>>> Super Micro: Fresh Evidence Of Accounting Manipulation, Sibling Self-Dealin



From: laurent@chekroun.com At: 08/27/24 15:51:56 UTC+2:00
To: Laurent Chekroun (MAKOR CAPITAL MARKET )
Subject: Fwd: Super Micro: Fresh Evidence Of Accounting Manipulation, Sibling Self-Dealing And Sanctions Evasion At This AI High Flyer (Nasdaq:SMCI)




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From: Hindenburg Research <info@hindenburgresearch.com>
Date: 27 August 2024 at 15:16:45 CEST
To: laurent@chekroun.com
Subject: Super Micro: Fresh Evidence Of Accounting Manipulation, Sibling Self-Dealing And Sanctions Evasion At This AI High Flyer (Nasdaq:SMCI)
Reply-To: Hindenburg Research <info@hindenburgresearch.com>



Super Micro: Fresh Evidence Of Accounting Manipulation, Sibling Self-Dealing And Sanctions Evasion At This AI High Flyer

(NASDAQ:SMCI)

  • Super Micro Computer Inc. is a $35 billion server maker based in Silicon Valley, California that has ridden the wave of AI enthusiasm.
  • Our 3-month investigation, which included interviews with former senior employees and industry experts as well as a review of litigation records, international corporate and customs records, found glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues.
  • In 2018, Super Micro was temporarily delisted from Nasdaq for failing to file financial statements. By August 2020, the company was charged by the SEC for “widespread accounting violations,” mainly related to $200+ million in improperly recognized revenue and understated expenses, resulting in artificially elevated sales, earnings and profit margins.
  • Less than 3 months after paying a $17.5 million SEC settlement, Super Micro began re-hiring top executives that were directly involved in the accounting scandal, per litigation records and interviews with former employees.
  • A former salesperson told us: “Almost all of them are back. Almost all of the people that were let go that were the cause of this malfeasance.”
  • According to a lawsuit filed in April 2024, Super Micro waited only 3 months after the SEC settlement before restarting “improper revenue recognition,” “recognizing incomplete sales,” and “circumvention of internal accounting controls”.
  • Even after the SEC settlement, pressure to meet quotas pushed salespeople to stuff the channel with distributors using "partial shipments" or by shipping defective products around quarter-end, per our interviews with former employees and customers.
  • One former salesperson described pushing products to distributors based on made-up demand forecasts, completing a partial shipment, then later coming up with an excuse for why the rest didn’t happen. “And now you have a problem. Accounting problem maybe.”
  • Former employees told us Super Micro’s business culture has not improved. Former senior sales director: "I don’t think the behavior of the company in many ways has changed in the 5 years since I started, and I started shortly after that delisting problem."
  • Three senior employees who left in early 2018 amidst the accounting scandal were rehired, individually serving as (1) a member of the board of directors (2) a consultant serving close to the CEO (3) and a VP of business development.
  • Former CFO Howard Hideshima left the company in January 2018 and was later individually charged by the SEC with accounting violations. In May 2023, he was hired by a key related party owned by Super Micro CEO’s brother.
  • A new CFO, praised by co-workers for his integrity, was hired in January 2018 to help the company recover from the scandal. He helped Super Micro re-list but resigned in January 2021. A former sales director suggested that he was edged out by the company.
  • Beyond fresh questions around its revenue accounting, we found that Super Micro’s relationships with both disclosed and undisclosed related parties serve as fertile ground for dubious accounting.
  • For example, disclosed related party suppliers Ablecom and Compuware, controlled by Super Micro CEO Charles Liang’s brothers, have been paid $983 million in the last 3 years. Ablecom is also partly owned by Super Micro CEO Charles Liang and his wife.
  • The relationships seem oddly circular. Super Micro provides components to the entities which assemble them and sell them back to Super Micro. They also rent warehousing and factory space to Super Micro even though it has its own sprawling factory.
  • The related parties seem to do little other business: ~99.8% of Ablecom’s exports to the U.S. since 2020 were to Super Micro, and ~99.7% of Compuware’s U.S. exports were to Super Micro, per trade records.
  • In addition to the concerns around the disclosed related parties, we found evidence of undisclosed related parties. The youngest brother of Super Micro’s CEO owns two Taiwan-based entities that make server components. Media reports and former employees indicate the entities are Super Micro suppliers.
  • Both entities operate out of the Super Micro Science and Technology Park in Taiwan, but Super Micro has not disclosed related party transactions with them.
  • Another brother of Super Micro’s CEO operates a disclosed related party but is also the director and shareholder of undisclosed Hong Kong and Taiwanese entities, which appear to resell Super Micro products and provide “professional OEM services.” It operates out of the same building as related party Compuware.
  • Collectively, disclosed and undisclosed related parties pose accounting risks relating to revenue recognition and reported margins. A former executive told us: “Basically it's a governance issue and just kind of shows you that Charles doesn't give a shit what you think…you're right to worry, though, that you just never know what's lurking.”
  • In addition to the CEO’s brothers, the company has an odd relationship with a key customer. In February 2024, Super Micro made an undisclosed investment in tech startup Lambda Labs as part of its $320 million funding round, per Bloomberg and per a confirmation we received from Lambda’s COO.
  • In August 2024, Super Micro signed an “unusual” $600 million contract to lease space at a California data center and sub-lease it to Lambda. The CFO glossed over questions about the reason for this arrangement.
  • In October 2023, two related parties run by CEO Liang’s brothers, one of them partially owned by Super Micro’s CEO, reportedly invested in small Taiwanese tech company Leadtek. Leadtek's website advertises products almost identical to Super Micro's, yet Super Micro discloses no relationship with Leadtek in what appears to be a clear undisclosed related party.
  • Super Micro has claimed its liquid cooling technology will “revolutionize the industry” and is its “competitive edge.” But at a recent industry conference, Super Micro featured related party Ablecom’s liquid cooling solutions, per an Ablecom engineer.
  • Ablecom has several patents for its liquid cooling technology. Despite this, Super Micro has never disclosed any related party involvement in its liquid cooling technology.
  • Besides questions around related parties and proprietary product offerings, in 2006, Super Micro pleaded guilty to a felony count of exporting banned components to Iran. The CEO said the company was in its infancy and had learned from its mistakes.
  • When Russia invaded Ukraine in February 2022, the U.S. government imposed stringent restrictions and bans on exports to Russia of high-performance computers and components.
  • Super Micro disclosed that some of its products were subject to export bans and said it was halting all sales and had “not recorded revenue” from Russia since the day before the war started.
  • Exports of Super Micro’s high-tech components to Russia have spiked ~3x since the invasion of Ukraine, apparently violating U.S. export bans, according to our review of more than 45,000 import/export transactions.
  • At least 46 companies that handled Super Micro products to Russia since the invasion are now under OFAC sanctions or on U.S. government watchlists.
  • Almost two-thirds of Super Micro’s exports to Russia since the invasion correspond to “high priority” components that the Russian military may be diverting to the battlefield, per U.S. government warnings.
  • One of the biggest importers of Super Micro products in Russia is a supplier to one of Russia’s largest “supercomputers” at a once-secret, now-sanctioned research center. That importer, Niagara Computers, has received at least $46.3 million worth of Super Micro products since the start of the Russia-Ukraine war, per trade data.
  • The sales were initially made through a distributor in California, but were later made through 3 newly-formed Turkish shell companies, including one that was eventually sanctioned for smuggling restricted items to Russia.
  • Almost $30 million worth of Super Micro components have also been shipped to Russia’s largest importer of dual-use civilian-military chips via a newly created Hong Kong shell entity. That Russian importer is now under OFAC sanctions.
  • Since 2016, Super Micro has had a joint venture with a Chinese state-run company called Fiberhome, which is involved in a campaign of “human rights violations and abuses,” high-tech surveillance, and repression of ethnic communities in western China, per the U.S. government.
  • Super Micro has sold ~$196 million of sophisticated computer components to the joint venture since Fiberhome was watchlisted by the U.S. government in 2020. Super Micro justifies the sales by saying the JV entity itself wasn’t watchlisted, even though its partner was.
  • Besides accounting issues and sanctions evasion, competition and quality concerns have resulted in major companies dropping Super Micro entirely or reducing their share.
  • Nvidia is a key partner and chip supplier to Super Micro. In May 2024, CEO Jensen Huang publicly endorsed Super Micro’s competition: “Nobody is better at building end-to-end systems of very large scale for the enterprise than Dell.”
  • CoreWeave was Super Micro’s largest customer over the last year, per Bloomberg Intelligence. But in December 2023, Dell announced a deal with CoreWeave for “thousands” of GPU servers, potentially worth over $1 billion.
  • Tesla had been sourcing its servers exclusively from Super Micro, per Barclays Research in September 2023. But recent reports in May 2024 and posts by Elon Musk show Dell has now won major deals from Tesla, and Musk’s xAI, eroding Super Micro’s exclusivity.
  • Super Micro has conceded that it is “under-indexed” with the world’s largest technology companies, called “hyperscalers.” Amazon AWS was a customer but cut ties after delivery issues, per a former employee.
  • Digital Ocean, a U.S. cloud service provider, switched from Super Micro to Dell after service issues, according to a Digital Ocean employee, describing the relationship as “a train wreck of sorts” fraught with reliability issues.
  • Genesis Cloud is touted as a “success story” on Super Micro’s website. But current and former employees told us otherwise: “Catastrophic. It is, on the technical side, one of my worst experiences I’ve had…in the industry.”
  • GMI Cloud, a start-up GPU cloud provider in Asia and the U.S., told us they experienced a malfunction rate of 17.5% on its orders of 256 Super Micro servers. GMI is now moving away from Super Micro to HPE less than a year after its first order, per an employee.
  • NexGen Cloud, an Nvidia partner, disclosed in October 2023 that it was investing $1 billion to build an AI super-cloud in Europe with over 20,000 Nvidia GPUs. But a NexGen employee told us that sometimes up to half of the orders received from Super Micro had firmware issues.
  • Multiple former employees and channel partners confirmed that after-sales service is undermining Super Micro’s ability to retain customers. One former salesperson said: “It’s their Achilles heel. It’s just horrible.”
  • All told, we believe Super Micro is a serial recidivist. It benefitted as an early mover but still faces significant accounting, governance and compliance issues and offers an inferior product and service now being eroded away by more credible competition.
Initial Disclosure: After extensive research, we have taken a short position in shares of Super Micro Computer, Inc. (Nasdaq:SMCI). This report represents our opinion, and we encourage every reader to do their own due diligence. Please see our full disclaimer at the bottom of the report.
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FT : Exxon says global oil use to remain robust and warns of supply shock

Exxon says global oil use to remain robust and warns of supply shock
Bullish forecast from US supermajor contrasts with predictions of rapid transition form fossil fuel

ExxonMobil has said global oil demand will remain virtually unchanged by 2050 and warned that any move to curtail investment in fossil fuels would trigger a new energy price shock.

In a forecast released on Monday, the US supermajor said oil demand would stay above 100mn barrels a day over the next 25 years — a forecast that assumes an energy transition will fail to curb the world’s thirst for fossil fuels.

Exxon warned of a new global oil shock if companies failed to keep investing to match that demand, saying crude prices could quadruple as supply fell.

Exxon’s prediction contrasts sharply with UK oil major BP, which expects oil consumption to decline to 75mn b/d in 2050. The International Energy Agency projects oil demand would fall to 54.8mn b/d if governments met their climate pledges on time.

The Texas oil company’s forecast comes amid an increasingly fraught debate between fossil fuel producers trying to defend their market and, policymakers and climate scientists who warn of dangerous global warming unless consumers rapidly curb burning of fossil fuels.

Exxon has long argued the world will need more of its oil to lift billions of people in the developing world out of poverty. But it faces lawsuits from environmentalists and policymakers in California, who argue Exxon deceived the public for decades about how the burning of fossil fuels was warming the planet.

The forecast comes three years after Exxon lost one of Wall Street’s most memorable proxy shareholder battles against activist investor Engine No. 1, which argued the supermajor faced an “existential business risk” by pinning its future on fossil fuels. This year Exxon sued activist investors who filed shareholder proposals demanding it to do more to tackle climate change.   

Despite continuing strong demand for oil and gas, Exxon forecast that carbon emissions would decline by 25 per cent by 2050 due to greater energy efficiency, the rollout of technologies such as carbon capture and renewables.

However, this is significantly below the emissions cuts needed to meet the net zero goals outlined in the 2015 Paris Agreement on climate change.

In June the Paris-based IEA, which represents rich-world consumers, warned the world faced a “staggering” surplus of oil by the end of the decade if producers kept raising output as the world turned away from fossil fuels.

The Opec producer cartel described the IEA’s forecast as “dangerous commentary” and stuck to its own forecasts for oil demand to reach 116mn barrels of oil by 2045.

Exxon’s report said oil and gas would remain essential to the global economy as population growth drove a 15 per cent increase in total energy use by 2050.

While the need for oil to make gasoline for passenger cars would fall by a quarter by 2050, Exxon predicted, demand from industry — the biggest source of consumption — would compensate.  

Exxon uses the forecasts contained in its global outlook to help determine its future production growth plans, which are among the most bullish in the oil industry and include expansions of projects from Texas’s shale to offshore Guyana.

Environmental campaigners said Exxon’s forecast represented a last-ditch effort from a dying industry to appeal to investors to support new production.  

“There is no long-term future and only material risk in oil expansion since governments worldwide and financial institutions have committed to an energy transition,” said Hannah Saggau, senior climate finance campaigner at Stand.earth, an environmental organisation.

FT : Emmanuel Macron hits back at claims Telegram chief’s arrest is political

Emmanuel Macron hits back at claims Telegram chief’s arrest is political
French president says that fate of Pavel Durov will be ‘up to the judges to decide’

Emmanuel Macron has hit back at accusations that the arrest of Telegram chief executive Pavel Durov in France is politically motivated, after the surprise move raised tensions with Moscow and escalated a global debate over free speech.

French prosecutors on Monday said they detained the Russian-born billionaire, who is now a French-Emirati citizen, as part of an investigation opened in July into the messaging app’s moderation of alleged criminal activity on the platform. This includes the spread of child sexual abuse material, drug trafficking, fraud and money laundering.

The French president also intervened on Monday after some Russian lawmakers claimed the arrest was made on political grounds, while the Russian embassy in France has said it had requested consular access to Durov.

“I have read false information here regarding France following the arrest of Pavel Durov,” Macron wrote on X on Monday. “The arrest of the Telegram president on French territory took place as part of an ongoing judicial investigation. This is in no way a political decision. It is up to the judges to decide.”

Dubbed the “Mark Zuckerberg of Russia” after co-founding its most popular social media network, VKontakte, Durov fled the country in 2014 after allegedly refusing to comply with Moscow’s demands for access to the data of Ukrainian users protesting against a pro-Russia administration.

His arrest marks the most drastic national action against a social media chief to date and is the latest battle between officials and regulators concerned with online safety and free speech advocates.

Earlier this month, technology billionaire Elon Musk clashed with UK leader Sir Keir Starmer and EU commissioner Thierry Breton after criticising the UK’s policing of the Southport riots and sharing misinformation and far-right content around the events, in a move that was perceived by critics as further fuelling the violence.

Over the weekend, Musk, a self-declared free speech absolutist, hit out at French authorities, posting the hashtag “#freepavel” on his platform.

The warrant for Durov’s arrest was issued by Ofmin, a French police agency set up in the last year focused on preventing violence against minors.

“At the heart of this issue is the lack of moderation and co-operation by the platform (which has nearly 1 billion users), particularly in the fight against child sex crimes,” Jean-Michel Bernigaud, the secretary-general of Ofmin, wrote on LinkedIn on Monday.

Ofmin is working on the preliminary probe in co-operation with the Paris prosecutors office and customs officials. Prosecutors also said on Monday the allegations included “refusal to hand over, at the request of competent authorities, information or documents”.

Durov was detained on Saturday night at Paris-Le Bourget airport after arriving on his private jet from Azerbaijan. On Sunday, the investigating magistrate extended his detention from 24 to up to 96 hours, during which time a magistrate will need to decide whether to bring charges.

Dubai-based Telegram has said its chief executive has “nothing to hide and travels frequently in Europe”, adding that its moderation was “within industry standards and constantly improving”.

The company also said it was abiding by EU laws including the Digital Services Act, a landmark law which came into force this year and requires platforms to police harmful content and disinformation more closely, or risk penalties or being restricted in the bloc.

“It is absurd to claim that a platform or its owner are responsible for abuse of that platform,” Telegram has said. “We’re awaiting a prompt resolution of this situation. Telegram is with you all.”

Founded in 2013, Telegram has exploded in popularity, nearing 1bn users and becoming one of the main communication tools in conflict zones and humanitarian crises such as the Russia-Ukraine war and the Israel-Hamas conflict.

Durov has taken a hands-off approach to moderation and cast the app as unassailable by governments. However, some researchers have warned that it has become a hub for illicit activity and extremism as a result.

In recent years, Durov has tried to distance himself and the app from Russia, amid claims by critics that the Kremlin might still have links to or leverage over Telegram.

“He thought his biggest problems were in Russia and left . . . he wanted to be a brilliant ‘citizen of the world’, living well without a homeland,” former Russian president Dmitry Medvedev, now a prominent rightwing commentator, wrote on his Telegram channel on Sunday.

“He miscalculated. To our common enemies, he is still Russian — unpredictable and dangerous, of different blood.”

9to5 : Apple officially announces iPhone 16 event for September 9: ‘It’s Glowtim

Apple officially announces iPhone 16 event for September 9: ‘It’s Glowtime’

Apple has officially announced its highly-anticipated iPhone 16 event for September 9. The event, which includes an in-person component at Apple Park, will take place on September 9 at 10 a.m. PT/1 p.m. ET. The Apple event invite teases: “It’s Glowtime.”

Here’s everything you need to know about next month’s Apple event, including expectations for the iPhone 16 and iPhone 16 Pro.

WSJ : Ken Griffin Reveals Plans for Citadel’s Miami Headquarters

Ken Griffin Reveals Plans for Citadel’s Miami Headquarters
Glass tower expected to include two restaurants, a rooftop hotel and a public waterfront terrace
A rendering of the new Citadel headquarters in Miami. Photo: Foster + Partners
MIAMI—Citadel’s gleaming new 54-story glass tower in Miami will include two restaurants, a rooftop hotel, a public waterfront terrace and perhaps a dock that would enable hotel and restaurant guests to arrive via Biscayne Bay.
Ken Griffin, the founder and chief executive of Citadel who moved his headquarters to Miami from Chicago in 2022, plans to break ground on the 1.7 million-square-foot project in the third quarter of 2025. The hedge fund and its sister firm, Citadel Securities, currently are located in a building in Miami’s downtown less than 1 mile from the development site.
Griffin filed plans for the project, designed by Foster + Partners, with Miami-Dade County on Friday. The building, which is expected to take five or more years to build, needs to get public approvals before it proceeds.
The plans describe a range of amenities but don’t mention a dock. People familiar with the project confirmed they are working through including access to the building by boat.
Ken Griffin, founder and CEO of Citadel, at the current Citadel offices in Miami. Photo: Scott McIntyre for WSJ
The new development will be the latest addition to the Miami skyline, which has been reshaped in recent years by the migration of businesses to Florida for its low taxes and business-friendly government policies. When Griffin, a billionaire who lives in Miami, announced plans to move there, he cited Chicago’s high crime rate and Florida’s better corporate environment.
Citadel employs 4,600 workers and is planning to expand in London and New York. The company isn’t planning to occupy all the office space in its new Miami headquarters. Some of it will be leased to other tenants.
Gattuso Development Partners, which developed the Comcast headquarters in Philadelphia that includes a Four Seasons hotel at the top, has been consulting on the project.
Plans for the Miami building call for two separate lobbies for the office space and hotel space. Griffin plans to connect the public terrace to the city’s Baywalk, a 5-mile waterfront trail envisioned by the city.
The new Citadel headquarters in Miami would include a public waterfront terrace. Photo: Foster + Partners

WSJ : Crypto Bros Aren’t Flipping Watches. That Is an Issue for Luxury Brands.

Crypto Bros Aren’t Flipping Watches. That Is an Issue for Luxury Brands.
It is becoming less lucrative to speculate on luxury watches, creating a knock-on effect in brands’ stores

To read the luxury watch business, it can help to look at what is going on in the secondhand market. Falling prices for used watches suggest that a recovery in firsthand sales will take a long time.

Watches were one of the worst categories for Europe’s top luxury companies in the latest quarter. Richemont, which owns Cartier as well as Vacheron Constantin CFR -0.25%decrease; red down pointing triangle, said sales of its specialist watches dropped 13% year over year in the three months through June. LVMH MC 0.12%increase; green up pointing triangle said sales in its watches and jewelry division fell 4% over the period, while Hermès RMS -0.14%decrease; red down pointing triangle watch sales dropped 4.9%.

The watch business has an unusually vibrant secondhand market. Around $50 billion of brand-new luxury watches are sold each year. A further $25 billion trade hands used, according to estimates from industry data provider WatchCharts.com.

For the luxury goods industry as a whole, secondhand sales were worth just 12% of primary market sales in 2023, according to consulting firm Bain & Co. Watches tend to hold their value better than other types of luxury products, and resale websites such as Watchfinder.com have made secondhand trading easier and more transparent.

But luxury brands have lost two sources of demand lately. Consumers who spent their excess savings on expensive watches during the pandemic pulled back once they were able to splurge on other things such as travel.

Speculators are also slipping away. For a while, luxury watches were billed as a hot new alternative investment. According to Charles Tian, founder of WatchCharts.com, many “crypto bros” diversified their portfolios by buying and flipping posh watches.

The trade was lucrative for hard-to-find models because collectors were willing to pay up to skip waiting lists in brands’ stores. At the peak of the luxury watch frenzy in March 2022, a Rolex Daytona could be bought new for $14,550 and immediately resold for $47,000 in the secondary market, data from WatchCharts.com shows. The Rolex Daytona still costs more to buy secondhand than new, as the brand keeps supply artificially low, but the arbitrage is less appealing now that the resale premium has shrunk to 43%.

Speculators also have backed away because they don’t want to be left with unsold stock. Available inventory on watch resale websites has soared. Because of a glut, a Rolex that took less three weeks to sell in 2021 now sits on the market for more than three months. The wait time is even longer for Patek Philippe watches, which currently take around half a year to shift.

The good news for watch connoisseurs is that they no longer have to compete with speculators to get their hands on rare watches in brands’ stores. Shoppers still can’t buy certain models immediately, but waiting lists are getting shorter.

Brands such as Patek Philippe that have an order backlog can rely on pent-up demand to keep sales steady during this slump. The outlook for less-coveted watchmakers such as LVMH-owned TAG Heuer and Hublot is more mixed.

Serious watch collectors keep a close eye on which models retain their value and are reluctant to splash out on a watch that is dropping in price secondhand. Nine consecutive quarters of falling watch values on resale platforms will depress demand and make it harder for the highest-end brands to raise prices in the primary market. Until the resale market stabilizes, luxury watch brands will have a difficult time.

NYT : Telegram Founder’s Arrest Part of Broad Investigation, French Prosecutors

Telegram Founder’s Arrest Part of Broad Investigation, French Prosecutors Say
A case was opened last month to investigate child pornography, drug sales, fraud and other criminal activities on the platform. The app’s founder, Pavel Durov, was detained over the weekend near Paris.

Prosecutors in France said on Monday that Pavel Durov, the entrepreneur who runs the Telegram messaging platform, had been arrested in connection with an investigation opened last month into criminal activity on the platform and a lack of cooperation with law enforcement.

Mr. Durov, 39, was detained on Saturday at Le Bourget Airport near Paris after landing on a private plane from Azerbaijan. He has not been charged and remains in custody, which can be extended through Wednesday, according to prosecutors.

Laure Beccuau, the Paris prosecutor, said in a statement that the arrest was part of an investigation opened on July 8 “against person unnamed” on a raft of potential charges, including complicity in the distribution of child pornography and selling of drugs, money laundering, and a refusal to cooperate with law enforcement.

The investigation is being handled by cybercrime and anti-fraud specialists, Ms. Beccuau said. “It is within this procedural framework that Pavel Durov was questioned by the investigators,” she said.

It is unclear whether any of the charges listed by Ms. Beccuau will be held against Mr. Durov.

In France, complex criminal cases are handled by special magistrates who have broad investigative powers and can place defendants under formal investigation, charging them when they believe the evidence warrants it.

But the magistrates can later drop charges if they do not think evidence is sufficient to proceed to trial, and cases can take years.

Mr. Durov’s arrest has become a flashpoint in the debate about free speech on the internet. President Emmanuel Macron of France on Monday dismissed accusations from supporters of Telegram that the arrest was an example of government censorship.

“The arrest of the president of Telegram on French soil took place as part of an ongoing judicial investigation,” Mr. Macron said in a statement posted on X. “It is in no way a political decision. It is up to the judges to rule on the matter.”

It was an unusual step for Mr. Macron, as French leaders usually refrain from commenting on the early stages of criminal investigations.

“France is deeply committed to freedom of expression and communication, to innovation, and to the spirit of entrepreneurship,” Mr. Macron wrote. “It will remain so.”

Telegram has more than 900 million users, with growth driven partly by a commitment to free speech. Telegram’s light oversight over content on the platform has helped people living under authoritarian governments communicate, but it has also made the app a haven for harmful content. Telegram works as a standard messaging app, but also hosts channels and groups in which large numbers of people can broadcast ideas and communicate, with minimal moderation.

Telegram has long been on the radar of law enforcement agencies because terrorist organizations, drug sellers, weapons dealers and far-right extremist groups have used it for communicating, recruiting and organizing. National governments, especially those in the European Union, have intensified pressure on technology companies to address disinformation, online extremism, child safety and the spread of illicit material.

The arrest of Mr. Durov, who was born in the Soviet Union, could further strain relations between France and Russia, which are already at a low point over French support for Ukraine in the war against Russia. The Russian Embassy in France said in a statement on Sunday that it had asked the French authorities for clarification on the arrest and requested consular access to the Telegram founder.

Mr. Durov, whose net worth was estimated by Bloomberg at more than $9 billion, left Russia in 2014 after he lost control of Vkontakte, the rival to Facebook in Russia. The year before, he had founded Telegram, which is now based in Dubai, United Arab Emirates. Mr. Durov has citizenship in France and the U.A.E., according to Telegram.

In a statement on Telegram on Sunday, the company said “it is absurd to claim that a platform or its owner are responsible for abuse of that platform.” Mr. Durov, the company added, “has nothing to hide.”

WSJ : Macron Fires Back at Critics of Telegram CEO Detention

Macron Fires Back at Critics of Telegram CEO Detention
The French leader said politics played no role in the decision to detain Pavel Durov on Saturday

PARIS—French President Emmanuel Macron fired back at critics of the detention of Pavel Durov, the founder and chief executive of messaging app Telegram, saying politics played no role in the decision to take the 39-year-old tech entrepreneur into custody over the weekend.

The move to detain Durov generated criticism on X, the social-media platform owned by Elon Musk, who posted “#FreePavel” and said France was attempting to censor Telegram. France’s decision raises the ante in the fight between governments and the biggest digital companies over the degree to which they can be held responsible for potentially dangerous content online.

“I read false information here about France following the arrest of Pavel Durov,” Macron said Monday in a post on X. “The arrest of the president of Telegram on French soil took place as part of an ongoing judicial investigation. It is in no way a political decision. It is up to the judges to rule on the matter.”

Police detained Durov at Le Bourget airport north of Paris on Saturday night when his private jet landed after a flight from Baku, the capital of Azerbaijan. French media reported that he was detained as part of a judicial investigation into whether Telegram is flouting requirements to prevent the spread of child pornography and other illegal content on its platform. French judges prolonged his detention on Sunday night, giving them a total of 96 hours to either bring charges against Durov or release him.

France’s judiciary is one of the country’s most powerful institutions, and its judges and prosecutors are fiercely independent. They have investigated some of the country’s most powerful political figures, including the current justice minister, Éric Dupond-Moretti; judicial authorities ultimately declined to send him to trial. For years, judges have investigated former President Nicolas Sarkozy for a series of possible crimes. A court convicted him earlier this year of violating campaign-finance laws.

French law requires social-media companies and other online platforms to cooperate with authorities in countering the spread of illegal content. It is mirrored to some extent by the Digital Services Act, the European Union law requiring platforms to prevent such content.

Telegram said it complies with the EU law, while also saying it was “absurd” to hold a platform responsible for those whose abuse it.

“In a state governed by the rule of law, freedoms are upheld within a legal framework, both on social media and in real life, to protect citizens and respect their fundamental rights,” Macron said.

Kremlin spokesman Dmitry Peskov told reporters Monday that the Kremlin doesn’t know why Durov was detained and what he’s accused of, and he called for no conclusions to be drawn until Durov is charged, “if he is charged at all.”

FT Lex : 23andMe hasn’t cracked code on life as a viable public company

23andMe hasn’t cracked code on life as a viable public company
Interesting technology was enough to get a public listing in a more lenient era but commercial aspects were undeveloped

There are 23 pairs of human chromosomes. Decoding them might only be worth 40 cents per share. 23andMe was once a high-flying consumer healthcare start-up, with admirable DNA itself. The founder, Anne Wojcicki, is part of a prominent Silicon Valley family and herself is a longtime healthcare investor. The company’s backers include Wojcicki’s former husband, Sergey Brin, the Google co-founder. Other large investors are Richard Branson and GSK.

But after listing its shares at a $4.5bn equity valuation, through Branson’s Spac, its market capitalisation is now below $180mn. Wojcicki is attempting to take 23andMe private at just 40 cents per share. It is an extraordinary achievement that a simple saliva sample returned by post can now be transformed into a detailed genetic test. But the barrier still to be broken is that of a viable business.


23andMe has various segments. The first is the consumer testing business, where for as little as $99 customers can get their DNA and ancestry analysed. Another involves selling the data that the company collects to researchers. Its drug development business is, however, being wound down while the company recently said it would offer weight-loss services to members of its subscription service.

For now, virtually all of 23andMe’s revenue comes from the consumer business. And it’s not a great business. In its recently completed fiscal year, it generated just $220mn in total revenue. When it listed its shares in 2021, it forecast almost twice that figure. Moreover, customer acquisition costs are elevated and its ebitda loss for fiscal 2024 was $176mn.

Wojcicki wishes to buy the 80 per cent of the company that she does not own. The Spac deal left nearly $1bn of cash on the 23andMe balance sheet. That figure was down to just $170mn at the end of June. Directors criticised the bid as lacking details around the financing secured by Wojcicki, along with a price that offers no premium to the trading price.

What has become clear is that merely interesting technology was enough to get a public listing in a more lenient era. The commercial aspects were undeveloped. 23andMe might get the space to figure out those elements away from public markets and may even be better off within a larger corporation. As for the remaining shareholders, they may not be getting a superior bid than 40 cents as the company is burning cash. The hope is to avoid a takeover price set at 23 cents or less.

FT : Justin Trudeau says Canada will impose steep tariffs on Chinese EVs and ste

Justin Trudeau says Canada will impose steep tariffs on Chinese EVs and steel
Move replicates US measures and follows visit to Ottawa by top US national security official

Canada’s Prime Minister Justin Trudeau said Ottawa would impose 100 per cent tariffs on imports of Chinese electric vehicles and 25 per cent levies on Chinese steel and aluminium, in a move replicating recent US measures.

Trudeau said Canada was introducing the EV tariffs because China was “not playing by the same rules”. It marks the latest example of the US and its allies taking actions to counter what they say are unfair economic practices.

“Actors like China have chosen to give themselves an unfair advantage in the global marketplace,” Trudeau said in Halifax, Nova Scotia during a cabinet retreat.

The announcement came one day after US national security adviser Jake Sullivan met the Canadian prime minister in Canada and urged Ottawa to follow Washington in imposing tariffs. Sullivan stopped in Canada en route to China where he will hold talks with Chinese foreign minister Wang Yi.

Since President Joe Biden took office in 2021, his administration has invested heavily in trying to persuade American allies to take measures together with Washington to help counter China. Speaking in Canada on Sunday, Sullivan said a “united front” would benefit the US and its partners.

The Canadian finance ministry said the tariffs, effective from October 1, would apply to Chinese EVs including passenger cars, trucks, buses and delivery vans. The steel and aluminium tariffs will come into force two weeks later.

The Canadian government is also launching a 30-day consultation to determine where else Ottawa needs to take action. It will examine batteries, semiconductors, solar products and critical minerals, the ministry added.

The Canadian tariffs follow a similar US action on Chinese EVs and the planned imposition of tariffs by the EU, albeit at lower rates than the US and Canada. Washington and its allies are concerned that China is poised to flood global markets with EVs given its dominant position.

The EU tariffs, which are expected to be approved by the end of October, could range from 9 to 36.3 per cent on top of existing levies of 10 per cent.

The Canadian finance ministry said China’s “intentional, state-directed policy of overcapacity and lack of rigorous labour and environmental standard” threatened workers and businesses in the global EV industry and undermined Canada’s long-term economic prosperity.

“That is why our government is moving forward with decisive action to level the playing field, protect Canadian workers, and match measures taken by key trading partners,” said Chrystia Freeland, the finance minister and deputy prime minister.

Carmaking is one of Canada’s most important manufacturing sectors, with plants clustered around the Great Lakes area to supply consumers in the US. The sector directly employs almost 120,000 people, according to the Canadian government. Ottawa has also followed the US in offering subsidies designed to spur demand for domestically made EVs.

The tariffs come one month after Mélanie Joly went to China in the first visit by a Canadian foreign minister in seven years. Relations between the countries plummeted in 2018 after China detained two Canadian citizens — Michael Kovrig and Michael Spavor — and did not release them for more than three years. The move was viewed as retaliation after Canada detained Meng Wanzhou, Huawei’s chief financial officer, in response to a US extradition request.

The Chinese embassy in Washington did not respond to a request for comment.