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Business

Exclusive: Bed Bath & Beyond preparing to file bankruptcy as soon as this week -sources

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NEW YORK, Jan 30 (Reuters) – Bed Bath & Beyond Inc (BBBY.O) is preparing to seek bankruptcy protection as soon as this week, and has lined up liquidators to close additional stores unless a last-minute buyer emerges, four people familiar with the matter said on Monday.

The timing of any bankruptcy filing was in flux Monday evening, with the U.S. home goods retailer’s advisers locked in meetings exploring any remaining options to avoid it, another person familiar with the matter said.

Bed Bath & Beyond is negotiating a loan to help it navigate bankruptcy proceedings, with investment firm Sixth Street in talks to provide some funding, two of the people said. The firm loaned Bed Bath & Beyond $375 million last year.

The chain, once considered a category killer in home goods like dinnerware and small appliances, has lined up liquidators who are readying store closing sales that could be launched as soon as this weekend, two of the people said.

The people spoke on condition of anonymity because the talks are not public.

The chain has said it is closing 87 Bed Bath & Beyond stores and five buybuy BABY stores, in addition to 150 closures announced last year. It is also shutting its health and beauty discount chain Harmon.

The people cautioned that a last-minute buyer for the chain could emerge, or it could still ink a deal for its brands such as buybuy BABY. Prospective buyers sometimes wait until a company files for bankruptcy before agreeing to purchase assets, hoping to negotiate more favorable terms.

Bed Bath & Beyond said in a statement to Reuters that it continued to work with its advisers to consider “multiple paths” but declined to comment on any bankruptcy planning.

The company has previously said it was exploring a range of options to address plunging sales, including selling assets, raising financing and declaring bankruptcy.

Sixth Street declined to comment.

Bed Bath & Beyond said last week it defaulted on a loan, bringing it closer to bankruptcy. Sources have also told Reuters that Bed Bath & Beyond is considering skipping debt payments due on Feb. 1, a typical move that distressed companies take to conserve cash.

Retailers in distress often decide to file for bankruptcy protection after the holiday season to take advantage of the cash cushion provided by recent sales.

Toys R Us liquidated in March 2018 in one of the largest failures to date of a specialty retailer.

As of February 2022, Bed Bath & Beyond had 953 locations, including buybuy BABY.

Bed Bath & Beyond for years had been considered a go-to shopping destination for couples making wedding registries and planning for new babies, but it lost its footing when it tried to expand into store brands.

The retailer’s management has since reversed course and aimed to bring in national brands shoppers knew the chain for. But the strategy has not gained traction with shoppers.

Earlier this month, the company raised doubts about its ability to continue as a going concern and said it would cut jobs.

Bed Bath & Beyond reported a loss of about $393 million after sales plunged 33% for the quarter ending Nov. 26.

Reporting by Jessica DiNapoli and Mike Spector; Editing by Cynthia Osterman and Jamie Freed

Our Standards: The Thomson Reuters Trust Principles.

Jessica DiNapoli

Thomson Reuters

New York-based reporter covering U.S. consumer products spanning from paper towels to packaged food, the companies that make them and how they’re responding to the economy. Previously reported on corporate boards and distressed companies.

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World

Exclusive: Top U.S. Treasury official to warn UAE, Turkey over sanctions evasion

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WASHINGTON, Jan 28 (Reuters) – The U.S. Treasury Department’s top sanctions official on a trip to Turkey and the Middle East next week will warn countries and businesses that they could lose U.S. market access if they do business with entities subject to U.S. curbs as Washington cracks down on Russian attempts to evade sanctions imposed over its war in Ukraine.

Brian Nelson, undersecretary for terrorism and financial intelligence, will travel to Oman, the United Arab Emirates and Turkey from Jan. 29 to Feb. 3 and meet with government officials as well as businesses and financial institutions to reiterate that Washington will continue to aggressively enforce its sanctions, a Treasury spokesperson told Reuters.

“Individuals and institutions operating in permissive jurisdictions risk potentially losing access to U.S. markets on account of doing business with sanctioned entities or not conducting appropriate due diligence,” the spokesperson said.

While in the region, Nelson will discuss Treasury’s efforts to crack down on Russian efforts to evade sanctions and export controls imposed over its brutal war against Ukraine, Iran’s destabilizing activity in the region, illicit finance risks undermining economic growth, and foreign investment.

The trip marks the latest visit to Turkey by a senior Treasury official to discuss sanctions, following a string of warnings last year by Treasury and Commerce Department officials, as Washington ramped up pressure on Ankara to ensure enforcement of U.S. curbs on Russia.

STRAINED RELATIONS

Nelson’s trip coincides with a period of strained ties between the United States and Turkey as the two NATO allies disagree over a host of issues.

Most recently, Turkey’s refusal to green-light the NATO bids of Sweden and Finland has troubled Washington, while Ankara is frustrated that its request to buy F-16 fighter jets is increasingly linked to whether the two Nordic countries can join the alliance.

Nelson will visit Ankara, the Turkish capital, and financial hub Istanbul on Feb. 2-3. He will warn businesses and banks that they should avoid transactions related to potential dual-use technology transfers, which could ultimately be used by Russia’s military, the spokesperson said.

Dual-use items can have both commercial and military applications.

Washington and its allies have imposed several rounds of sanctions targeting Moscow since the invasion, which has killed and wounded thousands and reduced Ukrainian cities to rubble.

Turkey has condemned Russia’s invasion and sent armed drones to Ukraine. At the same time, it opposes Western sanctions on Russia and has close ties with both Moscow and Kyiv, its Black Sea neighbors.

It has also ramped up trade and tourism with Russia. Some Turkish firms have purchased or sought to buy Russian assets from Western partners pulling back due to the sanctions, while others maintain large assets in the country.

But Ankara has pledged that international sanctions will not be circumvented in Turkey.

Washington is also concerned about evasion of U.S. sanctions on Iran.

The United States last month imposed sanctions on prominent Turkish businessman Sitki Ayan and his network of firms, accusing him of acting as a facilitator for oil sales and money laundering on behalf of Iran’s Revolutionary Guard Corps.

While in the United Arab Emirates, Nelson will note the “poor sanctions compliance” in the country, the spokesperson said.

Washington has imposed a series of sanctions on United Arab Emirates-based companies over Iran-related sanctions evasion and on Thursday designated a UAE-based aviation firm over support to Russian mercenary company the Wagner Group, which is fighting in Ukraine.

(This story has been corrected to change headline to UAE, Turkey, not Middle East; adds Turkey in paragraph 1)

Reporting by Daphne Psaledakis and Humeyra Pamuk
Editing by Don Durfee and Leslie Adler

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US

Exclusive: Tesla’s Musk met top Biden officials on EVs in Washington Friday

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WASHINGTON, Jan 27 (Reuters) – Tesla (TSLA.O) Chief Executive Elon Musk met two top White House officials on Friday in Washington to discuss how the car maker and Democratic President Joe Biden could work together to advance electric vehicle production and speed electrification of U.S. vehicle networks.

Musk met John Podesta, a Democratic stalwart who serves as Biden’s senior advisor for clean energy innovation, and Mitch Landrieu, who oversees infrastructure spending, a White House spokesperson told Reuters.

“John Podesta and Mitch Landrieu met with Elon Musk to discuss shared goals around electrification and how the Bipartisan Infrastructure Law and Inflation Reduction Act can advance electric vehicle production and charging as well as the broader cause of electrification,” the White House spokesperson said.

Musk responded on Twitter to a link to an earlier version of this story with “True.”

A Reuters witness on Friday saw Podesta, Landrieu and Musk entering a downtown building that houses both Tesla’s Washington lobbying operation and the Center for American Progress, a think tank Podesta founded. Landrieu and Podesta left about half an hour later and did not answer questions.

Musk left about 45 minutes after Podesta and Landrieu. He too ignored questions from a Reuters reporter.

BIDEN, MUSK TENSIONS

Relations have often seemed antagonistic between Biden, who has pushed for companies to use union labor, and Musk, who has pushed to keep unions out of his factories.

Musk called Biden “a damp sock puppet in human form” last year after Biden highlighted EV production by GM and Ford in a tweet but left out Tesla.

Biden only publicly acknowledged the role of Tesla in U.S. electric vehicle manufacturing over a year after taking office, after Musk repeatedly complained about being ignored.

In June, Biden compared Tesla unfavorably to Ford and sarcastically wished Musk “lots of luck” on his “trip to the moon” after the billionaire expressed reservations about the economy.

Still, Musk has long-standing important relationships with the U.S. government, and those have continued under the Biden administration.

Tesla has benefited from tax subsidies given to buyers of its electric vehicles while SpaceX, Musk’s rocket company, has contracts worth billions of dollars to deliver astronauts and cargo to and from the International Space Station, and to build a moon lander.

U.S. consumers who bought Teslas became eligible again this month for up to $7,500 in consumer tax credits, under the $430 billion U.S. Inflation Reduction Act (IRA) passed last August. An earlier tax credit for Tesla buyers expired after the automaker sold its first 200,000 vehicles in the United States.

The law imposes requirements that EVs receiving the tax credits must be North American-made. There are also caps on vehicle prices and income for buyers who are eligible for the credits.

The law also sets new battery sourcing restrictions expected to take effect in March. It also includes new U.S. battery production credits that Musk said earlier this week could have significant benefits to the company.

Reporting by Nandita Bose, David Shepardson and Raphael Satter; Editing by Heather Timmons, David Gregorio and Rosalba O’Brien

Our Standards: The Thomson Reuters Trust Principles.

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Business

Exclusive: Geely plans to turn maker of London black cabs into EV powerhouse

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COVENTRY, England, Jan 23 (Reuters) – China’s Geely (0175.HK) is planning a big investment to turn the maker of London’s iconic black taxis into a high-volume, all-electric brand with a range of commercial and passenger vehicles, executives at the unit told Reuters.

London Electric Vehicle Company (LEVC) also aims to expand its suite of services, which include cars arranging their own maintenance and recognising their owner’s interests to help them book activities.

“We need a developed product portfolio. We need to make big investments in terms of the technology and infrastructure,” LEVC Chief Executive Alex Nan said at the taxi maker’s headquarters in Coventry, central England. “Geely will make consistent investments into LEVC because this is a very unique project.”

LEVC builds a hybrid taxi model that starts at around 66,000 pounds ($81,500), which has a battery providing 64 miles (103 km) of range and a petrol range-extender giving it a total range of over 300 miles. The company’s business was hit hard by the pandemic and it laid off 140 staff in October.

Nan said LEVC and Geely would seek to attract other investors to its zero-emission portfolio and would look to partner with other carmakers to develop new technology.

Executives said the size of Geely’s investment would be disclosed later. So far the Chinese group, which took full control of LEVC in 2013, has invested 500 million pounds in it.

“Geely fully supports the new transition strategy laid out by LEVC’s board and executive team,” Geely said in a statement.

In 2021, Geely launched a 2 billion pound investment in another unit, niche British luxury sports carmaker Lotus, to massively expand production of its sports cars and build high-end SUVs and sedans in Britain and China. Geely is following a similar path in its plans to grow LEVC, executives said.

Britain’s EV ambitions were dealt a blow last week when startup Britishvolt, which had planned to build a major battery factory in northeast England, filed for administration.

“We need to make sure the UK environment as a whole is competitive and has its position on the world stage,” said LEVC managing director Chris Allen.

READY TO ACCELERATE

Geely owns multiple brands including Volvo (VOLCARb.ST) and – via a joint venture with Volvo – Polestar . Zeekr, another brand in the group, filed for a U.S. initial public offering last month.

As such, Geely faces a complexity that larger EV makers BYD (002594.SZ) and Tesla (TSLA.O) have avoided.

Allen said LEVC was exploring a range of commercial and passenger car models on a common electric platform. It can lean on other group brands that already have EVs to “move forward in a fast, agile way”.

The company already uses an infotainment system and software developed by Volvo and a steering wheel from the Swedish carmaker, allowing it to cut costs, Allen said.

“There’s nothing we couldn’t deliver in a very short time period if we needed to, but it’s just a question of timing,” he said, adding LEVC could easily have a full range of EVs on the road within five years.

“But in two years time, is the industry going to be ready, is the charging infrastructure going to be there, is consumer confidence going to be there?”

LEVC currently has the capacity to build 3,000 taxis a year running on a single shift at its Coventry factory. Allen said that could easily be increased to 20,000 and the plant had room to expand. It could also lean on production in China as Lotus has, Allen said. A major car plant produces on average around 300,000 vehicles per year.

“There’s a huge amount of value in our product that hasn’t ever really been maximised,” Allen said. “This is about growing LEVC into a much more recognizable brand on a global scale and expanding our product offering into as many spaces as we can.”

($1 = 0.8095 pounds)

Reporting by Nick Carey, Additional reporting by Zoey Zhange in Shanghai and Norihiko Shirouzu in Beijing
Editing by Mark Potter

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Business

Exclusive: ECB union says staff losing faith in leadership over inflation, pay

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  • 40% of ECB staff has low or no trust
  • Two-thirds say confidence is damaged
  • 63% worried about ECB’s ability to protect purchasing power

FRANKFURT, Jan 18 (Reuters) – (This Jan. 17 story has been corrected to restore the dropped words in paragraph 11)

European Central Bank staff are losing confidence in the institution’s leadership following the ECB’s failure to control inflation and a pay award that lagged the leap in prices, according to a survey by trade union IPSO.

The responses underline that even central banks, whose primary responsibility is fighting inflation, are not immune to staff dissatisfaction with the sharply rising cost of living.

The survey was organised in the context of a dispute between IPSO, which holds six out of nine seats on the ECB’s staff committee, and the central bank’s board over pay and remote-working arrangements.

An ECB spokesperson did not comment directly on IPSO’s findings when asked but pointed to a separate staff survey, run by the ECB itself last year, showing that 83% of nearly 3,000 respondents were proud to work for the ECB and 72% would recommend it.

Results of IPSO’s survey, which largely focused on pay and remote-working arrangements but also included questions about trust in the board, were sent to ECB staff on Tuesday in an email, seen by Reuters.

They showed two-thirds of roughly 1,600 respondents said their trust in Lagarde and the rest of the six-member ECB board had been damaged by recent developments such as high inflation and a pay increase that did not match the rise in prices.

Asked how much trust they had in Lagarde and the board when it comes to leading and managing the ECB, the central bank for the 20 countries that use the euro, just under half of respondents said “moderate” (34.3%) or “high” (14.6%).

But over 40% of respondents said they had “low” (28.6%) or “no” (12%) trust, while 10.5% could not say.

“This is a serious concern for our institution, as no one can correctly lead an organisation without the trust of its workforce,” the union said in its email.

INFLATION SURGE, PAY BATTLES

The survey was the first by IPSO to ask about trust in top management since Christine Lagarde took over as ECB President in late 2019.

A similar IPSO survey of ECB staff, taken just before her predecessor Mario Draghi stepped down, showed 54.5% of 735 respondents rated his presidency “very good” or “outstanding”, with support for his policy measures even higher.

Then, however, inflation in the euro zone had been low for a decade. Its recent surge to multi-decade highs in countries around the world has seen a revival in battles over pay between workers and the companies and institutions that employ them.

And a majority of respondents in the October 2019 survey also complained about a lack of transparency in recruitment and perceived favouritism under Draghi.

The most recent Bank of England staff survey, also conducted in 2019, showed 64% of respondents had “trust and confidence in the Bank’s leadership”.

A 2022 U.S. government survey of employees at departments and federal agencies found that 61% of respondents had “a high level of respect” for their organisation’s senior leaders – roughly stable compared to the previous two years.

The ECB spokesperson also pointed to internal surveys in 2020-21 that found roughly 80% of respondents were satisfied with health-and-safety measures taken by the ECB in response to the coronavirus pandemic.

The latest IPSO survey showed 63% of staff who responded were worried about the ECB’s ability to protect their purchasing power after being handed a pay increase of just 4% last year – or roughly half the rise in consumer prices.

The ECB has been criticised by politicians, bankers and academics for initially underestimating a surge in the cost of living and then making up for it with large and painful increases in borrowing costs.

Lagarde, who is not an economist and had not been a central banker before joining the ECB, colourfully defended her board at an event with staff last month.

“If it wasn’t for them I’d be a sad, lonely cowgirl lost somewhere in the Pampa of monetary policy,” Lagarde said, according to a recording of the Dec. 19 town hall seen by Reuters.

She and fellow board members have long worried about the risk of a potential “wage-price spiral”, where higher salaries feed into prices, which they argue would make it harder for the ECB to bring inflation back down to its 2% target.

But IPSO said that concern is misplaced and workers should not be made to bear the brunt of the current bout in inflation.

“The ECB might be preaching lower real wages, but this is not our stance as your staff union,” it wrote in its message to ECB employees.

Editing by Catherine Evans

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Business

Exclusive: FTX’s former top lawyer aided U.S. authorities in Bankman-Fried case

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Jan 5 (Reuters) – FTX’s former top lawyer Daniel Friedberg has cooperated with U.S. prosecutors as they investigate the crypto firm’s collapse, a source familiar with the matter said, adding pressure on founder Sam Bankman-Fried who was arrested on criminal fraud charges last month.

Friedberg gave details about FTX in a Nov. 22 meeting with two dozen investigators, the person said. The meeting, held at the U.S. Attorney for the Southern District of New York’s office included officials from the Justice Department, Federal Bureau of Investigation, and the U.S. Securities and Exchange Commission, the source said. Emails between attendees scheduling the meeting with those agencies were seen by Reuters.

At the meeting, he told prosecutors what he knew of Bankman-Fried’s use of customer funds to finance his business empire, the source said. Friedberg recounted conversations he had with other top executives on the subject and provided details of how Bankman-Fried’s hedge fund Alameda Research functioned, the source said.

Friedberg’s cooperation has not been previously reported. He has not been charged and has not been told he is under criminal investigation, the source said. Instead, he expects to be called as a government witness in Bankman-Fried’s October trial, the person said.

Friedberg’s lawyer, Telemachus Kasulis, the FBI and FTX did not respond to requests for comment on his cooperation. The SEC, the Department of Justice and Bankman-Fried’s spokesman declined to comment.

Bankman-Fried is accused of diverting billions of dollars in FTX client funds to Alameda to bankroll venture investments, luxury real estate purchases, and political donations. On Tuesday, he pleaded not guilty in Manhattan federal court.

Manhattan U.S. Attorney Damian Williams, who is leading the criminal case against now bankrupt FTX, said last month: “If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it.”

Two of Bankman-Fried’s closest associates, Caroline Ellison, Alameda’s former chief executive, and Gary Wang, FTX’s former chief technology officer, pleaded guilty to fraud and agreed to cooperate. A lawyer for Ellison didn’t respond to a request for comment. Wang’s lawyer declined to comment.

MEETING WITH PROSECUTORS

FTX filed for bankruptcy protection on Nov. 11. A few days later, on Nov. 14, Friedberg received a call from two FBI agents based in New York. He told them he was willing to share information but needed to ask FTX to waive his attorney-client privilege, according to a person familiar with the matter and emails viewed by Reuters.

Friedberg wrote to FTX the next day asking the company to waive his privilege so he could cooperate with prosecutors, according to the email seen by Reuters. FTX did not do so, but agreed with Friedberg on the points he could disclose to investigators, the person said.

Friedberg then wrote back to the two FBI agents, telling them in an email reviewed by Reuters: “I want to cooperate in all respects.”

The U.S. Attorney’s Office set up a meeting where Friedberg signed so-called proffer letters prepared for him by the SEC and other agencies, according to the source and an email exchanged by participants. Proffer letters typically describe a potential agreement between authorities and individuals who are witnesses or subjects of an investigation.

“THROUGH THICK AND THIN”

Prior to his work advising FTX, Friedberg advised a mix of banking, fintech, and online gaming companies.

One of his previous employers, a Canadian online gaming firm named Excapsa Software, where he was general counsel, also drew controversy due to a cheating scandal involving a poker site it operated called Ultimate Bet. A Canadian gaming commission in 2008 fined Ultimate Bet $1.5 million for failing to enforce measures to prevent fraudulent activities. Excapsa has since dissolved.

According to an audio recording available on the website PokerNews, Friedberg and some other Ultimate Bet associates privately discussed that year how to handle the scandal and minimize the amount of refunds owed to players. Friedberg previously told NBC News that the audio was illegally recorded but NBC’s article did not say that Friedberg challenged its authenticity.

Friedberg first represented Bankman-Fried in 2017 as outside counsel while at U.S. law firm Fenwick & West, where he chaired its payment systems group, the source familiar with the matter said. At the time, the source said Friedberg advised Bankman-Fried on running Alameda, which he founded that year.

In 2020, when Bankman-Fried launched a separate exchange for U.S. customers called FTX.US, Friedberg moved in-house as FTX’s chief regulatory officer.

In a now-deleted blog post published that year on FTX’s website, Bankman-Fried wrote that Friedberg was FTX’s legal advisor “from the very beginning,” noting he had been “with us through thick and thin.”

Friedberg resigned from his position on Nov. 8, a day after Bankman-Fried disclosed to top executives that FTX was almost out of money, according to the source and three other people briefed on the talks, along with text messages his legal team exchanged at the time.

Additional reporting by Hannah Lang; editing by Megan Davies and Anna Driver

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World

Exclusive: US says Russia’s Wagner Group bought North Korean weapons for Ukraine war

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WASHINGTON, Dec 22 (Reuters) – The private Russian military company, the Wagner Group, took delivery of an arms shipment from North Korea to help bolster Russian forces in Ukraine, a sign of the group’s expanding role in that conflict, the White House said on Thursday.

“Wagner is searching around the world for arms suppliers to support its military operations in Ukraine,” John Kirby, spokesperson for the White House National Security Council, told reporters.

“We can confirm that North Korea has completed an initial arms delivery to Wagner, which paid for that equipment. Last month, North Korea delivered infantry rockets and missiles into Russia for use by Wagner,” Kirby said.

The news was first reported by Reuters. The Wagner Group was founded in 2014 after Russia seized and annexed Ukraine’s Crimea peninsula and sparked a separatist insurgency in Ukraine’s eastern Donbas region.

The United States estimates that Wagner has 50,000 personnel deployed in Ukraine, including 10,000 contractors and 40,000 convicts recruited from Russian prisons, Kirby said.

The U.S. assessment is that the amount of material delivered by North Korea will not change the battlefield dynamics in Ukraine, but more military equipment was expected to be delivered by Pyongyang.

In November, after the White House said Pyongyang was covertly supplying Russia with a “significant” number of artillery shells, North Korea said it had never had arms dealings with Russia and has no plans to do so.

The Russian and North Korean missions to the United Nations in New York did not immediately respond to a request for comment on Thursday’s news.

The United States accused Pyongyang and Moscow of violating U.N. sanctions on North Korea and will share its information with the U.N. Security Council’s North Korea sanctions committee, U.S. Ambassador to the United Nations, Linda Thomas-Greenfield, said in a statement.

Pyongyang has built ballistic missiles capable of striking almost anywhere on earth, weapons experts say, as well as shorter-range weapons.

Kirby said Russian President Vladimir Putin has increasingly turned to the Wagner Group, owned by Putin’s ally Yevgeny Prigozhin, for help in Ukraine, where Russian forces have stumbled in their bid to topple the Kyiv government.

The European Union has imposed sanctions on the Wagner Group, accusing it of clandestine operations on the Kremlin’s behalf.

Putin has said the group does not represent the Russian state, but that private military contractors have the right to work anywhere in the world as long as they do not break Russian law.

SANCTIONS ON WAGNER

The Biden administration on Wednesday unveiled new curbs on technology exports to the Wagner Group in a bid to further choke off its supplies.

More sanctions are coming in the weeks ahead against the company and its support group in countries around the world, Kirby said.

Russian businessman Prigozhin is spending more than $100 million per month to fund Wagner’s operations in Ukraine, but has encountered problems recruiting Russians to fight there, Kirby said.

The Wagner Group, staffed by veterans of the Russian armed forces, has fought in Libya, Syria, the Central African Republic and Mali, among other countries.

U.S. intelligence indicates that Wagner has played a major role in the battle for the Ukrainian city of Bakhmut and has suffered heavy casualties there with about 1,000 Wagner fighters killed in recent weeks, most of them convicts, Kirby said.

Inside Russia, Prigozhin’s influence is expanding, and his group’s independence from the Russian Defense Ministry “has only increased and elevated over the course of the 10 months of this war,” Kirby said, without providing evidence.

Kirby said that in some instances, Russian military officials in Ukraine were subordinate to Wagner forces.

In addition, Prigozhin has criticized Russian generals and defense officials for their performance since the invasion.

Reporting by Steve Holland; Additional reporting by Idrees Ali, Michelle Nichols and Jarrett Renshaw; Editing by Ross Colvin, Heather Timmons and Daniel Wallis

Our Standards: The Thomson Reuters Trust Principles.

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Business

Exclusive: Sam Bankman-Fried to reverse decision on contesting extradition

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Dec 17 (Reuters) – Former FTX Chief Executive Sam Bankman-Fried is expected to appear in court in the Bahamas on Monday to reverse his decision to contest extradition to the United States, where he faces fraud charges, a person familiar with the matter said on Saturday.

The 30-year-old cryptocurrency mogul was indicted in federal court in Manhattan on Tuesday and accused of engaging in a scheme to defraud FTX customers by using billions of dollars in stolen deposits to pay for expenses and debts and to make investments for his crypto hedge fund, Alameda Research LLC.

His decision to consent to extradition would pave the way for him to appear in U.S. court to face wire fraud, money laundering and campaign finance charges.

Upon arrival in the United States, Bankman-Fried would likely be held at the Metropolitan Detention Center in Brooklyn, though some federal defendants are being held at jails just outside New York City due to overcrowding at the facility, said defense lawyer Zachary Margulis-Ohnuma.

At his initial court hearing in Manhattan, Bankman-Fried would be asked to enter a plea and a judge would make a determination on bail, Margulis-Ohnuma said. The attorney added that such a hearing must take place within 48 hours of Bankman-Fried’s arrival in the United States, though it would likely be sooner.

Prosecutors will likely argue that Bankman-Fried is a flight risk and should remain in custody because of the large sums of money involved in the case and the unclear location of those funds.

“The missing money gives prosecutors strong arguments that he is a flight risk,” said former federal prosecutor and white-collar defense attorney Michael Weinstein. “I expect that if a judge grants pretrial release, they would impose very restrictive and onerous conditions.”

Any trial is likely more than a year away, legal experts told Reuters.

Neither a spokesman nor a U.S.-based lawyer for Bankman-Fried immediately responded to requests for comment. Bankman-Fried has acknowledged risk management failings at FTX but has said he does not believe he has criminal liability.

A spokesman for the U.S. Attorney’s Office in Manhattan declined to comment.

‘BIGGEST FINANCIAL FRAUDS IN AMERICAN HISTORY’

It was not immediately clear what prompted Bankman-Fried to change his mind and decide not to contest extradition.

He was remanded on Tuesday to the Bahamas’ Fox Hill prison after Chief Magistrate JoyAnn Ferguson-Pratt rejected his request to remain at home while awaiting a hearing on his extradition.

The U.S. State Department in a 2021 report said conditions at Fox Hill were “harsh,” citing overcrowding, rodent infestation and prisoners relying on buckets as toilets. Authorities there say conditions have since improved.

Bankman-Fried amassed a fortune valued at over $20 billion as he rode a cryptocurrency boom to build FTX into one of the world’s largest exchanges. His arrest last Monday in the Bahamas, where he lives and where FTX is based, came just a month after the exchange collapsed amid a flurry of customer withdrawals.

Damian Williams, the top federal prosecutor in Manhattan, described the collapse of FTX as one of the “biggest financial frauds in American history.” He has described the office’s investigation as ongoing, and urged people with knowledge of wrongdoing at FTX or Alameda to cooperate.

One top executive at FTX, Ryan Salame, told securities regulators in the Bahamas on Nov. 9 that assets belonging to the exchange’s customers were transferred to Alameda to cover the hedge fund’s losses, according to a document made public as part of FTX’s bankruptcy proceedings in Delaware.

FTX filed for bankruptcy on Nov. 11, the same day Bankman-Fried stepped down as CEO.

A lawyer for Salame did not immediately respond to a request for comment.

Reporting by Jasper Ward; Additional reporting by Luc Cohen and Jack Queen; Writing by Luc Cohen; Editing by Chizu Nomiyama, Chris Reese, Amy Stevens and Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

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Business

Exclusive: PepsiCo to roll out 100 Tesla Semis in 2023, exec says

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NEW YORK/SAN FRANCISCO, Dec 16 (Reuters) – PepsiCo plans to roll out 100 heavy-duty Tesla Semis in 2023, when it will start using the electric trucks to make deliveries to customers like Walmart and Kroger, the soda maker’s top fleet official told Reuters on Friday.

PepsiCo Inc (PEP.O), which ordered the big trucks in 2017, is purchasing them “outright” and is also upgrading its plants, including installing four 750-kilowatt Tesla Inc (TSLA.O) charging stalls at both its Modesto and Sacramento locations in California, PepsiCo Vice President Mike O’Connell said in an interview. A $15.4 million state grant and $40,000 federal subsidy per vehicle helps offset part of the costs.

“It’s a great starting point to electrify,” said O’Connell, who oversees the company’s fleet of vehicles.

“Like any early technology, the incentives help us build out the program,” he said, adding that there were “lots” of development and infrastructure costs.

PepsiCo is the first company to experiment with the battery-powered Tesla Semis as a way of cutting its environmental impact. read more

United Parcel Service Inc (UPS.N) and food delivery company Sysco Corp (SYY.N) have also reserved the trucks, while retailer Walmart Inc (WMT.N) is testing alternatives.

PepsiCo’s plans to use the Semis have been reported, but O’Connell provided new details on how the company is using them and its timeline for deploying them. Tesla Chief Executive Elon Musk initially said the trucks would be in production by 2019, but that was delayed due to battery constraints.

PepsiCo said it plans to deploy 15 trucks from Modesto and 21 from Sacramento. It is unclear where the others will be based but O’Connell said the firm is targeting rolling out the Semis in the central United States next, and then the East Coast.

The company’s Frito-Lay division sells lightweight food products, making it a good candidate for electric trucks, which have heavy batteries that could limit cargo capacity.

The Semis will haul Frito-Lay food products for around 425 miles (684 km), but for heavier loads of sodas, the trucks will initially do shorter trips of around 100 miles (160 km), O’Connell said. PepsiCo then will also use the Semis to haul beverages in the “400 to 500 mile range as well,” O’Connell said.

“Dragging a trailer full of chips around is not the most intense, tough ask,” said Oliver Dixon, senior analyst at consultancy Guidehouse.

“I still believe that Tesla has an awful lot to prove to the broader commercial vehicle marketplace,” Dixon said, citing Tesla’s unwillingness to offer information on payload and pricing.

PepsiCo has earmarked some of the trucks planned for the Sacramento location to make deliveries to Walmart and grocers such as Kroger Co (KR.N) and Albertsons Cos Inc (ACI.N). The trucks at the Modesto Frito-Lay plant have just gone to PepsiCo distribution centers, O’Connell said.

All of the Semis going to PepsiCo will have a 500-mile (805-km) range. O’Connell added that he is not aware of when Tesla will start deploying 300-mile (480-km) trucks. When Tesla starts building them, PepsiCo “will rotate those up” into its fleet, he said.

PepsiCo declined to share details on the price of the trucks, a figure that Tesla has kept quiet. Competing vehicles sell for $230,000 to $240,000, said Mark Barrott of consulting firm Plante Moran. He added that the 500-mile range Tesla Semi could be priced higher because its 1,000-kilowatt-hour (kWh) battery pack is about twice the size of many of its rivals.

“We keep the trucks for a million miles, seven years,” O’Connell said. “The operating costs over time will pay back.”

The Gatorade maker declined to share specifics on the weight of the trucks, another closely guarded secret by Tesla.

He said Tesla did not help pay for the trucks’ megachargers but provided design and engineering services for the facilities, which come with solar and battery storage systems.

O’Connell said that a 425-mile (684-km) trip carrying Frito-Lay products brings the Semi’s battery down to roughly 20%, and recharging it takes around 35 to 45 minutes.

Reporting by Jessica DiNapoli in New York and Hyun Joo Jin in San Francisco; additional reporting by Joe White and Siddharth Cavale; Editing by Jonathan Oatis and Rosalba O’Brien

Our Standards: The Thomson Reuters Trust Principles.

Jessica DiNapoli

Thomson Reuters

New York-based reporter covering U.S. consumer products spanning from paper towels to packaged food, the companies that make them and how they’re responding to the economy. Previously reported on corporate boards and distressed companies.

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World

Exclusive: The global supply trail that leads to Russia’s killer drones

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Dec 15 (Reuters) – The hundreds of Russian drones hovering ominously over the Ukrainian battlefield owe their existence to an elastic, sanctions-evading supply chain that often runs through a shabby office above a Hong Kong marketplace, and sometimes through a yellow stucco home in suburban Florida.

The “Sea Eagle” Orlan 10 UAV is a deceptive, relatively low-tech and cheap killer that has directed many of the up to 20,000 artillery shells that Russia has fired daily on Ukrainian positions in 2022, killing up to 100 soldiers per day, according to Ukrainian commanders.

An investigation by Reuters and iStories, a Russian media outlet, in collaboration with the Royal United Services Institute, a defence think tank in London, has uncovered a logistical trail that spans the globe and ends at the Orlan’s production line, the Special Technology Centre in St. Petersburg, Russia.

Based on Russian customs filings and bank records, the investigation marks the first time a supply route for American technology has been traced all the way to a Russian manufacturer, whose weapon system is used in Ukraine.

The Special Technology Centre, which once made a variety of surveillance gadgets for the Russian government and now focuses on drones for the military, was first targeted by U.S. sanctions after President Barack Obama said it had worked with Russian military intelligence to try to influence the 2016 U.S. presidential election.

The sanctions, which took effect in 2017, barred any American citizen or resident or U.S. company from supplying anything that might end up with the Special Technology Centre. In March of this year, the U.S. government tightened those restrictions by blocking all sales of any American products for any military end user, and effectively blocked all sales to Russia of high-technology items like microchips, communications and navigation equipment.

None of that has stopped the production of the Orlan drone.

The Special Technology Centre did not respond to a written request for comment. But one top scientist, who is also a major shareholder, said in an interview with Reuters that the company was experiencing a “high demand” for its drones.

Russia’s Ministry of Defence did not respond to questions from Reuters about the impact of sanctions and its relationship to the Special Technology Centre.

The U.S. Department of Commerce, which enforces controls on the export of US technology, would not comment on its knowledge of the Special Technology Centre, or of U.S. parts supplying Russia’s drone program.

In a statement to Reuters, a Commerce spokesperson said the department cannot comment on the existence or non-existence of investigations. The spokesperson added: “We will not hesitate to use all the tools at our disposal to obstruct the efforts of those who seek to support Putin’s war machine.”

Among the most important suppliers to Russia’s drone program has been a Hong Kong-based exporter, Asia Pacific Links Ltd, which, according to Russian customs and financial records, provided millions of dollars in parts, though never directly. Many of the parts are microchips from U.S. manufacturers.

Asia Pacific’s exports to Russia were primarily delivered to one importer in St. Petersburg with close ties to the Special Technology Centre, those customs records show. The import company, SMT iLogic, shares an address with the drone maker and has numerous other connections.

Asia Pacific’s owner, Anton Trofimov, is an expatriate Russian who graduated from a Chinese university and has other business interests in China as well as a company in Toronto, Canada, according to his LinkedIn profile and other corporate filings.

According to public records, Trofimov is a resident of a modest East York neighborhood of Toronto. He did not respond to questions sent by email and LinkedIn. A woman who answered the door identified herself as Trofimov’s wife and said she would pass along a message for him to contact Reuters. He never did.

The neighborhood is a world away from Asia Pacific’s office in a shabby and narrow office building off a side alley and pedestrian market in Hong Kong’s business district.

No one was at the Hong Kong office when a Reuters journalist visited recently. The company shares a partitioned room with three other tenants, according to the building’s receptionist.

Despite appearances, business has boomed this year. In the seven months between March 1 and September 30, since Russia’s February invasion, Asia Pacific increased its business sharply, exporting parts valued at about $5.2 million, up from about $2.3 million in the same period of 2021, making it iLogic’s biggest supplier, according to Russian customs records. Many of the components were made by U.S. tech firms, the records also show.

Among the parts sent by Asia Pacific to iLogic in the same period of 2022 were $1.8 million of chips made by Analog Devices (ADI.O), $641,000 made by Texas Instruments (TXN.O), and $238,000 by Xilinx, according to the Russian customs data. The supplies also included model aircraft engines made by a Japanese company, Saito Seisakusho, that are used in the Orlan 10, as shown in photos of drones recovered in Ukraine. Saito said it was unaware of the shipments.

Asked about the shipments to Russia in recent months, Analog Devices didn’t reply to emailed questions. Texas Instruments and AMD (AMD.O), the owner of Xilinx, said their companies had not directly shipped or approved shipments into Russia for many months and were complying with all U.S. sanctions and export controls.

AMD added that it requires its authorized distributors to implement end-use screening measures to track the potential sale or diversion of AMD products into Russia or restricted regions. “SMT iLogic and Asia Pacific Links are not authorized AMD distributors,” AMD said.

THE SUPPLIER NEXT DOOR

Financial records provided by a Russian official and reviewed by Reuters show the Special Technology Centre relies on a number of suppliers, but most notably iLogic. According to a record of iLogic’s own bank receipts and payments seen by Reuters, iLogic works almost exclusively for the drone maker.

Since 2017, iLogic has imported about $70 million of mostly electronic products into Russia, according to customs records. And according to financial documents examined by iStories and Reuters, nearly 80% of the company’s income is from its business with the Special Technology Centre.

In turn, those same financial records show the Special Technology Centre’s biggest customer is Russia’s Ministry of Defence, which paid it nearly 6 billion rubles ($99 million) between February and August of this year. The examined records list all transfers to and from the company’s bank accounts during that period.

Reached by phone, Alexey Terentyev, a top scientist and major shareholder at the Special Technology Centre, said the war has forced it to focus on making drones.

“Due to the high demand for Orlans, we do not have the resources to do something else now. The demand for it is much bigger than we can produce,” he said.

U.S. sanctions had caused the company problems, he said, but it always found someone in the world to sell it what it needed. “Sanctions were imposed on us by one of the most powerful countries in the world,” Terentyev said. “We should be proud of this.”

Terentyev declined to say if iLogic was one of those suppliers. Asked about iLogic, he said, “You ask me about a company I don’t know.” Reminded that he was listed as one of iLogic’s founders in Russian corporate records, he said that if his name showed up in documents, it was “likely correct” he was a shareholder. “Yes, I remember something,” he said. But he could not recall what iLogic did. “I have lost connection with this company,” he said.

Those corporate records show iLogic is based at the same St Petersburg office address as the Special Technology Centre. Russian corporate records show it was founded by Terentyev and other senior executives of the drone maker or their relatives.

In a brief telephone interview, Roman Agafonnikov, chief executive officer of the Special Technology Centre, said he didn’t know anything about iLogic.

FLORIDA

On the coast of southeast Florida, living in a smart suburban house just behind a nature reserve, is another individual who has supplied Russia’s drone program.

Igor Kazhdan, a 41-year-old U.S.-Russian citizen, owns a company, IK Tech, that sold about $2.2 million worth of electronics to Russia between 2018 and 2021, Russian customs records show, over 90% of which were sold to iLogic.

Russian custom records show that IK Tech sold iLogic about 1,000 American-made circuit boards between October 2020 and October 2021, at a time when federal law banned the supply, whether directly or via another company, of any such technology to the Special Technology Centre.

The boards, valued at about $274,000, were made by a California manufacturer, Gumstix. The California company told Reuters it is “very concerned” to hear of the shipments and would investigate. It said it does not have customers located in Russia nor any products or services intended for Russia, adding, “We will take all appropriate action to address any identified diversion of products from lawful end use.”

Photos taken by Ukraine officials of the inside of a captured drone and seen by Reuters show a Gumstix board that is almost identical to the boards shipped by IK Tech. According to a list of components found on another drone supplied to RUSI and Reuters by the Ukrainian government, the board is part of the Orlan 10’s control unit.

Kazhdan’s activities drew the attention of U.S. authorities. Just two weeks before Russian tanks rolled into Ukraine and Orlan drones started buzzing overhead, federal agents arrested Kazhdan. He was later indicted on 13 counts of smuggling and evading export controls when selling electronic components to Russia between December 2021 and February 2022.

The indictment related to selling sophisticated amplifiers made by U.S.-based Qorvo that required an export license for Russia. It is not clear from court documents if U.S. authorities were aware of the ultimate destination of the products. The Qorvo amplifiers, which are often used in radar, communications and radio equipment, have been found in the radio communication circuits of Orlan drones, according to Ukrainian officials. In a statement to Reuters, Qorvo said the “declared destination” of the parts mentioned in the case was a distributor in Florida. It added: “Qorvo has never conducted business or had any relationship with IK Tech or Igor Kazhdan, and the Company’s products were exported and used without our knowledge.”

In November 2022, after Kazhdan pleaded guilty to two charges, a federal judge sentenced him to three years of probation, fined him $200 and ordered him to forfeit about $7,000. If convicted on all counts, Kazhdan could have faced 40 years in prison.

Speaking on the doorstep of his Dania Beach, Florida, home, Kazhdan, wearing a scruffy beard in shorts and short-sleeve shirt, said the scale of his exports to Russia was minimal compared to other companies when it was put to him that he may have been assisting Russia’s drone program.

“I just don’t think that whatever this is, it’s a big deal that you should be writing this story,” Kazhdan said. “This is just comical.”

Beyond that, he would not speak about the case or his shipments to Russia.

At his November 2022 sentencing hearing, Kazhdan told the Southern Florida District judge that he started doing business with Russia after making contact with importers at a 2016 satellite conference. Soon after, the importers convinced him to skirt reporting and licensing requirements, he said.

The U.S. Department of Justice declined to comment on the case.

((This article was reported by Stephen Grey in London, Maurice Tamman in New York and Florida and by Maria Zholobova, a reporter for iStories; Additional reporting by James Pomfret in Hong Kong and Anna Mehler Paperny in Toronto; editing by Janet McBride))

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