Bloomberg

(Bloomberg) — Kids who played three hours or more of video games a day performed better on tests of memory and impulse control than ones who didn’t play games, according to a study released Monday. 

Frequent gamers showed more activity and higher blood oxygen levels in frontal brain regions associated with more cognitively demanding tasks, and less brain activity in regions related to vision, the researchers found. 

The performance could be related to the games, but scientists stopped short of saying there was a cause-and-effect relationship. The kids who perform better on those tests may be ones who chose to play games in the first place, they said.

“While we cannot say whether playing video games regularly caused superior neurocognitive performance, it is an encouraging finding, and one that we must continue to investigate,” said Bader Chaarani, an assistant professor of psychiatry at the University of Vermont in Burlington and lead author of the study. 

The scientists analyzed brain scans from about 2,000 children who were among 9 and 10-year-old participants in the US Department of Health and Human Services’ Adolescent Brain Cognitive Development Study.

With the gaming industry raking in billions and children spending hours on their favorite titles, parents have continued to be concerned about the impact on their kids’ mental health. While previous research has linked video gaming to more aggressive behavior, this study contributes to a growing base of reports suggesting potential positives for the pastime. 

Guidelines set by the American Association of Pediatrics still encourage limits of one to two hours of video games per day. Other countries, such as China, have gone as far as not permitting children to spend more than the three hours a week.

“Numerous studies have linked video gaming to behavior and mental health problems,” said Nora Volkow, director of the National Institute on Drug Abuse, in statement with the report’s release. “This study suggests that there may also be cognitive benefits associated with this popular pastime, which are worthy of further investigation.”

 

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(Bloomberg) — A former employee of OpenSea, the world’s largest NFT marketplace, lost a bid to dismiss insider trading charges in the first such case involving digital assets.

Nathaniel Chastain, a former product manager at OpenSea, was arrested in June on wire fraud and money-laundering charges. He was responsible for selecting NFTs that were to be featured on OpenSea’s homepage between June and September 2021, according to the government. 

While the company kept the information confidential, Chastain secretly bought dozens of NFTs shortly before they were featured, selling them later for two to five times more than he paid, prosecutors said.

Chastain had asked US District Judge Jesse M. Furman to throw out the indictment, saying that NFTs aren’t securities or commodities and therefore aren’t subject to the government’s theory of misappropriation under the wire fraud law. He also argued that information he allegedly took is not “property” as required by the statute and that prosecutors can’t prove he committed money laundering because all the transactions at issue were done on the Ethereum blockchain.

Furman said Chastain’s argument that the NFTs are “property” may have some merit because the government may not be able to prove beyond a reasonable doubt that he used confidential business information, or that he tried to conceal his transactions while conducting them on a public blockchain. 

But the judge rejected Chastain’s contention about the limits of the wire fraud law, because he isn’t accused of insider trading “in the classic sense of the term” and isn’t charged with securities fraud. Furman cited a Supreme Court case upholding the wire fraud conviction of a Wall Street Journal columnist who was found guilty of sharing details of upcoming columns with traders, saying that the court found that the publication and contents of the column were “property” in the meaning of the law.

“No court has suggested, let alone held, that conviction in such a case requires trading in securities or commodities,” Furman said, adding in a footnote that the term “insider trading” may be misleading and that the appropriate solution may be to strike the phrase from the indictment.

Chastain’s lawyers have already asked Furman to strike references to “insider trading” from the indictment, saying it “serves no legitimate prosecutorial purpose and is simply a means for the government to increase media attention and inflame the jury in this first-of-its-kind case in the digital asset space.”

David I. Miller, a lawyer for Chastain, declined to comment on Furman’s decision.

The case is USA v. Chastain, 22-cr-305, US District Court, Southern District of New York (Manhattan).

Read More: Ex-NFT Marketplace Employee Charged with Insider Trading 

(Corrects name of defense lawyer in final paragraph of story originally published Oct. 21.)

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(Bloomberg) — Caisse de Depot et Placement du Quebec named Martin Longchamps as its new head of private equity, poaching the executive from another Canadian pension manager to run one of its largest portfolios. 

Longchamps will succeed Martin Laguerre, who had been in the role for less than two years, based in New York. Laguerre did not respond to a request for comment; the fund provided no explanation for his departure. 

Longchamps, who was managing director of private equity at the Public Sector Pension Investment Board, will work from the Caisse’s head office in Montreal, as he already lives in the city. 

Caisse de Depot had an exceptional year in private equity in 2021, posting a 39.2% return amid buoyant markets and strong performance in technology and health care. About a quarter of its private holdings are in technology and telecommunications, including software firm Druva and technology services firm Wizeline. 

Its private equity portfolio was worth C$82.5 billion ($60.1 billion), or nearly 20% of CDPQ’s assets under management at the end of last year. 

The Caisse recorded a 2.4% drop in private equity for the first six months of 2022, compared with a 16% decline for its public stock holdings.

The fund has attracted scrutiny in recent months for its $150 million investment in cryptocurrency lender Celsius Network LLC — though Laguerre was not involved in the venture, according to a spokesperson for the fund. The investment, made about a year ago, is now worthless after Celsius filed for bankruptcy. 

Longchamps will start in his new position on Nov. 14. “His experience in the institutional and private sectors, in all stages of the investment and asset management cycle, will be an asset,” Caisse Chief Executive Officer Charles Emond said in a statement. 

(Updates with information on performance.)

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(Bloomberg) — US stocks rallied for a second straight session as investors geared up for some of the world’s biggest companies to report earnings this week. Traders also mulled whether the Federal Reserve will slow its pace of interest-rate hikes after assessing weak economic data that released Monday. 

More than 80% of stocks in the S&P 500 index closed in green on Monday, buoyed by gains in technology and health-care companies. The Nasdaq 100 also rose more than 1%. US-listed Chinese shares plunged after that nation’s equity index tumbled as President Xi Jinping solidified his power. Among the megacap companies slated to report earnings this week are Alphabet Inc., Microsoft Corp. and Meta Platforms Inc. 

US Treasury 10-year yields ended the session around 4.25%. UK bonds posted some of their biggest gains on record as investors expect incoming Prime Minister Rishi Sunak to repair the damage caused by predecessor Liz Truss after her massive package of unfunded tax cuts roiled financial markets. 

Earnings remain in focus in the US, with investors still on edge over whether companies that are among the key profit-growth engines for the S&P 500 can deliver profits with inflation crimping margins. Of the almost 20% of companies that have reported so far, roughly 58% posted positive surprises in both revenue and earnings per share, according to data compiled by Bloomberg. As the Fed attempts to stomp out inflation, latest earnings displaying resilience and showing few signs of recession may be making some investors uneasy on equities. 

“Over the short-term, we think we can get some relief. The fact that earnings season has also been relatively strong is also helpful,” Andrew Sheets, Morgan Stanley’s chief cross-asset strategist, said on Bloomberg Television. “But the big picture — and I don’t think this changes — is that we still view this as a bear market rally rather than the start of a larger new bull market.”

Fed policy is also still a key focus for investors. Data on Monday indicated that Fed tightening is starting to hit the economy, with Purchasing Managers’ Index indicators showing contraction in the services and manufacturing sectors. Reports that the Fed may soon start reducing the size of its rate hikes had pushed stocks higher by more than 2% on Friday. San Francisco Fed President Mary Daly’s comments on Friday also added to the tentative optimism. But some investors are still cautious in their expectations that the central bank is moderating its rhetoric. 

“We are still agnostic as to whether the Fed really is going to pivot or be at the peak of its hawkish cycle,” said Lisa Erickson, senior vice president and head of public markets group at US Bank Wealth Management. “If you look at the underlying data, inflation remains sticky, particularly in services ex-housing, which can often be more persistent. So given the Fed’s dependence on the data, we’re not clear exactly again, when the Fed may truly begin to slow down.”

The central bank needs to maintain a balance between addressing inflation and reacting appropriately to any signs of slowdown in inflation, Erickson said. 

Read More: VIX’s Tandem Swings With S&P 500 Show Options Obsession Persists

Key events this week:

• Earnings due this week include: Apple, Microsoft, Exxon Mobil, Ford Motor, Credit Suisse, Airbus, Alphabet, Amazon, Bank of China, Boeing, Caterpillar, Cnooc, Coca-Cola, HSBC, Intel, McDonald’s, Mercedes-Benz, Merck, Samsung Electronics, Shell, UBS, UPS, Vale, Visa, Volkswagen
• US Conference Board consumer confidence, Tuesday
• Bank of Canada rate decision, Wednesday
• ECB rate decision, Thursday
• US GDP, durable goods orders, initial jobless claims, Thursday
• Bank of Japan policy decision, Friday
• US personal income, personal spending, pending home sales, University of Michigan consumer sentiment, Friday

Read More: Biden Team Working to Set Up Xi Meeting as Leader Tightens Grip

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1.2% as of 4 p.m. New York time
• The Nasdaq 100 rose 1.1%
• The Dow Jones Industrial Average rose 1.3%
• The MSCI World index rose 1.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%
• The euro rose 0.1% to $0.9873
• The British pound fell 0.2% to $1.1279
• The Japanese yen fell 0.9% to 148.98 per dollar

Cryptocurrencies

• Bitcoin fell 0.8% to $19,341.76
• Ether rose 1.1% to $1,344.95

Bonds

• The yield on 10-year Treasuries advanced three basis points to 4.25%
• Germany’s 10-year yield declined nine basis points to 2.33%
• Britain’s 10-year yield declined 31 basis points to 3.75%

Commodities

• West Texas Intermediate crude fell 0.5% to $84.66 a barrel
• Gold futures fell 0.1% to $1,654.20 an ounce

–With assistance from Emily Graffeo and Robert Brand.

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(Bloomberg) — SoftBank Group Corp.-backed Jellysmack, which helps content creators become YouTube and TikTok stars, is launching a spending spree for growth in Asia, following staff cuts earlier this year.

The New York-based startup, formally known as Keli Network Inc., said it’s partnering with Kuala Lumpur-based WebTVAsia to invest $30 million in up-and-coming influencers, most of whom are on the media giant’s roster. That money is part of a $500 million package Jellysmack has earmarked to fund social media personalities as it bets on their long-term growth.

Jellysmack’s financing differs from creator funds set up by Alphabet Inc. and Meta Platforms Inc., which pay for videos that capture viewers. Jellysmack provides cash upfront — based on creators’ existing and projected future work, allowing them to spend money on production equipment or marketing — in exchange for a cut of revenues.

Another startup that provides creators upfront money is Los Angeles-based Spotter Inc., which has advanced $600 million in exchange for exclusive licensing rights to creators’ YouTube back catalogs and ad revenue.

Among Jellysmack’s roster are the world’s biggest YouTuber Felix Kjellberg, better known as PewDiePie; Nas Daily’s Arab-Israeli YouTuber Nuseir Yassin; and Nigerian-American influencer Jackie Aina, who advocates for diversity in the cosmetics industry.

Jellysmack plans to deploy the $30 million over six months to help creators become “the MrBeast of Asia,” said Ezechiel Ritchie, Jellysmack’s general manager in the Asia-Pacific region, referring to the American personality.

“There’s a market for it; there’s a need,” Ritchie told Bloomberg News in an interview. “It’s very difficult for traditional creators or big YouTubers to go to a bank and get a loan.”  

Dubbed “a 21st-century-style creator collective” by SoftBank founder Masayoshi Son last year, Jellysmack uses machine learning to help influencers and brands monetize their work on platforms like Meta’s Instagram and Alphabet’s YouTube, taking an undisclosed share of ad revenue.

As with many of SoftBank’s big bets in the ride-hailing and e-commerce sectors, Jellysmack also had to cut costs amid a global tech slump, laying off 8% of its staff six months ago as it pulled back on projects related to the crypto sector. But the $100 billion creator economy has continued to balloon, fueled by the rise of short-form video and by aspiring artists who remain displaced by the pandemic.

When SoftBank invested in Jellysmack last year, venture capital-backed creator economy companies attracted funding worth $939 million, double the previous year’s, according to Crunchbase data. Jellysmack declined to disclose details of SoftBank’s investment, but said the money catapulted it among the ranks of unicorns with a valuation of $1 billion or more. It had a roster of 200 clients then. 

Jellysmack says it has so far paid out more than $175 million in revenues to creators since 2019, and that it now has 500 creators on contract.

WebTVAsia, which competes with Uuum Co. of Japan, is hoping Jellysmack will help it generate more revenue from its 3,500 creators around Asia. 

Monetizing video and other intellectual assets remains a challenge in developing markets like Vietnam, where ad revenue from social media platforms tends to be much lower than in advanced economies, WebTVAsia founder Fred Chong said in an interview.

“We see Asian creators as undervalued” compared with markets like the US, Chong said. WebTVAsia hopes to forge a long-term partnership with Jellysmack and tap its expertise in editing content for multiple platforms and in using machine learning to discover new talent and monetize content, he said. “This is phase one of this partnership.”

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(Bloomberg) — The Federal Trade Commission is penalizing alcohol delivery company Drizly Inc. and Chief Executive Officer Cory Rellas for alleged security lapses related to a 2020 data breach that exposed the personal information of 2.5 million consumers. 

The proposed order requires Drizly, now a subsidiary of Uber Technologies Inc., to destroy unnecessary data and restricts the information the company can collect and retain, according an FTC statement on Monday. It binds Rellas to data security requirements “for his role in presiding over unlawful business practices.”

In an unusual move, the FTC order applies personally to Rellas and will move with him even if he leaves Drizly. He will be required to implement an information security program at future companies if that company collects consumer information from more than 25,000 people, and where he is a majority owner, CEO or senior officer with information security responsibilities, according to the statement.

“Our proposed order against Drizly not only restricts what the company can retain and collect going forward but also ensures the CEO faces consequences for the company’s carelessness,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection, in the statement. “CEOs who take shortcuts on security should take note.”

In 2020, the alcohol delivery service acknowledged that a hacker acquired some of its customer data, including emails, date-of-birth information, passwords and in some cases, addresses.

Drizly and Rellas were alerted to security problems two years prior to the breach yet failed to take steps to protect consumers’ data from hackers, according to the FTC’s complaint. 

“We take consumer privacy and security very seriously at Drizly, and are happy to put this 2020 event behind us,” a Drizly spokesperson said in a statement. 

Uber bought Drizly for $1.1 billion 2021.

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(Bloomberg) — US stocks rose as investors await the next batch of earnings from some of the world’s biggest companies and mull whether the Federal Reserve will slow its pace of interest-rate hikes after assessing weak economic data. 

The S&P 500 climbed more than 1%, buoyed by technology and health-care stocks. The tech-heavy Nasdaq 100 also rose, paring losses of more than 1%. US-listed Chinese shares plunged after that nation’s equity index tumbled as President Xi Jinping solidified his power. Among the megacap companies slated to report earnings this week are Alphabet Inc., Microsoft Corp. and Meta Platforms Inc.

US equities are rallying despite a “growing acceptance” that monetary policy will likely remain restrictive for longer than expected just a few weeks ago, wrote 22V Research’s Dennis Debusschere, wrote in a note to clients. 

“That is a significant shift in the market narrative from ‘a pivot will save equities,’ toward a foundation that can support a sustainable increase in risk assets,” he said.

Earnings remain in focus, with investors still on edge over whether companies that are among the key profit-growth engines for the S&P 500 can deliver profits with inflation crimping margins. Of the almost 20% of companies that have reported so far, roughly 58% posted positive surprises in both revenue and earnings per share, according to data compiled by Bloomberg. As the Fed attempts to stomp out inflation, latest earnings displaying resilience and showing few signs of recession may be making some investors uneasy on equities. 

“Over the short-term, we think we can get some relief. The fact that earnings season has also been relatively strong is also helpful,” Andrew Sheets, Morgan Stanley’s chief cross-asset strategist, said on Bloomberg Television. “But the big picture — and I don’t think this changes — is that we still view this as a bear market rally rather than the start of a larger new bull market.”

Fed policy is also still a key focus for investors. Reports that the Fed may soon start reducing the size of its rate hikes pushed stocks higher by more than 2% on Friday. San Francisco Fed President Mary Daly’s comments on Friday also added to the tentative optimism. Data Monday indicated that Fed tightening is starting to hit the economy, with Purchasing Managers’ Index indicators showing contraction in the services and manufacturing sectors. But some investors are still cautious in their expectations that the central bank is moderating its rhetoric. 

“We are still agnostic as to whether the Fed really is going to pivot or be at the peak of its hawkish cycle,” said Lisa Erickson, senior vice president and head of public markets group at US Bank Wealth Management. “If you look at the underlying data, inflation remains sticky, particularly in services ex-housing, which can often be more persistent. So given the Fed’s dependence on the data, we’re not clear exactly again, when the Fed may truly begin to slow down.”

The central bank needs to maintain a balance between addressing inflation and reacting appropriately to any signs of slowdown in inflation, Erickson said. 

A gauge of the dollar strength rose. UK bonds posted some of their biggest gains on record as investors bet incoming Prime Minister Rishi Sunak will restore credibility to economic policy making.

Read More: Yellen Sees Environment Where US Financial Risks Could Emerge

Key events this week:

• Earnings due this week include: Apple, Microsoft, Exxon Mobil, Ford Motor, Credit Suisse, Airbus, Alphabet, Amazon, Bank of China, Boeing, Caterpillar, Cnooc, Coca-Cola, HSBC, Intel, McDonald’s, Mercedes-Benz, Merck, Samsung Electronics, Shell, UBS, UPS, Vale, Visa, Volkswagen
• US Conference Board consumer confidence, Tuesday
• Bank of Canada rate decision, Wednesday
• ECB rate decision, Thursday
• US GDP, durable goods orders, initial jobless claims, Thursday
• Bank of Japan policy decision, Friday
• US personal income, personal spending, pending home sales, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1.2% as of 2:46 p.m. New York time
• The Nasdaq 100 rose 0.9%
• The Dow Jones Industrial Average rose 1.5%
• The MSCI World index rose 1.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%
• The euro was little changed at $0.9870
• The British pound fell 0.2% to $1.1285
• The Japanese yen fell 0.9% to 148.94 per dollar

Cryptocurrencies

• Bitcoin fell 0.8% to $19,336.57
• Ether rose 0.7% to $1,339.83

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.23%
• Germany’s 10-year yield declined nine basis points to 2.33%
• Britain’s 10-year yield declined 31 basis points to 3.75%

Commodities

• West Texas Intermediate crude fell 0.6% to $84.57 a barrel
• Gold futures fell 0.2% to $1,652.80 an ounce

–With assistance from Emily Graffeo and Robert Brand.

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©2022 Bloomberg L.P.

(Bloomberg) — President Joe Biden expressed confidence that there was still time for Democrats to stave off a loss of their House and Senate majorities with two weeks to go until the Nov. 8 midterms and the latest polling favoring Republicans. 

“We’re running against the tide, and we’re beating the tide,” Biden said Monday during a visit to Democratic National Committee headquarters in Washington that was meant to rally staff for the final stretch of the campaign.

“I can’t think of a more consequential election that I’ve been involved in and we’ve been involved in,” he told the group, adding, “When we get people out to vote we win, and you’re getting them out to vote.”

Yet Republicans have double-digit advantages over Democrats on issues most important to voters, including inflation, the economy, gas prices and crime, according to an ABC News/Ipsos poll released Sunday. Those gains stunted Democratic momentum stemming from the Supreme Court’s decision in June overturning nationwide abortion rights and from backlash to former President Donald Trump’s conduct. 

Biden has sought to make the election into a choice between Democrats’ policies and a Republican Party he has painted as extreme. He regularly contrasts achievements, including his landmark health and climate law, with GOP lawmakers’ plans to slash Medicare and Social Security and extend Trump’s tax cuts.

“Everybody wants to make it a referendum, but it’s a choice between two vastly different visions for America,” he said Monday, adding that Republicans have “stated boldly that they want to cut Social Security, Medicare, and to the point that they’ll shut down the government.” 

The president again chastised Republicans for threatening to use the US debt limit as leverage to gain entitlement cuts. 

“There’s nothing, nothing that would create more chaos, more inflation and more damage to the American economy than this,” he said. “Republicans are going to crash the economy.”

Republicans, in turn, have framed the midterms as a referendum on Biden, whose approval ratings have sank amid record inflation and fears of an oncoming recession. The president has made few campaign stops in the closing weeks for candidates running in close races. 

“The only Democrats willing to welcome Joe Biden at this point are paid DNC employees who work in Washington, D.C.,” Republican National Committee Spokesperson Emma Vaughn said in a statement. “Meanwhile, down-ballot Democrats across the country are desperate to hide their Biden voting records.”

Read more: Unpopular Biden Shuns Obama-Trump Midterm Travel Strategy

Biden is scheduled to travel to Philadelphia on Friday for a Democratic Party dinner. He’s also traveling to Syracuse, New York, on Thursday to speak about Micron Technology Inc.’s plans to build a chip manufacturing facility. The area is represented by a Republican in the House — John Katko — who is not seeking re-election.

Biden on Wednesday will appear at “virtual political receptions” for House lawmakers from Nevada, Iowa and Pennsylvania, according to the White House. 

The Pennsylvania lawmaker is Matt Cartwright, whose district includes Scranton, Biden’s birthplace.

–With assistance from Justin Sink.

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(Bloomberg) — Apple Inc. increased prices for its music and TV+ services for the first time, citing rising licensing costs, a move that risks giving rivals an edge in a fiercely competitive streaming industry.

The company increased the price of Apple Music to $10.99 a month from $9.99 for individuals, effective immediately, making it more expensive than services from Spotify Technology SA and Amazon.com Inc. Spotify surged as much as 9.4% to $97.07 in response to the news, its biggest intraday rally in almost three months.

With its video plan, TV+, Apple will continue to offer a lower price than companies like Netflix Inc. or Warner Bros. Discovery Inc., but that service has been slow to build as big a following as rival platforms. The price of Apple TV+ will climb to $6.99 from $4.99, and the standard Apple One bundle increases $2 to $16.95. 

Apple’s push into streaming in recent years is part of a broader effort to generate more revenue from services. That category now generates nearly a quarter of the company’s sales — almost $20 billion in the June quarter — up from less than 10% in 2015. Apple is set to give its latest quarterly results this week.

The company said in a statement that the music price hike was due to “an increase in licensing costs” and that artists and songwriters will now earn more money. That came as good news for investors in Warner Music Group Corp., a top recording company, which sent the shares up as much as 15% on Monday.

Apple is also hiking its annual music plan to $109 from $99 and its TV+ yearly subscription to $69 from $49. Apple One bundles for families are going to $22.95 from $19.95, while the Premier package, which adds News+, Fitness+ and additional storage on top of Arcade, Music and TV+, is climbing $3 to $32.95.

Apple shares rose less than 1% to $148.56 on Monday. Though the stock is down 16% this year, that’s less of a rout than the broader indexes have suffered. The S&P 500 Index has fallen more than 20%.

In explaining the TV+ increase, Apple said that service was introduced “at a very low price” because it started with just a few shows and movies. It’s now “home to an extensive selection of award-winning and broadly acclaimed series, feature films, documentaries, and kids and family entertainment from the world’s most creative storytellers,” Apple said.

Still, the service’s viewership hasn’t matched that of other big streaming platforms. While Apple TV+ has had a run of critically acclaimed hits, including Oscar winner Coda and series such as Severance and Ted Lasso, it remains an also-ran in the hotly competitive streaming video space. Nielsen’s most recent report showed Americans spent more time watching at least five other paid services, plus ad-supported video from YouTube and Pluto TV.

Apple has increasingly relied on services to augment hardware sales in an environment where device upgrades have become pricier and less frequent. The Cupertino, California-based company has sped up the release of new digital offerings in recent years, including a credit card and, more recently, savings accounts.

Apple on Monday also released the first version of iPadOS 16 with Stage Manager multitasking software, as well as the macOS Ventura update for Mac desktops and laptops. It also rolled out iOS 16.1 with shared iCloud photo libraries and new features for smart homes.

The company isn’t alone in boosting streaming prices. The cost of Walt Disney Co.’s flagship Disney+ service will rise 38% to $11 later this year. The company is introducing a new ad-supported tier then that will be priced the same as its earlier offering at $8 a month. That follows a 43% price increase, to $10 a month, for its ESPN+ streaming service in August. Netflix, which raised prices earlier in the year, is also introducing an ad-supported plan, although — at $7-a-month — it will be cheaper than its existing offerings.

–With assistance from Christopher Palmeri.

(Updates Apple shares in seventh paragraph.)

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(Bloomberg) — US Bankruptcy Judge Martin Glenn dealt a blow to Celsius Network’s stockholders on Monday, ruling against their motion to form an official committee of equity holders as they seek to stake a claim to the crypto lender’s most valuable assets.

The ruling means holders of Celsius’s preferred equity will have to pay for their own lawyers and advisers during the bankruptcy. Venture capital firm WestCap Management LLC and pension fund Caisse de Depot et Placement du Quebec (CDPQ) are among the company’s stockholders. 

Some Celsius stockholders are arguing that they, rather than the company’s customers, are entitled to the value from the crypto lender’s mining business and loan book because of Celsius’s corporate structure. Lawyers for Celsius creditors — which are overwhelmingly its customers — disagree. 

In a written decision Monday, Judge Glenn said the stockholders hadn’t met the legal standard needed to have their advisers’ bills paid for by Celsius. The investors are already adequately represented and haven’t shown that they’ll probably recover money during the bankruptcy, he said. 

The bankruptcy is Celsius Network LLC, 22-10964, US Bankruptcy Court for the Southern District of New York (Manhattan).

 

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