Read the Plea Agreements From Associates of FTX’s Bankman-Fried

(Bloomberg) — Two associates of FTX founder Sam Bankman-Fried have pleaded guilty to criminal charges and have agreed to work with prosecutors.

Caroline Ellison and Gary Wang were charged “in connection with their roles in the frauds that contributed to FTX’s collapse,” the US Attorney for the Southern District of New York, Damian Williams, said in a statement.

In addition the US Securities and Exchange Commission and Commodity Futures Trading Commission both announced separate lawsuits against the pair.

Read Caroline Ellison’s plea agreement here.

Read Gary Wang’s plea agreement here.

Read the full SEC complaint here.

Read the full CFTC announcement here.


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Ambani’s Reliance To Acquire Metro’s India Unit for $344 Million

(Bloomberg) — Reliance Industries Ltd. agreed to buy Metro AG’s Indian unit for 28.5 billion rupees ($344 million) as the nation’s biggest retailer run by billionaire Mukesh Ambani further expands his footprint.

Metro will see a transaction gain of about €150 million at closing, and higher earnings per share are anticipated, the company said in a statement late Wednesday. The transaction with Reliance Retail Ventures is expected to close by March 2023. Parent Reliance Industries’ stock rose as much as 0.9% during trading in Mumbai on Thursday, pushing this year’s gain to 9.4%.

With India’s trade industry seeing consolidation and disproportionate growth, a sizeable investment would have been needed to further grow the business, Steffen Greubel, Metro’s chief executive officer, said in the statement. “Now is the right time to use the momentum and open a new chapter for METRO India,” Greubel said. 

The transaction brings to an end a months-long sale process that had once drawn interest from e-commerce giant Inc. and Thailand’s Charoen Pokphand Group Co. Adding Metro’s so-called cash-and-carry business will bolster Reliance, which is already India’s largest brick-and-mortar retailer. A bigger wholesale network will allow it to push deeper in India’s hinterland where bulk of its 1.4 billion people live. 

Metro entered the Indian market in 2003 and currently operates 31 wholesale distribution centers across the country serving business customers, according to its website. Core clients include hotels, restaurants, as well as different types of corporates as small retailers. 

The Ambani-led group’s B2B cash-and-carry business, Reliance Market, was set up in 2011 and has since then rapidly grown into a network of 52 stores with more than 4 million members, it said on its website.

Bloomberg News previously reported in October Reliance is said to be the sole bidder for Metro’s Indian unit and was in advanced discussions. 

–With assistance from Debjit Chakraborty.

(Updates with share price movement in the second paragraph.)

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China’s Soaring Covid Cases Send People to Black Market for Pills

(Bloomberg) — As Covid-19 infections soar across China, a shortage of antiviral medicines like Pfizer Inc.’s Paxlovid appears to be spurring people to turn to the black market.

The country’s abrupt U-turn on Covid Zero earlier this month surprised health experts and residents, as officials appear to have done little planning for the inevitable rise in cases that comes with reopening. That includes easy access to antiviral therapies that can be used by people who test positive and are at higher risk of hospitalization, like the elderly.

The worsening outbreak is boosting demand for such treatments, but Chinese have found the drugs in short supply across the increasingly strained health-care system. People are seeking out online sales channels to source generic versions of the drugs made elsewhere and not approved for sale in China, social media posts and newspaper reports show.

Read more: End of Covid Zero Risks Overwhelming China With Infections

One user on the popular Twitter-like Weibo platform said on Sunday that she was buying generic Paxlovid made in Bangladesh because she had an elderly relative and couldn’t get a hold of any in China. She said in the post, which has been removed, that while she’d heard China had imported tens of thousands of boxes of Paxlovid, ordinary residents weren’t able to access the potentially life-saving medicine. 

The same day, another Weibo user called for easier and quicker access to the pills. The poster shared a picture of an advertisement for generic versions of Paxlovid made in India that can be shipped the same day as payment and arrive in two-to-three weeks. 

Those that can get their hands on antivirals are paying huge premiums. The 21st Century Business Herald reported an unidentified white-collar worker in Guangdong paid 5,800 yuan ($830) to a Hong Kong agent for a box of Paxlovid, more than double the official price in mainland China. The Paper, a Shanghai-based publication, reported purchasing agents have sold more than 50,000 boxes of foreign generic antivirals since the government’s first tentative steps toward easing Covid Zero in November.

Hu Xijin, the retired editor-in-chief of state-backed tabloid the Global Times and a vocal pro-government commentator, joined the chorus lamenting the high price and noted dissatisfaction among Chinese. 

It’s unclear whether China is prepared to satisfy the huge demand, according to Siddharth Sridhar, clinical assistant professor in the University of Hong Kong’s department of microbiology. “Even if there is enough Paxlovid for China’s large population, a distribution infrastructure to get these pills to patients in time isn’t something that can be set up overnight,” he said.

How Will China’s Covid Pivot Play Out? Your Questions Answered

When China was still trying to keep out the virus, securing adequate supplies of antivirals was described by top health officials like Liang Wannian as essential before the country would consider reopening. The sudden about-turn on Covid means that the under-vaccinated elderly population that benefit most from such drugs are highly vulnerable.

The supply strain may also be intensified by heightened concern among Chinese about the dangers of Covid after three years of propaganda that painted the virus as exceptionally deadly. With the government’s official stance changing — one top medical adviser likened it to a cold — so has public messaging, and state media have published articles warning that not everyone needs to take antivirals. Earlier this week, a top infectious disease doctor said patients needing the therapies should take them under medical supervision and they’re not suitable for people already taking certain medications.

Regulatory Maze

Increasing supply is also complicated, and there’s little transparency over how much is available in China.

Paxlovid is the only foreign Covid medicine approved by China’s regulator for nationwide use, though AstraZeneca’s preventative antibody drug Evusheld can be accessed in a medical pilot zone in the southern island of Hainan. State-owned China Meheco Co. said last week it reached a deal with Pfizer to import and distribute the latter’s antiviral. Pfizer in August also announced a deal with Zhejiang Huahai Pharmaceutical Co., to make ingredients of Paxlovid in the country.

Pfizer said in a statement that it’s collaborating with all stakeholders to secure an adequate supply of Paxlovid in China and remains committed to fulfilling the treatment needs of patients in the country and around the world. It said it’s committed to bringing medicines and therapies including Paxlovid that will benefit Chinese patients as soon as possible. 

As a prescription medication, Paxlovid’s purchase channel will strictly align with government regulations, Pfizer said. The company continues to evaluate options to increase capacity, including opportunities to expand manufacturing capabilities, increase supplier base for key materials and contract manufacturing options for its supply chain, it said.

Meheco didn’t respond to an email or phone call seeking comment. Media outlet Yicai reported Tuesday, citing a phone call in which a journalist posed as an investor, that Meheco didn’t expect sales of Paxlovid to surge despite the massive waves of infection.

Merck & Co.’s molnupiravir isn’t approved, though in September it said it struck a deal with a state-owned drugmaker to import and market the pill.

Running Out

Even what China can produce domestically doesn’t always make it to its own residents. 

As part of efforts to provide generic low-cost antivirals to developing countries, the United Nations-backed Medicines Patent Pool program in March authorized five Chinese companies to make Paxlovid, but exclusively for export. The group includes Huahai, which struck a separate deal with Pfizer to make Paxlovid for China’s domestic market. 

A representative in Huahai’s investor relations department said it hasn’t started making generic versions of Paxlovid under the MPP agreement, and declined to comment on whether the company has started production of Paxlovid ingredients for the China market under the deal with Pfizer.

Some local companies are developing antivirals too. Henan Genuine Biotech Co. has received approval for the drug Azvudine, an HIV treatment that doctors can now prescribe for Covid patients. An antibody cocktail therapy developed by Brii Biosciences Ltd. has also been given the green light but it requires infusion at hospitals.

For now, there’s no end in sight to the antivirals shortage. On Friday, a hospital in the northeastern city of Jinan began offering Azvudine, sparking an endless stream of inquiries and buyers, Qilu Evening News reported.

While the hospital limited each person to two boxes, by Sunday it had sold all of its 5,000 pill supply.

–With assistance from Nacha Cattan.

(Updates with statement from Pfizer under ‘Regulatory Maze’ sub-heading)

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Fired Twitter Manager Sues Over Cancellation of Stock Options

(Bloomberg) — An former Twitter Inc. manager fired as part of billionaire Elon Musk’s revamping of the social-media platform after he bought it earlier this year claims the company improperly canceled some stock options he had. 

John Barnett, whose Chroma Labs start-up was bought by Twitter, argues the company violated a restricted-stock agreement he got in the Chroma buyout, according to a Delaware Chancery Court lawsuit unsealed Wednesday. 

Barnett, a staff-product manager, was terminated by email in November after expressing support for other colleagues fired in Musk’s efforts to cut costs. He claims Twitter is losing $4 million per day. The lawsuit was originally filed Dec. 16. 

“Twitter wrongfully cancelled Barnett’s” options in violation of the pact linked to the Chroma deal, “which caused Barnett to suffer, and continue to suffer, irreparable harm,” according to the 23-page complaint. Twitter officials didn’t immediately return an email for comment sent Wednesday after regular business hours.

The suit is among a number of legal actions taken by former Twitter employees who were fired after Musk took over the company in October. Some of Barnett’s ex-colleagues contend in a California suit Twitter failed to give proper layoff notices and is shortchanging them on severance pay. 

After Musk bought the social media company for $44 billion, he fired half the workforce, asked some essential employees to return, rolled back its expansive work-from-home policy, and called on workers to sign a pledge to remain “extremely hardcore” at Twitter or quit. He’s threatened to put the company into bankruptcy because of more than $3 billion in losses.

Barnett – an ex-Facebook programmer best known for creating apps with photo and video-editing features – joined Twitter in 2020 as part of the Chroma Labs acquisition. As part of the deal, he was awarded Twitter stock options that couldn’t be canceled unless he was fired for wrongdoing, according to the Delaware suit. The number of options were blacked out in the suit.

After Barnett expressed support for Eric Frohnhoefer, a Twitter software engineer fired after getting into a public spat with Musk, the manager said Twitter sent his termination notice to his wife’s email address. “Twitter never sent this email to Barnett himself,” his lawyers noted. Barnett’s wife wasn’t a Twitter employee, they added.

That notice said any unvested options would be canceled as part of the company’s decision to fire Barnett, according to the suit. Barnett wants a Delaware judge to order Twitter to abide by the terms of the stock-award agreement and pay him for his unvested options.

The case is John Barnett v. Twitter, 2022-1163, Delaware Chancery Court (Wilmington).

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Ellison, Wang Cooperate in FTX Fraud Case After Guilty Pleas

(Bloomberg) — Two top associates of disgraced crypto executive Sam Bankman-Fried have pleaded guilty to criminal charges and are cooperating with US prosecutors leading the investigation into FTX’s collapse.

The US Attorney for the Southern District of New York Damian Williams said in a statement on Wednesday night that Caroline Ellison and Gary Wang had been charged “in connection with their roles in the frauds that contributed to FTX’s collapse.” 

“Both Ms. Ellison and Mr. Wang have pleaded guilty to those charges and they are both cooperating with the Southern District of New York,” Williams said in the video statement. The US Securities and Exchange Commission and Commodity Futures Trading Commission also announced separate lawsuits against Wang and Ellison.

The announcements came hours after FTX co-founder Sam Bankman-Fried, who was arrested in the Bahamas last week, consented to being extradited back to the US to face several criminal charges. He boarded a private plane with FBI agents bound for New York on Wednesday night. Bankman-Fried is expected to appear in federal court in Manhattan on Thursday. 

“Let me reiterate a call I made last week,” Williams said. “If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it. We are moving quickly and our patience is not eternal.”

The SEC alleged Ellison and Wang participated in a multiyear scheme to defraud FTX investors. Between 2019 and 2022 Ellison — at the direction of former FTX CEO Sam Bankman-Fried — manipulated the price of FTX’s native token FTT by purchasing large quantities in the open market, according to the SEC complaint. The agency also alleged that Ellison and Wang knew or should have known Bankman-Fried was falsely touting FTX as a safe crypto trading platform, while at the same time improperly transferring customer funds from FTX to Alameda.

The SEC said Ellison and Wang are cooperating with its ongoing investigation into other potential individuals or entities tied to the misconduct at FTX.

The CFTC’s lawsuit, which also alleges fraud, accused Ellison of directing Alameda to use billions of dollars of FTX funds, including customer funds, for trades on other crypto exchanges and to pay for high-risk investments. According to a CFTC news release, Wang “created features in the code underlying the FTX trading platform that allowed Alameda to maintain an essentially unlimited line of credit on FTX.” The CFTC said the two former executives didn’t contest their liability on the CFTC’s claims.

(Updates with details on suits.)

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Yen’s Share of Global Payments Drops to Lowest Level Since 2014

(Bloomberg) — The Japanese yen is losing popularity as a currency for international payments, allowing the Chinese yuan to narrow the gap in global usage. 

The proportion of global payments made using the Japanese currency fell to 2.54% of the total in November, according to data from the Society for Worldwide Interbank Financial Telecommunications, known as SWIFT. That’s the lowest since August 2014 and down from a peak of close to 4% in March 2020. Usage was at 2.95% in October.

While the yen remains the fourth most-used currency in such transactions — behind the US dollar, the euro and the British pound — China’s is not far behind. Usage of the renminbi jumped to 2.37% from 2.13%, according to the data.

The prevalence of US dollar transactions, meanwhile slipped to 41.38%, while euro usage climbed to 36.12%. The pound lost ground in November after hitting its highest level since 2016. 

The shifts follow a decline in the valuation of the yen this year. The Japanese currency is one of the worst performers in 2022, even after a boost from this week’s shock policy announcement by the Bank of Japan.

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FTX Paid for Blockfolio Deal Mostly in FTT Token It Invented

(Bloomberg) — FTX, the bankrupt cryptocurrency exchange, used a token it invented to fund its takeover of trading platform Blockfolio, according to financial statements obtained by Bloomberg News.

FTX paid roughly $84 million in 2020 to take a majority stake in Blockfolio, in what was then among the largest crypto acquisitions. About 94% was paid in FTT tokens, a cryptocurrency that FTX created, according to documents reviewed by Bloomberg.

Details of the Blockfolio acquisition, which haven’t been previously reported, offer a glimpse of former FTX CEO Sam Bankman-Fried’s appetite for whimsical financial engineering, and an early hunger to amass customers through large-scale deals. Bankman-Fried doubled down on that ethos this year, going on a buyout binge for firms including Voyager and BlockFi, although those deals were thwarted when FTX imploded in November.

At the time the Blockfolio deal was announced, news outlets reported FTX financed it with a mix of cash, crypto and equity, without further details. The arrangement heralded big things for FTX, which Bankman-Fried founded only a year before. The agreement gave it a 52% equity stake in Blockfolio and valued the company at almost $160 million — with the option to buy the rest within two years, the financial statements show.

A spokesperson for Bankman-Fried declined to comment. 

The disgraced crypto entrepreneur faces criminal charges including fraud. Regulators allege that he misused FTX customer money for luxury real estate and political donations, and to bankroll sister trading firm Alameda Research.

The FTT token played a starring role in FTX’s demise. The weeks-long saga touched off after CoinDesk reported the exchange’s native token accounted for a sizable portion of Alameda’s balance sheet — and rival Binance Holdings Ltd. CEO Changpeng “CZ” Zhao announced plans to sell large sums of it.

As of Wednesday evening, Bankman-Fried was poised to be extradited to the US from the Bahamas, where FTX was based and where he was imprisoned.

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Micron to Cut 10% of Workforce as Demand for Computer Chips Slumps

(Bloomberg) — Micron Technology Inc., the largest US maker of memory chips, said the worst industry glut in more than a decade will make it difficult to return to profitability in 2023.

The company on Wednesday announced a host of cost-cutting measures, including a 10% workforce reduction, aimed at helping it weather a rapid drop in revenue. Micron also projected a steep sales decline and a wider loss than analysts had estimated for the current quarter.

Semiconductor makers are in the midst of plummeting demand for their products less than a year after being unable to produce enough to meet orders. Consumers have shelved purchases of personal computers and smartphones amid rising inflation and an uncertain economy. Makers of those devices, the main buyers of memory chips, are now stuck with stockpiles of components and are slowing orders for new stock.

The industry is experiencing its worst imbalance between supply and demand in 13 years, according to Micron Chief Executive Officer Sanjay Mehrotra. Inventory should peak in the current period, then decline, he said. Customers will move to more healthy inventory levels by about the middle of 2023, and the chipmaker’s revenue will improve in the second half of the year, Mehrotra said.

“Profitability will be challenged throughout 2023 because of the oversupply that exists in the industry,” he said in an interview. “The rate and pace of the recovery in terms of profitability depends on how fast supply is brought into line.” 

Mehrotra said a unique convergence of circumstances — the war in Ukraine, a surge in inflation, Covid and supply disruptions — has thrust the memory chip industry into a repeat of past cycles when prices plummeted and wiped out profits. Micron has responded aggressively to try to quickly get through the difficult period. One the downturn is over, the industry will resume profitable growth helped by demand for artificial intelligence computing and automation of various industries, he said. 

Micron, which had already announced factory output reductions, is cutting its budget for new plants and equipment, and now expects to spend from $7 billion to $7.5 billion for the fiscal year, a decline from an earlier target of as much as $12 billion. The company is slowing the introduction of more advanced manufacturing techniques and predicts that spending on new production will fall throughout the industry.

Unlike other parts of the chip sector, products from Micron are built to industry standards, meaning they can be swapped out for those of its competitors. Because memory can be traded like a commodity, its makers are exposed to more pronounced price swings. 



Micron’s pledge to reduce output from its factories and slow expansion projects won’t ease the glut of chips available unless rivals, including Samsung Electronics Co. and SK Hynix Inc., follow suit. That step can help support prices but comes with the penalty of running expensive plants at less than full capacity, something that can weigh heavily on profitability. 

In addition to its planned workforce reductions, the company has suspended share repurchases, is cutting executive salaries and will skip companywide bonus payments, executives said on a conference call after its results were released.

Micron said sales will be about $3.8 billion in the fiscal second quarter. That compares with analysts’ average estimate of $3.88 billion, according to data compiled by Bloomberg. The company projected a loss of about 62 cents a share, excluding certain items, in the period ending in February, compared with a loss of 29 cents expected by analysts.

In the three months ended Dec. 1, Micron’s revenue declined 47% to $4.09 billion. The company had a loss of 4 cents a share, excluding certain items. That compares with an average estimate of a loss of 1 cent a share on sales of $4.13 billion.

Micron’s shares declined about 2% in extended trading after closing at $51.19 in New York. The stock has dropped 45% this year, a worst decline than most chip-related equities. The Philadelphia Stock Exchange Semiconductor Index is down 33% in 2022.

Last month the company warned it was cutting production by about 20% “in response to market conditions.” Boise, Idaho-based Micron had 48,000 employees as of Sept. 1, according to filings. 

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US Attorney to Hold NY News Conference on Bankman-Fried Today

(Bloomberg) — Manhattan US Attorney Damian Williams called off plans to hold a press conference Wednesday on his office’s prosecution of Sam Bankman-Fried amid possible delays in the FTX co-founder’s return to the US.

Bankman-Fried, who was arrested in the Bahamas last week, on Wednesday morning agreed to be extradited to the US to face fraud charges over the cryptocurrency exchange’s collapse. He’d been expected to fly back to the US soon after, but he had still not departed the Bahamas early Wednesday evening.

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Trump Lawyer Accused of Evading Subpoena in Giuliani Defamation Case

(Bloomberg) — A lawyer who was part of former President Donald Trump’s 2020 legal team may be evading a subpoena in a defamation case against Rudy Giuliani, according to attorneys for two Georgia election workers who sued the former New York City mayor.

Over the past four months, the plaintiffs’ attorneys tried six addresses in three states to serve the subpoena on Trump lawyer Katherine Friess, with no luck, court papers show. They messaged five email addresses, receiving notice that one email was repeatedly opened but never getting a response. A lawyer who represented Friess in another case wouldn’t accept service on her behalf.

Friess isn’t a defendant in the defamation suit. But election workers Ruby Freeman and her daughter, Wandrea “Shaye” Moss, want her to turn over documents because they say Giuliani has identified Friess as a principal author of a strategic communications plan to cast doubt on President Joe Biden electoral win in 2020. 

Friess is “an important witness in this case, with personal knowledge of the origins of Defendant Giuliani’s lies about Plaintiffs,” Freeman and Moss said in court filings.

On Wednesday, US District Chief Judge Beryl Howell determined that Friess was “likely aware of this lawsuit” and issued an order allowing the plaintiffs to use other methods to serve her with the subpoena that don’t require direct contact.

Friess didn’t respond to emails sent to the five addresses listed in the DC case or to a voicemail left at the phone number associated with her attorney registration in Colorado.

The case stems from bogus claims by Trump that the 2020 election was mired in fraud, especially in Georgia, a key swing state. 

Read More: Trump-Inspired Menacing of Officials Dominates Jan. 6 Hearing

Moss was an employee of the Fulton County Registration and Elections Department and her mother had been hired as a temporary election worker. The two women became the targets of a false voter-fraud conspiracy theory promoted by Trump, Giuliani and others, which led to threats and harassment, according to Congressional testimony in June.

In December 2021, Freeman and Moss filed a defamation case in federal court in Washington, DC, against Giuliani, the conservative cable channel One America News Network, and OAN correspondent Chanel Rion. Freeman and Moss reached a settlement with the OAN defendants in the spring. Giuliani lost an early bid to get the case tossed out; a status report is due to the judge in August 2023.

Earlier this month, lawyers for Freeman and Moss told Howell there was evidence that Friess was intentionally trying to cut off avenues of contact, saying they learned she closed a post-office box after they had tried to serve her there. They wrote that Friess had been an attorney for 30 years “and is therefore familiar with the legal system and the mechanics of serving a witness.”

‘May Be Evading’

“On this record only, it is reasonable to infer that Ms. Friess is aware of Plaintiffs’ lawsuit, their interest in her personal knowledge, and their attempts to serve her with a subpoena, and that she may be evading service,” Freeman and Moss’ lawyers wrote in a Dec. 16 filing.

Howell, in her order, said the plaintiffs could email the subpoena to Friess at the various accounts they’d identified, mail copies to addresses they found in Colorado, and send one to the lawyer who represented her in an unsuccessful case she pursued in federal court in Colorado this year contesting a subpoena from the House Jan. 6 committee.

The lawyer in the Colorado case, Raymond Mansolillo, did not return requests for comment. Freeman and Moss’ attorneys with the legal advocacy group Protect Democracy declined to comment.

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