Jan 20 (Reuters) – Federal prosecutors have seized nearly $700 million in assets from FTX founder Sam Bankman-Fried in January, largely in the form of Robinhood stock, according to a Friday court filing.
Bankman-Fried, who has been accused of stealing billions of dollars from FTX customers to pay debts incurred by his crypto-focused hedge fund, has pleaded not guilty to fraud charges. He is scheduled to face trial in October.
The Department of Justice revealed the seizure of Robinhood shares earlier this month, but it provided a more complete list of seized assets Friday, including cash held at various banks and assets deposited at crypto exchange Binance.
The ownership of the seized Robinhood shares, valued at about $525 million, has been the subject of disputes between Bankman-Fried, FTX, and bankrupt crypto lender BlockFi.
The most recent asset seizure reported by the DOJ took place on Thursday, when prosecutors seized $94.5 million in cash from an account at Silvergate Bank which was associated with FTX Digital Markets, FTX’s subsidiary in the Bahamas. The DOJ seized more than $7 million from other Silvergate accounts associated with Bankman-Fried and FTX.
The DOJ previously seized nearly $50 million from an FTX Digital Markets account at Moonstone Bank, a small bank in Washington state.
DOJ also said that assets in three Binance accounts associated with Bankman-Fried were subject to criminal forfeiture, but did not provide an estimate of the value in those accounts.
Reporting by Dietrich Knauth; Editing by Noeleen Walder and Daniel Wallis
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SAN FRANCISCO Jan 20 (Reuters) – Elon Musk, Tesla Inc’s (TSLA.O) chief executive, is likely to be called to testify on Friday in a jury trial over his 2018 Twitter post that he had “funding secured” to take the electric carmaker private, which shareholders allege cost them millions in trading losses.
The class action trial in San Francisco federal court resumed with investor Timothy Fries telling the jury how he lost $5,000 buying Tesla stock after Musk sent the tweet at the center of the lawsuit.
Musk, known for combative testimony, is expected to address why he has insisted he had Saudi investor backing for the deal, which never came together, and whether he knowingly made a materially misleading statement with his tweet.
The case is a rare securities class action trial and the plaintiffs have already cleared high legal hurdles, with U.S. Judge Edward Chen ruling last year that Musk’s post was untruthful and reckless.
Shareholders alleged that Musk lied when he sent the tweet, costing investors.
Fries told the jury that funding secured meant to him that “there had been some vetting, some critical review of those funding sources.”
Musk’s attorney, Alex Spiro, told the jury in his opening statement Wednesday that Musk believed he had financing from Saudi backers and was taking steps to make the deal happen. Fearing leaks to the media, Musk tried to protect the “everyday shareholder” by sending the tweet, which contained “technical inaccuracies,” Spiro said.
Guhan Subramanian, a Harvard Law School professor, told the jury that Musk’s behavior in 2018 lacked the hallmarks of traditional corporate dealmaking by tweeting his interest in Tesla without proper financial or legal analysis.
“Compared to the standard template it’s an extreme outlier,” said Subramanian, who called Musk’s approach “unprecedented” and “incoherent.”
A jury of nine will decide whether the tweet artificially inflated Tesla’s share price by playing up the status of funding for the deal, and if so, by how much.
The defendants include current and former Tesla directors, whom Spiro said had “pure” motives in their response to Musk’s plan.
Reporting by Tom Hals in Wilmington, Del., and Jody Godoy in San Francisco; Editing by Noeleen Walder, Peter Henderson, Matthew Lewis and Daniel Wallis
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Jody Godoy
Thomson Reuters
Jody Godoy reports on banking and securities law. Reach her at jody.godoy@thomsonreuters.com
Jan 20 (Reuters) – The lending unit of crypto firm Genesis filed for U.S. bankruptcy protection on Thursday, owing creditors at least $3.4 billion, after being toppled by a market rout along with the likes of exchange FTX and lender BlockFi.
Genesis Global Capital, one of the largest crypto lenders, froze customer redemptions on Nov. 16 after the collapse of major exchange FTX sent shockwaves through the crypto asset industry, fuelling concern that other companies could implode.
Genesis is owned by venture capital firm Digital Currency Group (DCG).
Its bankruptcy filing is the latest in a string of crypto failures triggered by a market collapse that wiped about $1.3 trillion off the value of crypto tokens last year. While bitcoin has rallied so far in 2023, the impact of the market collapse has continued to hit companies in the highly interconnected sector.
The bankruptcy “doesn’t come as a shock to the markets,” said Ivan Kachkovski, currency and crypto strategist at UBS. “It remains to be seen if the chain effect would go on.”
“However, given that the funds have already been frozen for over two months and no other large crypto company reported an associated weakness, it’s likely that the contagion would be limited.”
Genesis’ lending unit said it had both assets and liabilities in the range of $1 billion to $10 billion, and estimated it had more than 100,000 creditors in its filing with the U.S. Bankruptcy Court for the Southern District of New York.
Genesis Global Holdco, the parent group of Genesis Global Capital, also filed for bankruptcy protection, along with another lending unit Genesis Asia Pacific.
Genesis Global Holdco said in a statement that it would contemplate a potential sale, or a stock-related transaction, to pay creditors, and that it had $150 million in cash to support the restructuring.
It added that Genesis’ derivatives and spot trading, broker dealer and custody businesses were not part of the bankruptcy process, and would continue their client trading operations.
CREDITORS’ CLAIMS
Genesis owes its 50 biggest creditors $3.4 billion, according to Reuters’ calculations from the bankruptcy filing. Its largest creditor is crypto exchange Gemini, which it owes $765.9 million. Gemini was founded by the identical twin cryptocurrency pioneers Cameron and Tyler Winklevoss.
Genesis was already locked in a dispute with Gemini over a crypto lending product called Earn that the two firms jointly offered to Gemini customers.
The Winklevoss twins have said Genesis owed more than $900 million to some 340,000 Earn investors. On Jan. 10, Cameron Winklevoss called for the removal of Barry Silbert as the chief executive of Digital Currency Group.
Representations of cryptocurrencies are seen in front of displayed decreasing stock graph in this illustration taken November 10, 2022. REUTERS/Dado Ruvic/Illustration
About an hour after the bankruptcy filing, Cameron Winklevoss tweeted that Silbert and Digital Currency Group continued to deny creditors a fair deal.
“Unless Barry (Silbert) and DCG come to their senses and make a fair offer to creditors, we will be filing a lawsuit against Barry and DCG imminently,” Winklevoss said in his tweet thread.
DCG did not immediately respond to a Reuters request for comment on the tweets.
Amsterdam-based crypto exchange Bitvavo, said in December it was trying to recover 280 million euros ($302.93 million) which it had lent to Genesis.
Bitvavo said in a blog post on Friday that talks on the repayment “have not yet led to an overall agreement that works for all parties concerned” and that it would continue to negotiate.
The bankruptcy filing “brings the process of negotiations to calmer waters,” Bitvavo said.
LENDING BUSINESS
Genesis brokered digital assets for financial institutions such as hedge funds and asset managers and had almost $3 billion in total active loans at the end of the third quarter, down from $11.1 billion a year earlier, according to its website.
Last year, Genesis extended $130.6 billion in crypto loans and traded $116.5 billion in assets, according to its website.
Its two biggest borrowers were Three Arrows Capital, a Singapore-based crypto hedge fund, and Alameda Research, a trading company closely affiliated with FTX, a source told Reuters. Both are in bankruptcy proceedings.
Three Arrows debt to Genesis was assumed by its parent company Digital Currency Group (DCG), which then filed a claim against Three Arrows. DCG’s portfolio companies also include crypto asset manager Grayscale and news service CoinDesk.
Crypto lenders, which acted as the de facto banks, boomed during the pandemic. But unlike traditional banks, they are not required to hold capital cushions. Earlier this year, a shortfall of collateral forced some lenders – and their customers – to shoulder large losses.
($1 = 0.9243 euros)
Reporting by Tom Hals in Wilmington, Delaware, Akanksha Khushi, and Elizabeth Howcroft in London; Editing by Lananh Nguyen, Clarence Fernandez, Kim Coghill, Ira Iosebashvili and Sharon Singleton
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Jan 18 (Reuters) – Citigroup Inc (C.N) has discriminated against the firearms sector, the office of Texas Attorney General Ken Paxton said, making a decision that “has the effect” of Texas halting Citi’s ability to underwrite most municipal bond offerings in the state.
Republicans have been ramping up pressure on the finance industry over environmental, social and governance (ESG) investment practices. Texas enacted a law in 2021 prohibiting government contracts with entities that discriminated against the firearms industry.
“It has been determined that Citigroup has a policy that discriminates against a firearm entity or firearm trade association”, the assistant attorney general chief of the public finance division of Texas AG wrote on Wednesday in the letter seen by Reuters.
“Citi’s designation as an SB-19 discriminator has the effect of halting its ability to underwrite most municipal bond offerings in Texas,” Paxton’s office told Reuters, referring to the law.
Until further notice, The Texas AG will not approve any public security issued on or after Wednesday in which Citigroup purchases or underwrites the public security, she added in the letter.
“Citi does not discriminate against the firearms sector and believe we are in compliance with Texas law”, a Citigroup spokesperson said in an emailed statement to Reuters, adding that the company would remain engaged with the Texas AG office to review options.
In 2018, Citigroup put restrictions on new retail business clients that sell guns, requiring that they pass background checks. That followed a high school shooting in Florida in February of that year in which 17 people died.
Bloomberg News first reported the news on Thursday.
Reporting by Lavanya Ahire and Akanksha Khushi in Bengaluru,Additional reporting by Urvi Dugar and Mrinmay Dey; Editing by Bradley Perrett, Bernadette Baum and David Gregorio
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Mass redundancies, spending review beckons for Wall Street giant
Cuts to all major divisions expected, globally
Restructuring in Asian wealth unit kicks off Wednesday’s layoffs
NEW YORK/LONDON/HONG KONG, Jan 12 (Reuters) – Goldman Sachs (GS.N) began laying off staff on Wednesday in a sweeping cost-cutting drive, with around a third of those affected coming from the investment banking and global markets division, a source familiar with the matter said.
The long-expected jobs cull at the Wall Street titan is expected to represent the biggest contraction in headcount since the financial crisis. It is likely to affect most of the bank’s major divisions, with its investment banking arm facing the deepest cuts, a source told Reuters this month.
Just over 3,000 employees will be let go, the source, who could not be named, said on Monday. A separate source confirmed on Wednesday that cuts had started.
“We know this is a difficult time for people leaving the firm,” a Goldman Sachs statement on Wednesday said.
“We’re grateful for all our people’s contributions, and we’re providing support to ease their transitions. Our focus now is to appropriately size the firm for the opportunities ahead of us in a challenging macroeconomic environment.”
The cuts are part of broader reductions across the banking industry as a possible global recession looms. At least 5,000 people are in the process of being cut from various banks. In addition to the 3,000 from Goldman, Morgan Stanley (MS.N) has cut about 2% of its workforce, or 1,600 people, a source said last month while HSBC (HSBA.L) is shedding at least 200, sources previously said.
Last year was challenging across groups including credit, equities, and investment banking broadly, said Paul Sorbera, president of Wall Street recruitment firm Alliance Consulting. “Many didn’t make budgets.”
“It’s just part of Wall Street,” Sorbera said. “We’re used to seeing layoffs.”
The latest cuts will reduce about 6% of Goldman’s headcount, which stood at 49,100 at the end of the third quarter.
[1/3] A trader works at the Goldman Sachs stall on the floor of the New York Stock Exchange, April 16, 2012. REUTERS/Brendan McDermid/File Photo
The firm’s headcount had added more than 10,000 jobs since the coronavirus pandemic as markets boomed.
The reductions come as U.S. banking giants are forecast to report lower profits this week. Goldman Sachs is expected to report a net profit of $2.16 billion in the fourth-quarter, according to a mean forecast by analysts on Refinitiv Eikon, down 45% from $3.94 billion net profit in the same period a year earlier.
Shares of Goldman Sachs have partially recovered from a 10% fall last year. The stock closed up 1.99% on Wednesday, up around 6% year-to-date.
LAYOFFS AROUND GLOBE
Goldman’s layoffs began in Asia on Wednesday, where Goldman completed cutting back its private wealth management business and let go of 16 private banking staff across its Hong Kong, Singapore and China offices, a source with knowledge of the matter said.
About eight staff were also laid off in Goldman’s research department in Hong Kong, the source added, with layoffs ongoing in the investment banking and other divisions.
At Goldman’s central London hub, rainfall lessened the prospect of staff huddles. Several security personnel actively patrolled the building’s entrance, but few people were entering or leaving the property. A glimpse into the bank’s recreational area just beyond its lobby showed a handful of staffers in deep conversation but few signs of drama. Wine bars and eateries local to the office were also short of post-lunch trade, in stark contrast to large-scale layoffs of the past when unlucky staffers would typically gather to console one another and plan their next career moves.
In New York, employees were seen streaming into headquarters during the morning rush.
Goldman’s redundancy plans will be followed by a broader spending review of corporate travel and expenses, the Financial Times reported on Wednesday, as the U.S. bank counts the costs of a massive slowdown in corporate dealmaking and a slump in capital markets activity since the war in Ukraine.
The company is also cutting its annual bonus payments this year to reflect depressed market conditions, with payouts expected to fall about 40%.
Reporting by Sinead Cruise and Iain Withers in London, Selena Li in Hong Kong, Scott Murdoch in Sydney and Saeed Azhar in New York; Editing by Josie Kao and Christopher Cushing
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Jan 5 (Reuters) – Bed Bath & Beyond Inc (BBBY.O) is preparing to seek bankruptcy protection in coming weeks, people familiar with the matter said, following poor sales and an inability to compete with large online and big-box retailers.
The U.S. home goods retailer is considering skipping debt payments due Feb. 1, one of the sources said, a typical move distressed companies on the verge of bankruptcy take to conserve cash.
Shares of the retailer, once a category killer in products like small appliances and bed sheets, ended down 30% on Thursday at $1.69 after the company said it expected to report a significant third-quarter loss and that there was substantial doubt about its ability to continue as a going concern.
The company said it was exploring a range of options to address its plunging sales that included declaring bankruptcy. The retailer said it has not made any final decisions on which course to take.
Bed Bath & Beyond had no immediate comment on any bankruptcy preparations beyond its disclosure on Thursday.
The company has interest payments on roughly $1.5 billion of bonds due Feb. 1, according to securities filings. The company is considering skipping the payout to conserve cash, which would likely trigger a 30-day grace period before the company officially defaults, the people said.
Troubled retailers often seek bankruptcy protection following the holiday season to take advantage of the cash cushion provided by recent sales. Should the company seek bankruptcy protection, it would likely seek financing from existing creditors to help it navigate a court restructuring, one of the people said.
The retailer’s fortunes soured after it pursued a strategy focused on its own private label goods. Management has since reversed course to bring in national brands shoppers recognized.
But on Thursday, signs emerged that this strategy too has failed to take off with the company reporting that it expects to post a loss of $385.5 million after sales plunged 33% for the quarter ending Nov. 26, due to lower customer traffic and reduced levels of inventory availability among other factors.
The company is scheduled to report its full third quarter results on Tuesday.
“The turnaround plan put in place last year is not working. … Put bluntly, the business is moving at rapid speed in the wrong direction with bankruptcy the most likely destination,” GlobalData analyst Neil Saunders said.
Bed Bath & Beyond has enlisted turnaround and consulting firm AlixPartners LLP to help advise on options for addressing its financial woes, people familiar with the matter said.
In addition to AlixPartners, the company is being advised by restructuring lawyers at Kirkland & Ellis LLP and investment bankers at Lazard Ltd (LAZ.N), one of the people said.
AlixPartners and Lazard declined to comment. Kirkland did not immediately respond to a request for comment. In a statement to Reuters late on Thursday, Bed Bath & Beyond said it was “working with strategic advisors to evaluate all paths to regain market share and enhance liquidity” but could not comment further on specific relationships.
The company became a meme stock last year when its shares soared more than 400%. Activist investor Ryan Cohen, the chairman of GameStop Corp (GME.N), took a stake in Bed Bath & Beyond, which he later sold, sending shares crashing.
Bed Bath & Beyond in its prior financial update in the fall said it had liquidity of $850 million but had burned through $325 million in the second quarter.
The company had also been asking bondholders to swap out their holdings for new debt to give it more breathing room to turn around its business but canceled the deal on Thursday after not getting much interest from investors, according to filings made with the U.S. Securities and Exchange Commission.
Bed Bath & Beyond had earlier considered selling its valuable buybuy Baby stores that sell goods for infants and toddlers but held off in the hopes it could later fetch a higher price, Reuters reported.
buybuy Baby is the “crown jewel” asset of the company and would likely generate the most interest from buyers in case the parent company decides to sell it as part of its restructuring efforts, Michael Baker, senior research analyst at DA Davidson said, without providing a valuation on the business.
The value of the chain helped the retailer ink a $375 million loan last year, the maximum amount it could borrow.
Reporting by Aishwarya Venugopal in Bengaluru and Siddharth Cavale in New York ; Editing by Shounak Dasgupta, Subhranshu Sahu, Mark Porter and Anna Driver
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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.
NEW YORK, Dec 30 (Reuters) – Just over half of the 50 U.S. states are exhibiting signs of slowing economic activity, breaching a key threshold that often signals a recession is in the offing, new research from the St. Louis Federal Reserve Bank report said.
That report, released Wednesday, followed another report from the San Francisco Fed from earlier in the week that also delved into the rising prospect that the U.S. economy may fall into recession at some point in coming months.
The St. Louis Fed said in its report that if 26 states have falling activity within their borders, that offers “reasonable confidence” that the nation as a whole will fall into a recession.
Right now, the bank said that as measured by Philadelphia Fed data tracking the performance of individual states, 27 had declining activity in October. That’s enough to point to a looming downturn while standing short of the numbers that have been seen ahead of some other recessions. The authors noted that 35 states suffered declines ahead of the short and sharp recession seen in the spring of 2020, for example.
Meanwhile, a San Francisco Fed report, released Tuesday, observed that changes in the unemployment rate can also signal a downturn is on the way, in a signal that offers more near-term predictive value than the closely-watched bond market yield curve.
The paper’s authors said that the unemployment rate bottoms out and begins to move higher ahead of recession in a highly reliable pattern. When this shift occurs the unemployment rate is signaling the onset of recession in about eight months, the paper said.
The paper acknowledged its findings are akin to those of the Sahm Rule, named for former Fed economist Claudia Sahm, who pioneered work linking a rise in the jobless rate to economic downturns. The San Francisco Fed research, written by bank economist Thomas Mertens, said its innovation is to make the jobless rate change a forward-looking indicator.
Unlike the St. Louis Fed state data that is tipping toward a recession projection, the U.S. jobless rate has thus far remained fairly stable, and after bottoming at 3.5% in September, it held at 3.7% in both October and November.
The San Francisco Fed paper noted that the Fed, as of its December forecasts, sees the unemployment rate rising next year amid its campaign of aggressive rate hikes aimed at cooling high levels of inflation. In 2023, the Fed sees the jobless rate jumping up to 4.6% in a year where it sees only modest levels of overall growth.
If the Fed’s forecast comes to pass, “such an increase would trigger a recession prediction based on the unemployment rate,” the paper said. “Under this view, low unemployment can lead to a heightened probability of recession when the unemployment rate is expected to rise.”
Tim Duy, chief economist with SGH Macro Advisors, said he believes that to achieve what the Fed wants on the inflation front, the economy would likely “lose roughly two million jobs, which would be a recession like 1991 or 2001.”
Anxiety over the prospect of the economy falling into recession has been driven by the Fed’s forceful actions on inflation. Many critics contend that the central bank is focusing too much on inflation and not enough on keeping Americans employed. Central bank officials have countered that without a return to price stability, the economy will struggle to meet its full potential.
What’s more, in the press conference following the most recent Federal Open Market Committee meeting earlier this month, central bank leader Jerome Powell said that he didn’t view the current Fed outlook as a recession prediction given the expectation growth will remain positive. But he added much remains uncertain.
“I don’t think anyone knows whether we’re going to have a recession or not and, if we do, whether it’s going to be a deep one or not. It’s just, it’s not knowable,” Powell said.
Reporting by Michael S. Derby;
Editing by Dan Burns and Aurora Ellis
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NEW YORK, Dec 23 (Reuters) – Sam Bankman-Fried and other FTX executives received billions of dollars in secret loans from the crypto mogul’s Alameda Research, the hedge fund’s former chief told a judge when she pleaded guilty to her role in the exchange’s collapse.
Caroline Ellison, former chief executive of Alameda Research, said she agreed with Bankman-Fried to hide from FTX’s investors, lenders and customers that the hedge fund could borrow unlimited sums from the exchange, according a transcript of her Dec. 19 plea hearing that was unsealed on Friday.
“We prepared certain quarterly balance sheets that concealed the extent of Alameda’s borrowing and the billions of dollars in loans that Alameda had made to FTX executives and to related parties,” Ellison told U.S. District Judge Ronnie Abrams in Manhattan federal court, according to the transcript.
Ellison and FTX co-founder Gary Wang both pleaded guilty and are cooperating with prosecutors as part of their plea agreements. Their sworn statements offer a preview of how two of Bankman-Fried’s former associates might testify at trial against him as prosecution witnesses.
In a separate plea hearing, also on Dec. 19, Wang said he was directed to make changes to FTX’s code to give Alameda special privileges on the trading platform, while being aware that others were telling investors and customers that Alameda had no such privileges.
Wang did not specify who gave him those directions.
Nicolas Roos, a prosecutor, said in court on Thursday that Bankman-Fried’s trial would include evidence from “multiple cooperating witnesses.” Roos said Bankman-Fried carried out a “fraud of epic proportions” that led to the loss of billions of dollars of customer and investor funds.
Bankman-Fried has acknowledged risk-management failures at FTX but said he does not believe he has criminal liability. He has not yet entered a plea.
Bankman-Fried founded FTX in 2019 and rode a boom in the values of bitcoin and other digital assets to become a billionaire several times over as well as an influential donor to U.S. political campaigns.
A flurry of customer withdrawals in early November amid concerns about commingling of FTX funds with Alameda prompted FTX to declare bankruptcy on Nov. 11.
Bankman-Fried, 30, was released on Thursday on $250 million bond. His spokesperson declined to comment on Ellison and Wang’s statements.
Lawyers for Wang and Ellison declined to comment.
Ellison told the court that when investors in June 2022 recalled loans they had made to Alameda, she agreed with others to borrow billions of dollars in FTX customer funds to repay them, understanding that customers were not aware of the arrangement.
“I am truly sorry for what I did,” Ellison said, adding that she is helping to recover customer assets.
Wang also said he knew what he was doing was wrong.
The transcript of Ellison’s hearing was initially sealed out of concern that the disclosure of her cooperation could thwart prosecutors’ efforts to extradite Bankman-Fried from the Bahamas, where he lived and where FTX was based, court records showed.
Bankman-Fried was arrested in the capital Nassau on Dec. 12 and arrived in the United States on Wednesday after consenting to extradition.
A magistrate judge ordered him confined to his parents’ California home until trial.
On Friday evening, Abrams recused herself from the case, saying in a court order that the law firm Davis Polk & Wardwell LLP, where her husband is a partner, advised FTX in 2021.
The firm also represented parties that could be adverse to FTX and Bankman-Fried in other proceedings, the judge said, and while her husband had no involvement in these matters, which “were confidential and their substance is unknown to the Court,” she was recusing herself to avoid a possible conflict.
Reporting by Luc Cohen in New York; Writing by Tom Hals in Wilmington, Del.; Editing by Noeleen Walder, Matthew Lewis and Daniel Wallis
Our Standards: The Thomson Reuters Trust Principles.
Luc Cohen
Thomson Reuters
Reports on the New York federal courts. Previously worked as a correspondent in Venezuela and Argentina.
Tom Hals
Thomson Reuters
Award-winning reporter with more than two decades of experience in international news, focusing on high-stakes legal battles over everything from government policy to corporate dealmaking.
NEW YORK, Dec 16 (Reuters) – Goldman Sachs Group Inc (GS.N) is planning to cut thousands of employees to navigate a difficult economic environment, a source familiar with the matter said.
The layoffs are the latest sign that cuts are accelerating across Wall Street as dealmaking dries up. Investment banking revenues have plunged this year amid a slowdown in mergers and share offerings, marking a stark reversal from a blockbuster 2021 when bankers received big pay bumps.
Goldman Sachs had 49,100 employees at the end of the third quarter after adding significant numbers of staff during the pandemic. Its headcount will remain above pre-pandemic levels, the source said. The workforce stood at 38,300 at the end of 2019, according to a filing.
The number of employees that will be affected by the layoffs is still being discussed, and details are expected to be finalized early next year, the source said.
The bank is weighing a sharp cut to the annual bonus pool this year, a separate source familiar with the matter said. That contrasts with increases of 40% to 50% for top-performing investment bankers in 2021, Reuters reported in January, citing people with direct knowledge of the matter.
“GS needs to show that its costs are as variable as its revenues, especially after a year when it provided special rewards to top managers during the boom times,” wrote Mike Mayo, a banking analyst at Wells Fargo.
“Goldman Sachs now needs to show that it can do the same when business is not as good and that they live up to the old Wall St. adage that they ‘eat what they kill,'” he said in a note.
The company’s stock fell 1.3% in afternoon trading alongside shares of JPMorgan & Chase Co (JPM.N) and Morgan Stanley (MS.N), which fell 0.6% and 1.3%, respectively.
Goldman shares have slumped almost 10% this year. But they have outperformed the broader S&P 500 bank index (.SPXBK), which is down 24% year to date.
[1/2] The logo for Goldman Sachs is seen on the trading floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., November 17, 2021. REUTERS/Andrew Kelly/File Photo
CONSUMER BANK STRUGGLES
The latest plan would include hundreds of employees being cut from Goldman’s consumer business, a source said.
The bank signaled it was scaling back its ambitions for Marcus, the loss-making consumer unit, in October. Goldman also plans to stop originating unsecured consumer loans, a source familiar with the move told Reuters earlier this week, another sign it is stepping back from the business.
Chief Executive Officer David Solomon, who took the helm in 2018, has tried to diversify the company’s operations with Marcus. It was placed under the wealth business in October as part of a management reshuffle that also merged the trading and investment banking units.
Trading and investment banking — the traditional drivers of Goldman’s profit — accounted for nearly 65% of its revenue at the end of the third quarter, compared with 59% in the third quarter of 2018, when Solomon took the top job.
Semafor earlier on Friday reported that Goldman will lay off as many as 4,000 people as the bank struggles to meet profit targets, citing people familiar with the matter.
Goldman Sachs declined to comment.
The latest plans come after Goldman cut about 500 employees in September, after pausing the annual practice for two years during the pandemic, a source familiar with the matter told Reuters at the time.
The investment bank had first warned in July that it might slow hiring and reduce expenses.
Global banks, including Morgan Stanley (MS.N) and Citigroup Inc (C.N), have reduced their workforces in recent months as a dealmaking boom on Wall Street fizzled out due to high interest rates, tensions between the United States and China, the war between Russia and Ukraine, and soaring inflation.
Reporting by Saeed Azhar and Lananh Nguyen; Additional reporting by Noor Zainab Hussain and Mehnaz Yasmin in Bengaluru; Editing by Mark Porter
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LONDON, Dec 6 (Reuters) – Goldman Sachs (GS.N) plans to spend tens of millions of dollars to buy or invest in crypto companies after the collapse of the FTX exchange hit valuations and dampened investor interest.
FTX’s implosion has heightened the need for more trustworthy, regulated cryptocurrency players, and big banks see an opportunity to pick up business, Mathew McDermott, Goldman’s head of digital assets, told Reuters.
Goldman is doing due diligence on a number of different crypto firms, he added, without giving details.
“We do see some really interesting opportunities, priced much more sensibly,” McDermott said in an interview last month.
FTX filed for Chapter 11 bankruptcy protection in the United States on Nov. 11 after its dramatic collapse, sparking fears of contagion and amplifying calls for more crypto regulation.
“It’s definitely set the market back in terms of sentiment, there’s absolutely no doubt of that,” McDermott said. “FTX was a poster child in many parts of the ecosystem. But to reiterate, the underlying technology continues to perform.”
While the amount Goldman may potentially invest is not large for the Wall Street giant, which earned $21.6 billion last year, its willingness to keep investing amid the sector shakeout shows it senses a long term opportunity.
Its CEO David Solomon told CNBC on Nov. 10, as the FTX drama was unfolding, that while he views cryptocurrencies as “highly speculative”, he sees much potential in the underlying technology as its infrastructure becomes more formalized.
Rivals are more sceptical.
“I don’t think it’s a fad or going away, but I can’t put an intrinsic value on it,” Morgan Stanley (MS.N) CEO James Gorman said at the Reuters NEXT conference on Dec. 1.
HSBC (HSBA.L) CEO Noel Quinn, meanwhile, told a banking conference in London last week he has no plans to expand into crypto trading or investing for retail customers.
Goldman has invested in 11 digital asset companies that provide services such as compliance, cryptocurrency data and blockchain management.
McDermott, who competes in triathlons in his spare time, joined Goldman in 2005 and rose to run its digital assets business after serving as head of cross asset financing.
His team has grown to more than 70 people, including a seven-strong crypto options and derivatives trading desk.
Goldman Sachs has also together with MSCI and Coin Metrics launched data service datonomy, aimed at classifying digital assets based on how they are used.
The firm is also building its own private distributed ledger technology, McDermott said.
‘TRUSTED’ PLAYERS
The global cryptocurrency market peaked at $2.9 trillion in late 2021, according to data site CoinMarketCap, but has shed about $2 trillion this year as central banks tightened credit and a string of high-profile corporate failures hit. It last stood at $865 billion on Dec. 5.
The ripple effects from FTX’s collapse have boosted Goldman’s trading volumes, McDermott said, as investors sought to trade with regulated and well capitalized counterparties.
“What’s increased is the number of financial institutions wanting to trade with us,” he said. “I suspect a number of them traded with FTX, but I can’t say that with cast iron certainty.”
Goldman also sees recruitment opportunities as crypto and tech companies shed staff, McDermott said, although the bank is happy with the size of its team for now.
Others also see the crypto meltdown as a chance to build their businesses.
Britannia Financial Group is building its cryptocurrency-related services, its chief executive Mark Bruce told Reuters.
The London-based company aims to serve customers who are eager to diversify into digital currencies, but who have never done so before, Bruce said. It will also cater to investors who are very familiar with the assets, but have become nervous about storing funds at crypto exchanges since FTX’s collapse.
Britannia is applying for more licenses to provide crypto services, such as doing deals for wealthy individuals, he said
“We have seen more client interest since the demise of FTX,” he said. “Customers have lost trust in some of the younger businesses in the sector that purely do crypto, and are looking for more trusted counterparties.”
Reporting by Iain Withers and Lawrence White, Editing by Lananh Nguyen and Alexander Smith
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