FTX said it is investigating abnormalities with wallet movements.
Photo:
DADO RUVIC/REUTERS
Bankrupt cryptocurrency exchange FTX is probing a potential hack and asked customers to stay off the FTX website, the company said. More than $400 million worth of crypto funds appears to be missing, according to crypto analytics firm Elliptic Enterprises Ltd.
The potential hack occurred Friday after FTX filed for bankruptcy. Ryne Miller, FTX US’s general counsel, said in a Saturday tweet that FTX and FTX US had started moving all digital assets to cold storage—crypto wallets that aren’t connected to the internet—after the bankruptcy filing.
FTX is “investigating abnormalities with wallet movements related to the consolidation of FTX balances across exchanges,” Mr. Miller said on Twitter. He called the movements unauthorized transactions and said the facts are still unclear. FTX will “share more info as soon as we have it,” he said.
A post in the exchange’s official Telegram channel called the fund flows a hack.
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Approximately $473 million in crypto assets appeared to be taken from FTX without permission, according to
Tom Robinson,
co-founder of Elliptic. The tokens were quickly converted to ether, the second-largest cryptocurrency, on so-called decentralized exchanges.
Such platforms process transactions automatically, making them popular among hackers to prevent funds from being seized, he said.
—Caitlin Ostroff contributed to this article.
Write to Elaine Yu at elaine.yu@wsj.com and Vicky Ge Huang at vicky.huang@wsj.com
Global companies have racked up more than $59 billion in losses from their Russian operations, with more financial pain to come as sanctions hit the economy and sales and shutdowns continue, according to a review of public statements and securities filings.
Almost 1,000 Western businesses have pledged to exit or cut back operations in Russia, following its invasion of Ukraine, according to Yale researchers.
Many are reassessing the reported value of those Russian businesses, as a weakening local economy and a lack of willing buyers render once-valuable assets worthless. Companies under U.S. and international reporting standards have to take impairment charges, or write-downs, when the value of an asset declines.
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The write-downs to date span a range of industries, from banks and brewers to manufacturers, retailers, restaurants and shipping companies—even a wind-turbine maker and a forestry firm. The fast-food giant
McDonald’s Corp.
expects to record an accounting charge of $1.2 billion to $1.4 billion after agreeing to sell its Russian restaurants to a local licensee;
Exxon Mobil Corp.
took a $3.4 billion charge after halting operations at an oil and gas project in Russia’s Far East; Budweiser brewer
Anheuser-Busch InBev SA
took a $1.1 billion charge after deciding to sell its stake in a Russian joint venture.
“This round of impairments is not the end of it,” said Carla Nunes, a managing director at the risk-consulting firm Kroll LLC. “As the crisis continues, we could see more financial fallout, including indirect impact from the conflict.”
The financial fallout of the conflict isn’t significant for most multinationals, in part because of the relatively small size of the Russian economy. Fewer than 50 companies account for most of the $59 billion tally. Even for those, the Russian losses are typically a relatively small part of their overall finances. McDonald’s, for example, said its Russia and Ukraine businesses represented less than 3% of its operating income last year.
Some companies are writing off assets stranded in Russia. The Irish aircraft leasing company
AerCap Holdings
NV last month took an accounting charge of $2.7 billion, which included writing off the value of more than 100 of its planes that are stuck in the country. The aircraft were leased to Russian airlines. Other leasing companies are taking similar hits.
Other businesses are assuming that they will realize no money from their Russian operations, even before they have finalized exit plans. The British oil major
BP
PLC’s $25.5 billion accounting charge on its Russian holdings last month included writing off $13.5 billion of shares in the oil producer
Rosneft.
The company hasn’t said how or when it plans to divest its Russian assets.
BP’s $25.5 billion accounting charge on its Russian holdings include writing off $13.5 billion of shares in oil producer Rosneft.
Photo:
Yuri Kochetkov/EPA/Shutterstock
Even some companies that are retaining a presence in Russia are writing down assets. The French energy giant
TotalEnergies
SE took a $4.1 billion charge in April on the value of its natural-gas reserves, citing the impact of Western sanctions targeting Russia.
The Securities and Exchange Commission last month told companies that they have to disclose Russian-related losses clearly, and that they shouldn’t adjust revenue to add back the estimated income that has been lost because of Russia.
Bank of New York Mellon Corp.
, which in March said it had stopped new banking business in Russia, appeared to breach this guidance when it reported its results for the first three months of this year. The New York custody bank in April reported $4 billion in revenue under one measure that included $88 million added to reflect income lost because of Russia.
A BNY Mellon spokesman declined to comment.
Investors appear to have mixed reactions to the write-downs, partly because most multinationals have relatively small Russian exposure, academic research suggests.
Financial markets are “rewarding companies for leaving Russia,” a recent study by Yale School of Management found. The share-price gains for companies pulling out have “far surpassed the cost of one-time impairments for companies that have written down the value of their Russian assets,” the researchers concluded.
Bank of New York Mellon said earlier this year that it had stopped new banking business in Russia.
Photo:
Gabriela Bhaskar/Bloomberg News
Research using a different methodology found a more subtle investor reaction. Analysis by Indiana University professor Vivek Astvansh and his co-authors of the short-term market impact of more than 200 corporate announcements revealed a marked trans-Atlantic divide. Investors punished U.S. companies for pulling out of Russia, and non-American companies for not withdrawing, the analysis found.
More write-downs and other Russia-related accounting charges are expected in the coming months, as companies complete their planned departures from the country.
British American Tobacco
PLC, whose brands include Rothmans and Lucky Strike, said on March 11 it had “initiated the process to rapidly transfer our Russian business.” That transfer is still ongoing, according to a BAT spokeswoman. BAT hasn’t taken an impairment in relation to the business.
Accounting specialist
Jack Ciesielski
said companies might hold off announcing a write-down until they have a good handle on how big the loss will be.
“You don’t want to put a number out there until you’re confident that it’s not likely to change,” said Mr. Ciesielski, owner of investment research firm R.G. Associates Inc.
The ruble’s recovery is helping Russia prop up its economy and continue its Ukraine war effort. WSJ’s Dion Rabouin explains how Russia boosted its ailing currency and how it is affecting the global economy. Illustration: Ryan Trefes
Many companies are giving investors rough estimates about what to expect on Russia-related losses.
The manufacturer
ITT Inc.,
which has suspended its operations in Russia, said last month it expects a $60 million to $85 million hit to revenue this year because of a “significant reduction in sales” in the country. That is a small slice of the $2.8 billion in total revenue for the maker of specialty components for the auto, aerospace and energy industries.
As sanctions weaken the Russian economy, businesses still operating there are reassessing their future earnings and booking losses. Ride-sharing giant
Uber Technologies Inc.
in May took a $182 million impairment on the value of its stake in a Russian taxi joint-venture because of forecasts of a protracted recession in the Russian economy. Uber said in February it was looking for opportunities to accelerate its planned sale of the stake.
—Thomas Gryta and Nick Kostov contributed to this article.
A former senior executive at Better.com alleged in a lawsuit that the online mortgage lender misled investors in financial filings and other representations it made as it attempts to go public.
Sarah Pierce,
Better.com’s former executive vice president for sales and operations, alleged in the suit that Chief Executive
Vishal Garg
and the company misrepresented Better.com’s business and prospects to keep investors onboard with a planned merger with a special-purpose acquisition company, or SPAC. The deal was agreed to last May and has yet to close.
Ms. Pierce said in the suit that she was pushed out of her role at the company in February in retaliation for raising these issues. She has also filed a complaint alleging retaliation with the Occupational Safety and Health Administration under the Sarbanes-Oxley Act, according to a footnote in the suit.
“We have reviewed the claims in the complaint and strongly believe them to be without merit,” Better.com said in a statement after the initial publication of this article. “The company is confident in our financial and accounting practices, and we will vigorously defend this lawsuit.”
Better.com was a major winner of the boom in housing prices and mortgage refinancing that accompanied the pandemic and low interest rates. The company grew revenue nearly 10-fold to $876 million in 2020 from the year prior, posted a profit of $172 million and hired thousands as it rushed to keep up with the market, company filings said. It raised $500 million from
SoftBank Group Corp.
last spring and weeks later said it planned to go public at a valuation of $7 billion.
Better.com has since been rocked by the rise in interest rates and resulting sharp pullback in refinancings and a highly publicized controversy when Mr. Garg laid off 900 workers via a Zoom call in December. He took a brief leave after the call sparked an uproar. The company has laid off thousands more as the market for SPAC deals has also cooled.
In the aftermath of the December layoffs, Mr. Garg said in a public letter that he took responsibility for the decision to lay off the staff but “blundered the execution.” He began a leave the following day, and Better.com said it hired an outside company to assess its culture and leadership. Mr. Garg returned to his position in January, according to an email sent to employees.
In her complaint, filed Tuesday in federal court in Manhattan, Ms. Pierce says Mr. Garg and the company’s alleged misrepresentations were made in an effort to keep its merger on track. Ms. Pierce’s complaint alleged Mr. Garg and Better.com’s treatment of her constituted unlawful retaliation, defamation and intentional infliction of emotional distress.
The company lost $304 million last year, according to company filings. Last winter, Mr. Garg allegedly told the company’s board and investors that the company would become profitable again by the end of the first quarter in 2022, according to the lawsuit. Ms. Pierce said her operations team, in partnership with the company’s finance department, had presented internal projections to Mr. Garg that showed the company couldn’t expect to break even until at least the second half of this year.
The lawsuit contains colorful remarks allegedly made by Mr. Garg. He allegedly replaced one of the words in the acronym for the accounting phrase, GAAP, or “generally accepted accounting principles” with a profanity. He told other executives at Better.com that interest rates would stay low because President Biden would contract Covid-19 and die, according to the suit. Another former Better.com executive said they also remembered the GAAP comments and Mr. Garg’s expectations that unforeseen events would keep rates low.
Ms. Pierce also alleges in the suit that the company had overstated the strength of its brand in financial filings relating to its potential merger.
In the prospectus for its SPAC deal, Better.com said it believed that 30% of its loans made directly to consumers came through internet traffic that wasn’t generated by paid marketing efforts. That compared favorably to other large financial brands despite lower advertising spending. In her complaint, Ms. Pierce says that company’s internal data showed that number to be no more than 12%.
Ms. Pierce raised concerns about the alleged misrepresentation to Mr. Garg and Better.com ahead of the filing’s publication, according to the lawsuit.
Mr. Garg allegedly repeatedly defied advice from other executives regarding the mass Zoom layoff in December, leading the company to likely violate the California Worker Adjustment and Retraining Notification Act which requires employees receive 60 days notice in advance of mass layoffs, the suit said.
