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Sam Bankman-Fried’s Risky Defense Strategy Faces a Big Test

Sam Bankman-Fried is to return to the stand today after the former wunderkind faced a four-hour grilling that exposed inconsistencies in his assertion that he didn’t defraud customers of FTX, his bankrupt crypto exchange.

Bankman-Fried made a few bombshell admissions. The biggest involved Alameda Research, the sister hedge fund he controlled that’s at the heart of a collapse that has cost investors, business partners and customers billions. Under questioning, he conceded that he played a larger role at Alameda before it imploded.

His decision to testify was long seen as risky, and that became clearer yesterday. The 31-year-old, who faces nearly a lifetime in prison on fraud and money-laundering charges, delivered curt “yep,” “no” and several “I’m not sure” responses, the latter drawing rebukes from the judge. The performance dealt a potential blow to his credibility in the eyes of jurors.

The lead prosecutor used Bankman-Fried’s own words against him. Danielle Sassoon clerked for the Supreme Court Justice Antonin Scalia, who taught her how to shoot a pistol “and made me feel like I had grit.” That prosecutorial style came into focus as she confronted Bankman-Fried with his own statements to journalists, on Twitter, and elsewhere that appeared to contradict his argument that he always had his customers’ backs.

Here’s what else we learned:

  • Alameda had a near-unlimited $65 billion line of credit with FTX. Bankman-Fried conceded that detail yesterday after Sassoon showed jurors an excerpt from an interview he had given to Zeke Faux for the Bloomberg News reporter’s new book, “Number Go Up.”

  • Bankman-Fried conceded that Alameda was not subject to the same credit rules as other FTX customers — a point he first made at last year’s DealBook Summit in an interview with Andrew, which the prosecutor cited yesterday — and he admitted that Alameda’s venture investments were too large and put too much risk on the hedge fund’s balance sheets.

  • Bankman-Fried tried to downplay the media coverage about him and FTX. “I disagreed with basically every article written about me” after FTX collapsed, he said.

The toughest questions may lie ahead. Three of Bankman-Fried’s closest colleagues have pleaded guilty and have testified against him. Bankman-Fried has pleaded not guilty but has not offered much to contradict their testimony. And the prosecution hasn’t yet pressed Bankman-Fried on the events that immediately precipitated FTX’s spectacular fall late last year.

Eurozone inflation cools as the economy slows. Consumer prices rose by a smaller-than-expected 2.9 percent in October, its lowest level in more than two years. But third-quarter G.D.P. fell by 0.1 percent, worse than forecast, as a string of interest-rate increases slowed growth. Tomorrow, the focus will be on the Fed, which is expected to leave U.S. rates unchanged.

BP’s stock drops after its earnings miss analyst forecasts. The oil giant reported $3.29 billion in adjusted net income for the third quarter, far short of the $4.05 billion that Wall Street had expected, because of lower prices for oil and disappointing performance in gas trading. Relatedly, Saudi Arabia said its G.D.P. shrank 4.5 percent from a year ago after it cut oil production.

Samsung shows a rebound in the global market for computer chips. The South Korean electronics giant reported a 262 percent quarter-on-quarter increase in profit, largely on improved sales of memory chips. That’s good news for an industry that has suffered a glut in inventory. In other chip news, Nvidia reportedly may cancel $5 billion worth of A.I. chip orders meant for Chinese customers because of U.S. export controls, according to The Wall Street Journal.

X now values itself at just $19 billion. The social network gave stock grants to employees yesterday at that valuation, about 55 percent less than the $44 billion that Elon Musk paid for the company last year. That appears to reflect the disruption in the business since then, though Musk pledged to employees last week that X was on its way to becoming a super-app.

General Motors struck a tentative deal with the U.A.W. yesterday, the last of the three major Detroit automakers to do so after weeks of punishing strikes that have cost the companies billions.

The deals are seen as a vindication of the U.A.W.’s bare-knuckle campaign. But they’ll also test whether the Big Three have put themselves at a financial disadvantage at a crucial time for their industry.

The U.A.W. bet big on an unusual strategy to win concessions as it sought to reassert the power of organized labor, particularly in the automotive sector. (Employees of Ford, G.M. and Stellantis represent just 146,000 of its 400,000 members.)

A cadre of outsiders, including three thirty-somethings who had never worked on a factory floor, helped craft the union’s new strike rule book, according to The Wall Street Journal. That included targeting all three Detroit companies at once, as well as having workers walk out of select factories.

How much of a burden the deals will impose on the automakers remains to be seen. Industry executives have argued that they could not shoulder too many additional costs as they transition to electric vehicles (even as demand for those kinds of cars and trucks appears to have slowed). And rivals like Tesla and foreign-owned carmakers like Toyota, whose workers aren’t represented by the U.A.W., don’t have to face those expenses — though the union has made clear it now plans to try to organize those companies’ work forces.

Auto executives and analysts say the costs are manageable. Mary Barra, G.M.’s chief executive, said yesterday that the tentative agreement “reflects the contributions of the team while enabling us to continue to invest in our future and provide good jobs in the U.S.” Steve Patton, the mobility sector leader for the consulting firm EY, told The Times, “I’m quite certain the deal wouldn’t have been signed if they weren’t confident they could remain competitive.”

  • In related news, Stellantis said the U.A.W. strike cost it about $3.2 billion in revenue in the third quarter, offset by better-than-expected sales.


A long-shot legal challenge against Apple suddenly could emerge as a potential disruption to one of its best-selling gadgets, the Apple Watch.

Last week, the International Trade Commission, an independent nonpartisan agency, ruled against Apple in a patent infringement case brought by the medical technology company Masimo and an affiliated business, Cercacor Laboratories. The firms are known for their pulse oximeter technology to monitor blood flow; Apple introduced its first watch with this feature in 2020.

The decision could lead to an import ban on Apple Watches and a cease-and-desist order on sales starting Dec. 26.

The Times’s Peter Coy writes:

It’s agreed by both sides that Apple sought a meeting with Masimo when it was exploring adding pulse oximetry to the Apple Watch. Apple signed a confidentiality agreement. A meeting was held in 2013. At this point, stories differ. Joe Kiani, the electrical engineer who founded Masimo in 1989 and remains its chief executive officer, told me on Friday that Apple decided that rather than pay for licenses to use the technology, do a joint venture, or buy Masimo, Cercacor or both, it decided to do “strategic hiring” of key employees. Apple says it concluded that Masimo’s technology wasn’t suited for a consumer device, so it went in a different direction. (Although of course it did hire those key Masimo employees.)

The fight is far from over since the companies are battling in other courts. Apple says it respects other companies’ intellectual property, and it accuses Masimo of litigating rather than innovating. The tech giant could seek an appeal of the I.T.C. order.

Kiani told Peter that his campaign has a big aim: “It’s to get Apple to change its ways.”


After nearly 20 months as chief counsel to Mayor Eric Adams of New York City, Brendan McGuire is returning to the law firm WilmerHale as a partner, The Times’s William Rashbaum writes for DealBook.

McGuire, who nearly a decade ago oversaw cases of terrorism and public corruption as a federal prosecutor in Manhattan, said that he planned to draw on his experience as one of the city’s top officials to help clients solve their complex legal and policy problems.

McGuire served as the mayor’s top legal adviser. During his tenure, he expanded the role — which typically involved dispensing advice on matters involving City Hall — to include overseeing a portfolio of agencies that in the past would have reported to a deputy mayor. Among the issues he focused on were some of New York’s biggest challenges, from mental illness to the migrant crisis.

Kathryn Wylde, the C.E.O. of the Wall Street-backed Partnership for New York City, praised McGuire’s work in City Hall. “Brendan took the role of senior counsel in a new administration that was not steeped in the legal and ethical proprieties of City Hall and guided them through a series of conflicts and difficult issues,” she said.

That work builds on McGuire’s years as a top prosecutor in the Southern District of New York, where he helped convict the Russian arms dealer Viktor Bout, a Somali pirate and more than a half-dozen former elected city and state officials. (That work continued his family’s long tenure in law enforcement: He is the son of a New York City police commissioner and the grandson of an N.Y.P.D. inspector.)

After leaving public service for the first time, McGuire worked as a partner at WilmerHale’s white-collar practice.

Asked what set his work for Adams apart from his previous experience as a prosecutor, as well as his previous stint in private practice, McGuire cited the breadth of the challenges he faced — and “the broader scope of tools that can be brought to bear to address them.”

Deals

  • The data storage company Western Digital said it would split itself in two, after failing to merge with the Japanese semiconductor maker Kioxia. (FT)

  • Jack Cooper, a privately held trucking company, is reportedly working on a takeover bid for Yellow, a rival whose bankruptcy may lead to losses for the federal government. (Reuters)

  • The Spanish government is weighing an investment in Telefónica to counter Saudi Telecom, which has agreed to buy a 10 percent stake in the wireless giant. (Bloomberg)

Policy

Best of the rest

  • FIFA banned Luis Rubiales, the former head of Spain’s soccer federation, from the sport for three years after he forcibly kissed a player following the Women’s World Cup final in August. (NYT)

  • “The Apple-Picking Apocalypse of Upstate New York” (NYT)

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Sumber: www.nytimes.com