DOJ probes Equifax; China bitcoin ban broadens

Receiving Wide Coverage ...
Now it’s serious: The U.S. Department of Justice has launched a criminal investigation in conjunction with the FBI into the Equifax data breach. The department is also looking into possible insider trading violations by three Equifax executives, including its chief financial officer, who sold $1.8 million in company shares in the weeks before the company disclosed the hack. Financial Times, New York Times

Equifax said it experienced a “security incident” in March that was unrelated to the massive data breach that took place in May. The company said the incident “was reported to customers, affected individuals and regulators” at the time, although it didn’t make a general public announcement.

The Wall Street Journal details “how deeply rooted Equifax is in the financial life of the country,” which is now “cause for concern” following the data hack. In addition to its main role as a credit bureau, the company also provides identity verification services for the Social Security Administration and helps the Medicare and Medicaid programs verify eligibility.

Bitcoin ban: In what the Journal is calling “some of the most draconian measures any government has taken to control bitcoin,” China is planning a “broad clampdown” on buying or selling the digital currency, going beyond merely closing commercial bitcoin exchanges. “Until last week, many entrepreneurs in China’s bitcoin circles had thought authorities might shut down only commercial trading activity while tolerating peer-to-peer, or over-the-counter, bitcoin platforms,” the paper reports. Rather, the government has “decided on a comprehensive ban.”

So what’s bitcoin worth, anyway? The paper’s investment editor, James Mackintosh, says he’s “inclined to say $0, especially if bitcoin’s value depends on it being adopted as a global digital currency to replace dollars. There is no chance whatsoever that bitcoin can displace the dollar, for the simple reason that it is badly designed. Bitcoin can handle a pathetically small number of transactions, and uses an inordinate amount of electricity to do so, making it entirely unsuitable to replace ordinary money.”

But Jeremy G. Philips, a general partner at Spark Capital and an adjunct professor at Columbia Business School, writes in the New York Times that bitcoin is a “long way from being a worthless fraud,” as JPMorgan Chase CEO Jamie Dimon described it last week.

“Undoubtedly, there will be plenty of hits and misses, as one would expect in the early days of a new technology. And there will be some outright scams as well,” Philips writes. “But the toothpaste is now out of the tube, and there is sufficient momentum for legitimate use cases to develop.”

Wall Street Journal
Not much to tell, apparently: The paper offers “a brief history” — two minutes and 17 seconds to be exact — that “explains the history of retail banking over the course of four decades, and where the industry is going next.”

Dirty money: Swiss prosecutors say two women flushed about €100,000 ($119,000) in €500 bank notes down a toilet at a UBS branch in Geneva as well as commodes at three nearby restaurants in May. The prosecutors are still perplexed as to why the women tried to flush the money, but the culprits have agreed to pay for the damage they did to the toilets.

Financial Times
Not safer: The consensus view “that the world’s banking systems are now far safer than they were” could be too sanguine, according to financial editor Patrick Jenkins. There is a “more persistent danger to the financial system than many people realize,” he writes, “and it has to do with the seismic shift of banking from branches to the internet, and more recently to our mobile phones.”

New York Times
Fined: The National Collegiate Student Loan Trusts, one of the largest holders of private student loans, has reached a settlement with the Consumer Financial Protection Bureau to pay nearly $19 million in penalties and borrower refunds. According to the agency, the trusts “sued consumers for student loans they couldn’t prove were owed and filed false and misleading affidavits in courts across the country.” Under the terms of the settlement, the trusts must refund millions of dollars to borrowers and stop many of its collection actions. It could still be liable for millions in additional payments and forgiven loans.

Quotable
“The U.S. attorney for the northern district of Georgia is working with the FBI to conduct a criminal investigation into the Equifax breach and resulting theft of personal information.” — John Horn, the acting chief prosecutor in the DOJ’s Atlanta office.