FT : Assad cousins hit with sanctions over amphetamine trade that funds regime

Assad cousins hit with sanctions over amphetamine trade that funds regime
Captagon is estimated to be worth $57bn annually to the Syrian government

The US and UK have slapped sanctions on Syrian President Bashar al-Assad’s cousins for their alleged role in the manufacture and export of Captagon, a highly addictive amphetamine whose trade has become an economic lifeline for the regime.

The sanctions were imposed on Tuesday on four Syrians allegedly involved in the illegal trade, including the president’s cousins Samer Kamal and Wassim Badia al-Assad, as well as two Lebanese drug magnates.

The UK targeted five additional people, including militia leaders and businessmen, over their ties to the Captagon trade, which it estimated was worth $57bn in annual revenues to Damascus.

“Trade in the drug is a financial lifeline for the Assad regime — it is worth approximately three times the combined trade of the Mexican cartels,” the UK said in a statement announcing the sanctions.

Its trade “enriches Assad’s inner circle, militias and warlords, at the expense of the Syrian people who continue to face crippling poverty and repression at the hands of the regime”.

While estimates of the market’s size and worth vary, the Captagon trade has long been associated with the conflict in Syria, now in its 13th year. Fighters on the battlefield frequently took it to suppress their appetites and sharpen concentration.

In recent years, with economic crises in Lebanon and Syria worsening, experts warned that the trade had spread. Millions of Syrian-made Captagon pills worth billions of dollars have been seized by authorities in Middle Eastern countries as well as in southern Europe, where experts report a growing market.

Its huge scale has led analysts to conclude that the Assad regime, which has regained control of two-thirds of Syria, is complicit in the trade. Experts added that Hizbollah, the Lebanese militant movement, and other Iranian-linked militias in the region were behind the drug’s surge.

Hizbollah and the Assad government have denied involvement in the making and trafficking of the drug.

Among the four Syrians targeted by both Washington and London was Khalid Qaddour, a businessman. Qaddour, along with the two Assad cousins, has been censured over his ties to the president’s younger brother Maher, who heads the Syrian army’s Fourth Division.

Announcing the sanctions, US Treasury’s Office of Foreign Assets Control said Maher and the Fourth Division were known for running illicit trades, ranging from “smuggling cigarettes and mobile phones to facilitating the production and trafficking of Captagon”.

“It is reportedly Qaddour who is responsible for managing revenues generated by these activities,” Ofac said.

Samer Kamal al-Assad oversaw the drugs’ production in the northern coastal city of Latakia in co-ordination with “certain associates of Hizbollah” and the Fourth Division, the US said. It alleged that in 2020, $1.2bn worth of pills made at the Latakia facilities were seized at the Italian port of Salerno.

Wassim Badia al-Assad, meanwhile, is described by the US as a “key figure in the regional drug trafficking network”, while also leading a paramilitary group that backs the regime.

While most Captagon is made in Syria, much of it “is trafficked through Lebanon”, which shares a porous border with Syria, Ofac said.

Among those hit with sanctions were Noah Zeiter, a weapons and drugs trafficker, and Hassan Daqqou, a dual national who has been nicknamed “the King of Captagon” in local media.

FT : Big debt investors dealt blow in mattress maker bankruptcy ruling

Big debt investors dealt blow in mattress maker bankruptcy ruling
Serta Simmons court decision is milestone in ‘creditor-on-creditor violence’ litigation

A US judge has dealt a blow to Apollo Global Management, Angelo Gordon and other big creditors in the bankruptcy of mattress maker Serta Simmons Bedding, in a ruling that could settle a fierce dispute on Wall Street.

Federal bankruptcy judge David Jones in Houston dismissed arguments by Apollo and Angelo Gordon that they had been unfairly frozen out of a controversial $875mn loan refinancing Serta Simmons executed in 2020.

The slim majority of lenders that participated in the deal were able to swap their debt into more senior loans, giving them higher standing in the bankruptcy, while Apollo and Angelo Gordon were not. The so-called uptier exchange included $200mn of new cash lent to Serta to keep it afloat during the coronavirus pandemic.

Apollo and Angelo Gordon are institutional investors known for their market savvy. Jones said from the bench that the excluded lenders knew or should have known by studying the loan contract that they could be on the wrong side of such an exchange.

“I sit with these matters every single day,” Jones said in his oral ruling. “Sophisticated parties know what words they want to choose . . . this is very easy for me.”

The excluded lenders had been challenging the 2020 transaction since it was announced, in cases that had been winding through state and federal courts in New York.

Serta Simmons had filed for bankruptcy protection in January and had immediately asked the Texas-based court to rule that refinancing was permissible in order to allow it to emerge from bankruptcy later this year.

The Serta case had been closely followed on Wall Street as a series of distressed companies in recent years had raised fresh capital and refinanced debt in deals where lenders in the same class of debt competed against each other to provide a new financing package.

Litigation around such transactions, known in the industry as “creditor-on-creditor violence”, had yielded few final verdicts. This makes Tuesday’s Serta decision a milestone.

The disagreement between Serta and the losing group of lenders focused on an esoteric dispute over the meaning of the term “open market purchase”.

Apollo and Angelo Gordon along with LCM Asset Management had insisted that the phrase required Serta to allow all lenders, rather than simply a smaller handpicked majority, the chance to swap older debt into the new, more senior issue.

Serta told the court that the company was evaluating multiple financing offers and that it simply rejected a similar deal that Angelo Gordon and Apollo had provided in favour of what it thought were better terms from the majority group, which includes asset manager Eaton Vance.

“For the nature of what was being transacted, this fits within [the definition] of an open market purchase,” Jones said.

Jones, however, allowed a claim to proceed that said the 2020 transaction violated the so-called covenant of good faith and fair dealing, a doctrine that says a contract that may violate market norms can be invalidated even if there is no official breach of explicit terms.

The holders of the new debt tranche created in 2020 are now set to take control of the reorganised Serta with the deprived group only to get a modest recovery.

The reorganisation plan, if approved by the court, will eliminate much of Serta’s $1.9bn in debt with the bulk of the equity in the reorganised stock going to the lenders which participated in the 2020 refinancing.

Apollo declined to comment. Serta and Angelo Gordon did not immediately respond to requests for comment.

FT : JPMorgan’s Jamie Dimon to be deposed in Epstein lawsuits

JPMorgan’s Jamie Dimon to be deposed in Epstein lawsuits
Sworn testimony scheduled to take place behind closed doors in May as bank fights litigation

Jamie Dimon, the longtime chief executive of JPMorgan Chase, will be interviewed under oath over his bank’s decision to retain the late sex offender Jeffrey Epstein as a client, said people familiar with the matter.

The sworn deposition, due to take place behind closed doors in May, is the latest development in two high-profile cases brought against the largest US bank by an alleged Epstein victim and the US Virgin Islands, where the disgraced financier had a home.

The lawsuits claim JPMorgan, which banked Epstein for 15 years from 1998 to 2013, benefited from human trafficking and ignored several internal warnings about its client’s illegal behaviour. The lender has described the claims as meritless.

The pre-trial process unearthed communications between JPMorgan employees that contained a reference to a “Dimon review” into the bank’s relationship with Epstein. The bank has denied that its CEO had any knowledge of such a review.

A person familiar with the bank’s internal probe said there was no record found of Dimon being in direct communication with Epstein or being included in any discussion over retaining him as a client.

JPMorgan declined to comment.

Lawyers for JPMorgan had previously resisted attempts to depose Dimon and had tried to limit the range of documents handed over during the pre-trial process.

Last week, Judge Jed Rakoff, who is presiding over the cases, denied in part JPMorgan’s request to dismiss the lawsuits and allowed some of the claims against the bank — as well as some against Deutsche Bank, which is being sued separately by an alleged Epstein victim — to proceed.

He later ordered JPMorgan to hand over documents containing communications involving Dimon and former general counsel Steve Cutler from before 2006, the year that Epstein was first arrested.

A provisional trial date for both cases has been set for October.

Dimon’s looming deposition comes after other senior figures at the bank, including Mary Erdoes, the head of the bank’s $4tn asset and wealth management business, were scheduled to be interviewed by plaintiffs’ lawyers as part of the lawsuits.

Former JPMorgan executive Jes Staley is also set to be deposed by his former employer’s lawyers in April, after the US bank countersued him for any potential damages. JPMorgan’s complaint claims Staley witnessed and participated in sex crimes at Epstein’s residences, and alleges he did not disclose this “despite having a fiduciary duty” to do so.

Staley has repeatedly denied any involvement in Epstein’s illegal activities.

The bank is trying to claw back more than $80mn of pay from Staley, one of the largest such attempts in US history.

Dimon was originally scheduled to be deposed in April as well, but JPMorgan’s lawyers argued for his interview to take place after Staley’s, said a person familiar with the matter.

Staley, who later became head of London-based Barclays bank, has denied any involvement in Epstein’s crimes. Earlier this month, Barclays’ board acknowledged in a notice ahead of its annual meeting in May that the recent allegations against their former chief executive were “serious and new”.

Staley left Barclays in 2021 to “contest” the results of an investigation by UK regulators that concluded he had mischaracterised his relationship with Epstein.

>>> US Close Dow -0.12% S&P -0.16% Nasdaq -0.45% Russell -0.06%

Closing Stock Market Summary

Today's price action occurred in a relatively tight trading range on below average volume. The main indices closed with modest declines after climbing off their worst levels in the afternoon trade. The Nasdaq trailed its peers again today, weighed down by lagging mega cap stocks.

In the early going, money flows looked somewhat similar to yesterday's trade with bank stocks leading the market higher. Sentiment seemed to shift, though, around the time that FDIC Chairman Michael Barr told the Senate Banking Committee that he anticipates having to increase capital and liquidity standards for firms over $100 billion, adding that more regulation is needed.

Still, there was some underlying strength in the market as evidenced by the 0.2% gain in the Invesco S&P 500 Equal Weight ETF (RSP) versus the 0.2% decline in the market-cap weighted S&P 500. 

Roughly half of the 11 S&P 500 sectors closed in the green, but energy (+1.5%) was the only sector to gain more than 1.0%. On the flip side, the communication services sector (-1.0%) was the worst performer by a decent margin, feeling the weight of its mega cap components. The health care (-0.6%) and information technology (-0.5%) sectors were also notable laggards today. 

Market breadth also reflected mixed action and a lack of conviction from both sellers and buyers. Advancers led decliners by a roughly 4-to-3 margin at the NYSE while decliners led advancers by the same margin at the Nasdaq. 

Treasuries settled the session with losses. The 2-yr note yield rose six basis points to 4.06% and the 10-yr note yield rose four basis points to 3.56%.

  • Nasdaq Composite: +11.9% YTD
  • S&P 500: +3.4% YTD
  • S&P Midcap 400: +0.1% YTD
  • Russell 2000: -0.5% YTD
  • Dow Jones Industrial Average: -2.3% YTD

Looking ahead to Wednesday, market participants will receive the following economic data:

  • 7:00 ET: Weekly MBA Mortgage Index (prior 3.0%)
  • 10:00 ET: February Pending Home Sales (consensus -2.3%; prior 8.1%)
  • 10:30 ET: Weekly crude oil inventories (prior +1.12 mln)

Reviewing today's economic data:

  • The advanced report for international trade in goods showed a $91.6 billion deficit in February versus the prior revised $91.1 billion deficit in January (-$91.5billion). The advanced report for retail inventories reflected a 0.8% build in February following a 0.1% increase in January. The advanced report for wholesale inventories showed a 0.2% build in February after a revised 0.5% decline in January (from -0.4%).
  • The FHFA Housing Price Index rose 0.2% in January following a 0.1% decline in December. The S&P Case-Shiller Home Price Index rose 2.5% in January ( consensus 2.5%) following a 4.6% increase in December.
  • The Conference Board's Consumer Confidence Index for March hit 104.2 (consensus 101.5) versus an upwardly revised 103.4 (from 102.9) for February. In the same period a year ago, the index stood at 107.6.
    • The key takeaway from the report is that consumer confidence held up well even though the survey period covered the week after Silicon Valley Bank collapsed. That said, the Expectations Index remained below 80.0 for the 12th month out of the last 13, which serves as a concerning signal about future growth.