Semiconductor maker Micron announced Wednesday that it would reduce its headcount by about 10% in 2023, in the latest example of a technology industry slowdown affecting employment.
Shares of Micron fell more than 1% in extended trading.
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Idaho-based Micron has about 48,000 employees, according to a recent SEC filing. The company said it would hit its reduction target through voluntary departures as well as layoffs.
Micron also said it is suspending 2023 bonuses.
“On December 21, 2022, we announced a restructure plan in response to challenging industry conditions,” the company said in an SEC filing. “Under the restructure plan, we expect to reduce our headcount by approximately 10% over calendar year 2023, through a combination of voluntary attrition and personnel reductions.”
Micron said it expected a $30 million charge in the current quarter related to the restructuring, which will also include less investment into manufacturing capacity and cost-cutting programs.
The move comes as Micron reported fiscal first-quarter 2023 results where it missed analyst estimates for earnings and revenue, and forecast a larger loss per share than expected in the current quarter.
Here’s how Micron did versus Refinitiv consensus estimates for the quarter ending in December:
Loss per share: $0.04, adjusted, versus $0.01 estimated
Revenues: $4.09 billion versus $4.11 billion estimated
Micron said it expected a loss of 62 cents per share on revenue of $3.8 billion in the current quarter. Analysts had expected guidance of a loss of 30 cents per share on $3.75 billion in sales.
Micron is best known for supplying memory to computer makers, but it is facing an environment where PC sales have already started to slow or shrink, while server sales are expected to show little growth in 2023.
Micron CEO Sanjay Mehrotra said in prepared remarks that there is too much memory supply and not enough demand, which has resulted in the company keeping more inventory and losing pricing power.
“In the last several months, we have seen a dramatic drop in demand,” Mehrotra said, according to the prepared remarks.
He said he expects the company’s profitability to “remain challenged” through the end of 2023 but that the firm expects revenue and free cash flow to recover later in 2023. Micron said it has suspended share repurchases.
Micron’s restructuring comes after other semiconductor companies have announced hiring freezes or layoffs. In October, Intel announced that it would lay off workers as part of a plan to cut $10 billion in spending. Nvidia announced a hiring slowdown over the summer, and Qualcommannounced its hiring freeze in November.
But it’s not just semiconductor companies adjusting after two pandemic-fueled years of growth and supply issues. Tech companies includingMeta, Twitter, Snap, Stripe and Tesla have also cut staff as companies gird for a potential recession and higher interest rates.
This photo illustration taken on December 18, 2022 in Los Angeles shows a phone displaying Elon Musk’s Twitter page where he is conducting a survey about his future as the head of the company.
Chris Delmas | AFP | Getty Images
Twitter’s new owner and CEO, Elon Musk, posted an informal poll of the social media platform’s users Sunday asking if he should step down as head of the company.
At 6:20 a.m. ET on Monday, the poll ended with a majority of respondents (57.5%) calling for the billionaire to leave his post. More than 17 million users had voted by the time the poll closed.
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Musk claimed he would abide by the results of the poll. It is unclear whether or not he will actually do so. Shares of Tesla — another one of Musk’s companies — rose more than 4% in U.S. premarket trading Monday.
In court in November, Musk said, “I expect to reduce my time at Twitter and find somebody else to run Twitter over time.” However, on Sunday, he wrote in a tweet that there is no possible successor for him at the social media company.
“The question is not finding a CEO, the question is finding a CEO who can keep Twitter alive,” he wrote.
In response to another user speculating that Musk has already chosen a successor, the billionaire said: “No one wants the job who can actually keep Twitter alive. There is no successor.”
Twitter polls are straw polls, meaning they are informal and not comparable to professional public opinion research. Malicious bots or inauthentic accounts may also be able to register a response to a Twitter poll.
Musk’s Sunday poll followed online backlash after the “Chief Twit” (as he has called himself) made sudden changes to policies impacting users of Twitter in the last week.
For example, the company introduced a new social media platform promotion policy on Sunday, which prohibited users from sharing links to some of their other social media accounts. Longtime Musk friends and proponents, including Y Combinator founder Paul Graham, expressed their dismay at the policy causing Musk to later apologize and roll it back.
Days earlier, Twitter made changes to its policy on “doxxing,” which the company now defines as “sharing someone’s private information online without their permission.” The new policy prohibits users from sharing other people’s live location information, home addresses, contact information or physical location information but has left many confused over what information crosses Twitter’s line.
Musk’s policy changes were used as a justification to suspend the Twitter accounts of a number of U.S.-based journalists, commentators and others who were critical of the CEO or his companies in the past. Some of the accounts were fully or partially restored a few days later, but not all.
The suspensions marked the latest chapter of Musk’s rocky takeover of Twitter. He led the acquisition of the company for around $44 billion in October, and his leadership has resulted in massive staff cuts, a spike in racist hate speech, advertisers fleeing or slashing their spending on the platform, as well as the reinstatement of previously banned accounts.
The billionaire’s management of Twitter is bleeding into, and raising concerns about, his other ventures.
For example, Musk has sold billions of dollars worth of Tesla shares this year to finance the Twitter takeover. He has also pulled in talent from both Tesla and SpaceX, including executives, engineers and attorneys, to assist him at Twitter.
A CEO spending time and money on Twitter isn’t Tesla’s only challenge — the company is currently offering discounts on vehicles in China, an indication of weaker demand for its cars there, according toTesla bear Toni Sacconaghi of Bernstein onCNBC’s “Squawk on the Street” last week.
Earlier this month, NASA Administrator Bill Nelson asked SpaceX President and COO Gwynne Shotwell whether Musk’s “distraction” at Twitter might affect SpaceX’s work with the space agency, NBC News reported. Nelson said she reassured him it would not.
But Musk’s behavior at Twitter is having a negative impact on his car company’s public image and stock price. Shares in Tesla had dropped about 60% year to date as of Friday’s close. It comes amid a broad decline in growth stocks which has seen the tech-heavy Nasdaq Composite fall more than 30% year to date.
In a note late Sunday, Dan Ives, managing director of equities at Wedbush Securities, wrote that the second-biggest request on his Christmas “wish list” was for Musk to find a successor to run the social media company.
“With the Twitter chaos front and center and resulting in a major headache and overhang for the Tesla story, we believe Musk needs to name a permanent CEO of Twitter (and not Musk himself) to end the pain,” Ives said.
Tesla’s largest retail shareholder, Leo Koguan, wrote in a tweet on Dec. 14, that “Elon abandoned Tesla and Tesla has no working CEO.” He called on the company’s board of directors to take action. “Tesla needs and deserves to have [a] working full time CEO,” he wrote, criticizing the board for apparent inaction.
A survey in Germany’s Der Spiegel last week found that 63% of respondents feel that Musk’s public performance as CEO of Twitter has had a mostly negative or clearly negative impact on their view of Tesla.
And only 9% of respondents to that survey said they find Tesla very or mostly likable as a brand — the company ranked far behind VW, BMW, Opel and others in Germany. That’s despite the fact that Tesla is investing heavily in the German market. It opened a major vehicle assembly plant in Grünheide, outside of Berlin, in March o this year.
Correction: This article has been updated to reflect that at 3.30 a.m. ET the majority of poll respondents had voted for Musk to leave his post.
FTX founder Sam Bankman-Fried (2nd L) is led away handcuffed by officers of the Royal Bahamas Police Force in Nassau, Bahamas on December 13, 2022.
Mario Duncanson | AFP | Getty Images
FTX founder and former CEO Sam Bankman-Fried will no longer contest extradition to the U.S., an about-face just days after he was remanded to Bahamian jail pending a hearing, a person familiar with the matter told CNBC.
The former crypto billionaire will appear in Bahamian court this Monday to formally waive his extradition rights, paving the way for federal authorities to secure his return to the U.S.
Extradition between the Bahamas and the U.S. is codified by a 1991 treaty. In practice, the process takes months, if not years, to complete because the accused have numerous chances to appeal. Bankman-Fried’s legal team had initially said that it planned to fight extradition. The change of heart would move up the timeline for Bankman-Fried’s federal trial significantly.
The 30-year-old MIT graduate was originally scheduled for his next hearing in February 2023.
A representative for Bankman-Fried declined to comment.
Bankman-Fried was indicted in New York federal court on Monday, on charges of wire fraud, securities fraud, conspiracy to defraud the United States, and money laundering. If sentenced, he could face the rest of his life in prison. The former FTX CEO also faces concurrent charges from the Securities and Exchange Commission and the Commodity Futures Trading Commission over similar allegations that he worked to defraud FTX customers of billions of dollars since 2019, the year the exchange was founded.
At the heart of Bankman-Fried’s empire was Alameda Research, a crypto hedge fund that federal regulators allege used FTX customer money to engage in trading which lost billions of dollars.
FTX’s collapse was precipitated when reporting by CoinDesk revealed a highly concentrated position in self-issued FTT coins, which Bankman-Fried’s hedge fund Alameda Research used as collateral for billions in crypto loans. Binance, a rival exchange, announced it would sell its stake in FTT, spurring a massive withdrawal in funds. The company froze assets and declared bankruptcy days later. Charges from the SEC and CFTC indicated that FTX had commingled customer funds with Bankman-Fried’s crypto hedge fund, Alameda Research, and that billions in customer deposits had been lost along the way.
Binance’s Co-founder & CEO Changpeng Zhao has given several interviews discussing the outlook for cryptocurrency following a turbulent couple of weeks in the market.
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Over a month after the collapse of FTX, investor concern over crypto exchangeBinance isn’t fading.
Binance’snative token, BNB, has fallen 15% in the past week, including a drop of over 6% in the past 24 hours. BNB, first minted in 2017, isthe world’s fifth most valuable cryptocurrency, with a market cap of about $39 billion, according to CoinMarketCap. It’s behind only bitcoin, ethereum, tether and USD Coin.
The latest issue looming over Binance is FTX’s bankruptcy proceedings. Binance was the first outside investor in FTX. In exiting its equity position in the company last year, Binance received payment equal to roughly $2.1 billion.
In an interview with CNBC’s “Squawk Box” on Thursday, Binance CEO Changpeng Zhao dismissed concerns that his company could have that money clawed back as FTX winds its way through bankruptcy court and trustees look to retrieve any fraudulent conveyances made by FTX to outside businesses or investors.
“We are financially OK,” Zhao said, after he was asked by CNBC’s Becky Quick if the company could handle a $2.1 billion demand.
Crypto investors have become skeptical of comments from top executives about the financial health of their companies. FTX founder and ex-CEO Sam Bankman-Fried said on Twitter that his company’s assets were fine, even as executives knew it was in the midst of a liquidity crunch that eventually forced the exchange into bankruptcy. Bankman-Fried was arrested this week in the Bahamas and charged by U.S. prosecutors with fraud and money laundering.
Withdrawal demands are another area of concern. Zhao said that around $1.14 billion of net withdrawals took place on Tuesday, but tweeted that this was “not the highest withdrawals we processed, not even top [five].” On Wednesday, he said the situation had “stabilized.” Blockchain analytics firm Nansen said the withdrawal number on Tuesday reached as high as $3 billion.
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A Binance spokesperson told CNBC in a statement that, “we passed this extreme stress test because we run a very simple business model – hold assets in custody and generate revenue from transaction fees.” The spokesperson did not provide an immediate response to a question about the drop in BNB.
Binance andFTX were intimately connected. Zhao announced publicly last month that his company was liquidating its position in FTT, FTX’s native coin, amid concerns surrounding the solvency of both FTX and its sister trading firm, Alameda Research.
FTX then faced an immediate surge in withdrawal demands, and Binance stepped in with a non-binding agreement to acquire the company as part of a rescue plan. A day later, Binance backed out of the deal, stating that FTX’s “issues are beyond our control or ability to help.”
Like all of the major crypto projects and companies, Binance developed its own currency. On its website, the company says people can “use BNB to pay for goods and services, settle transaction fees on Binance Smart Chain, participate in exclusive token sales and more.” Areas where BNB can be used, the site says, include payment, travel and entertainment.
There’s a circulating supply of about 160 million BNB out of a total maximum supply of 200 million, according to CoinMarketCap. Bloomberg reported in June that the SEC was investigating whether the 2017 token sale amounted to a security offered that should have been registered with regulators.
— CNBC’s MacKenzie Sigalos contributed to this report.
Salesforce co-CEO Marc Benioff told employees in a Slack message on Friday that the company’s newest hires aren’t being productive enough, and he asked for feedback as to why that’s the case.
“Are we not building tribal knowledge with new employees without an office culture?” he asked in a message viewed by CNBC. He said he was “asking for a friend,” a phrase people often use on the internet to humorously reveal their curiosity about a topic. The message included an emoji showing a smiling face with a halo hovering over it, suggesting innocence.
Benioff’s companywide message addresses what’s become a hot-button issue in Silicon Valley. Since the arrival of Covid sent workers home almost three years ago, companies have been trying to reimagine a future workplace that allows more employee flexibility than in the past. Some businesses have allowed employees to work from anywhere permanently.
Salesforce, the biggest private employer in San Francisco, was among the first tech companies to tell its workforce they didn’t have to come back. Last year, Salesforce acquired communications app Slack, and Benioff said people can work very effectively from their homes. Salesforce said it would let teams decide how much time they would be in office.
But Benioff may be recognizing some of the challenges remote work presents. On Friday he highlighted an issue that he said was affecting employees who joined Salesforce this year and last. Salesforce’s headcount grew by 32% in the past year, and last month it cut hundreds of jobs.
A Salesforce spokesperson declined to comment on Benioff’s message but sent a statement on the company’s policy.
“We have a hybrid work environment that empowers leaders and teams to work together with purpose,” the spokesperson wrote. “They can decide when and where they come together to collaborate, innovate, and drive customer success.”
Benioff is contending with slowing revenue growth as the economy weakens, and a thinning of the upper ranks within Salesforce. Last month, the company said Bret Taylor would be stepping down from his position as co-CEO in January. He’d just been promoted to share the top job with Benioff a year earlier. And days later, Slack CEO Stewart Butterfield announced his departure.
Here’s the full text of Benioff’s Slack post:
How do we increase the productivity of our employees at salesforce? New employees (hired during the pandemic in 2021 & 2022) are especially facing much lower productivity. Is this a reflection of our office policy? Are we not building tribal knowledge with new employees without an office culture? Are our managers not directly addressing productivity with their teams? Are we not investing enough time into our new employees? Do managers focus enough time and energy on onboarding new employees & achieving productivity? is coming as a new employee to salesforce too overwhelming? Asking for a friend. (Im leaving this open ended to get the broadest level of response.)
The message prompted a variety of comments.
Some reacted with an emoji stating “THIS” alongside an up arrow. Others chose emojis that read “WFH” or “citation needed.” Dozens went with a standard emoji known as thinking face.
Benioff chimed in again in the responses.
“Asking hard questions of employees (and customers and each other) for their answers is one of the most effective ways to get answers as a leader today,” he wrote. “It’s why we bought Slack because there is no better way to ask questions and crowd source answers quickly. Already today we have almost 500 replies to these questions — amazing and incredibly useful!”
He was displeased that his message found its way to the press, ultimately ending up on Twitter.
“I hope you will agree it is also disappointing that our private conversations here were almost immediately given to the public media,” he wrote. “I wonder how do we reinforce that Trust is our highest company value? How do we demonstrate the power of Trust and Transparency without an immediate public disclosure. It gets to the heart of who we are at salesforce.”
Monitors display Coinbase signage during the company’s initial public offering (IPO) at the Nasdaq MarketSite in New York, U.S., on Wednesday, April 14, 2021.
Michael Nagle | Bloomberg | Getty Images
Heading into 2022, Coinbase debtholders showed little reason for concern. Even though third-quarter earnings missed estimates, revenue at the crypto exchange had more than quadrupled from the prior year and the company was wildly profitable.
Coinbase ended last year with $7.1 billion in cash and equivalents as crypto traders swarmed to the app to get in on the boom in prices of bitcoin, ether and other digital currencies. The company was minting so much money that, in April of last year, it went public through a direct listing instead of an IPO, foregoing the opportunity to reel in a bundle of money from new investors.
Rather than raising dilutive cash through a stock sale, Coinbase tapped the bond market over the course of the year for $3.4 billion in long-term debt, choosing to pad its balance sheet with what it described as “low-cost capital.”
As 2022 nears its end, Coinbase’s debt load is looking more worrisome. Cash and equivalents dropped to $5 billion as of Sept. 30, having fallen for three straight quarters — and that was before the FTX collapse in November caused a panic across the crypto industry.
Bond holders have been running for the exits. For over a month, Coinbase notes set to mature in 2031 have been trading around 50 cents on the dollar, down from about 92 cents at the beginning of the year. The company laid off 18% of its staff in July, when CEO Brian Armstrong admitted that he’d hired too quickly and needed to cut costs “to ensure we can successfully navigate a prolonged downturn.”
Coinbase CFO Alesia Haas said in an emailed statement that the company is in a “strong capital position” and does “not have a liquidity problem.”
For now, debt investors are in the clear. The first tranche of bonds — $1.4 billion in convertible notes — don’t mature until June 2026. But the company is projected by analysts to run up a $2.6 billion loss this year and another deficit of $1.4 billion in 2023, according to Refinitiv estimates. Bankruptcies in the industry have hit with such speed that the future has become increasingly hard to predict.
Moody’s Investors Service has placed its rating outlook for Coinbase under review for possible downgrade. The firm currently has a Ba3 rating on the corporate family, which is three notches below investment grade. It has a Ba2 rating on the bonds, one notch higher.
“They had a very strong 2020 and 2021, but those are in the rearview mirror now,” said Fadi Abdel Massih, senior analyst at Moody’s, in an interview. “The company is in a strong liquidity position, but at the same time they have to deal with a changing operating environment.”
Brian Armstrong, CEO and Co-Founder, Coinbase, speaks during the Milken Institute Global Conference on May 2, 2022. in Beverly Hills, California.
Patrick T. Fallon | AFP | Getty Images
Equity investors started bailing on Coinbase long ago, selling their positions as they saw the price of bitcoin and ether tumble and as other high-multiple tech stocks got whacked. The stock fell by at least 30% a month for three straight months starting in April, and is down 83% this year, pinning the company’s market cap under $10 billion.
Coinbase’s bond prices also dropped significantly over that stretch, reflecting the deteriorating operating environment in crypto and the number of firms being forced to exit the market. But the alarming slide came last month, when the 2031 notes fell below 50 cents on the dollar for the first time. They’re now at close to 52 cents. The yield is near 13%, just below its high. Bond yields move in the opposite direction of price.
Coinbase’s $1 billion worth of notes that mature in October 2028 are trading at about 55 cents on the dollar, up just barely from their November low and down from about 94 cents at the start of the year.
Analysts at Mizuho Securities raised additional concerns on Friday, in downgrading the firm’s rating on Coinbase shares to the equivalent of a sell from a hold. Mizuho’s stock price target of $30 is the lowest among analysts tracked by FactSet. The stock closed Monday at $42.60
Coinbase’s 2022 slump
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The Mizuho analysts flagged Coinbase’s tight relationship with Circle, the company behind the stablecoin USD Coin (USDC), as a potential emerging problem. While transaction revenue has been plummeting at all the major exchanges, Coinbase has been able to soften the blow because of a dramatic increase in revenue from its holdings of USDC.
Backed by U.S. dollars, USDC has gained value with the rise in interest rates. In the third quarter, the value of Coinbase’s USDC holdings climbed to $368.1 million from $100.1 million at the end of 2021. Net interest income soared to $101.8 million from $8.4 million a year earlier.
Mizuho estimates that roughly 80% of interest income was due to Coinbase’s relationship with Circle, which was supposed to go public through a special purpose acquisition corporation but canceled that transaction last week.
Mizuho speculates that Circle may be looking to “rethink its business model” and to eventually take advantage of the leverage it has with respect to its control over USDC.
“Any potential change to COIN’s USDC income from Circle could have an amplified adverse effect on its profitability,” the analysts wrote in a report subtitled, “Is interest income the next shoe to drop?”
In the risk factors section of its latest quarterly report, Coinbase pointed to “ongoing relationships with third parties” as an area where “operating results could fluctuate” should there be changes.
Moody’s puts Coinbase’s USDC holdings in the category of cash and cash equivalents, where the firms says the company has “financial strength.” Massih, the analyst covering Coinbase, said bond holders aren’t in a dire situation because Coinbase has enough cash on hand that it could pay off all its debt now if it so desired.
“Why would they do that?” he said, answering his own question with, “There’s no reason to do that.”
For bondholders, today isn’t what matters. Rather, they’re betting that Coinbase won’t keep bleeding cash at the rate it has over the course of the past year. To get paid back, investors don’t need revenue growth to return to the crypto hype days of 2021 — they just need to see some measure of stability.
Bahamian authorities have arrested Sam Bankman-Fried after U.S. law enforcement filed charges against the former crypto billionaire.
Bahamas Attorney General Ryan Pinder said that the United States had filed unspecified criminal charges against Bankman-Fried and was “likely to request his extradition.”
In a statement, Bahamian Prime Minister Philip Davis said “The Bahamas and the United States have a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law. While the United States is pursuing criminal charges against SBF individually, The Bahamas will continue its own regulatory and criminal investigations into the collapse of FTX, with the continued cooperation of its law enforcement and regulatory partners in the United States and elsewhere.”
Bankman-Fried was expected to testify before the House Financial Services Committee tomorrow. His arrest is the first concrete move by regulators to hold individuals accountable for the multi-billion dollar implosion of FTX last month.
Last month, FTX and its affiliates filed for bankruptcy and Bankman-Fried stepped down from his role as CEO.
This is breaking news. Please check back for updates.
A long exposure photo shows the path of SpaceX’s Falcon 9 rocket as it launched the ispace mission on Dec. 11, 2022, with the rocket booster’s return and landing visible as well.
SpaceX
Japanese lunar exploration company ispace began its long-anticipated first mission on Sunday, with a SpaceX Falcon 9 rocket launching the venture’s lunar lander from Florida.
“This is the very, very beginning of a new era,” ispace founder and CEO Takeshi Hakamada told CNBC.
The Tokyo-based company’s Mission 1 is currently on its way to the moon, with a landing expected near the end of April.
Founded more than a decade ago, ispace originated as a team competing for the Google Lunar Xprize under the name Hakuto – after a mythological Japanese white rabbit. After the Xprize competition was canceled, ispace pivoted and expanded its goals, with Hakamada aiming to create “an economically viable ecosystem” around the moon, he said in a recent interview.
The company has grown steadily as it worked toward this first mission, with over 200 employees around the world – including about 50 at its U.S. subsidiary in Denver. Additionally, ispace has steadily raised funds from a wide variety of investors, bringing in $237 million to date through a mixture of equity and debt. The investors of ispace include the Development Bank of Japan, Suzuki Motor, Japan Airlines, and Airbus Ventures.
The ispace Mission 1 lander carries small rovers and payloads for a number of government agencies and companies – including from the U.S., Canada, Japan, and the United Arab Emirates.
The ispace Mission 1 spacecraft deploys from the upper stage of the Falcon 9 rocket on Dec. 11, 2022.
SpaceX
Before the launch, ispace outlined 10 milestones for the mission – with the company having completed the first three so far: Preparation for launch, deployment after launch, and then establishing a communication link. Next up is to maneuver in orbit, and then a one-month period flying through space before entering the moon’s orbit. The milestones demonstrate the complexity and difficulty of ispace’s mission, with Hakamada emphasizing both his confidence in the mission, as well as noting that each milestone represents another step forward for the company’s goals.
“I have 100% trust in our engineering team, they have been doing the right things to accomplish our successful landing on the lunar surface,” Hakamada said.
If successful, ispace would be the first private company to land on the moon – a feat previously accomplished by global superpowers.
Kris Marszalek, CEO of Crypto.com, speaking at a 2018 Bloomberg event in Hong Kong, China.
Paul Yeung | Bloomberg | Getty Images
Kris Marszalek wants everyone to know that his company, Crypto.com, is safe and in good hands. His TV appearances and tweets make that clear.
It’s an understandable approach. The crypto markets have been in freefall for much of the year, with high-profile names spiraling into bankruptcy. When FTX failed last month just after founder Sam Bankman-Fried said the crypto exchange’s assets were fine, trust across the industry evaporated.
Marszalek, who has operated out of Asia for over a decade, subsequently assured clients that their funds belong to them and are readily available, in contrast to FTX, which used client money for all sorts of risky and allegedly fraudulent activities, according to court filings and legal experts.
Bankman-Fried has denied knowing about any fraud. Regardless, FTX clients are now out billions of dollars with bankruptcy proceedings underway.
Crypto.com, one of the world’s largest cryptocurrency exchanges, may well be in fine health. After the FTX collapse, the company published its unaudited, partial proof of reserves. The release revealed that nearly 20% of customer funds were in a meme token called shiba inu, an amount eclipsed only by its bitcoin allocation. That percentage has dropped since the initial release to about 15%, according to Nansen Analytics.
Marszalek said in a Nov. 14 livestream on YouTube that the wallet addresses were representative of customer holdings.
While no evidence has emerged of wrongdoing at Crypto.com, Marszalek’s business history is replete with red flags. Following the collapse of a prior company in 2009, a judge called Marszalek’s testimony unreliable. His business activities before 2016 — the year he founded what would become Crypto.com — involved a multimillion-dollar settlement over claims of defective products, corporate bankruptcy and an e-commerce company that failed shortly after a blowout marketing campaign left sellers unable to access their money.
Court records, public filings and offshore database leaks reveal a businessman who moved from industry to industry, rebooting quickly when a venture would fail. He started in manufacturing, producing data storage products for white label sale, then moved into e-commerce, and finally into crypto.
CNBC reached out to Crypto.com with information on Marszalek’s past and asked for an interview. The company declined to make Marszalek available and sent a statement indicating that there was “never a finding of wrongdoing under Kris’s leadership” at his prior ventures.
After CNBC’s requests, Marszalek published a 16-tweet thread, beginning by telling his followers: “More FUD targeting Crypto.com is coming, this time about a business failure I had very early in my career. I have nothing to hide, and am proud of my battle scars, so here’s the unfiltered story.” FUD is short for fear, uncertainty and doubt and is a popular phrase among crypto executives.
In the tweets, Marszalek described his past personal bankruptcy and the abrupt closure of his e-commerce business as learning experiences, and added that “startups are hard,” and “you will fail over and over again.”
Marszalek founded a manufacturing firm called Starline in 2004, according to his LinkedIn profile. Based in Hong Kong, with a plant in mainland China, Starline built hardware products like solid state drives, hard drives, and USB flash drives. Marzsalek’s LinkedIn page says he grew the business into a 400-person company with $81 million in sales in three years.
There was much more to the story.
Marszalek owned 50% of the company, sharing ownership and control with another Hong-Kong based individual, who partnered with Marszalek in multiple ventures.
In 2009, Marzsalek’s company settled with a client over a faulty shipment of flash drives. The $5 million settlement consisted of a $1 million upfront payment and a $4 million credit note to the client, Dexxon. The negotiations over the settlement began at some point after 2007.
CNBC was unable to locate Marszalek’s business partner.
Court documents don’t show whether Starline made good on either the $1 million “lump sum settlement fee” or the $4 million credit note. Starline was forced into bankruptcy proceedings by the end of 2009, court records from 2013 show.
Over the course of 2008 and 2009, Marszalek and his partner were transferred nearly $3 million in payments from Starline, according to the documents.
Over $1 million was paid out to Marszalek personally in what the court said were “impugned payments.” His partner took home nearly $1.9 million in similar payments.
“It appears that there was a concerted effort to strip the cash from Starline,” Judge Anthony Chan later wrote in a court filing.
Some $300,000 was paid by Starline to a British Virgin Islands holding company called Tekram, the document says. That money went through Marszalek, and Tekram eventually returned it to Starline.
By 2009, Starline had collapsed. Marszalek’s representatives told CNBC in a statement that Starline went under because customers failed to pay back credit lines that the company had extended them during the financial crisis of 2007 and 2008. Starline borrowed that money from Standard Chartered Bank of Hong Kong (SCB).
“The bank then turned to Starline and the co-founders to repay the lines of credit and filed for liquidation of the company,” the statement said.
Starline owed $2.2 million to SCB.
Marszalek said on Twitter that he had personally guaranteed the loans from the bank to Starline. As a result, when the bank forced Starline into liquidation, Marszalek and his partner were forced into bankruptcy as well.
The court found that the $300,000 transfer to Tekram was “in truth a payment” to Marszalek.
Marszalek said the money in the Tekram transfer was repayment of a debt Starline owed to Tekram. The judge described that claim as “inherently incredible.”
“There is no explanation why the repayment had to be channelled through him or why the money was later returned to the debtor,” the judge said.
Bankruptcy didn’t sever the ties between Marszalek and his partner or keep them out of business for long. At the same time Starline was shutting down, the pair set up an offshore holding company called Middle Kingdom Capital.
Middle Kingdom was established in the Cayman Islands, a notorious hub for tax shelters. The connection between Middle Kingdom and Marszalek and his partner, who each held half of the firm, was exposed in the 2017 Paradise Papers leak. The Paradise Papers, along with the Panama Papers, contained documents about a web of offshore holdings in tax havens. They were published by the International Consortium of Investigative Journalists.
Middle Kingdom was the owner of Buy Together, which in turn owned BeeCrazy, an e-commerce venture that Marszalek had started pursuing. Similar to Groupon, retailers could use BeeCrazy to sell their products at steep discounts. BeeCrazy would process payments, take a commission on goods sold, and distribute funds to the retailers.
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Sellers and buyers flocked to the site, drawn in by considerable discounts on everything from spa passes to USB power banks. Buy Together drew attention from an Australian conglomerate called iBuy, which was on the verge of an IPO and pursued an acquisition of BeeCrazy as part of a plan to build out an Asian e-commerce empire.
Court filings and Australian disclosures show that to seal the deal, Marszalek and his partner had to remain employed by iBuy for three years and clear their individual bankruptcies in Hong Kong court. The partner’s uncle came forward in front of the court to help his nephew and Marszalek clear their names and debts, filings show.
While the judge called the uncle’s involvement “suspicious,” he allowed him to repay the debt. As a result, both Marszalek and his partner’s bankruptcies were annulled. A few months later, in October 2013, BeeCrazy was purchased by iBuy for $21 million in cash and stock, according to S&P Capital IQ.
A month and a half after buying BeeCrazy, iBuy went public. Marszalek was required to remain until 2016.
The company struggled after its IPO as competition picked up from bigger players like Alibaba. Marszalek was eventually promoted to CEO of iBuy in August 2014, according to filings with Australian regulators.
Alibaba headquarters in Hangzhou, China.
Bloomberg | Bloomberg | Getty Images
Marszalek renamed iBuy as Ensogo in an effort to retool the company. Ensogo continued to suffer, running up a loss in 2015 equal to over $50 million.
By the following year, Ensogo had already reportedly laid off half its staff. In June 2016, Ensogo closed down operations. The same day, Marszalek resigned.
After the sudden shuttering of Ensogo, sellers on the site told the South China Morning Press that they never received proceeds from items they’d already delivered as part of a final blowout sale.
“[Many] sellers had already sold their goods but had yet to receive any money from the platform at that time, their money thus vanished altogether with the online shopping platform,” according to translated testimony from a representative for a group of sellers before Hong Kong’s Legislative Council.
One seller told Hong Kong’s The Standard that she lost more than $25,000 in the process.
“It seems to us that they wanted to make huge business from us one last time before they closed down,” the seller told the publication.
Marszalek’s representative acknowledged to CNBC that “the shutdown angered many customers and consumers” and said that was “one of the reasons Kris was opposed to the decision.”
Marszalek moved quickly on to his next thing. The same month he resigned from Ensogo, Foris Limited was incorporated, marking Marszalek’s entry into the crypto market.
Foris’ first foray into crypto was with Monaco, an early exchange.
With a leadership team composed entirely of former Ensogo employees, Monaco told prospective investors they could expect three million customers and $169 million in revenue within five years.
The exterior of Crypto.com Arena on January 26, 2022 in Los Angeles, California.
Rich Fury | Getty Images
By 2021, the company had smashed its own goals, crossing the 10 million user mark. Revenue for the year topped $1.2 billion, according to the Financial Times. That’s when crypto was soaring, with bitcoin climbing from about $7,300 at the beginning of 2020 to a peak of over $68,000 in November of 2021.
The company inked a deal with LeBron James for a Super Bowl ad, aired a prior commercial with Matt Damon and spent a reported $700 million to put its name on the arena that’s home to the Los Angeles Lakers. It’s also a sponsor of the World Cup in Qatar.
The market’s plunge in 2022 has been disastrous for all the major players and goes well beyond the FTX collapse and the numerous hedge funds and lenders that have liquidated. Coinbase’s stock price is down84%, and the company laid off 18% of its staff. Kraken recently cut 30% of its workforce.
Crypto.com has laid off hundreds of employees in recent months, according to multiple reports. Questions percolated about the company in November after revelations that the prior month Crypto.com had sent more than 80% of its ether holdings, or about $400 million worth of the cryptocurrency, to Gate.io, another crypto exchange. The company only admitted the mistake after the transaction was exposed thanks to public blockchain data. Crypto.com said the funds were recovered.
Marszalek went on CNBC on Nov. 15, following the FTX failure, to try and reassure customers and the public that the company has plenty of money, that it doesn’t use leverage and that withdrawal demands had normalized after spiking.
Still, the market cap for Cronos, Crypto.com’s native token, has shrunk from over $3 billion on Nov. 8 to a little over $1.6 billion today, reflecting a loss of confidence among a key group of investors. During the crypto mania at this time last year, Cronos was worth over $22 billion.
Cronos has stabilized of late, hovering around six cents for the last three weeks. Bitcoin prices have been flat for about four weeks.
Marszalek’s narrative is that he’s learned from past mistakes and that “early failures made me who I am today,” he wrote in his tweet thread.
He’s asking customers to believe him.
“I’m proud of my scar tissue and the way I persevered in the face of adversity,” he tweeted. “Failure taught me humility, how to not overextend, and how to plan for the worst.”
Correction: Crypto.com’s Super Bowl ad featured LeBron James, not Matt Damon. The commercial with Damon came out in late 2021.
Clarification: This story has been updated to more accurately reflect where in Asia Marszalek has operated.
The Pentagon said Wednesday that Amazon, Google, Microsoft and Oracle received a cloud-computing contract that can reach as high as $9 billion total through 2028.
The outcome of the Joint Warfighting Cloud Capability, or JWCC, effort is in line with the U.S. Defense Department’s effort to rely on multiple providers of remotely operated infrastructure technology, as opposed to relying on a single company, a strategy promoted during the Trump Administration.
A Department of Defense spokesperson told CNBC by email that “JWCC is a multiple award procurement composed of four contracts with a shared ceiling of $9 Billion.”
An increasing tally of businesses have also sought to rely on more than one cloud provider. In some cases they rely on specialized capabilities on one and the majority of front-end and back-end workloads on another. At other times, they come down to cost. Having more than one cloud might make organizations more confident that they can withstand service disruptions brought on by outages.
Originally, the Pentagon had awarded the Joint Enterprise Defense Infrastructure, or JEDI, to Microsoft in 2019. A legal battle ensued as Amazon, the top player in the cloud infrastructure market, challenged the Pentagon’s decision. Oracle challenged the Pentagon’s pick as well.
In 2020, the Pentagon’s watchdog conducted a review and ruled that there was no evidence to conclude that the Trump Administration had intervened in the process of awarding the contract. Months later the Pentagon announced it would stick with Microsoft for the JEDI deal.
Last year the Pentagon changed its approach, asking for bids from Amazon, Google, Microsoft and Oracle to address cloud needs. But the General Services Administration stated at the time that only Amazon and Microsoft seemed to be able to meet the Pentagon’s requirements.
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Wednesday’s result is a boon in particular for Oracle, which analysts don’t see in the top tier of companies offering cloud-based computing services. Oracle generated $900 million in cloud infrastructure revenue in the quarter that ended Aug. 31, a small fraction of the $20.5 billion total for Amazon’s cloud subsidiary, Amazon Web Services, in the third quarter.
All four of the technology companies have won indefinite delivery, indefinite quantity, or IDIQ, contracts, meaning that they can involve an indefinite amount of services for a specific period of time.
“The purpose of this contract is to provide the Department of Defense with enterprise-wide globally available cloud services across all security domains and classification levels, from the strategic level to the tactical edge,” the Defense Department said.
Correction: A prior version of this story said each company was awarded a contract of up to $9 billion, but that number represents the combined total for the four.
Former Theranos chief operating officer and president Ramesh “Sunny” Balwani was sentenced to nearly 13 years in prison Wednesday for fraud, after the unraveling of the blood-testing juggernaut prompted criminal charges in California federal court against both Balwani and Theranos founder Elizabeth Holmes, who on Nov. 18 was sentenced to more than 11 years in prison.
During the sentencing hearing, attorneys for Balwani attempted to pin the blame on Holmes, telling U.S. District Court Judge Edward J. Davila that “decisions were made by Elizabeth Holmes.”
Davila had set a sentencing range of 11 years plus 3 months to 14 years, but prosecutors today sought a 15-year sentence given his “significant” oversight role at Theranos’ lab business.
The final guideline sentence was 155 months, plus three years of probation. Davila set a Mar. 15, 2023, surrender date.
Sunny Balwani, former president of Theranos Inc., arrives at federal court in San Jose, California, on Wednesday, Dec. 7, 2022.
David Paul Morris | Bloomberg | Getty Images
Balwani and Holmes, former romantic partners, helmed Theranos as the company enjoyed a meteoric rise, attracting backers ranging from the DeVos family to news magnate Rupert Murdoch. It was one of Murdoch’s publications, The Wall Street Journal, that first reported on irregularities with Theranos’ purportedly revolutionary blood-testing machines.
As COO, Balwani managed both the laboratory business and the financial aspects of the company. Theranos was marred with repeated failures during his tenure, including falsified documents and erroneous test results.
“I am responsible for everything at Theranos,” Balwani said in a message to Holmes. Balwani assumed broad responsibility for day-to-day operations at the company.
Theranos claimed the machines required just a few drops of blood to run and could execute more than 1,000 tests. In reality, the Journal reported the company could only process a little over a dozen tests. The Journal’s reporting eventually prompted the company’s dissolution in 2018 and, later, the arrest of Balwani and Holmes on fraud charges.
Balwani’s sentencing in federal court marks the end of the Theranos saga, which enthralled the public and prompted documentary films and novel treatments.
With a star-studded investor list, a captivating founder who drew comparisons to Apple’s Steve Jobs, and a potentially revolutionary technology, the company for a time represented the apex of Silicon Valley ingenuity.
The revelations about Theranos brought about a stunning fall from grace for both Balwani and Holmes, who were in a relationship for much of their tenure at the company. Holmes accused Balwani of abuse in court proceedings, providing text messages and contemporaneous notes from their relationship as evidence.
“Kill the old Elizabeth,” Balwani purportedly told her.
Balwani perpetrated a “decade-long campaign of psychological abuse,” Holmes’ lawyers argued. Balwani is nearly 20 years older than Holmes, who testified that he managed the lab and financial side of the business.
This is a developing story. Please check back for updates.
CUPERTINO, CALIFORNIA – JUNE 06: Apple CEO Tim Cook looks at a display of brand new redesigned MacBook Air laptop during the WWDC22 at Apple Park on June 06, 2022 in Cupertino, California. Apple CEO Tim Cook kicked off the annual WWDC22 developer conference. (Photo by Justin Sullivan/Getty Images)
Apple announced on Wednesday that it plans to allow users to encrypt additional kinds of iCloud data on its servers, including full backups, photos and notes.
The feature, called Advanced Data Protection, will prevent Apple from seeing the contents of some of the most sensitive user data stored on its servers, and will make it impossible for Apple to provide the content of an encrypted backup to law enforcement.
Encrypted backups will be opt-in, according to Apple, and will be available in the U.S. before the end of the year.
While Apple has previously encrypted a lot of data it stores on servers, entire device backups that included text messages, contacts, and other important data were not end-to-end encrypted, and Apple previously had access to the contents of the backups.
The move will please security advocates, many of whom previously pointed to unencrypted iCloud backups as a weak link in Apple’s privacy policy. It also means that user data content would not be exposed if Apple’s servers were ever breached.
It could upset law enforcement, which has used Apple’s policy of not encrypting backups as a way to obtain materials in investigations even though Apple’s iMessage and devices are encrypted.
Apple famously fought the FBI’s attempt to force it through the courts to unlock an encrypted iPhone used by a terrorist in San Bernardino. At the time, Apple said that an unencrypted iCloud backup on its servers was an option to get the same data.
Law enforcement officials around the world generally oppose encryption because it allows suspects to “go dark,” and denies law enforcement access to potential evidence they could previously access under lower levels of security.
Apple also announced two other security features on Wednesday. Users will soon be able to use a physical key as second-factor protection for Apple ID logins. Another update allows users facing significant security threats to confirm that text messages aren’t being intercepted.
Last year, in an apparent effort to appease law enforcement, Apple announced a system to scan for illegal content such as child sexual abuse materials using a complicated system that would still allow Apple to encrypt user photos on its servers. The system was opposed by privacy advocates who said that it would essentially allow Apple to scan people’s hard drives.
Amazon Web Services has been the biggest growth engine for its parent company over much of the past decade, taking business from some of the largest tech vendors in the world.
But as corporations face the most daunting economic environment since the 2008 financial crisis, those massive checks they’re writing to AWS for their tech infrastructure are getting greater scrutiny.
Peter Kern, CEO of online travel company Expedia Group, sees the cloud as an area where his company can reduce its fixed costs. In recent years, Expedia has moved considerable parts of its operations to AWS from on-premises data centers.
“We haven’t fully optimized the cloud,” Kern said during the company’s earnings call last month. “We’ve moved a lot of technology into the cloud, but we have a lot of work to do.”
U.S. stocks are poised to close out their worst year since 2008. Central bankers have continued to lift interest rates to address rising prices, prompting skittishness about economic deterioration by consumers and businesses. Executives are in cash-preservation mode to appease Wall Street and make sure they’re in position to weather a potential recession.
The National Football League, which uses AWS to produce statistics and schedules, is making conservative plans around costs, said Jennifer Langton, the NFL’s senior vice president of health and innovation.
“We are not recession proof,” Langton told CNBC during an interview at AWS’ annual Reinvent customer conference in Las Vegas this week. The league is negotiating with AWS on the terms of a renewed multi-year agreement, and there are some areas her organization wants to prioritize, she said.
Amazon knows customers are facing challenges. In some cases, Amazon cloud employees reach out to clients to see how it can help optimize spending, said David Brown, AWS’ vice president responsible for the core EC2 computing service. At other times, customers contact AWS, he said.
AWS is coming off its slowest period of expansion since at least 2014, the year Amazon started reporting on the group’s finances. It also missed analysts’ estimates. Still, the division recorded growth of 27.5%, outpacing Amazon’s overall growth of 15%. And it generated $5.4 billion in operating income, accounting for more than 100% of profit for its parent company.
With such a hefty cash balance, AWS can afford to accommodate customers in the short term if it means more business in the future. The company did the same thing during the pandemic in 2020, when Amazon sent some users an email with an offer of financial support.
AWS isn’t the sole big cloud provider that’s dealing with customers’ budget constraints. In the third quarter, Microsoft’s Azure consumption growth moderated as the company helped clients optimize existing workloads, finance chief Amy Hood said in October. Amazon leads the market in cloud computing, with an estimated 39% share.
“If you’re looking to tighten your belt, the cloud is the place to do it,” AWS CEO Adam Selipsky said during his keynote presentation in front of over 50,000 people on Tuesday. Selipsky said that moving IT jobs to the cloud could help budget-strapped organizations save money, citing customers Agco and Carrier Global.
Not everyone agrees. Last year, investors Sarah Wang and Martìn Casado of venture firm Andreessen Horowitz published an analysis, showing that a company could trim its computing costs by half or more by bringing workloads from the cloud back to on-premises data centers.
Amazon is trying to give customers options to reduce costs. It offers Graviton computing instances based on energy-efficient Arm-based chips, a less expensive alternative to instances using standard AMD and Intel processors.
“Customers of every size have adopted Graviton, and they’re achieving up to 40% better price performance simply by shifting their workloads to Graviton instances,” Selipsky said. He said AT&T‘s DirecTV unit was able to eliminate 20% of computing costs by adopting current-generation Graviton chips.
Selipsky told CNBC’s Jon Fortt in an interview that AWS teams are working with customers that are trying to become more efficient.
“We do see some customers who are doing some belt-tightening now,” Selipsky said. One example is data analytics software maker Palantir, which said last month its operating profit in the third quarter was higher than expected primarily because of cloud and deployment efficiencies.
Other companies are in on the trend. NetApp and VMware have acquired startups to help businesses streamline their cloud spending. On the Reinvent exhibition floor, several companies were promoting their cost-trimming capabilities.
Zesty, which announced a $75 million funding round in September, added Sainsbury and Silicon Laboratories to its customer list in the current quarter. The company’s technology can automatically adjust the amount of storage space a company is using to avoid waste.
CEO Maxim Melamedov said Zesty picked up a bunch of new leads at its Reivent booth, where the startup was handing out candy, socks and stuffed animals and giving visitors the chance to win AirPods.
“Some of my guys lost their voices,” Melamedov said. “We are 15 people constantly on our feet. We’re constantly talking.”
An aerial view of Apple Park is seen in Cupertino, California, United States on October 28, 2021.
Tayfun Coskun | Anadolu Agency | Getty Images
Twitter owner Elon Musk said he went to Apple’s headquarters and met with Apple CEO Tim Cook in tweets on Wednesday.
The meeting marks a significant de-escalation days after Musk went on a tweet storm accusing Apple of threatening to pull the Twitter app from the App Store and posted then deleted a meme that suggested he would rather “go to war” than pay Apple’s 30% platform fees.
“Good conversation. Among other things, we resolved the misunderstanding about Twitter potentially being removed from the App Store,” Musk tweeted. “Tim was clear that Apple never considered doing so.”
In another tweet, Musk posted a short video of a reflecting pool at the center of Apple Park in Cupertino, California.
On Monday, Musk posted several tweets criticizing Apple and arguing that its App Store moderation policies were against the spirit of free speech, a complaint subsequently echoed by Republican lawmakers. Over the weekend, he mused that he may make his own smartphone.
Musk also chafed against Apple’s fees, which take between 15% and 30% of digital sales through apps on iPhones. Apple stands to make money from Twitter if Musk succeeds in his plan to significantly expand Twitter subscription revenue, and those features are sold through the Twitter iPhone app.
“Did you know Apple puts a secret 30% tax on everything you buy through their App Store?” Musk tweeted on Monday. He also tagged Cook’s Twitter account on Monday and asked what was going on with a potential suspension of the Twitter app.
Apple representatives did not respond to requests for comment.
Salesforce cofounder and co-CEO Marc Benioff speaks during the grand opening of the Salesforce Tower, the tallest building in San Francisco, Calif., Tuesday, May 22, 2018.
Karl Mondon | Bay Area News Group | Getty Images
Salesforce reported earnings and revenue on Wednesday that beat analyst expectations. It also announced that co-CEO Bret Taylor is stepping down. CEO and Salesforce co-founder Marc Benioff will the be sole person in charge of the company.
Salesforce stock fell over 6% in extended trading.
Here’s how the company did versus Refinitiv consensus estimates for the quarter ending in October:
EPS: $1.40, adjusted, versus $1.21 expected by analysts
Revenue: $7.84 billion versus $7.82 billion expected by analysts
Salesforce said it expected between $7.9 billion to $8.03 billion in revenue in the company’s fourth fiscal quarter, lower at the midpoint than analyst expectations of $8.02 billion in sales in the fourth quarter. The company also said it would take a $900 million hit in sales because of foreign currency effects.
Salesforce’s total revenue increased 14% year-over-year. Last quarter, Salesforce trimmed its year-end estimates for both revenue and earnings, citing a weaker economic cycle. It reaffirmed those estimates on Wednesday.
Salesforce said that its operating cash flow came in at $313 million for the quarter, which was a decrease of 23% year-over-year.
Subscription and support revenue, which includes the company’s flagship Sales Cloud software and comprises the majority of the company’s sales, came in at $7.23 billion, which was up 13% year-over-year.
The Platform and Other category that includes Slack reported $1.51 billion in sales, an 18% increase year-over-year.
Salesforce spent $1.7 billion on share repurchases during the quarter, the company said.
Striking a contrite tone, former FTX CEO Sam Bankman-Fried said he “didn’t do a good job” at upholding his responsibilities to regulators, customers, and investorsin a hotly anticipated conversation with CNBC’s Andrew Ross Sorkin at the Dealbook Summit.
“I didn’t ever try to commit fraud on anyone,” Bankman-Fried said. “I saw it as a thriving business and I was shocked by what happened this month.”
“I’ve had a bad month,” Bankman-Fried added later.
Bankman-Fried appeared by video feed from the Bahamas, Sorkin said. “I’ve been in the Bahamas for the last year,” Bankman-Fried said when asked about why he remained in the island nation.
Sorkin asked Bankman-Fried what motivated his acquisitions in the crypto industry, given the size of Alameda’s borrowing from companies Bankman-Fried intended to acquire.
Bankman-Fried claimed that he believed that by the middle of 2022, Alameda had repaid all lines of credit to various borrowing desks. But Alameda still owes BlockFi over $670 million, according to court filings.
“What are your lawyers telling you right now? Are they suggesting it’s a good idea for you to be speaking?” Sorkin asked the former billionaire.
“No, they’re very much not.”
“The time that I really knew there was a problem was November 6,” Bankman-Fried said, after Alameda’s sizable FTT position was exposed by Coindesk. “When we looked at that, there was a potential serious problem.”
“Alameda had taken a huge hit” by that point. “We were seeing a run on the bank start,” Bankman-Fried said.
“I was nervous [when] the Alameda balance sheet” was exposed by Coindesk, Bankman-Fried said, but expected the damage was going to be limited to Alameda, not an “existential” crisis for FTX.
Sorkin asked Bankman-Fried why FTX and Bankman-Fried even had access to customer money.
“I wasn’t running Alameda, I didn’t know exactly what was going on, I didn’t know the size of their position,” Bankman-Fried said. “A lot of these are things I’ve learned over the last month [in the days leading up to bankruptcy.]”
New leadership at FTX said that Bankman-Fried exercised significant control over the entire empire.
Sorkin pressed Bankman-Fried on Alameda’s gambling on questionable cryptocurrencies, reading a letter out from an investor who lost his life savings of $2 million.
“The U.S. platform is fully solvent and funded,” Bankman-Fried said. “I believe withdrawals could be opened up today and be made whole.”
Bankman-Fried defended the fact that he was unaware of the Alameda exposure. In 2019, he said, 40% of FTX’s volume was from Alameda. By 2022, Bankman-Fried claimed, that number was down to 2%, which led him to believe that FTX’s exposure was lessened.
Sorkin continued to press Bankman-Fried on the lending of customer assets. Bankman-Fried demurred.
“In 2018, FTX didn’t have bank accounts,” Bankman-Fried said as justification for why users were asked to wire funds to an account in Alameda’s name instead of directly to FTX.
Rumors had flown since FTX’s Nov. 11 implosion about whether Bankman-Fried would appear at the event. In a tweet last week, the former FTX CEO confirmed he’d sit down to talk with Sorkin.
Bankman-Fried’s FTX imploded in mid-November after Coindesk reported irregularities in FTX balance sheets. Since FTX filed for bankruptcy protection in Delaware on Nov. 11, Bankman-Fried has engaged with the media sporadically. “F*** regulators,” he told a Vox reporter in a Twitter message.
“I f***** up,” he wrote in another Tweet.
Semafor disclosed messages between Tesla CEO Elon Musk and Bankman-Fried, in which Musk invited the former crypto billionaire to roll over his $100 million stake in Twitter.
FTX was once hailed as the poster child of responsible crypto. Regulators and lawmakers looked to Bankman-Fried as the future of crypto regulation, a reputation that Bankman-Fried cultivated through appearances before Congress and deepened through generous political contributions.
Bankman-Fried was already known as one of the largest donors to Democratic candidates. He claimed in a recent interview that he gave equally generously to Republican causes, through so-called “dark pool” contributions.
Reporters, Bankman-Fried said, “freak the f*** out if you donate to Republicans.”
This is a developing story. Please check back for updates.
An image captured by the ION Elysian Eleonara satellite in January 2022.
D-Orbit
Amazon’s cloud computing division successfully ran a software suite on a satellite in orbit, in a “first-of-its-kind” experiment, the company announced Tuesday.
AWS, or Amazon Web Services, conducted the prototype satellite software demonstration through partnerships with Italian company D-Orbit and Swedish venture Unibap. The experiment was conducted over the past 10 months in low Earth orbit, using a D-Orbit satellite as the test platform.
The success of the AWS demo has implications across the space industry, as spacecraft – meaning anything from space stations to satellites – face a bottleneck in both data storage and communications while in orbit.
A “downlink,” the process of transferring data from orbit, requires a spacecraft connect to a ground station, with limitations such as the speed of the connection, or the time window in which the spacecraft is above the ground station.
AWS’ software automatically reviewed images to decide which were the most useful to send to the ground. It also reduced the size of images by up to 42%.
“We demonstrated the capability to increase the [satellite’s] productivity,” AWS vice president Max Peterson told CNBC.
Peterson added that the experiment also showed that AWS can help companies perform “insight operations on the satellite, instead of having to wait until you can downlink back to Earth.”
“We can train models to recognize practically anything … [giving] the ability to both improve the utilization of a really expensive asset in space, and be able to take huge amounts of data and get insights and translate it into action faster,” Peterson said.
AWS has steadily built out its Aerospace and Satellite Solutions unit since its establishment in 2020, with the company providing cloud services to a variety of customers and partners across the space sector.
An image of new Twitter owner Elon Musk is seen surrounded by Twitter logos in this photo illustration in Warsaw, Poland on 08 November, 2022.
STR | Nurphoto | Getty Images
Twitter owner Elon Musk said on Monday evening that the company is planning to delay the relaunch of its $8 per month Blue Verified service. Musk said Twitter will “probably use different color check for organizations than individuals.”
Twitter Blue was launched earlier this month but was pulled after users abused the new paid option, which Musk hoped would drive new revenue to the platform. It allowed users to pay for a Blue checkmark, previously reserved for verified users.
The paid Blue subscription service led to a plethora of pranksters creating imposter accounts on Twitter. It left the platform even more ripe for misinformation, and many cheaply acquired checkmarks were used to impersonate brands, politicians and celebrities with unflattering messages.
A user impersonating pharmaceutical giant Eli Lily, for example, tweeted “we are excited to announce insulin is free now.”
Eli Lilly’s stock price dropped sharply after the false message was posted, and so did other pharmaceutical companies including AbbVie, which was also impersonated on Twitter. At that time, major stock indices were positive, amid a market rally.
Twitter has trialed using two check marks, including a Blue one for paid and previously-verified users and a gray “Official” checkmark for some brands, such as news organizations. But there was a confusing overlap, where some accounts had both checkmarks. Musk killed the “Offical” checkmark the same day it rolled out.
The delay comes after Musk gutted much of Twitter’s staff. About half of the company’s 7,500 employees were laid off earlier this month. Then, last week, about another 1,200 full-time employees left, according to The New York Times, after Musk demanded employees commit to working “long hours at high intensity” on his vision for “Twitter 2.0” or submit their resignations.
Chairman Sherrod Brown (D-OH) questions Treasury Secretary Janet Yellen and Federal Reserve Chairman Powell during a Senate Banking, Housing and Urban Affairs Committee hearing on the CARES Act, at the Hart Senate Office Building in Washington, DC, September 28, 2021.
Kevin Dietsch | Pool | Reuters
Four Democratic lawmakers on the Senate Banking Committee urged federal regulators to look into SoFi’s cryptocurrency trading activity in a letter on Monday, warning its “digital asset activities pose significant risks to both individual investors and safety and soundness.”
SoFi shares were down more than 6% Monday afternoon.
“Over the past year, several meltdowns in the crypto market have wiped out trillions in value, including another huge crash last week,” the letter to Noto said.
SoFi is unique among institutions singled out for regulatory scrutiny because it operates as both a bank holding company and as a crypto exchange, through a subsidiary.
SoFi pitches itself as a digital financial services company with 3.9 million members as of Q1 2022. SoFi began as a student loan company in 2011. Since then, the San Francisco-based, Nasdaq-traded company made its first foray into crypto through a partnership with Coinbase in 2019. But lawmakers have honed in on SoFi’s February 2022 acquisition of Golden Pacific Bancorp.
That acquisition converted SoFi into a bank holding company and, according to lawmakers, subjected it to “consolidated supervision by the Federal Reserve.” It’s this new regulatory oversight that has prompted lawmakers’ objections to SoFi’s expanding cryptocurrency offerings.
Bank holding companies have to conform to strict regulations on the kinds of financial products they can offer. Heightened financial and risk controls mean that SoFi’s crypto activities “pose significant risks to both individual investors and safety and soundness,” the lawmakers said.
The lawmakers — Senate Banking Chair Sherrod Brown, D-Ohio, and fellow committee members Jack Reed, D-R.I., Chris Van Hollen D-Md., and Tina Smith D-Minn. — point to SoFi’s financial guidance as evidence. Investor education material from SoFi warns that a cryptocurrency offered on SoFi’s crypto platform, Dogecoin, has “no special use case or features.” SoFi’s literature calls it a pump-and-dump scheme.
To offer products that the company knows are “pump-and-dumps” flies in the face of SoFi’s new obligation to “fundamental principles of investor protection and safety and soundness,” lawmakers wrote.
In the letter to Noto, the Democrats said they are “concerned that SoFi’s continued impermissible digital asset activities demonstrate a failure to take seriously its regulatory commitments and to adhere to its obligations.” They urged leaders of the Federal Reserve System, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency to “ensure that SoFi complies with all consumer financial protection and banking regulations.”
“SoFi takes our regulatory and compliance commitments seriously, including our non-bank operations within the digital assets space,” a SoFi spokesperson said in a statement. “We believe we have been fully compliant with the mandates of our bank license and all applicable laws. Additionally, we maintain consistent, constructive dialogue with each of our regulators. Cryptocurrency remains a non-material component of our business. We look forward to sharing the requested information with the Senators in a timely fashion.”
The letters to regulators and SoFi come as crypto markets weather their worst crisis yet. The implosion of cryptocurrency exchange FTX and the engagement that FTX founder Sam Bankman-Fried had with U.S. regulators, have drawn the ire of Congress and the public.
Lawmakers have demanded an explanation from SoFi on its risk management, credit, financial and compliance systems by Dec. 8. The company has already endured tumult over potential plans to forgive student loan balances, with shares down over 24% since President Biden announced his intentions.
New Twitter owner and CEO Elon Musk announced that he will reinstate the Twitter account of former President Donald Trump on Saturday.
Musk ran a straw poll on the social media platform starting late Friday asking his followers to vote on whether to reinstate former U.S. President Donald Trump’s account on the platform. The poll ran for twenty four hours.
At its conclusion, Musk wrote in a tweet, “The people have spoken. Trump will be reinstated. Vox Populi, Vox Dei.” The latter phrase means “the voice of the people is the voice of god.”
Trump’s account appeared to be live on Twitter, but the former president had not issued any new posts to the social media platform immediately after Musk removed the ban.
Under previous ownership, Twitter had issued a lifetime ban on President Donald Trump’s account in January 2021.
The former president’s account was first suspended by Twitter in the wake of the January 6, 2021, insurrection at the U.S. Capitol where his supporters rioted and disrupted lawmakers who were formally counting Electoral College votes.
At the time, Twitter said in a tweet, it made the decision “due to the risk of further incitement of violence.”
Once Trump was banned from Twitter, and other social platforms including Facebook, he formed a social media company of his own.
For his part, Trump said earlier this year that he would not return to the social media platform even if Musk reversed the ban.
The former president told CNBC’s Joe Kernen in April after news of the deal that though he likes Musk, he was “disappointed by the way I was treated by Twitter. I won’t be going back on Twitter.”
Musk had foreshadowed his decision to welcome Trump back onto the platform back in May, shortly after he first agreed to buy the company. At FT Live’s Future of the Car conference, Musk said he “would reverse the permanent ban” if the deal went through.
“Permanent bans should be extremely rare and really reserved for accounts that are bots, or scam, spam accounts… I do think it was not correct to ban Donald Trump,” Musk said at the time. “I think that was a mistake, because it alienated a large part of the country and did not ultimately result in Donald Trump not having a voice.”
The move to bring Trump back to Twitter comes days after the former president announced his third campaign for the White House. Trump is currently under federal investigation for his handling of classified documents and his role in a massive effort to overturn the 2020 presidential election results.
Trump’s account being reactivated arrives weeks before the December runoff election between Sen. Raphael Warnock, D-Ga., and Republican candidate Herschel Walker. Trump’s activity on Twitter could impact the race.
Conservative radio host Erick Erickson tweeted, “There goes Georgia,” in response to the news. Erickson seemed to suggest that Trump would damage Walker’s chances with his prospective tweets.
Trump has applauded Twitter’s new ownership under Musk. “I am very happy that Twitter is now in sane hands, and will no longer be run by Radical Left Lunatics and Maniacs that truly hate our country,” Trump wrote on his Truth Social account in October. Truth Social is a Twitter-like platform run by the Trump Media & Technology Group.
On Oct. 28, as Musk was taking the helm at Twitter, he wrote on the platform that, “Twitter will be forming a content moderation council with widely diverse viewpoints. No major content decisions or account reinstatements will happen before that council convenes.”
Musk has not yet said whether he has formed a content moderation council or who is participating in it.
The NAACP was one of the first civil rights groups to condemn Musk for allowing Trump back onto the platform. Derrick Johnson, the CEO of the NAACP, called on any companies still working with Twitter to pause their advertising following the decision to reinstate Trump.
“Any advertiser still funding Twitter should immediately pause all advertising,” Johnson said in a statement to CNBC. “If Elon Musk continues to run Twitter like this, using garbage polls that do not represent the American people and the needs of our democracy, God help us all,” he added.
Johnson was among a group of civil rights leaders who recently met with Musk and called on him to disallow the return of many users that had been banned from the platform.
Democratic leaders have concerned for months that Musk would allow Trump to return to Twitter.
Members of President Joe Biden’s inner circle and party strategists were worried that misinformation will rise on Twitter under Musk’s leadership and ahead of the 2024 presidential election, which could pit Biden against the former president in a rematch, CNBC previously reported.
A White House spokesman did not return a request for comment.
