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Second Ex Parte Convo Adds To Chaos In Young Thug Trial
by Gunnar Larson 02 Aug '24

02 Aug '24

Second Ex Parte Convo Adds To Chaos In Young Thug Trial <https://www.law360.com/legalethics/articles/1864314?nl_pk=153d4a8a-6fb9-4a5…> By Chart Riggall Defense counsel in the increasingly disarrayed gang trial of Atlanta rapper Young Thug accused the case's former judge on Wednesday of being a "co-conspirator" with the state, after learning of yet another ex parte conversation with prosecutors that had been concealed. Read full article » <https://www.law360.com/legalethics/articles/1864314?nl_pk=153d4a8a-6fb9-4a5…> | Save to favorites » <https://www.law360.com/legalethics/articles/1864314?nl_pk=153d4a8a-6fb9-4a5…>

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Crypto Groups Say Loper Bright Defeats SEC Dealer Rule
by Gunnar Larson 02 Aug '24

02 Aug '24

Crypto Groups Say Loper Bright Defeats SEC Dealer Rule <https://www.law360.com/fintech/articles/1863612?nl_pk=d2b3e7ef-ab62-4a62-80…> By Jessica Corso The crypto industry groups fighting U.S. Securities and Exchange Commission regulations that could force some of their members to register with the agency as securities dealers are arguing that the U.S. Supreme Court's recent abandonment of Chevron deference bolsters their argument that the SEC lacked the authority to expand its definition of dealer. Brief attached | Read full article » <https://www.law360.com/fintech/articles/1863612?nl_pk=d2b3e7ef-ab62-4a62-80…> | Save to favorites » <https://www.law360.com/fintech/articles/1863612?nl_pk=d2b3e7ef-ab62-4a62-80…>

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Young Thug's 3rd Judge Denies Mistrial For Bench Swaps
by Gunnar Larson 02 Aug '24

02 Aug '24

Young Thug's 3rd Judge Denies Mistrial For Bench Swaps <https://www.law360.com/legalethics/articles/1863785?nl_pk=153d4a8a-6fb9-4a5…> By Cara Salvatore A Georgia judge who recently became the third presider in rapper Young Thug's sprawling racketeering trial ruled Tuesday there will be no mistrial on grounds of judge substitution, but said rulings on other mistrial motions are still to come. Read full article » <https://www.law360.com/legalethics/articles/1863785?nl_pk=153d4a8a-6fb9-4a5…> | Save to favorites » <https://www.law360.com/legalethics/articles/1863785?nl_pk=153d4a8a-6fb9-4a5…>

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Bank Regulators Issue Warnings on Fintech and Banking as Disasters Pile Up
by Gunnar Larson 02 Aug '24

02 Aug '24

https://wallstreetonparade.com/2024/07/federal-bank-regulators-issue-warnin… By Pam Martens and Russ Martens: July 31, 2024 ~ Wall Street Bull (Thumbnail)Last Thursday, the Board of Governors of the Federal Reserve System (the Fed), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), the federal supervisors of banks, issued 11 pages of warnings on what could go wrong when federally-insured banks get in bed with uninsured and untested financial technology companies. These financial technology companies are lovingly called Fintechs on Wall Street and in Silicon Valley where big money can be made by venture capitalists who bring the sexy-sounding Fintech startup as an IPO (Initial Public Offering) to investors on Wall Street. The Wall Street firm, in return, gets a nice payday in underwriting fees and a law firm also gets paid as counsel to the underwriters. Federal banking regulators have been in a frenzied scramble to deal with the growing fallout of disastrous marriages between Fintech and federally-insured banks. You might recall that after news broke that the fraudster crypto exchange, FTX, was using Silvergate Bank for deposits, there was turmoil at Silvergate, forcing it into eventual voluntary liquidation. (See Disgraced Silvergate Bank Hints It May Not Be Able to Cover All of Its Deposits; Fed Slaps It with a Cease and Desist Consent Order.) Then there is the mess with the Fintech payment app, Zelle. Things are so bad with that app that the U.S. Senate’s Permanent Subcommittee on Investigations had to hold a hearing on May 21. The Chair of that Subcommittee, Richard Blumenthal, opened the hearing with this: “The banks of America have a dirty little secret. It’s called Zelle. And it’s not just Zelle, it’s other P2P paid platforms—apps that people use to transfer money among their bank accounts. In the case of Zelle, it is nearly instantaneous. It’s almost always irreversible. And it is owned by banks. “In fact, Zelle is the largest peer-to-peer payment app. It’s actually operated by Early Warning Services, which in turn is owned and operated by the seven largest banks. And Zelle is often integrated into consumers’ existing online bank accounts and mobile apps. “Zelle markets itself as ‘A fast and easy way to send and receive money.’ But, as this Committee has found, a fast and easy way to lose money is often what happens on Zelle. And that is probably a more accurate catchphrase for Zelle and for other P2P platforms as well. What distinguishes Zelle is speed, permanence, and bank ownership, and that’s really the reason why we are focusing on Zelle, but the other platforms deserve attention as well. In fact, it’s less well known than other payment apps like Cash App and Venmo, but Zelle is by far the largest—several times its nearest competitor, and it is approximately three times larger than its nearest rival. “Zelle transfers are nearly instant and irreversible, and by the time a consumer knows they’ve been scammed, usually it’s too late to do anything about it—at least according to Zelle and according to the banks that own, control, and in effect operate Zelle. “Just three banks, J.P. Morgan Chase, Bank of America, and Wells Fargo handled 73% of all Zelle transactions in 2023….” The most recent embarrassment for U.S. banking regulators was the bankruptcy filing by Synapse Financial Technologies, a fintech startup that had financial backing from Andreessen Horowitz, the giant Menlo Park, California venture capital firm that has morphed into a major funder of the Super PAC, Fairshake, that is attempting to pack the U.S. Senate with crypto sycophants come the election in November. (See Crypto Just Got Exponentially More Dangerous: Meet Fairshake.) Synapse describes itself as “a finance platform” that “provides payment, card issuance, deposit, lending, compliance, credit and investment products as APIs [Application Programming Interface] to more than 18 million end users.” Very sexy stuff to Wall Street. Far less sexy is the fact that Synapse’s failure has prevented “More than 100,000 Americans with $265 million in deposits” to become locked out of their bank accounts since May, according to CNBC. How big is the scope of this potential Fintech/Banking disaster? The Hill reported this last week: “While the numbers vary, fintech companies have been valued today at more than $1 trillion. There is another $2.5 trillion in cryptocurrencies represented by 10,000 different coins, as well as about $1.3 trillion in synthetic and derivative crypto securities being sold by Wall Street. Blackrock and Grayscale have accumulated $42 billion under management in their Bitcoin Spot ETFs in just the six months since the Securities and Exchange Commission approved them.” In addition to issuing the 11-page warning, the federal banking regulators simultaneously issued a 32-page RFI (Request for Information) to the banks, seeking specific information on the entanglements of the federally-insured bank with all things Fintech. Question 14 on the RFI seems to drill down to a core problem in this loosey goosey world of federally-insured banking and Fintech. It asks: “In the context of bank-fintech arrangements, how are deposit accounts usually titled? Describe the range of practices reconciling bank deposit account records with the fintechs’ records. Generally, what party holds and maintains the account records? Describe the structure in place to exchange accurate customer information between the bank and the fintech company and how the agreements between banks and fintech companies generally address these matters. Describe any additional controls that banks or fintechs may use to provide for accurate reconciliations.”

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JPMorgan Is Tapping Illiquid Assets in its Global Collateral Program; the New York Fed Is Paying for Its Services
by Gunnar Larson 02 Aug '24

02 Aug '24

https://wallstreetonparade.com/2024/08/jpmorgan-is-tapping-illiquid-assets-… By Pam Martens and Russ Martens: August 1, 2024 ~ JPMorgan Building FacadeOn Monday, we wrote about the $2.3 trillion in agency mortgage-backed securities (MBS) that JPMorgan Chase is being paid to hold for the New York Fed as custodian and the multitude of related services for which it is billing the New York Fed on a monthly basis. Wall Street On Parade had filed a Freedom of Information Act request for JPMorgan’s invoices to the New York Fed for calendar year 2023. Instead of the 20 business days that a FOIA is supposed to take, we were stonewalled for three months and then received invoices with dollars amounts redacted. One fascinating bit of information we were able to glean from the invoices was that JPMorgan is billing the New York Fed for a service titled: “Tri-Party Collateral Management.” (Scroll toward the end of the invoices at this link.) We have been researching JPMorgan for the past 30 years. We had come across nothing in that time about its Tri-Party Collateral Management Program which the firm calls “Collateral Central.” It turns out that is because this program has not been written about by any major mainstream business media. Fortunately for our readers, JPMorgan has written about it extensively itself. It publishes a periodic “J.P. Morgan Tri-party Program Update” which it has curiously marked in all caps as “STRICTLY PRIVATE AND CONFIDENTIAL” but then proceeded to put the publications on its public website. The most layman-friendly definition of what a tri-party collateral management program is all about comes from the European Central Bank. It defines it as follows: “Triparty collateral management services (TCMS) provided by triparty agents (TPAs) allow market participants to optimise the use of their securities portfolios when collateralising credit and other exposures stemming from different products and instruments (e.g. repo, securities lending, central bank credit, secured loans and exposures arising from over-the-counter transactions).” That last term – “over-the-counter transactions” – includes derivative contracts, which now amount to more than $180.5 trillion at the four largest federally-insured banks in the U.S. The breakdown is as follows as of March 31, 2024 according to the Office of the Comptroller of the Currency: $55.68 trillion in derivatives at Goldman Sachs Bank USA; $54 trillion at JPMorgan Chase Bank NA; $49.87 trillion at Citigroup’s Citibank NA; and $20.97 trillion at Bank of America. (For the background on why federal banking regulators continue to allow this kind of dangerous derivative risk inside of federally-insured banks after promising to end it under the Dodd-Frank financial reform legislation of 2010, see our article at this link.) In its June 2024 Tri-Party update, JPMorgan explains an eye-popping facet of the program as follows: “Structured Financing Solutions have long been a constituent of Tri-party, and across our business globally, we are seeing a growing demand for more complex and bespoke structured transactions including new SPVs [Special Purpose Vehicles] and conduit solutions. “The issuance of Commercial Paper or notes by Special Purpose Vehicles (SPV) continues to be a channel used for raising liquidity either from Bank-owned or non-bank programs; however, additional solutions are now evolving focused on capital efficiency with structures across GMSLA [Global Master Securities Lending Agreement], GMRA [Global Master Repurchase Agreement] and pledge. “Traditionally, these vehicles have accepted a broad array of collateral types, expanding to less liquid and esoteric assets such as notes and emerging market assets. This continues to be an important tool for mitigating balance sheet pressures. “Structured trades in Tri-party can be more targeted with specific objectives such as contingent funding trades to facilitate the immediate availability of HQLA [High Quality Liquid Assets] or negative haircuts with the key driver being RWA [Risk-Weighted Assets] reduction – well supported within our standard Tri-party operating model….” The reference to SPVs in the above should be a wake-up call to bank regulators. Citigroup had used SPVs to hide off-balance sheet subprime debt exposure leading to its collapse in 2008 and early 2009 when its stock plummeted to 99 cents. The reference to RWA, Risk-Weighted Assets, should also be a wake-up call to regulators. Lowering the amount of RWA lowers the amount of capital that banks have to hold to meet their regulatory obligations. The London Whale derivatives fiasco at JPMorgan Chase in 2012 was judged by the U.S. Treasury’s Office of Financial Research to be a dodgy attempt at capital relief trades. The bank lost $6.2 billion of depositors’ money from its federally-insured bank in the process; triggered an FBI investigation; and paid $920 million in fines to its U.S. and U.K. regulators. As for Citigroup, the New York Fed secretly pumped more than $2.5 trillion in revolving emergency loans into Citigroup between December 2007 and July of 2010 according to a subsequent audit conducted by the Government Accountability Office (GAO), which was released to the public in 2011. (See chart on page 131 of the GAO report.) Equally mind-numbing, JPMorgan’s June 2023 Tri-Party update shares this: “Our newly enhanced documentation acts like a ‘collateral passport’ that enables clients to move assets across J.P. Morgan contracting entities on a single platform regardless of jurisdiction and J.P. Morgan contracting entity. “The solution comes in response to clients’ need for increased mobilization of collateral placed within the J.P. Morgan tri-party platform, where inter entity movement was supported, but not completely seamless if leveraging different J.P. Morgan contracting entity. “As an example, clients can now freely move collateral between J.P. Morgan SE—Luxembourg Branch (international platform), JPMorgan Chase Bank N.A., London Branch (segregated initial margin), JPMorgan Chase Bank N.A. (U.S. platform) and JPMorgan Chase Bank N.A. Sydney Branch (Australian platform).” Unfortunately, U.S. bank regulators do not have visibility or authority in all of these jurisdictions – making them the last to know what’s actually going on in the industry they are mandated to regulate and to prevent another financial collapse that takes down the U.S. economy as happened in 2008. That JPMorgan Chase – with five felony counts on its record – is being allowed to custody $2.3 trillion of the New York Fed’s securities is problem one. Problem two is that the New York Fed is its bank examiner. Problem three is that the New York Fed had to provide $2.59 trillion (term-adjusted) in emergency loans to JPMorgan Chase as recently as the last quarter of 2019. And problem four is that, for unknown reasons, the New York Fed is using this Tri-Party Collateral Management Program offered by JPMorgan Chase and being billed monthly for whatever unknown services JPMorgan Chase is providing under that program.

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Budget Cuts 'Jeopardize' Pension Portals, Aegon Warns
by Gunnar Larson 01 Aug '24

01 Aug '24

Budget Cuts 'Jeopardize' Pension Portals, Aegon Warns <https://www.law360.co.uk/financial-services-uk/articles/1863971?nl_pk=a94fc…> By Joel Poultney The Labour government's decision to cut £50 million ($64 million) from its communication and marketing budget for the next two years could jeopardize the successful rollout of the long-delayed pensions portal program, provider Aegon has warned. Read full article » <https://www.law360.co.uk/financial-services-uk/articles/1863971?nl_pk=a94fc…> | Save to favorites » <https://www.law360.co.uk/financial-services-uk/articles/1863971?nl_pk=a94fc…>

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Dutch Regulators OK Freshfields-Guided Asset Exchange
by Gunnar Larson 01 Aug '24

01 Aug '24

Dutch Regulators OK Freshfields-Guided Asset Exchange <https://www.law360.co.uk/financial-services-uk/articles/1863665?nl_pk=a94fc…> By Emilie Ruscoe A Dutch digital asset exchange is touting itself as the first widely accessible and regulated crypto derivatives exchange in Europe after receiving a license from the government of the Netherlands, aided by the guidance of Freshfields Bruckhaus Deringer LLP, the firm has announced. Read full article » <https://www.law360.co.uk/financial-services-uk/articles/1863665?nl_pk=a94fc…> | Save to favorites » <https://www.law360.co.uk/financial-services-uk/articles/1863665?nl_pk=a94fc…>

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Pension Plans Do Minimum ESG Compliance, Watchdog Says
by Gunnar Larson 01 Aug '24

01 Aug '24

Pension Plans Do Minimum ESG Compliance, Watchdog Says <https://www.law360.co.uk/financial-services-uk/articles/1863975?nl_pk=a94fc…> By Joel Poultney Too many retirement savings plans attain only minimum compliance with environmental, social and governance standards, The Pensions Regulator has said, and urged them to improve their approach. Read full article » <https://www.law360.co.uk/financial-services-uk/articles/1863975?nl_pk=a94fc…> | Save to favorites » <https://www.law360.co.uk/financial-services-uk/articles/1863975?nl_pk=a94fc…>

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Indian Businessman Loses Extradition Over $32M Loan Fraud
by Gunnar Larson 01 Aug '24

01 Aug '24

Indian Businessman Loses Extradition Over $32M Loan Fraud <https://www.law360.co.uk/financial-services-uk/articles/1864039?nl_pk=a94fc…> By Ronan Barnard An Indian businessman accused of defrauding 28.6 million Swiss francs ($32.5 million) from companies in an advance fee fraud scheme lost his chance to challenge the decision to extradite him from the U.K. on Wednesday after a London judge ruled that he could not mount a double jeopardy defense. Read full article » <https://www.law360.co.uk/financial-services-uk/articles/1864039?nl_pk=a94fc…> | Save to favorites » <https://www.law360.co.uk/financial-services-uk/articles/1864039?nl_pk=a94fc…>

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Prosecutors Say Bribery Ruling Won't Disrupt Madigan Trial
by Gunnar Larson 31 Jul '24

31 Jul '24

Prosecutors Say Bribery Ruling Won't Disrupt Madigan Trial <https://www.law360.com/governmentcontracts/articles/1863732?nl_pk=4126fe73-…> By Celeste Bott Prosecutors accusing former Illinois House Speaker Michael Madigan of corruption said Monday night his case is unaffected by the U.S. Supreme Court's ruling limiting the reach of a bribery statute that once criminalized gratuities, saying the government's allegations do not rely on gratuities, so "this dog will not hunt." Response attached | Read full article » <https://www.law360.com/governmentcontracts/articles/1863732?nl_pk=4126fe73-…> | Save to favorites » <https://www.law360.com/governmentcontracts/articles/1863732?nl_pk=4126fe73-…>

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