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Firm co-founded by Omeed Malik invests in ‘parallel economy’ of conservative-friendly companies

Five years ago, Omeed Malik was a self-described “run-of-the-mill corporate Democrat,” with a seat on the Council on Foreign Relations, a summer house in the Hamptons, and stints at Bank of America and white-shoe law firm Weil, Gotshal under his belt.

Then Covid happened. Chafing under government mandates he found illogical and corporate limits on speech that felt to him like censorship, he moved from Manhattan to Florida and began hanging out with Republican donors. He discovered a business opportunity in a so-called “parallel economy” of conservative-friendly companies.

Now, he is one of their financiers. Malik this year launched 1789 Capital, which aims to capitalize on the opportunities that it sees left open by the “wokeness” of more traditional sources of capital.

Its first fund, with a modest $150 million, made its initial investment Monday, leading a $15 million seed round with other private investors into Tucker Carlson and Neil Patel’s new media company. Carlson and Patel’s company has been registered in Nevada under the holding company name Last Country, Inc. Malik is familiar with Carlson and Patel, having invested in an earlier media venture of theirs, the Daily Caller.

The goal of 1789, which is named for the year the Bill of Rights was written, is to get Carlson and Patel’s company to the point of showing a proof of concept for its online video-driven business model, so the pair can continue raising the hundreds of millions of dollars they are eventually targeting, people familiar with the matter said.

Malik thinks some right-leaning business ventures have failed to sustain mass appeal because they didn’t have sophisticated financial backers.

“What has happened up to now is you’ve had some rich benefactor, who is ideological, put a company in business, but then there is no institutional support to continue to finance that business,” Malik said. Silicon Valley venture firms operate with that level of sophistication but typically don’t want to be affiliated with conservative companies, he said.

Malik’s fund is small compared with the giants of the venture-capital world, with their multibillion-dollar funds, so the scope and scale of investments he can make is limited. And he will be facing competition for the most promising firms he targets.

The Carlson investment is structured as a SAFE, short for Simple Agreement for Future Equity, a common arrangement pioneered by Silicon Valley startup accelerator Y Combinator that often doesn’t assign a valuation to the startup, according to the people familiar with the matter.

Carlson and Patel’s venture will be driven by subscriptions but also offer a stream of free online videos of Carlson, a former star at Fox News, and other talent. Already, Carlson has been posting free video content on Elon Musk’s X, such as his high-profile interview with Donald Trump that streamed during a recent GOP presidential debate.

Through connections formed via the Rockbridge Network, a secretive organization run by Chris Buskirk that seeks to connect conservative megadonors with entrepreneurs and tech leaders, Malik teamed up with co-founders Buskirk and Rebekah Mercer to create 1789 Capital.

“The whole vision is to create the next media company that is purpose-built for the 2020s and 2030s, in a way that Fox and Rupert [Murdoch] and Roger [Ailes] built a cable news business that was really purpose-built for its time and place,” Buskirk said.

The investment in Carlson and Patel’s venture is part of 1789’s thesis of “EIG” investing, short for entrepreneurship, innovation and growth. It is meant as a response to the ESG—or environment, social and governance—ethical investing standards that have been championed by funds such as BlackRock as good business but have sparked a backlash on the right.

Malik sees the addressable market as, at minimum, the 74 million Americans who voted for Trump. Entrepreneurs targeting this market point to the market value lost when Bud Light lost its place as the bestselling beer in America after consumers organized a boycott in response to collaboration with a transgender influencer for marketing.

“Where’s the money going to go?” Malik said. “I want us to be the beneficiary of it.”

His fund sees opportunities within three buckets: the “parallel economy” of companies like Carlson’s that use existing business models to reach more right-leaning consumers; “deglobalization,” or companies that bring jobs and technology back to the U.S.; and “anti-ESG,” or companies that can’t get loans because of what Malik calls the “ESG cult.”

“What we are focused on is opportunities that we think have developed in the market because other forms of institutional capital have become politicized,” Buskirk said. He pointed to the challenges that many defense startups face in getting funding because some traditional venture-capital firms are prohibited by their investors from investing in weapons.

1789 is finalizing its next investment in Firehawk, a startup that makes 3D-printable rocket fuel for missiles that it claims is safer and cheaper than traditional methods, according to the 1789’s founders. Firehawk didn’t immediately respond to a request for comment.

Blake Masters, who serves as an adviser to 1789 and ran for the Senate in Arizona as a Republican, compares the current moment to the one in 2014, when he co-wrote the bestselling startup bible “Zero to One” with Peter Thiel, which asked the question, “What valuable company is nobody building?”

“What valuable company is nobody investing in? I think that answer is very likely at any given time to be an ideologically right of center company,” Masters said.

In addition to 1789, Malik runs a bank, Farvahar Partners, which he describes as “apolitical,” and a special-purpose acquisition company that recently merged with PublicSq., a commerce platform for what it describes as patriotic Americans.

1789 joins a movement of businesses aimed at the MAGA side of an increasingly fragmented marketplace, from Black Rifle Coffee to Truth Social to Rumble, all three of which either went public via SPAC or are pursuing doing so. Such firms served as inspiration for 1789, Malik said.

Vivek Ramaswamy, the Republican presidential candidate whose Strive Asset Management has become famous for its critique of corporate “wokeness” and recently crossed $1 billion in assets under management, takes credit for starting the conversation.

He called Malik, who has been a supporter of his campaign, “an intellectual” who has the “curiosity and depth” to challenge the status quo.

“I feel like I spawned what I think is a new cultural current in American business,” he said.

Sam Bankman-Fried and other FTX executives spent $8 billion worth of customer funds on real estate, venture capital investments, campaign donations, endorsement deals and even a sports stadium, according to testimony from former senior FTX executive Nishad Singh.

Singh’s testimony, which kicked off the third week of Bankman-Fried’s trial, provides fresh details of exactly where that money went.

Singh, who has already pled guilty to fraud, money laundering and violation of campaign finance laws, said Monday that he learned of the massive hole in Alameda’s books as a result of a coding error that “prevented the correct accounting” of user deposits by around $8 billion.

Singh’s testimony helps corroborate the statements given by three previous prosecution witnesses, all of whom were in Bankman-Fried’s inner circle: FTX CTO Gary Wang, Alameda CEO Caroline Ellison and FTX engineer Adam Yedidia. While Wang and Ellison have pled guilty, each witness has pointed to Bankman-Fried as the orchestrator of fraud and money laundering.

Singh said that even after learning about the hole, “implicitly and explicitly, I green-lit transactions that I knew must have been digging the hole deeper and therefore coming from customer funds.”

Singh went on to describe Bankman-Fried’s spending as “excessive.” He said that he often learned about large spends after the fact, and that his expressions of concern weren’t taken seriously.

“I also would express that I felt kind of embarrassed or ashamed of how much it all wreaked of excess and flashiness,” said Singh. “It didn’t align with what I thought we were building a company for.”

Prosecutor Nicolas Roos and Singh went through spreadsheets detailing different ways Alameda spent the $8 billion in customer funds. Singh testified that Bankman-Fried was “in general the one making the final decision on investments and investment team decisions as a whole.”

In addition to going over a $1 billion on Genesis Digital Assets, a crypto mining firm in Kazakhstan, and $500 million on Anthropic, an AI company focused on safety, the prosecution focused on Alameda’s $200 million investment into K5 Global, a venture firm led by investor Michael Kives who is known for his extensive network.

That network seemed to impress Bankman-Fried deeply. After attending a Super Bowl Party hosted by K5 in Los Angeles, the former crypto mogul told Singh that he had met “the most impressive collection of people he ever had in one location.” Faces at the party included Hilary Clinton, Katy Perry, Orlando Bloom, Leonardo DiCaprio, Jeff Bezos, Kendall and Kris Jenner and Kate Hudson.

Bankman-Fried had proposed a term sheet to Singh and Wang one night that laid out hundreds of millions of dollars of onuses to Kives and Bryan Baum, co-founder and managing partner of K5. The sheet also proposed up to $1 billion long-term capital to give to the VC firm, according to Singh.

“We can get from them essentially infinite connections,” wrote Bankman-Fried in a letter to FTX leadership that was shared at Monday’s trial. “I think that if we asked them to arrange a dinner with us, Elon, Obama, Rihanna and Zuckerberg in a month, they would probably succeed.”

Singh said he expressed concern about partnering with K5 and giving them such substantial funds, which would be “really toxic to FTX and Alameda culture.” He said that “politicking and social climbing was not going to be rewarded, and here we were rewarding people in exorbitant amounts.”

The former FTX executive suggested that Bankman-Fried use his own money, not FTX’s, to make some of these investments. Those protestations didn’t yield results, according to the spreadsheet, which showed the K5 deal went through Alameda’s venture arm.

Bankman-Fried also believed that endorsement deals and even “unpaid partnerships with celebrities” would help increase FTX’s influence to propel its success, said Singh.

To that end, about $205 million of that $8 billion chunk was spent renaming the Miami Heat stadium to FTX Arena. Another $150 million was spent to endorse the MLB. Other items on a spreadsheet shown to the jury show FTX paid out $1.13 billion in exchange for endorsements from basketball player Steph Curry, video game developer Riot, Seinfeld writer Larry David to endorse FTX in a Super Bowl ad, football star Tom Brady and model Giselle Bündchen, with whom FTX was coordinating on some philanthropic efforts, according to Singh. .

Singh’s testimony also revealed a range of properties that had been purchased with the funds, including a $30 million penthouse in the Bahamas that Singh said was “too ostentatious.”

Bankman-Fried has also donated tens of millions to election campaigns.

The former FTX executive, who also went to high school with Bankman-Fried and was a close friend of his brother, testified that he expressed concern about the company’s spending, but was usually blown off.

Singh recalled one instance where Bankman-Fried got visibly angry with him and said that people like him were “sowing seeds of doubt in the company decisions” and were “the real insidious problem here.”

“It was pretty humiliating,” said Singh.

Singh’s testimony aligned with Yedidia’s that states in June 2022, the executives learned that Alameda owed $8 billion worth of FTX customer money after Ellison shared a Google Doc displaying the “extremely negative” balance.

Singh told the court this hole was due to a bug that Yedidia accidentally introduced into the system in 2021. The bug “prevented correct accounting for fiat@FTX.com’s balances on specific types of withdrawals,” said Singh. Fiat@FTX.com was an internal accounting system that recorded user deposits.

On top of this, Singh testified that he built out systems on FTX that gave Alameda “special privileges” not afforded to other users. A feature called “allow negative” let Alameda trade, borrow and withdraw FTX funds in excess of its balance and collateral amounts, according to Singh. He testified that he coded an initial version of the feature in 2019 at Bankman-Fried and Wang’s advisement.

A later version of this code allowed Alameda to borrow from FTX without having tis collateral liquidated. In effect, it could “withdraw money that it didn’t have,” meaning it could “lose money” that “belonged to customers,” Singh said.

By June 2022, Alameda had built up its own $2.7 billion deficit on the FTX platform.

“This seemed like a real abuse of a feature that until this point I believe was serving FTX, not hurting it,” said Singh.

Alameda at this point also owed $8 billion in user funds to FTX that it no longer had on hand. In total, the negative account balance and accounting bug contributed to a $11 billion hole on FTX’s balance sheet, Singh testified.

Activist fund targets Japanese rail company with $12bn stake in Tokyo Disneyland owner

Palliser’s campaign comes at a time companies in the country are under intensifying pressure to raise corporate value

A Japanese rail operator holding a nearly $12bn stake in the owner of Tokyo Disneyland is being targeted by a UK-based fund, as part of intensifying efforts by shareholders to release value trapped in corporate Japan.

Palliser Capital’s campaign comes at a time when Japanese companies are under intensifying pressure to raise value, increase their price-to-book ratios and improve governance.

Investors have sharpened their focus on large crossholdings of shares between groups in Japan and other non-core holdings that could unlock value if sold.

Palliser, a company led by former employees of activist fund Elliott Management, holds a 1.6 per cent stake in Keisei Electric Railway, which runs trains around Tokyo and includes one of the main lines from Narita airport into the city centre. Keisei has a 22 per cent stake in Oriental Land, the ¥8.58tn ($57bn) listed property group which owns Tokyo Disneyland.

Keisei’s stake in Oriental was valued at roughly $1.3bn on its balance sheet for the full year that ended in April due to accounting conventions in Japan, even though its current market value is close to $12bn, an amount twice the current market capitalisation of the railway company itself.

The fund is pushing for the railway company to reduce its stake in Oriental Land and use the proceeds from the sale to focus on the core business of running and modernising its railway, according to people with knowledge of the situation.

The fund is expected to deliver a presentation on its plans for a Keisei campaign on Tuesday at the 13D Monitor Active-Passive Investor Summit, a hedge fund activism conference in New York.

Japanese authorities are also trying to push companies to improve governance standards and lift corporate values. The chief executive of the Japan Exchange Group, the company which controls the Tokyo Stock Exchange, said last week that it would be setting up a “name and shame” regime designed to improve companies’ capital efficiency.

Palliser’s presentation says that the distortion caused by the accounting treatment makes it impossible for Keisei’s management to properly allocate capital.

Keisei did not immediately respond to a request for comment.

As Keisei’s eighth-largest shareholder, Palliser has been engaged in what it describes in the presentation as “patient, respectful and collaborative engagement”, with Keisei’s management. Palliser’s stake in Keisei allows it to make a shareholder proposal at the next annual meeting in June.

Yet the rail company has been reluctant to reduce its stake in Oriental Land, which it has told Palliser is not non-core and which it holds because the businesses are complementary, according to sources close to Palliser.

John Seagrim, a Japan equities broker at CLSA said that the Keisei stake in Oriental Land was one of the biggest valuation anomalies in corporate Japan.

Defrosting

European efforts to tap into the revenues from immobilised Russian central bank assets received high-profile backing last week from Janet Yellen, the US treasury secretary.

Meetings in Brussels and Luxembourg today will show whether this can help overcome the difficulties of bringing the plans to fruition and funnelling the cash to Ukraine, writes Sam Fleming.

Context: The G7 allies froze more than $300bn in Russian central bank reserves following Russia’s full-scale invasion of Ukraine in February last year. The majority of those assets is caught in Europe, suspended in Brussels-headquartered Euroclear, the world’s largest clearinghouse.

Rather than seize the assets, some officials have advocated a levy on the excess, or windfall, profit made by Euroclear.

EU experts will meet in Brussels today to discuss how to move things forward, following a much-needed thumbs up by the G7 last week of the plans. EU finance ministers are holding separate talks with Yellen in Luxembourg today, during which they will also touch on the issue.

Belgium last week said it would use the corporate tax it already collects on Euroclear’s profits from the Russian assets to create a €1.7bn fund dedicated to Ukraine.

Mairead McGuinness, the financial services commissioner, told the FT that the move by premier Alexander De Croo’s government was “the start of something significant”, and that it was now up to member states to discuss further steps.

“We need to make Russia pay and this is the start of that process,” McGuinness said.

France’s finance minister Bruno Le Maire told the FT last week that he wanted experts to work on the plan through the end of the year, with the hopes of already using revenues from the Russian assets next year to support Ukraine.

But the discussions remain legally complex. The European Central Bank is still worried that if the EU seizes profits made on assets held by a foreign state, other central banks will drop their euro-denominated assets for fear of suffering the same fate — and endanger the whole currency.

Representatives of the ECB will attend the expert meeting in Brussels today.

While the G7 acted with extraordinary speed when it first froze the Russian assets, reaching a deal to tap into the proceeds would be far more laborious.