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Sam Bankman-Fried is a 30-year-old guy who was running a $32 billion corporate empire. Its collapse will be a story for the history books discussed for many years to come.

But put aside the big questions specifically about FTX–was there a crime committed? Will customers get any money back? And why was SBF speaking publicly against the advice of lawyers? There are even bigger questions surrounding the future of cryptocurrencies in general.

Crypto has had dips before, but this could be the worst one yet. What’s the future of the industry?

The European Central Bank took a stab at this one on Wednesday, arguing in a blog post that Bitcoin is “on the road to irrelevance” after its latest leg down. Blockchain–based coins “have created limited value for society,” the authors wrote.

Furthermore, regulation of the industry has tempted conventional banks to invest in crypto as an asset class. Those banks now look like they have risked the reputation of the entire financial world, the ECB said.

The pressing issue is discovering what will be the next shoe to drop. Kraken, another crypto exchange, is laying off 30% of its workforce to adjust to new market conditions.

SBF on Wednesday issued a subtle warning to crypto investors. While he said he doesn’t know about other exchanges, if he were a customer, he would want to see proof of reserves and regulatory reporting.

Given the drama at FTX over the past month, that seems sensible.

Brian Swint

*** Join Barron’s deputy editor Alex Eule and senior technology writer Tae Kim today at noon when they discuss the outlook for tech companies and individual stocks. Sign up here.

***

FTX Founder Speaks Out

Sam Bankman-Fried, the founder of now-bankrupt cryptocurrency exchange FTX, said he “didn’t ever try to commit fraud” and “wasn’t trying to commingle funds” belonging to his firm and its customers in an interview on Wednesday evening.

  • The interview at the New York Times Dealbook Summit was one of the first the former FTX CEO has given since the trading platform collapsed in spectacular fashion earlier this month.

  • Bankman-Fried said he was shocked by the collapse and attributed the failure to him not understanding how exposed his firm had become to troubles at Alameda Research, a hedge fund and market maker that Bankman-Fried also founded. “Obviously that’s a pretty big oversight that I wasn’t more aware,” he said.

  • While he admitted to problems at FTX’s main, international operation, Bankman-Fried said he believed some other components of FTX, such as its U.S. operations, were still solvent and could be processing withdrawals right now, if allowed to.

  • The former FTX CEO also said he doesn’t think he has criminal liability but that he’s more focused on trying to help customers who lost money on the platform. He admitted his lawyers had advised him not to speak publicly as much as he has.

What’s Next: At a court hearing last week, FTX lawyers said a substantial amount of customer funds were missing or stolen. Over the next weeks and months state and federal agencies will investigate FTX’s collapse and how exactly the firm managed to lose the assets.

Joe Light

***

Powell: Federal Reserve Focusing on Slower-But-Steadier Hikes

Federal Reserve Chairman Jerome Powell emphasized that the central bank would focus on slower-but-steadier interest-rate increases in coming months, likely reaching a higher peak than had previously been expected and keeping rates elevated for some time. He paved the way for a half-point interest-rate hike.

  • “It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Powell told the Brookings Institution. “The time for moderating the pace of rate increases may come as soon as the December [13-14] meeting.”

  • Fed officials hope that by downshifting gears after four straight 0.75-percentage-point hikes, they will minimize the risk of overtightening, which could push the economy into recession. “Cutting rates is not something we want to do soon,” he said. “So that’s why we’re slowing down.”

  • Powell’s speech marks one of the Fed’s final chances to set the narrative before the December meeting. Fed officials have suggested the central bank would ease up on its policy of tightening rates as economic growth slows, inflation moderates, and the labor market eases.

  • The markets climbed during Powell’s speech and roared into the end of the trading session. The
    Dow Jones Industrial Average
    jumped 737 points, or 2.2%, while the
    S&P 500
    closed up 3.1%, and the
    Nasdaq Composite
    advanced 4.4%.

What’s Next: Powell adopted a somewhat hawkish tone concerning the path forward, warning that the Fed has yet to see “clear progress on slowing inflation” and that the economic conditions necessary to slow prices have not yet arrived. “The truth is that the path ahead for inflation remains highly uncertain.”

Megan Cassella and Janet H. Cho

***

Senate Takes Up Railroad Measure Passed by the House

The Senate will consider a measure passed by the House that would force the adoption of a tentative labor agreement and avert a national railroad strike. House members passed it 290-137 and approved a separate proposal to provide railroad workers with seven days of paid sick leave.

  • The measure aims to resolve a longstanding dispute between the unions representing more than 115,000 railroad workers and major railroads including
    Union Pacific,

    CSX,
    the BNSF unit of
    Berkshire Hathaway,

    Norfolk Southern,
    and U.S. units of
    Canadian National Railway.

  • The Sept. 15 labor agreement, brokered by the White House, includes a 24% pay increase over five years, backdated to 2020 through 2024. Members of four unions rejected it because they wanted railroads to address strict attendance policies and a lack of paid sick days. Management wanted to negotiate those working conditions on a railroad-by-railroad basis.

  • A 1926 law gave Congress the power to intervene in railroad disputes that threaten to disrupt the economy. President Joe Biden urged Congress to step in, saying a rail shutdown “would devastate our economy,” could put up to 765,000 Americans out of work, and cost $2 billion a day.

  • House Speaker Nancy Pelosi told her caucus that although she was sympathetic with the railroad workers’ concerns, she was reluctantly asking for their support to prevent a strike that could halt shipments of food and medicine and hurt small businesses.

What’s Next: Senate Majority Leader Chuck Schumer said he and Minority Leader Mitch McConnell have agreed to move it forward as the Dec. 9 strike date looms. Labor Secretary Marty Walsh and Transportation Secretary Pete Buttigieg are expected to meet with Democrats today, The Wall Street Journal reported.

Bill Alpert and Janet H. Cho

***

Companies From Kraken to CNN Announce Job Cuts

More companies announced layoffs on Wednesday as they grapple with rising costs after growing quickly during the Covid-19 pandemic and then facing a slowdown in demand and shifting consumer preferences.

  • The cryptocurrency exchange Kraken is cutting its workforce by about 1,100 people, or 30%, shrinking to the size it was a year ago. Co-founder and CEO Jesse Powell said Kraken has struggled to rein in costs amid the “crypto winter” that has reduced trading volumes and new clients.

  • Swedish retailer
    H&M
    is cutting about 1,500 positions as part of a broader effort to trim administrative and overhead costs. H&M previously said third-quarter profitability was hurt by winding down business in Russia, higher raw material and freight costs, the strong dollar, and weak sales, The Wall Street Journal reported.

  • DoorDash
    is cutting about 1,250 corporate jobs, or 6% of the company, in an effort to pare down costs after expanding rapidly during the pandemic. Despite strong growth, CEO Tony Xu wrote that “our operating costs—if left unabated—would continue to outgrow our revenue.”

  • CNN, which is owned by Warner Bros. Discovery,
    is cutting an undisclosed number of employees and paid contributors starting today “as part of a recalibrated reporting strategy,” CEO Chris Licht told staff in a memo viewed by the Journal, describing the process as a “gut punch.”

What’s Next: The Bureau of Labor Statistics on Friday will release the November jobs report, including nonfarm payrolls and the unemployment rate for November. Economists polled by The Wall Street Journal expect the U.S. to have added 200,000 jobs last month, compared with 261,000 in October.

Janet H. Cho

***

After Tweet Storm, Elon Musk Makes Nice With Apple

Elon Musk may be seeking a detente with
Apple
CEO Tim Cook after telling his 119.7 million Twitter followers he had a tour of the iPhone maker’s California headquarters, thanking Cook and showing a video of a serene reflecting pool on the campus.

What’s Next: Washington has been scrutinizing the power of the App Store, and lawmakers have proposed legislation that would rein in how it controls third-party software distributed to its iPhones. Sen. Marsha Blackburn (R., Tenn.) tweeted that a bill she sponsors would dissolve the monopolistic power of Apple and Google.

Liz Moyer

***

What is ‘effective altruism,’ the philanthropic movement championed by Sam Bankman-Fried? Five facts you need to know.

The downfall of crypto exchange FTX and its founder, Sam Bankman-Fried, has thrown a spotlight on “effective altruism,” the philanthropic movement that Bankman-Fried championed as he amassed a fortune that peaked at an estimated $26.5 billion.

That money appears to have evaporated along with FTX’s customer deposits, leaving the effective altruism movement reeling. It has simultaneously lost one of its biggest donors and suffered a reputational blow.

So what is effective altruism? Here are seven key facts—and one big question.

Read more here.

Leslie Albrecht

***

—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner

Credit: marketwatch.com

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