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U.S. House to vote to block rail strike despite labor objections

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WASHINGTON/LOS ANGELES, Nov 29 (Reuters) – The U.S. House of Representatives was set to vote Wednesday to block a rail strike that could potentially happen as early as Dec. 9, after President Joe Biden warned of dire economic consequences and massive job losses.

House Speaker Nancy Pelosi said lawmakers will vote Wednesday to impose a tentative contract deal struck in September on a dozen unions representing 115,000 workers.

Pelosi said the House would vote separately on Wednesday on a proposal to give seven days of paid sick leave to railroad employees.

“I don’t like going against the ability of unions to strike but weighing the equities, we must avoid a strike,” she said Tuesday after a meeting with Biden.

Biden had warned Monday of a catastrophic economic impact if railroad service ground to a halt, saying up to 765,000 Americans could lose their jobs in the first two weeks of a strike.

“Congress, I think, has to act to prevent it. It’s not an easy call, but I think we have to do it. The economy is at risk,” Biden said.

Despite the close ties between unions and the Democratic Party, several labor leaders criticized Biden asking Congress to impose a contract that workers in four out of 12 unions rejected over its lack of paid sick leave.

The Brotherhood of Maintenance of Way Employes, one of four unions that voted against the contract, objected to Biden’s call to Congress to intervene, saying “the railroad is not a place to work while you’re sick. It’s dangerous…. it is unreasonable and unjust to insist a person perform critical work when they are unwell.”

There are no paid sick days under the tentative deal after unions asked for 15 and railroads settled on one personal day.

[1/2] U.S. President Joe Biden meets with congressional leaders including House Republican leader Kevin McCarthy, Senate Majority Leader Chuck Schumer, Speaker of the House Nancy Pelosi and Senate Republican leader Mitch McConnell at the White House in Washington, U.S., November 29, 2022. REUTERS/Kevin Lamarque TPX IMAGES OF THE DAY

The union push for paid sick time won support on Capitol Hill, where Senator Bernie Sanders threatened to delay the railroad bill unless he got a vote on the sick time issue.

“Guaranteeing 7 paid sick days to rail workers would cost the rail industry a grand total of $321 million a year – less than 2% of its profits,” Sanders said. “Please don’t tell me the rail industry can’t afford it. Rail companies spent $25.5 billion on stock buybacks and dividends this year.”

Regulators and shippers have accused railroads of cutting staff to improve profitability. The railroads oppose giving their workers paid sick time because they would have to hire more staff. The carriers involved include Union Pacific Corp (UNP.N), Berkshire Hathaway Inc’s (BRKa.N) BNSF, CSX Corp (CSX.O), Norfolk Southern Corp (NSC.N) and Kansas City Southern.

The measure needs a simple majority to pass the House. The bill would require a supermajority of 60 out of 100 votes to pass the Senate.

“I can’t in good conscience vote for a bill that doesn’t give rail workers the paid leave they deserve,” Representative Jamaal Bowman, a Democrat, said on Twitter.

Biden on Monday praised the proposed contract for including a 24% wage increase over five years and five annual $1,000 lump-sum payments.

House Republican Leader Kevin McCarthy also criticized the effort but said “I think it will pass, but it’s unfortunate that this is how we’re running our economy today.”

A rail traffic stoppage could freeze almost 30% of U.S. cargo shipments by weight, stoke already surging inflation and cost the American economy as much as $2 billion per day.

Brian Dodge, president of the Retail Industry Leaders Association (RILA), said the idea of a rail shutdown “is just absolutely catastrophic” after companies spent the last year and a half trying to untangle gridlock in the supply chain. “We’d be setting ourselves back down that same path and it would take just as long to untangle the next time,” he said.

The U.S. Congress has passed laws to delay or prohibit railway and airline strikes multiple times in recent decades.

Reporting by David Shepardson in Washington and Lisa Baertlein in Los Angeles Steve Holland and Doina Chiacu; Writing by Kanishka Singh in Washington; Editing by Jonathan Oatis, Heather Timmons, Lisa Shumaker and Simon Cameron-Moore

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Business

Crypto lender BlockFi files for bankruptcy, cites FTX exposure

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  • Filing follows weeks after FTX collapse
  • FTX listed as BlockFi’s No.2 creditor
  • Bitcoin down over 70% from 2021 peak

Nov 28 (Reuters) – Cryptocurrency lender BlockFi has filed for Chapter 11 bankruptcy protection, it said on Monday, the latest crypto casualty after the firm was hurt by exposure to the spectacular collapse of the FTX exchange earlier this month.

The filing in a New Jersey court comes as crypto prices have plummeted. The price of bitcoin , the most popular digital currency by far, is down more than 70% from a 2021 peak.

“BlockFi’s Chapter 11 restructuring underscores significant asset contagion risks associated with the crypto ecosystem,” said Monsur Hussain, senior director at Fitch Ratings.

New Jersey-based BlockFi, founded by fintech executive-turned-crypto entrepreneur Zac Prince, said in a bankruptcy filing that its substantial exposure to FTX created a liquidity crisis. FTX, founded by Sam Bankman-Fried, filed for protection in the United States earlier in November after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.

“Although the debtors’ exposure to FTX is a major cause of this bankruptcy filing, the debtors do not face the myriad issues apparently facing FTX,” said the first day bankruptcty filing by Mark Renzi, managing director at Berkeley Research Group, the proposed financial advisor for BlockFi. “Quite the opposite.”

BlockFi said the liquidity crisis was due to its exposure to FTX via loans to Alameda, a crypto trading firm affiliated with FTX, as well as cryptocurrencies held on FTX’s platform that became trapped there. BlockFi listed its assets and liabilities as being between $1 billion and $10 billion.

Renzi said that BlockFi had sold a portion of its crypto assets earlier in November to fund its bankruptcy. Those sales raised $238.6 million in cash, and BlockFi now has $256.5 million in cash on hand.

In a court filing on Monday, BlockFi listed FTX as its second-largest creditor, with $275 million owed on a loan extended earlier this year. It said it owes money to more than 100,000 creditors. The company also said in a separate filing it plans to lay off two-thirds of its 292 employees.

Under a deal signed with FTX in July BlockFi was to receive a $400 million revolving credit facility while FTX got an option to buy it for up to $240 million.

BlockFi’s bankruptcy filing also comes after two of BlockFi’s largest competitors, Celsius Network and Voyager Digital , filed for bankruptcy in July citing extreme market conditions that had resulted in losses at both companies.

Crypto lenders, the de facto banks of the crypto world, boomed during the pandemic, attracting retail customers with double-digit rates in return for their cryptocurrency deposits.

Crypto lenders are not required to hold capital or liquidity buffers like traditional lenders and some found themselves exposed when a shortage of collateral forced them – and their customers – to shoulder large losses.

BlockFi’s first bankruptcy hearing is scheduled to take place on Tuesday FTX did not respond to a request for comment.

CREDITOR LIST

BlockFi’s largest creditor is Ankura Trust, a company that represents creditors in stressed situations, and is owed $729 million. Valar Ventures, a Peter Thiel-linked venture capital fund, owns 19% of BlockFi equity shares.

BlockFi also listed the U.S. Securities and Exchange Commission as one of its largest creditors, with a $30 million claim. In February, a subsidiary of BlockFi agreed to pay $100 million to the SEC and 32 states to settle charges in connection with a retail crypto lending product the company offered to nearly 600,000 investors.

Bain Capital Ventures and Tiger Global co-led BlockFi’s March 2021 funding round, according to a press release issued by BlockFi at the time. Both firms did not immediately respond to a request for comment.

In a blog post, BlockFi said its Chapter 11 cases will enable the company to stabilize its business and maximize value for all stakeholders.

“Acting in the best interest of our clients is our top priority and continues to guide our path forward,” BlockFi said.

In its bankruptcy filing, BlockFi said it had hired Kirkland & Ellis and Haynes & Boone as bankruptcy counsel.

BlockFi had earlier paused withdrawals from its platform.

In a filing, Renzi said that Blockfi intends to seek authority to honor client withdrawal requests from its customer wallet accounts, in which crypto assets are held in custody. However, the company did not disclose its plans for how it might treat withdrawal requests from its other products, including its interest-bearing accounts.

“BlockFi clients may ultimately recover a substantial portion of their investments,” Renzi said in the filing.

ORIGINS

BlockFi was founded in 2017 by Prince, who is currently the company’s chief executive officer, and Flori Marquez. Though headquartered in Jersey City, BlockFi also has offices in New York, Singapore, Poland and Argentina, according to its website.

In July, Prince had tweeted that “it’s time to stop putting

BlockFi in the same bucket / sentence as Voyager and Celsius.”

“Two months ago we looked the ‘same.’ They shut down and have impending losses for their clients,” he said.

According to a profile of BlockFi published earlier this year by Inc, Prince was raised in San Antonio, Texas, and financed his college education at the University of Oklahoma and Texas State University with winnings from online poker tournaments. Before starting BlockFi with Marquez, he held jobs at Orchard Platform, a broker dealer, and at Zibby, a lease-to-own lender now called Katapult (KPLT.O).

Marquez previously worked at Bond Street, a small business lending outfit that was folded in to Goldman Sachs (GS.N) in 2017, according to Inc.

Reporting by Hannah Lang in Washington, Niket Nishant and Manya Saini in Bengaluru and Elizabeth Howcroft in London
Additional reporting by Dietrich Knauth, Editing by Megan Davies, Conor Humphries, Matthew Lewis and Anna Driver

Our Standards: The Thomson Reuters Trust Principles.

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Business

Elon Musk trial opens to decide fate of his $56 billion Tesla pay

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WILMINGTON, Del, Nov 14 (Reuters) – A trial opened Monday over shareholder allegations that Tesla Inc Chief Executive Elon Musk’s $56 billion pay package was rigged with easy performance targets and that investors were duped into approving it, with Musk slated to take the stand later this week.

A Tesla (TSLA.O) shareholder hopes to prove during the five-day trial that Musk used his dominance over the electric vehicle maker’s board to dictate terms of the 2018 package, which did not even require him to work at Tesla full-time.

Musk, the world’s richest person, will testify Wednesday, Greg Varallo, an attorney for shareholder Richard Tornetta, told a court in Wilmington, Delaware, on Monday.

The trial began with Ira Ehrenpreis, a Tesla board member since 2007, taking the stand to describe the early years of the company and Musk’s role.

“I was very impressed with his vision for this endeavor,” said Ehrenpreis.

Tornetta has asked the court to rescind the pay package, which is six times larger than the top 200 CEO salaries combined in 2021, according to Amit Batish of research firm Equilar.

Musk and Tesla’s directors, who are also defendants, have denied the allegations. They argued the pay package did what it aimed to do — ensure that the entrepreneur successfully guided Tesla through a critical period, which helped drive the stock tenfold higher.

The case will be decided by Chancellor Kathaleen McCormick of Delaware’s Court of Chancery. She oversaw the legal dispute between Twitter Inc (TWTR.MX) and Musk that ended with his purchase of the social media platform for $44 billion last month.

The Tesla shareholder lawsuit argues that the pay package should have required Musk to work full-time at Tesla. The company’s shareholders have become concerned that Musk is distracted by Twitter, which he has warned might not survive an economic downturn.

Musk told a business conference on the sidelines of the G20 summit in Bali, Indonesia, on Monday that he had too much on his plate at the moment.

Legal experts said Musk is in a better legal position in the pay case than he was in Twitter’s lawsuit, which prevented him from walking away from the takeover.

Boards have wide latitude to set executive compensation, according to legal experts.

However, directors must meet more stringent legal tests if the pay package involves a controlling shareholder, and part of this trial is likely to focus on whether that description fits Musk. While he owned only 21.9% of Tesla in 2018, plaintiffs are likely to cite what is seen as his domineering personality and ties to directors.

In all, 19 witnesses are scheduled to testify, including directors and executives from 2018, compensation experts, and advisors who helped craft the pay package.

The disputed package allows Musk to buy 1% of Tesla’s stock at a deep discount each time escalating performance and financial targets are met. Otherwise, Musk gets nothing.

Tesla has hit 11 of the 12 targets as its value ballooned briefly to more than $1 trillion from $50 billion, according to court papers.

A decision will likely take around three months after the trial and could be appealed to the Delaware Supreme Court.

Reporting by Tom Hals in Wilmington, Delaware; Editing by David Gregorio and Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

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.

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Business

Japanese yen jumps as traders suspect intervention

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TOKYO/LONDON/NEW YORK, Oct 21 (Reuters) – Japanese authorities likely intervened in markets to stem the slide of the country’s battered currency on Friday, market participants said, following an unexpected jump in the yen against the dollar.

The yen rose as high as 144.50 per dollar on Friday, up more than 7 yen from a 32-year low of 151.94 yen per dollar, touched earlier in the session. The dollar was last down 1.8% at 147.34 yen.

“It’s very clearly the Ministry of Finance stepping in to sell dollar-yen,” said Mazen Issa, senior FX strategist at TD Securities in New York.

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Karl Schamotta, chief market strategist, at Corpay in Toronto concurred. “We are hearing large blocks are being traded,” he said. “That typically means either larger institutions are moving money or that a central bank is intervening in size. The clearest evidence is just the scale of dollar selling that is happening.”

The Nikkei, citing a source, also said Japan had intervened to buy yen and sell dollars.

Japan’s Ministry of Finance declined to comment.

If confirmed, this would be the second time since September that Japan has intervened in the currency market to shore up the yen.

The currency, down about 22% against the dollar this year, has been battered as the Bank of Japan sticks to an ultra-loose monetary policy, while the U.S. Federal Reserve and other major central banks aggressively raise interest rates.

The falling yen is pushing up import costs and households’ living expenses, piling pressure on Prime Minister Fumio Kishida to stop the relentless fall.

Reuters Graphics

WARNING SPECULATORS

While Bank of Japan Governor Haruhiko Kuroda has repeatedly ruled out changing the policy stance, policymakers have been vocal with their concerns.

In a speech on Friday, Kuroda stressed the central bank’s resolve to keep rates low. “Uncertainty over Japan’s economic outlook is extremely high,” Kuroda said. “We must closely watch the impact financial and currency market moves could have on Japan’s economy and price.

Japanese Finance Minister Shunichi Suzuki said earlier on Friday that the authorities were dealing with currency speculators “strictly”.

“We cannot tolerate excessive moves by speculators. We will respond appropriately while watching currency market movements with a high sense of urgency,” Suzuki said.

TD’s Issa said the market intervention happened at “a very illiquid time”, when traders in London were headed home for the weekend.

“It seems like it is designed to inflict as much pain as possible on, they like to use the term, speculators,” Issa said.

RARE MOVES

Japan has rarely intervened in currency markets. Before the September intervention, the last time it stepped in to support the currency was during the Asian financial crisis of 1997 to 1998.

It spent up to a record 2.8 trillion yen ($19.7 billion) – equivalent to half its annual defence spending – in the intervention last month. read more

Speculation that Japan would step into the market again had grown over the past week as yen weakened beyond a key psychological level of 150 per dollar on Thursday for the first time since August 1990.

While authorities have denied having a line-in-the-sand in mind, political factors mean they do need to be mindful of defending psychologically important thresholds.

They also look at technical charts for key support levels for the Japanese currency which, if broken, could accelerate its decline.

Some market participants have pointed to the dollar/yen’s July 1990 high above 152 as the next threshold, then 155.

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Reporting by Tetsushi Kajimoto and Leika Kihara in TOKYO, John McCrank, Saqib Iqbal Ahmed and Gertrude Chavez in NEW YORK and Dhara Ranasinghe in LONDON; Additional reporting by Kantaro Komiya and Sakura Murakami
Editing by Chang-Ran Kim, Shri Navaratnam, Kirsten Donovan and Diane Craft

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Business

Trump-tied SPAC delays vote after falling short on shareholder support

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NEW YORK, Oct 10 (Reuters) – The blank-check acquisition firm that agreed to merge with former U.S. President Donald Trump’s social media company postponed on Monday its shareholder vote to Nov. 3 after failing to garner enough support to win a 12-month extension.

At least 65% of the shareholders of Digital World Acquisition Corp (DWAC.O) needed to agree to the extension. The special purpose acquisition company (SPAC) opted to push back the deadline to try to find more votes.

Digital World, which had already pushed back the deadline for its shareholders to vote on the 12-month extension several times over the past month, fell short of that threshold on Monday.

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At stake is an over $1 billion private investment in public equity (PIPE) financing that Trump Media & Technology Group (TMTG) stands to receive from Digital World, which inked a go-public deal with the social media company in October 2021.

Digital World last month said it had received termination notices from PIPE investors who were pulling out about $139 million of the total financing commitment.

The transaction with TMTG has been on hold amid civil and criminal investigations into the circumstances around the deal. Digital World has not yet received approval from the U.S. Securities and Exchange Commission (SEC), which is reviewing its disclosures on the deal.

Digital World is set to liquidate on Dec. 8, after managing to extend its life by three months in September.

Reuters reported last month that executives behind Digital World had failed to pay Saratoga Proxy Consulting, their proxy solicitors, for its work rallying shareholders for the vote.

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Reporting by Echo Wang in New York, additional reporting by Svea Herbst-Bayliss; Editing by Will Dunham

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Business

Kim Kardashian pays $1.26 million fine for paid crypto ad, SEC says

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WASHINGTON, Oct 3 (Reuters) – Kim Kardashian has promoted everything from appetite-suppressing lollipops to melon-flavored liqueur to toilet paper, but it was her foray into the murky world of cryptocurrencies that got her into hot water.

The reality television star and influencer has agreed to settle charges of unlawfully touting a crypto security and to pay $1.26 million in penalties and fees, the U.S. Securities and Exchange Commission said on Monday.

Kardashian, who has 330 million followers on Instagram and 73.7 million followers on Twitter, failed to disclose that she was paid $250,000 by crypto company EthereumMax to publish an Instagram post about its EMAX tokens, the SEC said.

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The SEC in November 2017 warned celebrities looking to cash in on the emerging digital asset space that U.S. rules require they disclose when they are being paid to endorse crypto tokens.

Since then it has pursued a handful of other celebrities, including action film star Steven Seagal, music producer “DJ Khaled” and boxer Floyd Mayweather Jr. for breaking that rule, but Kardashian is arguably the most high profile. read more

Her post contained a link to the EthereumMax website, which provided instructions for potential investors to purchase EMAX tokens. “Sharing what my friends just told me about the EthereumMax token!” the post read.

Under U.S. law, people who tout a certain stock or crypto security need to disclose not only that they are getting paid to do so, but also the amount, the source and the nature of those payments, SEC Chair Gary Gensler said on Monday.

“This was really to protect the investing public – when somebody is touting that stock and whether that’s a celebrity or an influencer or the like, and that’s at the core of what this is about,” Gensler said in an interview with CNBC.

Kim Kardashian arrives on the red carpet for the annual White House Correspondents’ Association Dinner in Washington, U.S., April 30, 2022. REUTERS/Tom Brenner

“I want to acknowledge Miss Kardashian cooperating and ongoing cooperation. We really appreciate that,” Gensler added.

Kardashian has agreed to pay the charge without admitting or denying the SEC’s findings. Her lawyer Michael Rhodes said Kardashian was pleased to have resolved the case.

“She wanted to get this matter behind her to avoid a protracted dispute. The agreement she reached with the SEC allows her to do that so that she can move forward with her many different business pursuits,” Rhodes said in a statement.

ONGOING LAWSUIT

Kardashian is also named, along with boxer Mayweather and former basketball star Paul Pierce, in an ongoing lawsuit filed in January by investors who allege they suffered losses after the celebrities promoted EMAX. read more

EMAX tokens have declined around 98% since June 13, 2021, when Kardashian posted about them on Instagram to her then 225 million followers, according to the website CoinMarketCap.com.

Last month, Kardashian, who has expanded her footprint in the world of finance, launched a new private equity firm focused on investing in consumer and media businesses.

Regulating cryptocurrency markets has been high on the SEC chair’s agenda this year, as prices of digital assets suffer wild swings due to heightened recession fears, rising interest rates and geopolitical turmoil. read more read more

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Reporting by Doina Chiacu in Washington, Manya Saini in Bengaluru; additional reporting by John McCrank in New York; Editing by Louise Heavens, Alexander Smith and Aurora Ellis

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Business

Barclays hit by $361 million U.S. penalty for ‘staggering’ blunder

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Sept 30 (Reuters) – British lender Barclays (BARC.L) agreed a $361 million penalty with U.S. regulators on Thursday for “staggering” failures that led it to oversell $17.7 billion of structured products, racking up further costs for an error that has blighted CEO C.S. Venkatakrishnan’s first year in charge.

The bank said after London market close on Friday that its own review led by external lawyers into the error had also concluded, adding it would consider individual accountabilities and whether to take disciplinary action or dock pay packets based on the findings.

Barclays’ shares closed down 0.2% on the day.

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The conduct concerned dates back to March this year when Barclays disclosed that it had accidentally oversold complex structured and exchange-traded notes, overshooting by about 75% a $20.8 billion limit on such sales it had agreed with the Securities and Exchange Commission.

The bank had failed to implement any internal controls to track such transactions in real time, the SEC found.

“While we acknowledge Barclays’ efforts to identify, disclose and remediate this conduct, the control deficiencies and the scope of the conduct at issue here was simply staggering,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement.

Barclays will pay the penalty without admitting or denying the SEC’s findings, it said.

Barclays said its review found the over-issuance happened primarily because of a failure to identify and escalate to senior executives the consequences of a change in its issuer status and because of a decentralised structure for securities issuances.

The error was not due to “a general lack of attention to controls by Barclays”, the bank said its review concluded.

Buyers of the notes, considered “unregistered securities,” had the right to demand Barclays buy back the products at the original price plus interest. The bank took a charge of 1.3 billion pounds in the second quarter to cover the costs of buying back the securities, denting its profits. read more

On Thursday, the SEC said Barclays had agreed to pay a $200 million civil penalty for the control lapses. In addition, it agreed to pay disgorgement and interest of more than $161 million, although the regulator said that additional charge was satisfied by the buyback offer.

While the SEC settlement helps draw a line under the incident, which has been an embarrassment for Venkatakrishnan – known at the bank as ‘Venkat’ – it still faces private litigation relating to the incident. read more

Barclays also still has to outline the final costs of its so-called rescission offer to buy back the securities it sold in error. The bank said on Friday the full financial impact would be “materially in line” with that disclosed in its half-year financial results, with further details in its third quarter results on Oct 26.

Barclays said this month that investors had submitted claims for $7 billion out of the $17.7 billion worth of securities it over-sold. read more

WELL-SEASONED ISSUER

Under a previous enforcement settlement Barclays agreed with the SEC in 2017, the bank was stripped of its “well known seasoned issuer” status that had allowed it to sell notes in the United States with flexible filing requirements.

As a result, Barclays had to quantify the total number of securities that it anticipated offering and selling and pay registration fees for those offerings in advance. In August 2019, the bank and the SEC agreed Barclays could offer or sell approximately $20.8 billion of securities, for a period of three years.

Given this requirement, staff knew they had to keep close track of actual offers and sales of securities against the amount of registered offers and sales on a real-time basis, but the bank failed to establish a mechanism to do this, the SEC said.

Around March 9, staff realized that they had oversold the agreed amount of securities and alerted regulators a few days later, the SEC said.

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Reporting by John McCrank in New York, Kanishka Singh in Washington and Iain Withers in London; editing by Deepa Babington, Jason Neely and Nick Zieminski

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Business

Exclusive: U.S. regulators to vet Alibaba, other Chinese firms’ audits -sources

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  • Alibaba notified of U.S. audit inspection -sources
  • Vetting of U.S.-listed Chinese firms’ audits starts next month
  • Follows landmark U.S.-China audit deal
  • Alibaba shares fall nearly 3%

HONG KONG, Aug 31 (Reuters) – U.S. regulators have selected e-commerce giant Alibaba Group Holding Ltd (9988.HK) and other U.S.-listed Chinese companies for audit inspections starting next month, three sources familiar with the matter said.

The move follows Friday’s landmark audit deal between Beijing and Washington allowing U.S. regulators to vet accounting firms in mainland China and Hong Kong, potentially ending a long-running dispute that threatened to boot more than 200 Chinese companies from U.S. stock exchanges. read more

Alibaba has been notified that it is among the first batch of Chinese companies whose audits will be inspected by the U.S. audit watchdog – Public Company Accounting Oversight Board (PCAOB) – in Hong Kong, the sources told Reuters.

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PwC, the accounting firm of China’s biggest e-commerce company, has also been informed of the audit work inspection, said the sources, declining to be identified due to confidentiality constraints.

Alibaba did not respond to a request for comment while a PwC spokesperson said it was company policy not to comment on any client matters.

A PCAOB spokesperson said the board did not comment on inspections. The China Securities Regulatory Commission (CSRC) did not immediately respond to a request for comment.

Alibaba’s U.S.-listed shares closed down nearly 3% on Tuesday after the Reuters report, having been up about 1% in pre-market trade. Its Hong Kong shares slumped more than 3% in Wednesday morning trade while tech giants listed in the city (.HSTECH) dropped nearly 2%.

U.S. regulators have for more than a decade demanded access to audit papers of U.S.-listed Chinese companies, but Beijing has been reluctant to let U.S. regulators inspect its accounting firms, citing national security concerns.

Alibaba, which went public in New York in 2014 in what was at the time the largest listing in history, is the most valuable Chinese firm listed in the United States with a market value of $248 billion as of Tuesday.

NO SPECIAL TREATMENT

The PCAOB said on Friday that the watchdog had notified the selected companies, without naming them, and its officials are expected to land in Hong Kong, where the inspections will take place, by mid-September.

The regulator, which oversees audits of U.S.-listed companies, would select companies based on risk factors, such as size and sector, and that no companies could expect special treatment, according to the PCAOB. read more

Reuters could not immediately determine how many and which other Chinese companies were in the first batch of U.S. inspections.

Founded in 1999, Alibaba counts e-commerce as its key business and has expanded into fast-growing sectors such as cloud services and internet of things in recent years. It also owns AutoNavi Holdings Ltd, a large Chinese digital mapping and navigation firm.

In July, it was added to the U.S. Securities and Exchange Commission’s (SEC) list of Chinese companies that might be delisted for not complying with audit requirements. read more

The list now has more than 160 Chinese companies including fellow e-commerce group JD.com Inc (9618.HK) and electric vehicle maker Nio Inc .

Current U.S. rules stipulate that Chinese companies that are not in compliance with audit working papers requests will be suspended from trading in the United States in early 2024.

Days before being added to the SEC’s delisting watchlist, Alibaba said it planned to add a primary listing in Hong Kong to its New York presence, targeting investors in mainland China. read more

Already present on the Hong Kong bourse with a secondary listing since 2019, the tech behemoth said it expects the primary listing to be completed by the end of 2022.

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Reporting by Julie Zhu in Hong Kong; Additional reporting by Katanga Johnson in Washington; Editing by Sumeet Chatterjee and Christopher Cushing

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Business

Twitter misled U.S. regulators on hackers, spam, whistleblower says

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Aug 23 (Reuters) – Twitter Inc (TWTR.N) misled federal regulators about its defenses against hackers and spam accounts, the social media company’s former security chief Peiter Zatko said in a whistleblower complaint.

In an 84-page complaint, Zatko, a famed hacker widely known as “Mudge,” alleged Twitter falsely claimed it had a solid security plan, according to documents relayed by congressional investigators. Twitter’s shares fell 7.3% to close at $39.86.

The document alleges Twitter prioritized user growth over reducing spam, with executives eligible to win individual bonuses of as much as $10 million tied to increases in daily users, and nothing explicitly for cutting spam.

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Twitter labeled the complaint a “false narrative.” The social media company has been battling Elon Musk in court after the world’s richest person attempted to pull out of a $44-billion deal to buy Twitter. Musk said it failed to provide details about the prevalence of bot and spam accounts.

Tesla Inc (TSLA.O) Chief Executive Musk had offered to buy Twitter for $54.20 per share, saying he believed it could be a global platform for free speech.

Twitter and Musk have sued each other, with Twitter asking a judge on the Delaware Court of Chancery to order Musk to close the deal. A trial is scheduled for Oct. 17.

Zatko filed the complaint last month with the U.S. Securities and Exchange Commission and the Department of Justice, as well as the Federal Trade Commission (FTC). The complaint was also sent to congressional committees.

“We are reviewing the redacted claims that have been published but what we have seen so far is a false narrative that is riddled with inconsistencies and inaccuracies,” Twitter Chief Executive Parag Agrawal told employees in a memo.

The Senate Judiciary Committee’s top Republican, Chuck Grassley, said the complaint raised serious national security concerns and privacy issues and needed to be investigated.

“Take a tech platform that collects massive amounts of user data, combine it with what appears to be an incredibly weak security infrastructure, and infuse it with foreign state actors with an agenda, and you’ve got a recipe for disaster,” he said.

The FTC declined to comment. A spokesperson for the Senate Intelligence Committee said it had received the complaint and was setting up a meeting to discuss the allegation.

A Twitter logo is seen outside the company’s headquarters in San Francisco, California, U.S., April 25, 2022. REUTERS/Carlos Barria/File Photo

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Twitter’s real regulatory risk lies in whether the documentary evidence shows “knowing or reckless misleading” of investors or regulators, said Howard Fischer, a partner at Moses & Singer and a former SEC attorney.

‘GIVE A LITTLE WHISTLE’

Musk could not be reached for comment but reacted on Twitter with memes and emoji of a robot. Musk’s legal team has subpoenaed Zatko, CNN reported after the whistleblower disclosure was made public.

American hackers have admired Zatko since the 1990s, when he was credited with inventing a tool to crack passwords. He later used his hacking chops to become a sought-after security consultant and with other rebellious techies of the era, transitioned to top government and boardroom positions.

The whistleblower document says that after the Jan. 6 riots, the incoming Biden administration offered him “a day-one appointed position as Chief Information Security Officer for the United States,” which he turned down.

Cybersecurity leaders expressed widespread support for Zatko, and many deplored Twitter’s reaction to his revelations.

Robert Lee, founder of industrial cybersecurity company Dragos, said it was “one of the very rare times based on who it is I don’t even need to know a detail to form an opinion,” he said on Twitter. “If Mudge is making this type of claim, it deserves the investigation.”

In January, Twitter said Zatko was no longer its head of security, two years after his appointment to the role.

On Tuesday, a Twitter spokesperson said Zatko was fired for “ineffective leadership and poor performance,” adding his allegations appeared designed to capture attention and inflict harm on Twitter, its customers and its shareholders.

Debra Katz and Alexis Ronickher, attorneys for Zatko, said in a statement that throughout his tenure at Twitter, he repeatedly raised concerns about inadequate information security systems to the company’s executive committee, CEO and board. Twitter did not respond to a request for comment on that statement.

(This story corrects closing price and removes extraneous percentage symbol in paragraph two)

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Reporting by Chavi Mehta, Ankur Banerjee and Tiyashi Datta in Bengaluru, Peter Henderson in Oakland and Raphael Satter in Washington; Additional reporting by Rick Cowan in Washington; Writing by Ankur Banerjee; Editing by Kenneth Li, Saumyadeb Chakrabarty, Sriraj Kalluvila and David Gregorio

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Business

Alibaba added to SEC’s delisting watchlist, shares fall

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July 29 (Reuters) – Alibaba Group Holding Ltd (9988.HK), on Friday became the latest company to be added to the U.S. Securities and Exchange Commission’s list of Chinese companies that might be delisted.

Alibaba’s shares were down 11% at $89.37 at the closing bell, ending the month 21.4% lower. The e-commerce giant’s shares were already feeling the pressure after reports suggested Ma was planning to cede control of financial technology firm Ant, an affiliate of Alibaba. read more

Alibaba is among more than 270 Chinese companies listed in New York identified as being at risk of delisting under the Holding Foreign Companies Accountable Act (HFCAA), intended to address a long-running dispute over the auditing compliance of U.S.-listed Chinese firms.

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U.S. regulators have been demanding complete access to audit working papers of New York-listed Chinese companies, which are stored in China.

While Washington and Beijing are in talks over the dispute, KFC operator Yum China Holdings (9987.HK), biotech firm BeiGene Ltd (6160.HK), Weibo Corp and JD.Com are among firms that could face delisting.

Alibaba’s IPO in 2014 was the largest debut in history at that time and paved the way for other Chinese companies seeking fresh capital to list on the U.S. stock exchange.

Founded in 1999 in Jack Ma’s apartment and catering to a large population in China, the e-commerce company has seen the wrath of both U.S. and Chinese regulators amid a broad crackdown, battering its shares since 2020.

It now plans to add a primary listing in Hong Kong, targeting investors in mainland China.

“Applying for the primary listing status in Hong Kong doesn’t necessarily mean they think they’re going to get delisted in the U.S… it’s just to mitigate that potential risk,” said Bo Pei, an analyst with U.S. Tiger Securities.

Others added to the list on Friday include Mogu Inc (MOGU.N), Boqii Holding Limited (BQ.N), Cheetah Mobile Inc and Highway Holdings Limited (HIHO.O).

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Reporting by Nivedita Balu in Bengaluru; Editing by Krishna Chandra Eluri

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