US Business

The US Securities and Exchange Commission charged disgraced cryptocurrency tycoon Sam Bankman-Fried on Tuesday with defrauding customers of billions of dollars, a day after he was arrested in the Bahamas at the request of the United States.

Bankman-Fried had “built a house of cards on a foundation of deception” in his dealings with investors in his FTX crypto firm, the SEC said.

“Today we are holding Mr. Bankman-Fried responsible for fraudulently raising billions of dollars from investors in FTX and misusing funds belonging to FTX’s trading customers.”

The charge comes a day after Bankman-Fried was arrested in the Bahamas on the eve of his scheduled appearance at a US congressional hearing in which he was to testify under oath about the crypto exchange’s overnight demise.

The SEC said investigations “as to other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.”

The 30-year-old had in recent weeks defied legal advice and made multiple media appearances offering his version of his company’s sudden failure, usually by video link from the Bahamas, where his company is headquartered.

According to a press release from the attorney general’s office in the Bahamas, Bankman-Fried was to be held in custody before an expected request for his extradition by the United States. 

The Bahamian prime minister’s office shared news of the arrest, as well as a police statement saying Bankman-Fried was arrested in the early evening at his apartment complex in the capital Nassau.

He was taken into custody without incident, the statement said, and was to appear in court in Nassau on Tuesday.

As much as anyone, Bankman-Fried had embodied the apparent emergence of cryptocurrency as an above-board investment rather than a frowned-upon get-rich-quick scheme shunned by the banking establishment. 

His FTX platform was plugged by celebrities in advertising campaigns and the cyber whiz kid became a regular presence in Washington, where he donated tens of millions of dollars in political contributions.

But after reaching a valuation of $32 billion, FTX’s implosion was swift following a November 2 report on ties between FTX and Alameda, a trading company also controlled by Bankman-Fried.

The report exposed that Alameda’s balance sheet was heavily built on the FTT currency — a token created by FTX with no independent value.

– ‘Grossly inexperienced’ –

The price of FTT plunged in early November, roiling both Alameda and FTX, where Alameda had large trading positions. 

Reeling from customer withdrawals and short some $8 billion, FTX and around 100 related entities filed for bankruptcy protection on November 11, inviting scrutiny from regulators, prosecutors and furious clients. 

Among the revelations, FTX is suspected of fraud for propping up Alameda with billions of dollars in customer funds that are now likely lost forever.

Questions also linger over whether Bankman-Fried engaged in market manipulation, or illegally provided inside information to Alameda.

“If convicted he could be facing the rest of his life in prison, given the dollar amount of the fraud,” Jacob S. Frenkel, a former federal criminal prosecutor at Dickinson Wright, told AFP.

“We would not see an indictment if prosecutors were not absolutely convinced that they will win a conviction,” he added.

In his media interviews, Bankman-Fried has admitted to mistakes, but has denied intent to defraud his customers.

FTX CEO John Ray, who came to the company after the debacle, was to tell Congress on Tuesday that the problems arose because control was “in the hands of a very small group of grossly inexperienced and unsophisticated individuals.”

“Never in my career have I seen such an utter failure of corporate controls at every level of an organization, from the lack of financial statements to a complete failure of any internal controls or governance whatsoever,” Ray said in prepared remarks.

The fall of FTX has caused major doubts about the long term viability of cryptocurrency and heaped stress on other platforms and entities that rode the success of Bitcoin and other currencies.

President Volodymyr Zelensky on Tuesday said Ukraine needed emergency aid for its energy sector totalling around 800 million euros to help his country survive Russia’s bombing of its civilian infrastructure.

Failing to make an impact on the battlefield in its invasion, Moscow has switched tactics since October when it began airstrikes targeting Ukraine’s energy network, plunging millions into cold and darkness at the onset of winter.

The alarm over Ukraine’s ability to cope comes nine months into the Russian assault against its neighbour, which has seen Moscow make only slight territorial gains in the face of fierce Ukrainian resistance.

Zelensky made the request for 800 million euros at international conference in Paris designed to raise material and money to repair Ukraine’s damaged infrastructure.

It is hosted by French President Emmanuel Macron with whom he has sometimes had testy ties.

“Of course it is a very high amount, but the cost is less than the cost of a potential blackout,” Zelensky told the gathering in Paris via video link.

“I hope that decisions will be made accordingly.”

Zelensky said that Ukraine needed transformers, equipment to repair damaged high-voltage power lines, as well as generators and gas turbines. 

“Because of the destruction of our power plants by terror attacks we will need to use more gas this winter than expected,” added Zelensky, whose wife Olena attended the conference in person.

Zelensky urged G7 nations on Monday to provide “about two billion cubic metres” of additional gas to get through the winter as well as more tanks and missiles to fight the invasion.

– Russia wants ‘darkness’ –

Ukrainian Prime Minister Denys Shmygal also appealed for help from the 70 states and international agencies gathered in Paris for the “Standing with the Ukrainian People” conference.

“They (Russians) want to put us into darkness and it will fail, thanks to our partners all over the world,” he added.

Shmygal also said Tuesday that the UN nuclear watchdog IAEA had agreed to dispatch permanent teams to the country’s nuclear plants, including the Russian-controlled Zaporizhzhia plant, a hotspot of fighting.

The prime minister said after a meeting with IAEA chief Rafael Grossi that teams would deploy to plants at Zaporizhzhia, Rivne, Khmelnytskyi, Pivdennoukrainska and Chernobyl without specifying a timeframe.

Ukrainian Energy Minister German Galushchenko told AFP ahead of the conference that Russia’s war against Ukraine “completely changes our understanding of nuclear security”.

Macron said the focus in Paris was on providing short-term assistance given Russia’s attempts to “sow terror” in Ukraine by “cowardly” bombing the country’s infrastructure.

“Very concretely, these are commitments to deliver generators, help repair infrastructure, deliver LEDs (light-emitting diodes) for lighting,” he said.

Macron has riled his Ukrainian allies in the past, most notably in June when he said “we must not humiliate Russia”.

Macron called for Russia to be offered “security guarantees” at the end of the war during an interview on December 3, drawing criticism from some Ukrainian and eastern European politicians that he was focusing on diplomatic compromises with Russian President Vladimir Putin.

But in a call at the weekend, he “reminded President Zelensky that Ukraine can count on France’s support for as long as is required to fully re-establish its sovereignty and national integrity,” the French presidency said.

UN chief Antonio Guterres will also make an address remotely to attendees, which include ambassadors from some Gulf states, as well as India and Indonesia.

China has not sent a representative.

– No Putin presser –

French organisers have stressed that the meeting is different from other recent international gatherings in Lugano, Warsaw or Berlin dedicated to long-term reconstruction.

Instead, they hope donors will pledge help from engineering expertise to generators and spare parts to carry out repairs on the energy grid.

One key outcome will be developing a new platform, agreed by G7 leaders Monday, that will enable donors to see Ukraine’s needs and coordinate their aid.

In Russia meanwhile, the Kremlin has announced that Putin will not hold his annual end-of-year press conference this year, a break with tradition amid the military setbacks.

Kremlin spokesman Dmitry Peskov gave no reason for not holding the event which Putin has hosted almost every year he has been in power since 2000.

Elsewhere, Belarus held a surprise inspection of its armed forces Tuesday, raising fears of a possible escalation in the conflict.

Belarus is a close ally of Moscow but Belarusian leader Alexander Lukashenko has repeatedly said he does not plan to send Belarusian troops to Ukraine.

Turkey said Tuesday it has cleared up a dispute linked to a Western price cap on Russian crude that had stalled the passage of tankers through the Bosphorus and Dardanelle straits.

A queue of around 20 oil ships had been waiting to sail through the straits for much of the past week in a spat over Turkey’s demand for physical proof of insurance.

The European Union and the Group of Seven leading industrialised nations agreed earlier this month to block Western firms from servicing ships that sell Russian oil for more than $60 a barrel.

The decision was part of a US-led drive to punish Russia for its war on Ukraine by stripping away its main source of income while avoiding major disruptions to the global crude market.

The plan hit a snag when Turkey voiced alarm over the possibility of uninsured ships passing through the Bosphorus — a strait running through the heart of the 16-million-strong city of Istanbul.

Turkish coast guards began to demand letters proving ships had so-called “protection and indemnity” insurance against spills and other accidents.

Western insurance companies balked at the demand because it made them liable for the possible breach of the new sanctions.

European diplomats have been meeting with insurers and Turkish officials in a bid to agree on a compromise text that could suit all parties.

Turkey’s transport ministry said tankers have now started to produce a “confirmation letter” that guaranteed their passage from Russian ports to world markets.

“There are no tankers loaded with crude waiting for passage,” the ministry said in a statement.

The bottleneck in the Turkish straits had made little impact on the global oil market because most Western countries no longer purchase Russian crude.

An analysis by Bloomberg showed that Bulgaria was the only European country to have imported Russian oil this month.

It showed most of the Russian tankers now headed for Asian markets through the Suez Canal.

EU ministers meeting in Brussels on Tuesday struggled to bridge differences over a proposed cap on natural gas prices, a challenge stymying other measures designed to mitigate Europe’s energy crunch.

The continent has entered a bitingly cold winter with fewer energy options because Russia has reduced gas supplies in retaliation for EU sanctions imposed over its war in Ukraine.

Gas prices are high, albeit lower than during the middle of the year, spurring worries that European homes and businesses could face blackouts or unpayable bills, if not this winter than in the next.

Several energy ministers going into the talks doubted a compromise could be reached. They said discussions could roll over to another meeting scheduled for next Monday.

“I’m viewing this meeting today with a bit of scepticism because there has been too little movement in the last days,” Austrian Energy Minister Leonore Gewessler said.

She said two other measures, joint gas purchases and speeded-up authorisations for renewable energy sources, could find agreement but they were “being held hostage” by countries intent on securing a gas price cap.

Several EU countries, including France, Poland and Spain, want a price cap lower than the one proposed by the European Commission, with fewer conditions attached.

The commission has suggested a price ceiling of 275 euros per megawatt hour, but only if the price remains above that level for at least two weeks, and then only if the price for liquified natural gas (LNG) goes above 58 euros for 10 days within that same two-week period.

Some EU countries including Germany, the Netherlands and Austria, view a too-rigid price cap as a threat to supplies, comporting the risk that deliveries could be diverted from Europe to more lucrative markets in Asia.

“The time for consultation has run out,” the Italian minister for European affairs, Raffaele Fitto, said.

“European citizens are in agony, European businesses are closing… All of us must heed to our responsibilities and agree without delay on the market correction mechanism and energy solidarity.”

Czech Industry Minister Jozef Sikela, who was chairing the meeting under his country’s EU presidency, said he understood the concerns of both camps but believed a “feasible proposal” was on the table.

“The citizens and businesses of Europe, they expect from us that we will come up with a clear solution,” he said.

China has filed a dispute with the World Trade Organization over US restrictions on chip exports, Beijing’s commerce ministry said in a statement late Monday, accusing Washington of threatening global supply chains.

The United States in October announced new export controls aimed at restricting China’s ability to buy and manufacture high-end chips with military applications, complicating Beijing’s push to further its own semiconductor industry and develop advanced military systems.

The moves include export restrictions on some chips used in supercomputing as well as stricter requirements on the sale of semiconductor equipment.

The aim is to prevent “sensitive technologies with military applications” from being acquired by China’s military, intelligence and security services, the US Commerce Department said in October.

However, China’s foreign ministry claimed Tuesday that the United States has “repeatedly used national security as an excuse to interfere in the normal operation of international trade”.

“All countries should stand up and not let Washington’s unilateralism and protectionism go unchecked,” foreign ministry spokesman Wang Wenbin said at a routine briefing.

“This concerns the stability of the global trade system and more importantly, international justice.”

China’s Ministry of Commerce on Monday had accused the United States of “obstructing normal international trade in products including chips and threatening the stability of the global industrial supply chain”, as well as violating international trade rules and engaging in “protectionist practices”.

The WTO dispute is intended to defend China’s “legitimate rights and interests”, the ministry said in its statement, urging Washington to “give up zero-sum thinking”.

The two superpowers have long faced off over a range of issues including technology, trade, Hong Kong, Taiwan and human rights.

Chinese leader Xi Jinping and US President Joe Biden pledged to repair frayed relations at a summit in Bali, Indonesia last month.

Days before the latest chip controls, the Pentagon added 13 more Chinese firms including drone manufacturer DJI and surveillance firm Zhejiang Dahua Technology to a blacklist of military-linked entities.

Markets were mixed Tuesday as nervous investors sat tight ahead of key US inflation data and a Federal Reserve policy decision but fresh pledges by China to open up from zero-Covid offered support.

The region was given a positive lead after Wall Street’s three main indexes raced out of the traps Monday, with analysts citing a survey by the central bank that showed inflation expectations falling.

The November consumer price index figures later in the day follow Friday’s forecast-beating print on wholesale inflation, which dented hopes the Fed could take a more dovish tilt in its monetary-tightening campaign.

The central bank is then widely expected to lift interest rates 50 basis points on Wednesday — a slowdown from the previous four 75-point hikes — but its post-meeting statement and comments from boss Jerome Powell will be closely followed.

While the general view is that policymakers will stop increasing borrowing costs next year, there is debate about how high they will peak and when they will start to come down.

“I think CPI will be important but not necessarily for this meeting, for which a 50 basis point hike is well flagged, but rather it will help determine the extent of further tightening and give clues to the terminal rate,” Mitul Kotecha, of TD Securities, said.

“However, we think the risks are asymmetric in that a higher CPI print will likely have a bigger impact than a lower print.”

But the Wall Street Journal reported that there were disagreements within the policy board about the way forward, with doves trying to limit the economic pain as they bring inflation down, while hawks want a tougher line on fighting prices by weakening the jobs market.

“In this light, don’t expect clearcut signals from the Fed… on what they expect to be doing at early 2023 (policy) meetings after a widely expected 50 basis points fund rate hike this week,” said National Australia Bank’s Ray Attrill.

Hong Kong rose after authorities announced a further easing of the city’s Covid rules, while Tokyo, Sydney, Singapore, Wellington, Bangkok and Jakarta were all well up.

However, Shanghai dipped along with Seoul, Taipei, Manila and Mumbai.

London, Paris and Frankfurt edged up at the open.

“It’s been a do-nothing day as investors take stock before the onslaught of a series of high-risk events,” said SPI Asset Management’s Stephen Innes.

China’s shift away from its economically damaging zero-Covid policy continued to support sentiment as the world’s number two economy opens up.

Meanwhile, top Chinese officials are meeting this week to draw up their economic blueprint for re-emerging from Covid, with observers predicting more stimulus measures and pledges of support for the troubled property sector.

But there is also a worry among investors that the quick relaxation of containment measures such as mass testing and lockdowns might lead to a massive surge in infections that could overwhelm the healthcare system and weigh on the economy.

Still, the expected pick-up in demand in China boosted oil prices further, with both main contracts extending Monday’s strong gains.

“China’s reopening is coming, it won’t happen overnight, but it will provide a major boost to demand in the outlook next quarter,” said OANDA’s Edward Moya. 

– Key figures around 0820 GMT –

Tokyo – Nikkei 225: UP 0.4 percent at 27,954.85 (close)

Hong Kong – Hang Seng Index: UP 0.7 percent at 19,596.20 (close)

Shanghai – Composite: DOWN 0.1 percent at 3,176.33 (close)

London – FTSE 100: UP 0.1 percent at 7455.50

Euro/dollar: UP at $1.0551 from $1.0539 on Monday

Dollar/yen: DOWN at 137.46 yen from 137.66 yen

Pound/dollar: UP at $1.2274 from $1.2268

Euro/pound: UP at 85.96 pence from 85.87 pence

West Texas Intermediate: UP 1.4 percent at $74.21 per barrel

Brent North Sea crude: UP 1.6 percent at $79.21 per barrel

New York – Dow: UP 1.6 percent at 34,005.04 (close)

The US Department of Energy is expected to announce Tuesday that its researchers have achieved a “major scientific breakthrough” regarding nuclear fusion, a technology seen as a possible revolutionary alternative power source.

Scientists have been working for decades to develop nuclear fusion — touted by its supporters as a clean, abundant and safe source of energy that could eventually allow humanity to break its dependence on the fossil fuels driving a global climate crisis.

The Energy Department has refused to give any specific details about what it will announce Tuesday, but a Financial Times report over the weekend has set the scientific community abuzz.

According to the UK-based outlet, researchers at the Lawrence Livermore National Laboratory (LLNL) in California have succeeded for the first time in producing a “net energy gain” from nuclear fusion, meaning more energy was produced in the reaction than was used to activate it.

If the achievement is confirmed, “that is a true breakthrough moment which is tremendously exciting,” said physicist Jeremy Chittenden with Imperial College London.

“It proves that the long sought-after goal, the ‘holy grail’ of fusion, can indeed be achieved.”

Nuclear power plants around the world currently use fission — the splitting of a heavy atom’s nucleus — to produce energy.

Fusion on the other hand combines two light hydrogen atoms to form one heavier helium atom, releasing a large amount of energy in the process.

That’s the process that occurs inside stars, including our sun.

On Earth, fusion reactions can be provoked by heating hydrogen to extreme temperatures inside specialized devices.

Researchers at the LLNL use the massive National Ignition Facility — 192 ultra-powerful lasers all pointed into a thimble-sized cylinder filled with hydrogen.

According to the Financial Times, LLNL scientists recently produced about 2.5 megajoules of energy in a nuclear fusion reaction, or about 120 percent of the 2.1 megajoules used by the lasers to initiate it.

– Decades to achieve –

That result would finally provide proof for the physical principles outlined decades ago by fusion researchers. It would be a “a success of the science,” said Tony Roulstone, a lecturer at Cambridge University.

Like fission, fusion is carbon-free during operation, but has many more advantages: it poses no risk of nuclear disaster and produces much less radioactive waste.

However, there is still a long way to go before fusion is viable on an industrial scale.

“To turn fusion into a power source we’ll need to boost the energy gain still further,” cautions Chittenden.

“We’ll also need to find a way to reproduce the same effect much more frequently and much more cheaply before we can realistically turn this into a power plant,” he added.

That could take yet another 20 or 30 years, Erik Lefebvre, project manager at the French Atomic Energy Commission, told AFP.

Climate experts however warn that the world cannot wait that long to reduce its greenhouse gas emissions, and limit the worst effects of global warming.

Other nuclear fusion projects are also in development around the world, including the major international project known as ITER, which is currently under construction in France.

Instead of lasers, ITER will use a technique known as magnetic confinement, containing a swirling mass of fusing hydrogen plasma within a massive donut-shaped chamber.