Fed bars another Goldman banker for 1MDB; SEC readies major crypto suit

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1MDB fallout

The Federal Reserve permanently barred from the banking industry Andrea Vella, Goldman Sachs’ former co-head of investment banking in Asia, for his role in the 1MDB fraud. “An Italian-born banker, Mr. Vella played key roles in Malaysian bond offerings in 2012 and 2013 that have since ensnared the New York bank in a sprawling corruption probe,” the Wall Street Journal says. “He is the third Goldman executive barred from the industry by the Fed.”

In a settlement, the Fed said Vella had “engaged in unsafe and unsound practices” in $6.5 billion of bond sales for the Malaysian fund, the New York Times says. “The Fed specifically faulted Mr. Vella, who resigned from Goldman last weekend, for not doing more to ensure that a Malaysian financier, Jho Low, had no role in the bond sales, which generated $600 million in fees for Goldman.”

“Goldman remains in negotiations with the Department of Justice over a settlement for its role in helping 1MDB, the Malaysian state investment fund at the center of the worst corruption scandal in the country’s history, to raise $6 billion, much of which was ultimately looted,” the Financial Times reports.

Prepping for battle

Telegram, “a startup best known for its popular encrypted messaging application, is testing the limits of the U.S. government’s crackdown on digital assets, with both sides readying for a court clash in the biggest cryptocurrency case the Securities and Exchange Commission has levied," the Journal says. "The agency is accusing Telegram of violating investor-protection laws” when it sold $1.7 billion of cryptocurrency in 2018, “saying Telegram’s digital coin is actually a security and not a currency.”

“The court fight carries high stakes for the SEC. Unlike many of the SEC’s targets, Telegram had the advice of a Wall Street law firm before raising funds, while the investors in its digital-coin sale included the Silicon Valley venture-capital firm Kleiner Perkins as well as executives from Fortress Investment Group and SoftBank.”

Separately, a former governor of the Banque de France “has raised doubts that major central banks will launch digital currencies for consumers within the next 10 years, but forecast that digital payments between commercial banks ‘will happen fairly soon.’” Christian Noyer told the FT “the decline in usage of physical cash, along with the rise of private initiatives such as Facebook’s Libra, had prompted central banks around the world to look more deeply into digital currencies. But he added there was ‘clear hesitation’ from the world’s top central banks over whether to launch their own projects, because of concerns over privacy and the impact on the central bank’s ability to conduct monetary policy.”

Wall Street Journal

A big first step

The Federal Housing Finance Agency awarding a potential $45 million advisory contract to Houlihan Lokey to help the agency “sort out the future of housing giants Fannie Mae and Freddie Mac” is a “meaningful marker of the brisk pace in creating momentum for Fannie and Freddie’s potential recapitalization and release to public markets,” the paper says.

“But a key next step for the housing-market giants would be proposing, then approving, new guidelines for exactly how much capital they will need to maintain as independent companies. Determining just how much capital they will need will help figure the amount of public equity they might need to raise. Other big questions also loom, including the fate of the U.S. government’s backing. It is also a highly contentious political issue.”

Financial Times

Green push

Barclays “is under intense pressure” to reduce its financing of fossil fuel producers after the Investor Forum, “a group that represents the U.K.’s largest investors, with £18.5 trillion in assets, demanded the British lender adopts a stricter climate change policy.” A source said “Barclays significantly lagged behind European peers, ranking as the biggest financier of fossil fuel companies in Europe.”

Bad moon rising

Danske Bank is warning its profits could drop by nearly 50% this year “as Denmark’s biggest lender remains under pressure from a €200 billion money-laundering scandal and negative interest rates. “Danske remains under criminal investigation by the U.S., France, Denmark and Estonia” over the scandal at its Baltic branch. “It is also fighting against more than seven years of negative interest rates in Denmark with little end in sight.”

Quotable

“This is the biggest SEC cryptocurrency case yet. They have it all out on the line, and they’re pulling out all the stops.” — Kenneth Herzinger, a partner at Orrick Herrington & Sutcliffe, commenting on the SEC’s suit challenging Telegram’s sale of $1.7 billion of digital coins

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