The new management of FTX is pressuring hundreds of politicians and political organizations to return millions of dollars donated by the crypto platform or its founders before it went bankrupt last year.
The company, which collapsed in November and is now at the center of a massive federal fraud investigation, said it was sending “confidential messages” to political figures, political action funds and other recipients as it seeks to claw back assets to repay its estimated 1 million creditors. In a statement on Sunday, FTX said the donations need to be returned by the end of the month. If they aren’t, FTX said it reserves the right to sue recipients.
“To the extent such payments are not returned voluntarily, the FTX Debtors reserve the right to commence actions before the Bankruptcy Court to require the return of such payments, with interest accruing from the date any action is commenced,” the statement reads. The company added that recipients who gave the funds to a third party, including a charity, aren’t off the hook.
In FTX’s heyday, founder Sam Bankman-Fried was a fixture in DC politics, lobbying for light-touch regulation of the nascent crypto industry and becoming one of the largest contributors to the Democratic Party. Bankman-Fried himself gave roughly $40 million to campaigns and political action committees, largely backing Democrats, during the 2022 midterm election cycle, according to Federal Election Commission records.
Bankman-Fried later told journalist Tiffany Fong that he donated an equal amount to Republicans but that those donations were “dark.”
Federal prosecutors say that FTX, at the direction of Bankman-Fried, stole funds from customer deposits to make political donations, buy luxury real estate and cover losses at his hedge fund, Alameda Research.
Bankman-Fried pleaded not guilty to eight counts of fraud and conspiracy last month. Two of his former associates, meanwhile, have pleaded guilty and implicated Bankman-Fried in the alleged crimes.
Separately, on Monday, FTX’s CEO John Ray III, who took over for Bankman-Fried when the firm filed for bankruptcy, testified about the company’s cybersecurity infrastructure, which he called “very loose” and “vulnerable.”
“Literally one of the founders could come into this environment, download half a billion dollars’ worth of wallets onto a thumb drive and walk off with them, and there’d be no accounting for that whatsoever,” he said, adding that such lapses would be “virtually unthinkable…in a controlled environment.”
He described the process of securing FTX customer passwords and wallets in the first 48 hours of his leadership as “pure hell.” Ray became CEO in November, replacing Bankman-Fried. In the weeks between November 11, when he took over the company, and the end of the year, Ray told the court that he made approximately $690,000 in fees, excluding expenses.
Ray’s testimony underscored his previous accounts of stepping into a business in complete disarray. Ray, who oversaw the liquidation of Enron, said in November that had never seen such a “complete failure of corporate controls” and absence of reliable financial statements in his career.
The judge in the case was weighing an effort by the US Trustee, which represents the Department of Justice in bankruptcy cases, to install an independent, court-appointed examiner to oversee FTX’s bankruptcy.
Lawyers for FTX argued against such a a move, saying that an examiner would be duplicative, wasteful and costly, with the burden being shouldered by FTX creditors.
The US Trustee argued that the allegations of fraud and misconduct are “too important to be left to an internal investigation.”
Judge John Dorsey has not yet ruled on the examiner issue.
U.S. stocks rebounded in another choppy session Thursday after renewed concerns over the economy and a weak outlook from market bellwether Microsoft (MSFT) weighed on sentiment in earlier trading.
The S&P 500 jumped 0.4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, climbing back from a lower open, while the Dow Jones Industrial Average hovered just above breakeven. The tech-heavy Nasdaq extended gains to 1.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} as all three indexes attempt to bounce back from two straight days of losses.
Shares of Microsoft slipped 2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} at open after the technology giant lowered its profit and revenue outlook, citing headwinds from from moves in foreign exchange rates, joining other companies that have recently reported grappling with challenging macroeconomic conditions.
Investors also weighed a bevy of employment data. The Labor Department’s latest weekly jobless claims report showed applications for unemployment insurance unexpectedly fell to 200,000 in a sign labor market conditions remain a bright spot in the economy amid mounting worries of a slowdown. On the other hand, job creation in the U.S. private sector dropped off sharply last month to the slowest pace of growth in the COVID-era recovery, according to ADP’s private payrolls report.
Oil prices retreated from a rally earlier this week following reports Saudi Arabia and other OPEC members may boost crude production to offset a sharp drop in Russia’s output under new sanctions by the European Union. West Texas Intermediate (WTI) and Brent crude oil futures each fell more than 3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} Thursday morning.
Wall Street weighed several quarterly reports in the early trade. Pet retailer Chewy (CHWY) saw shares pop more than 12{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} at open after the company reported a surprise profit following Wednesday’s closing bell. Hewlett-Packard Enterprise (HPE) added to a growing list of corporate names slashing forecasts over macroeconomic headwinds from supply chain disruptions, unfavorable currency movements and its exit from Russia. Shares fell roughly 8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} at the start of trading.
More earnings are in store for traders through Friday from companies including Lululemon (LULU), RH (RH) and Okta (OKTA). With earnings season tailing off, investors will take their cue from economic data, with the labor market in focus.
On Wednesday, the April job openings report, also known as JOLTS, reflected a decline in the number of vacancies, a data point the Federal Reserve is likely to view positively as it works to cool the labor market. Manufacturing data from the Institute for Supply Management out Wednesday also pointed to resilience in the economy and suggested fears of downturn may be exaggerated.
The data coincided with market-moving comments from JPMorgan (JPM) CEO Jamie Dimon that signaled a grimmer outlook for the U.S. economic picture. At a conference Wednesday, the leader of the largest bank in the U.S. said the economy is facing a “hurricane” as the Federal Reserve moves forward with its monetary tightening plans.
“Are we going to slow down from a growth perspective? Yes, absolutely,” Cornerstone Wealth Group Chief Investment Officer Cliff Hodge told Yahoo Finance Live on Wednesday, commenting on Dimon’s remarks. “Are we going to fall into a recession? Eventually, but I think it is going to take longer to play out.”
In the last session, the Federal Reserve indicated in its periodic “Beige Book” that U.S. economic activity may have cooled in some parts of the country, weighed down by inflation, supply chain snafus and labor shortages.
“Worker shortages are still keeping labor markets tight and businesses understaffed,” LPL Financial Chief Economist Jeffrey Roach said in commentary. “In some districts, firms are freezing hirings, which is consistent with the decline in April job openings reported by the Bureau of Labor Statistics.”
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9:30 a.m. ET: Stocks extend losses as weak guidance from Microsoft weighs on tech
Here were the main moves in markets as of 9:30 a.m. ET:
S&P 500 (^GSPC): -9.61 (-0.23{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 4,091.62
Dow (^DJI): +7.78 (+0.02{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 32,821.01
Nasdaq (^IXIC): -65.67 (-0.55{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 11,928.79
Crude (CL=F): -$1.33 (-1.15{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $113.93 a barrel
Gold (GC=F): S$ettlement Date to $N/A per ounce
10-year Treasury (^TNX): -2.3 bps to yield 2.9080{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
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9:18 a.m. ET: Another 200,000 Americans filed new claims last week
Applications for unemployment insurance unexpectedly fell in the latest weekly data suggesting labor market conditions remain a bright spot in the economy amid mounting worries of a slowdown.
The Labor Department’s latest weekly jobless claims report showed 200,000 claims were filed in the week ended May 28, coming in below the 210,000 economists surveyed by Bloomberg had expected.
Last week, the Labor Department’s weekly data raised concerns among investors that the labor market may be cooling as the Federal Reserve tightens financial conditions.
“Jobless claims were higher a couple weeks ago stoking some fears that the economy had suddenly hit a soft patch, but today’s data indicate that a storm is not brewing in the labor markets,” FWDBONDS Chief Economist Christopher Rupkey said in a note. “Quite the opposite, with the drop in the total number of people receiving unemployment compensation indicating the unemployment rate could drop in tomorrow’s monthly report to a new record low.
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9:06 a.m. ET: US private payroll growth sees worst month since April 2020
Job creation in the U.S. private sector dropped off sharply last month to the slowest pace of growth in the COVID-era recovery, pointing to a cooldown in demand for labor amid a backdrop of rising interest rates and tighter financial conditions.
Private-sector payrolls grew by 128,000 in May, ADP said in its closely-watched monthly report on Thursday. This came following an increase of 202,000 jobs added in April, downwardly revised from 247,000 reported in the initial reading. Consensus economists were looking for private payrolls to rise by 300,000, according to Bloomberg data.
ADP’s monthly private jobs report comes ahead of the Labor Department’s official jobs report out Friday. While ADP’s report typically does not serve as a perfect indicator of what to expect in the government-issued data due to differences in survey methodology, the print has often served as a gauge of job growth that took place during a given period.
“Under a backdrop of a tight labor market and elevated inflation, monthly job gains are closer to pre-pandemic levels,” said ADP Chief Economist Nela Richardson.”The job growth rate of hiring has tempered across all industries, while small businesses remain a source of concern as they struggle to keep up with larger firms that have been booming as of late.”
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7:12 a.m. ET: Stock futures jump, oil slips ahead of market open
Here’s where the major indexes were in pre-market trading Thursday:
S&P 500 futures (ES=F): +24.00 (+0.59{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 4,123.00
Dow futures (YM=F): +154.00 (+0.47{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 32,952.00
Nasdaq futures (NQ=F): +95.00 (+0.76{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 12,646.00
Crude (CL=F): -3.23 (-2.80{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $112.03
Gold (GC=F): +$9.90 (+0.54{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $1,858.60 per ounce
10-year Treasury (^TNX): +8.00 bps to yield 2.931{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., May 20, 2022. REUTERS/Andrew Kelly
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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