prosecutors’ request to make Google at least sell off Google Ad Manager, a platform that includes the company’s publisher ad server and its ad exchange.

Google offered to sell the ad exchange this year to end an EU antitrust investigation but European publishers rejected the proposal as insufficient, Reuters first reported in September.