TheChek News Flow

Managers say opportunities remain despite an uncertain economic outlook

Hedge funds investing in fast-growing public and private companies lost tens of billions of clients’ money last year. That isn’t stopping more “crossover” funds from launching.

Mala Gaonkar, 53 years old, a former co-investment chief of Lone Pine Capital LLC, launched her New York-based crossover fund, SurgoCap Partners, on Jan. 3 with $1.8 billion, people familiar with her firm said. Ms. Gaonkar’s launch was widely anticipated given her experience and marks the largest-ever startup from a female hedge-fund manager. Lone Pine, which Ms. Gaonkar left roughly a year ago, lost 36% in 2022 in its flagship hedge fund.

Patrick Fu, 45, who co-led Sequoia ‘s hedge fund until October 2021 before leaving in March, is aiming to raise as much as $1 billion for his crossover fund, Los Angeles-based Dandelion Capital Management, people familiar with his effort said. Dandelion is targeting a third-quarter start. Sequoia Capital Global Equities lost about 41% last year in its worst-ever showing, according to people familiar with the crossover fund, including from its investment in bankrupt cryptocurrency exchange FTX.

Kristov Paulus, 33, a senior investor at Boston-based Whale Rock Capital Management LLC who left at year-end, plans to launch Kultura Capital Management in San Francisco in the second half of the year, people familiar with his plans said. Several chief executives of private companies Mr. Paulus backed while at Whale Rock have committed to investing. Whale Rock lost 43% in its crossover fund last year through November.

Loading up on shares of fast-growing public and private companies was one of the most surefire paths to profit for hedge funds in the later stages of the bull market, supercharging companies’ valuations, juicing funds’ returns and minting fortunes for managers, who said insights from their investments in private companies informed their public-markets wagers and vice versa. But funds’ recent losses as public and private valuations come under pressure are prompting a reassessment by managers and their clients.

Even against such a daunting backdrop, more launches are possible. Bankers say they are having ongoing conversations with employees at wounded crossover firms who are thinking about starting their own funds.

When funds are clawing their way back to their high-water mark, or the point at which they have recouped losses and can start charging full performance fees again, fat paydays for employees are less likely in the near-term. Some firms also are parting ways with employees as they shift course or reassess their teams.

The report card for crossover funds in 2022 is grim. Tiger Global Management lost 56% in its flagship hedge fund and 67% in its long-only fund, historic losses for the firm, while D1 Capital Partners lost about 30% in the share class in which half of clients’ money can be invested in private companies. Coatue Management and Viking Global Investors, among the best performers, lost about 19% and 23%, respectively, in their crossover funds.

In comparison, stock-picking hedge funds lost an average 2% last year on an equal-weighted basis, according to a Goldman Sachs Group Inc. client note. The S&P 500 lost about 18% last year, including dividends.

The firms have been relatively resilient despite suffering the kinds of percentage losses that caused hedge funds to close in 2008, showcasing the crossover strategy’s benefits for managers. “Historically you would have seen runs on the bank,” said Jason Kaplan, a partner at law firm Schulte Roth & Zabel LLP. But with the additional stability private investments provide, “Many of these firms will survive the difficult 2022 and be in a position to make money on the upswing.”

Appetite for new crossover funds is unclear.

Investors have been slow to redeem from their existing crossover managers and crystallize losses, meaning they have less to invest in new funds. They also say the bar is high for swapping out a fund working for no performance fees for one charging full-freight.

Ms. Gaonkar’s sizable launch, which Bloomberg News earlier reported, is likely to remain an outlier. A Lone Pine founding partner, Ms. Gaonkar led its technology, media and telecom bets for more than two decades and is one of the industry’s most experienced female investors. She put nine figures of her own money into SurgoCap, said people familiar with the firm, which can invest up to 25% of clients’ money in private companies. SurgoCap plans to use data science and invest in the disruptive impacts of technology on sectors including financials, industrials and healthcare.

Managers say opportunities remain despite an uncertain economic outlook.

Mr. Paulus has told potential clients continued innovation and companies’ ongoing migration to the cloud are opportunities. A self-taught developer, Mr. Paulus focused on software and private investments at Whale Rock and led profitable, early bets on Shopify Inc. and Tencent Holdings Ltd. Mr. Paulus has said he plans to donate part of his profits to charity.

Mr. Fu, who worked at Lone Pine before moving to co-helm Sequoia’s hedge fund in 2017 with its longtime managing partner, Jeff Wang, helped expand the Sequoia fund from $700 million to more than $12 billion. He has told potential clients he profitably invested in companies when they weren’t popular hedge-fund holdings and sourced private investments outside Sequoia’s famed venture ecosystem. One Sequoia Capital-backed company he invested in was FTX, he wrote in a recent fundraising letter viewed by The Wall Street Journal.

Dandelion will thematically invest in innovation, Mr. Fu wrote. Investors can opt into having up to 30% of their money in private companies. But “public markets currently hold more opportunity than their private counterparts” after their steep selloff, he wrote. “We expect to be highly selective in deploying capital to private investments.”

Swedish start-up Heart Aerospace says airlines need incentives to decarbonise their fleets

Western nations need to offer more subsidies to encourage the airline industry to switch to electric-powered planes, according to one of the leading emissions-free start-ups.

Anders Forslund, chief executive and co-founder of Heart Aerospace in Sweden, said airlines were generally too focused on short-term profitability and needed countries to follow the likes of Norway, which aims to electrify all domestic flights by 2040.

“Governments are the ones making the rule book,” Forslund told the Financial Times. “There must be an economic incentive for airlines to take on this leadership. It needs a push, and it needs the push now.”

Heart, a start-up based in Gothenburg on Sweden’s west coast, is developing a 30-seater regional aircraft for 2028 and has firm orders for 230 planes from United Airlines and Mesa Airlines in the US as well as Air Canada. Other airlines including SAS, BRA and Icelandair in the Nordics have signed letters of intent for the aircraft, while Air Canada and Swedish defence company Saab became shareholders in September.

Heart recently changed its plans from a pure electric 19-seater to a larger hybrid aircraft, which will use sustainable aviation fuel to power its reserve system needed for emergencies, something that extends its range to 800km from 200km if solely using batteries.

Forslund pointed to public service mandates in the US and Norway as something necessary to help develop such a regional electric plane.

“The reason it works in Norway is subsidies. The fact that they’re rich is that they can pay the premium, just like they did in electric cars,” he said, noting that the success of Tesla’s Model S led to it developing the cheaper Model 3.

Heart is not just touting the zero-emissions potential for its plane but also the lower noise it produces on take-off and landing. By 2040, it believes battery technology will allow it to fly 400km emissions-free and 600km using its hybrid reserves, while its goal for 2050 is to fly 1,500km, capturing two-thirds of all departures and one-third of aviation’s emissions.

The company believes the total cost of ownership for an electric aircraft, which will require less maintenance, should be lower than a traditional plane.

Forslund argued that “a lot of the centre of gravity” in the nascent industry was moving to the US because of the Biden administration’s Inflation Reduction Act, which offers big subsidies for green technology.

“We’re a little bit waiting for the European response,” he said, pointing to the likes of Denmark and Iceland as interesting markets because of renewable energy and relatively short flights.

Ultra-high safety standards and the relatively long distances involved mean aviation is seen as one of the harder industries to make emissions-free. Companies from Airbus and BP to Rolls-Royce are trying different technologies such as hydrogen, battery power and sustainable aviation fuel.

Forslund argued that a mixture of all three was likely to be needed to decarbonise air travel but that there was a risk of aiming for the perfect technology and ending up “in an endless R&D loop”.

“The general problem is not too much too soon but too little too late,” he said. “You need that sense of urgency.”

He added: “How do we make this transition — as airlines, countries and policymakers? This is going to require a combination of established actors, suppliers and industry partners along with new start-ups. The industry needs to reinvent itself.”

Enron, Madoff and now FTX: New York’s Belfer family strike out again

Wealthy oil dynasty were shareholders in collapsed crypto group after previous investments turned sour

A New York oil dynasty that was a client of the legendary fraudster Bernard Madoff and lost billions in the demise of Enron has been embroiled in the collapse of FTX, according to court documents.

Investment firms for the Belfer family, whose name sits above galleries at New York’s Metropolitan Museum of Art, were included in a list of shareholders of the cryptocurrency exchange FTX and its US business that were released in court documents this week.

FTX founder Sam Bankman-Fried has been accused by US prosecutors of orchestrating “one of the biggest financial frauds in American history”, drawing comparisons to the Ponzi scheme architect Madoff and sprawling bankruptcy of Enron, which sank amid fraud allegations. Bankman-Fried has pleaded not guilty.

The Belfer family, one of Enron’s largest shareholders, lost around $2bn in the company’s collapse, according to estimates at the time. The family’s patriarch, Robert Belfer, played a high-profile role as a long-serving member of Enron’s board of directors for several decades until 2002. Several family foundations and companies also invested with Madoff’s sham investment firm.

A representative for Belfer’s family office, Belfer Management, run by Robert’s son Laurence Belfer, said the family does not give interviews and declined to comment. Robert Belfer said in 2011: “Needless to say, Enron was a painful experience” and that the financial losses had forced the family to reduce the scale of its giving.

The ability of FTX to woo the wealthy New York family gives a fresh sign of how far Bankman-Fried had penetrated the US elite in his drive to attract investment for his businesses. Billionaire Robert Kraft and several celebrities and well-known athletes are also shareholders in FTX, the court documents show.

Belfer Investment Partners held shares from FTX’s equity fundraisings in 2021 and early 2022, as well as investing in the crypto exchange’s US business, the documents show. Another firm linked to the family, Lime Partners LLC, also held shares in FTX and FTX US. The two companies’ combined stake in FTX Group was valued at $34.5mn as of the most recent fundraising round early last year, according to share prices provided by a person familiar with the deal.

The Belfers are known for their extensive philanthropic donations. Robert and his wife Renee made large donations to the Met Museum to renovate the New York institution’s Greek and Roman galleries, which are named for the Belfers. The family are also major benefactors of Harvard, where the centre for international affairs at the University’s Kennedy School is named after them.

The family descend from Arthur Belfer who moved to the US from Poland around the time of the second world war and imported feathers for down pillows and sleeping bags before branching out into rubber and petroleum. The family oil company was acquired in the 1980s by a predecessor of Enron, making the Belfers major stakeholders in the doomed energy giant.

Their financial misfortunes include trusting Madoff’s phoney investment firm. However, according to court documents, after the demise of Enron, the Belfer companies withdrew more than $28mn from Madoff’s scheme before it collapsed.

Investor appetite for woke corporatism has its limits and it usually begins with a declining share price. For further proof, look at what’s going down at Disney.

For years the “House of Mouse” was the epicenter of political correctness. Investors largely ignored this circus (including a same-sex kissing scene in children’s programming) because Disney’s stock soared.

No longer. After longtime CEO Bob Iger retired in 2020, successor Bob Chapek proved to be far less adept as a manager and a seller of wokeness. Pandemic theme-park closures didn’t help. Plus he was also crushed by Florida Gov. Ron DeSantis for opposing a law that prevented schools from teaching sex ed to 6-year-olds and lost Disney’s special tax status.

Much of his programming turned out to be a dud and his streaming strategy floundered. Disney’s stock collapsed so much that Chapek was shown the door just about two years into the job.

Iger, 71, made his return to right the ship and got more grief. His stock has largely flatlined because costs are up and streaming remains in limbo, eating into revenues and profits.

A duo of nettlesome activist investors are now circling the company like vultures. Dan Loeb’s Third Point and Nelson Peltz’s Trian Partners are unlike passive fund managers in that they use their ownership positions to advocate for changes they believe will lead immediately to a higher share price, current ­management be damned.

Both have big stakes in Disney and, for starters, both want Iger to focus less on programming that appeals to AOC and more on stuff that appeals to Middle America,. They want a coherent streaming strategy, cost cuts and much more.

Peltz, in particular, should make Disney and Iger squirm. He preaches “constructive engagement” with companies he’s targeting, but he’s a longtime critic of Iger and has a significant, $940 million stake in the stock that he will likely add to as he gears up for war. Meanwhile, look what he did at GE: He defenestrated CEO Jeff Immelt just two years after acquiring shares because he believed Immelt couldn’t make his numbers and the stock floundered.

Immelt’s successor went bye-bye about a year later for the same reason. Current management installed by Peltz is in the process of breaking up what was one of the biggest conglomerates in US history.

OK, Peltz often gets his way and isn’t known for his patience when his money is being wasted away as it was at GE. A boardroom battle for the ages is certain now that Peltz demanded a board seat and Iger told him to pound sand. Iger is about to up the ante, I am told, by filing a preliminary proxy to explain why he thinks Peltz is unqualified for the seat.

So far, Peltz says he doesn’t want to pull a GE on Disney and break it up, and Iger can stay as CEO for the next two years. But based on his history, Peltz won’t stand for getting the stiff-arm if Disney’s stock doesn’t start to move higher and fast.

That could mean, in addition to everything else on Peltz’s wish list, the shedding of Disney’s so-called “noncore assets” to boost profits. Bankers tell me sales of Disney’s sports cable network ESPN, and maybe all of its ABC television network, are on the table and a real possibility to appease Peltz’s desire for a higher stock price.

Also most certainly on the table is Iger’s job if he doesn’t make his numbers.

Sam Bankman-Fried ordered the co-founder of his cryptocurrency exchange FTX to create a “secret” backdoor that allowed his hedge fund Alameda Research to borrow $65 billion of clients’ money without their permission, according to testimony over the firm’s implosion.

Gary Wang was told to create a secret line of credit using customer funds from FTX to Alameda, said Andrew Dietderich, an attorney for FTX, in Delaware bankruptcy court on Wednesday.

“Mr. Wang created this backdoor by inserting a single number into millions of lines of code for the exchange, creating a line of credit from FTX to Alameda, to which customers did not consent,” Dietderich testified.

“And we know the size of that line of credit. It was $65 billion.”

Dietderich said the “backdoor was a secret way for Alameda to borrow from customers on the exchange without permission.”

Bankman-Fried had moved $10 billion between the two companies, with a further $2 billion still unaccounted for, according to sources cited by Reuters in November.

The Post has sought comment from Bankman-Fried.

The lawyer’s testimony corroborates allegations made by the Commodity Futures Trading Commission, the independent federal agency which regulates derivatives such as futures and swaps.

Last month, the CFTC filed charges against Wang and Alameda Research CEO Caroline Ellison, who was also Bankman-Fried’s on-again, off-again girlfriend.

The CFTC accused Wang of creating a “virtually unlimited” secret line of credit. Dietderich’s testimony is believed to be the first time an FTX official has given the line of credit a firm dollar value.

Wang and Ellison have both pleaded guilty to federal charges including fraud and conspiracy. They are cooperating with investigators.

Bankman-Fried, who was arrested and extradited to the US from his home base in the Bahamas last month, is under house arrest at his parents’ $4 million Palo Alto home as per the conditions of his $250 million bond release.

While awaiting trial, Bankman-Fried published a Substack blog post on Thursday in which he professed his innocence.

“I didn’t steal funds, and I certainly didn’t stash billions away,” Bankman-Fried wrote.

“Nearly all of my assets were and still are utilizable to backstop FTX customers.”

The disgraced former crypto mogul, 30, accused Binance boss Changpeng “CZ” Zhao of waging a lengthy campaign to destroy his empire.

He alleged that Zhao’s “fateful tweet” on Nov. 6 capped an “extremely effective months-long PR campaign against FTX.”

“In November 2022, an extreme, quick, targeted crash precipitated by the CEO of Binance made Alameda insolvent,” Bankman-Fried wrote.

The disgraced FTX founder’s business collapsed shortly after Zhao tweeted that Binance was dumping its position on FTX’s in-house digital token FTT.

The tweet started a domino effect that pushed Bankman-Fried’s crypto hedge fund Alameda Research into insolvency and FTX filed for bankruptcy on Nov. 11.

Meanwhile, Bankman-Fried’s parents are also preparing for possible legal exposure.

Joseph Bankman, Bankman-Fried’s father, has hired a Manhattan-based attorney, Sean Hecker of Kaplan Hecker and Fink LLP, to represent him, Reuters is reporting.

Bankman has not been charged with a crime or informed he’s under federal investigation, a source familiar with the situation told The Post.

However, his work at FTX has come under intense scrutiny since the platform declared bankruptcy.

While testifying on Capitol Hill last month, current FTX CEO John Ray confirmed that his team was “investigating” the role that Bankman and his wife, fellow Stanford law professor and Democratic operative Barbara Fried, played in the platform’s collapse.

Ray told lawmakers Bankman had given “legal advice” to his son at FTX and received cash payments from the company.

Water-rich opals discovered on the surface of Mars could help resolve the question of whether life has ever existed on the red planet.

NASA’s Curiosity rover has discovered a wealth of opals on Mars that could help resolve the question of whether life has ever existed on the red planet, and provide water for any future human missions to the Martian surface, reports a recent study.

Opals are prized as gemstones because they display shimmering colors that often look like iridescent rainbows. These gems form when silicon oxides get sloshed around in wet environments and then harden in fissures between rocks. This process transforms opals into miniature oases that can contain as much as 20 percent liquid water.

Martian opals have previously been spotted from afar by a NASA orbiter, and they have been identified in Martian meteorites that landed on Earth. Now, a team led by Travis Gabriel, a research scientist for the United States Geological Survey, shows that the Curiosity rover has also encountered light-toned opal deposits on the Martian surface.

Gabriel and his colleagues said that these opals were formed in “a vast fluid event in recent Martian geologic history” that may have made Mars habitable for longer than previously assumed, and perhaps even preserved microbial life in the alien gemstones, according to a recent study published in the Journal of Geophysical Research: Planets.

The high water content of opals could make them a useful source of hydration for future humans on Mars, especially at the planet’s equator, where water ice is far more scarce than at the poles.

The “water-rich subsurface network” that produced the opal deposits “was shielded from modern harsh surface conditions, allowing for a potentially habitable environment on Mars in a more recent era,” Gabriel and his colleagues said in the study. “These light-toned features are also ideal for follow-up investigation or sample return as similar opal-rich deposits on Earth are known to preserve traces of microbial life.”

“Additionally, the features themselves contain a considerable amount of readily released water, making them an ideal resource at the otherwise dry Martian equator,” the team added.

Curiosity landed in Gale Crater, an impact basin on Mars, in August 2012, and it has produced a litany of discoveries ever since. The rover has amassed evidence that water likely flowed over Gale Crater billions of years ago, producing conditions that would have been habitable to life. Its successor, NASA’s Perseverance rover, is now also searching an ancient lakebed for signs of this past life on Mars.

Gabriel and his colleagues realized that Curiosity has been stumbling over opals for years by studying old observations from the rover with new analytical techniques. The team identified light-colored rocks surrounding geological features known as “fracture halos” at multiple sites on Curiosity’s road trip. Observations from several instruments on the rover, including data obtained from drill cores of the Martian surface, suggest that these halos contain abundant reserves of water-rich opals.

“Our new analysis of archival data showed striking similarity between all of the fracture halos we've observed much later in the mission,” Gabriel said in a statement. “Seeing that these fracture networks were so widespread and likely chock-full of opal was incredible.”

Scientists know that Mars was much wetter and warmer some 3.7 billion years ago, but the presence of opal deposits at Gale Crater suggests that the planet may have also experienced short-lived floods within the past few hundred millions years. While it’s unlikely that life still persists on the desiccated Martian surface, these brief deluges have helped microbes survive deeper underground, or preserved their microbial remains in opals that are easily accessible from the surface.

“Given the widespread fracture networks discovered in Gale Crater, it's reasonable to expect that these potentially habitable subsurface conditions extended to many other regions of Gale Crater as well, and perhaps in other regions of Mars,” Gabriel said in the statement. “These environments would have formed long after the ancient lakes in Gale Crater dried up.”

Even if these opals don’t ultimately point to alien life on Mars, they could be an important part of a life support system for humans on Mars. The team estimated that about 1.5 gallons of water could be harvested from a one-meter-long halo, enabling astronauts to quench their thirst with the help of extraterrestrial opals.

In this way, the recent study may open a window into the Martian past, when microbes may have flourished in bygone lakes and reservoirs, while also paving the way toward human exploration of the red planet in the future.

The pivot away from ‘zero Covid’ could have profound health, social, political and economic impacts

Chinese leader Xi Jinping went from cementing his supremacy last fall to battling a public-health and economic crisis into the new year—fallout from an abrupt pivot from “zero Covid” that could cast a shadow over China for months to come.

Mr. Xi secured a norm-breaking third term as Communist Party chief in October, and stacked the leadership with allies who sang their leader’s praises and trumpeted his vision of a thriving China. That rosiness dissolved amid intensifying economic pain and a wave of public protests against Mr. Xi’s zero-tolerance Covid strategy of lockdowns and border controls, followed by a haphazard dismantling of pandemic protocols that threatens to further batter the world’s second-largest economy.

Some analysts describe China’s tumultuous exit from zero-Covid policies as largely self-inflicted pain, exacerbated by Mr. Xi’s domineering style. The repercussions could be profound for Mr. Xi, who had touted his pandemic strategy as an example of the Communist Party’s superior governance.

“This is likely to be a year of turbulence for Xi Jinping,” says Alfred Wu, an associate professor at the Lee Kuan Yew School of Public Policy in Singapore.

The party’s energies are set to be consumed managing the economic and social impact from the end of zero Covid, as well as restoring public trust, Mr. Wu says, adding that the paramount leader’s prestige is at stake. “Xi claims all the credit but deserves all the blame, too.”

Seeking ‘reasonable’ growth

Chinese leaders have struck a stoic tone. They promised to deliver “reasonable” economic growth in 2023, calling on officials to stimulate domestic demand while signaling plans to further ease regulations that have triggered a downward spiral in the property market and hampered private business investments.

Mr. Xi also brooked no criticism of his top-down methods. At a Politburo meeting in December, Mr. Xi insisted on “absolute loyalty” to his leadership “under any circumstance,” while appearing to blame local officials for faulty implementation of his policies.

“We have now entered a new phase of pandemic controls, where tough challenges remain,” Mr. Xi said in a televised New Year message. “Let’s make extra efforts to pull through, for perseverance is triumph, unity is victory.”

Many economists expect a fraught year ahead for China, citing the risk of surging Covid-19 infections disrupting supply chains and overwhelming the healthcare system. Though some analysts forecast a rebound in commerce and consumption after fresh outbreaks subside, possibly in the spring, it remains to be seen how firm this recovery will be.

“The transition to living with Covid will be a bumpy one, not least because of the abrupt change in policy itself, which leaves many people unprepared (and unvaccinated) and the medical system inadequately geared for the surge in cases,” Bert Hofman, director of the East Asian Institute at the National University of Singapore, wrote in a recent newsletter.

Tentative consumers

Chinese consumers appeared tentative as 2022 drew to a close. Domestic trips edged up 0.4% over the New Year holiday weekend compared with the same period a year earlier, while tourist spending ticked up 4%. Movie box-office receipts fell more than 45% year-over-year.

Beijing also faces an uphill battle in rebuilding confidence among businesses, which increasingly regard Mr. Xi’s government as capricious in setting policy, says Jörg Wuttke, president of the European Union Chamber of Commerce in China.

In a 2022 survey of its members, the EU Chamber reported that 60% of respondents reported increased difficulties in doing business in China, compared with 47% in the previous year, in part due to the opaque regulatory environment and the increased politicization of business. “We associate China with a very well-planned, well-organized government, and all of a sudden we see it capitulate in the face of Omicron,” Mr. Wuttke says. “That takes away a lot of trust in the government’s abilities.”

The onus therefore falls upon the Xi administration to restore public confidence, economists and business groups say. “Chinese citizens know who is in charge,” says Andrew Collier, managing director of Orient Capital Research in Hong Kong. “The huge death toll, coupled with the collapsing property market, are going to test the people’s trust in Beijing in 2023.”

On the diplomatic front, Beijing’s transition to a postpandemic future has raised hopes that a revival of cross-border interactions could help mitigate geopolitical tensions with the West. Mr. Xi himself has already re-emerged from a self-imposed absence from the international stage by attending a number of multilateral summits in the latter months of 2022.

China’s ties with Western governments remain fraught over Beijing’s support for Moscow throughout the Russian invasion of Ukraine. Tensions with the U.S. still simmer even as Mr. Xi and President Biden, who met in November, pledged to restore dialogue and a measure of stability in a fractious relationship.

“Like Washington, Beijing seeks greater stability in the near term while investing in efforts to deter and counter perceived threats,” says Jessica Chen Weiss, a Cornell University professor who studies Chinese foreign policy. Tensions aren’t likely to subside, she says, “without reciprocal actions to lower the temperature,” while the campaigning ahead of the 2024 presidential elections in the U.S. and the island democracy of Taiwan could add complications.

Beijing, which claims Taiwan as its territory, continues to regard with deep suspicion U.S. efforts to strengthen cooperation with the island. Since then-House Speaker Nancy Pelosi’s August visit to Taipei, which China condemned, the People’s Liberation Army has conducted an array of combat drills that showcased capabilities to cut off Taiwan. Nonetheless, the Biden administration has pledged to continue providing arms and training to help Taipei defend itself.

Notwithstanding recent setbacks, Mr. Xi seems set to double down on his priorities, says Mr. Wu, the Singapore-based academic. “In difficult times like these, he often emphasizes the need for greater ‘fighting spirit,’ and insists that they must overcome any challenges.”

NASA is in discussions with SpaceX if there is an emergency at research facility

The space agencies for the U.S. and Russia agreed that a Russian spacecraft will fly next month to the International Space Station to retrieve three people, after a leak emerged on the Russian ship that flew them to the facility.

Officials are still determining when the trio would board the empty ship, called Soyuz MS-23, for a return trip to Earth after it docks to the research facility. They are expected to remain in orbit for several extra months, beyond their planned six-month mission.

The U.S. and Russian space agencies have continued to work together on space missions, despite ongoing tensions between the two countries over the war in Ukraine, officials from the National Aeronautics and Space Administration have said. The space station, which relies on technology from both NASA and Roscosmos, is operated by international partnership that also includes space agencies for Europe and Japan.

In December, the Russian-made spacecraft that transported NASA astronaut Frank Rubio and Russian cosmonauts Sergey Prokopyev and Dmitri Petelin to the facility began to leak, according to both agencies.

The leak was caused by a micrometeorite that punctured a component on the vehicle, Roscosmos said. Joel Montalbano, NASA’s program manager for the space station, said at a briefing Wednesday that images of the problem pointed to that debris as the cause of the leak. “So far we are in concurrence with Roscosmos,” he said.

NASA and Roscosmos are also evaluating options in the event of an emergency, officials said, given the damage to the Russian Soyuz ship.

For one option, NASA has been in discussions with SpaceX about transporting additional people off the station in an emergency, Mr. Montalbano said. Under that potential scenario, one or more additional people would board the SpaceX Crew Dragon craft that is docked right now to the facility for a return flight to Earth, he said.

Sergei Krikalev, executive director for human space flight programs at Roscosmos, said at the briefing that the Soyuz vehicle that sustained the leak could be used in an emergency situation, but with added risk.

“With our NASA colleagues, we are looking for several options to minimize risk,” such as shifting at least one crew member onto SpaceX’s ship, he said.

Space Exploration Technologies Corp., the formal name for the Elon Musk -led company, didn’t respond to a request for comment.

In October, SpaceX transported two NASA astronauts, one Japanese astronaut and a Russian cosmonaut to the space station on a mission for NASA, which has hired aerospace companies to handle crew and cargo runs to the facility.

Anna Kikina, the Russian cosmonaut on board, joined the SpaceX flight as part of a crew swap between Roscosmos and NASA. Under that deal, NASA’s Mr. Rubio flew to the station on the Russian spacecraft that dealt with the leak.

NASA, Roscosmos and other space agencies have been setting plans for the future of the space station, where astronauts and cosmonauts work on experiments and conduct scientific research.

Yury Borisov, head of the Russian space agency, said this past July that Roscosmos would pull out of the facility at some point after 2024. Mr. Krikalev, the agency’s human-spaceflight executive, later said during a briefing with NASA officials that a decision about Russia’s role in the station could occur as soon as 2025 or even in 2030.

NASA wants to keep the station in operation through 2030. The agency is working in parallel with space companies, such as Jeff Bezos ‘s Blue Origin LLC and Northrop Grumman Corp. , on developing privately run stations.

New York congressman, under scrutiny for his finances and lies about his past, was paid by Florida-based company, now in receivership after it was sued by regulator

WASHINGTON—Embattled Rep. George Santos persuaded at least one person to make a six-figure investment in a Florida-based company that the U.S. Securities and Exchange Commission later said was a Ponzi scheme, according to people familiar with the matter and documents viewed by The Wall Street Journal.

Mr. Santos was hired in 2020 to raise capital for the company, Harbor City Capital, and landed at least one significant investment from a wealthy investor, the people said. When the investment failed to deliver on the promised returns, according to one of the people, Mr. Santos sought to reassure the investor by saying he had personally raised nearly $100 million and had invested his own family’s money in Harbor City.

Mr. Santos, a 34-year-old freshman Republican member of Congress from Long Island, is facing calls to resign from Democrats and a number of New York Republicans amid investigations into his campaign finances and lies he told during his campaign, pertaining to his education, work history, wealth, ancestry and other matters. The Republicans’ narrow majority in the House made his vote crucial for the election of Kevin McCarthy as speaker.

Mr. Santos has admitted to lying about working at Goldman Sachs Group Inc. and Citigroup Inc. but has defended his experience in the financial-services sector, saying in one interview: “I did work in the industry for a number of years.”

Mr. Santos’s financial-industry experience, according to his résumé, included a job in 2017 with a company that organized conferences for money managers and private-wealth investors, as well as his 2020 stint at Harbor City Capital. Harbor City has been in receivership since soon after the SEC accused it of being a Ponzi scheme in a 2021 civil lawsuit. Mr. Santos was paid for work he did at Harbor City, according to the receiver, Katherine Donlon. She declined to comment further on Mr. Santos’s work for Harbor City.

The SEC declined to comment on Mr. Santos’s role at Harbor City. Mr. Santos has denied wrongdoing and previously said in interviews that he wasn’t named as a defendant in the SEC’s lawsuit against the company. A spokesperson for Mr. Santos didn’t respond to a request for comment for this article.

People who raise money from investors and are paid in the form of commissions generally have to be brokers and be registered to work with a licensed brokerage firm. The SEC routinely brings civil-enforcement actions against people who conduct the work of brokers but aren’t licensed to do so; it has filed no such action against Mr. Santos. A search of a database maintained by the Financial Industry Regulatory Authority, or Finra, doesn’t show Mr. Santos registered as a broker. The terms under which Mr. Santos was paid for his work at Harbor City couldn’t be determined.

Those raising money for smaller businesses or investment managers are sometimes called “finders,” and they are often paid for recruiting investors. Since the companies seeking the capital are private, the deals often don’t involve audited financial statements or other disclosures that investors in the public markets rely upon.

Mr. Santos didn’t disclose any income from Harbor City on the financial-disclosure forms that federal candidates are required to file when running for office, as earlier reported by the Washington Post.

At Harbor City Capital, Mr. Santos’s job was to bring in investors for the company’s financial offering, one of the people familiar with the matter said. Harbor City said in a 2020 press release that Mr. Santos would serve as regional director of its New York City office and “will represent Harbor City Capital Corp primarily with domestic and international family offices, institutional investors, and high net worth clientele.”

Harbor City promised investors returns from investing in digital marketing campaigns. Such advertising campaigns typically aren’t investor-funded but rather paid for by corporations through their ad agencies as part of their standard marketing budgets.

In investor material viewed by The Wall Street Journal, Harbor City was offering what it alternatively called “secured bonds” or “fixed income strategy” investments. Harbor City promised investors high yields of up to 20% with a secured principal—in some instances claiming that investors “can’t lose” or that their initial investment was “100% safe.” At times the company described the investment vehicle as “digital marketing arbitrage,” suggesting that Harbor City was able to take advantage of inefficiencies in digital advertising to deliver guaranteed returns.

At the time Mr. Santos worked there in 2020, Harbor City proposed using a financial instrument known as a Standby Letter of Credit, or SBLC, to protect investor principal, offering extremely high returns with what the company assured investors was almost no risk, investor materials show.

In its 2021 lawsuit, the SEC said Harbor City and its affiliates had no underlying business activity or revenue and appeared either to be paying dividends to other investors or diverting funds for the personal use of Harbor City’s chief executive officer and founder, J.P. Maroney. Mr. Maroney didn’t respond to repeated requests for comment.

The SEC alleged that Mr. Maroney, a Florida businessman, ran the company as a Ponzi scheme since 2015 and defrauded more than 100 investors out of more than $17 million. In connection with the SEC’s lawsuit, numerous investors provided sworn statements in Florida federal court describing the same pattern: investing in Harbor City and receiving a handful of the promised distributions of returns before they abruptly stopped. The investor recruited by Mr. Santos experienced just that pattern, according to one of the people familiar with the matter.

Mr. Maroney has said in a court filing that he is the subject of a continuing criminal investigation into Harbor City’s activities, but no criminal charges have been made public. The Harbor City receiver has taken possession of a multimillion-dollar property, as well as Mr. Maroney’s four Jet Skis and his Mercedes automobile in an attempt to recoup money for investors, according to court documents.

Mr. Santos has been facing numerous inquiries about his campaign-financing and business activities since his deceptions came to light, most prominently through reporting by the New York Times. The district attorneys in Queens and Nassau counties, as well as federal prosecutors from the Eastern District of New York, are investigating the congressman, according to people familiar with the matter.

Brazilian authorities said they intend to reopen a criminal investigation into Mr. Santos over charges that he committed check fraud in 2008 in Brazil—a case that had been suspended because police had been unable to find him. Mr. Santos previously said he hasn’t committed any crimes.

Turkish lawmakers likely won’t vote on Swedish, Finnish membership bids before election, says presidential aide

ISTANBUL—The Turkish government is unlikely to seek parliamentary approval for Ankara to back Sweden and Finland’s entrance to NATO before Turkey’s national election later this year, a top aide to President Recep Tayyip Erdogan said Saturday.

Ibrahim Kalin, who is Mr. Erdogan’s spokesman and effectively serves as his national-security adviser, told journalists in Istanbul that the government was unlikely to seek a vote in parliament due to public opinion in Turkey, which is broadly supportive of Mr. Erdogan’s hard line against Sweden and Finland over their relations with Kurdish separatists.

“The opposition will ask all kinds of questions, and we cannot risk our political capital as we go into elections in the next three, four months,” he said.

Mr. Erdogan’s ruling party has a strong majority in parliament, but both the president and his Justice and Development Party, or AKP, are facing a close reelection bid this year due to Turkey’s struggling economy. Turkey’s largest opposition parties have joined Mr. Erdogan in strongly criticizing Sweden in particular over allowing alleged Kurdish separatists into the country.

Mr. Kalin said the election would most likely take place in May, slightly earlier than a constitutional deadline in June.

The comments come as Western leaders are intensifying efforts to convince Turkey to drop its opposition to the two Nordic countries’ joining the alliance before the North Atlantic Treaty Organization summit in Lithuania in July.

Finland and Sweden applied to join NATO last year in a historic shift in security policy for both countries, responding to Russia’s invasion of Ukraine. Every member of NATO has approved the Nordic nations’ entry except for Turkey and Hungary, and Hungarian officials have said they would send the matter to parliament early this year.

Mr. Erdogan first threatened to veto Sweden’s and Finland’s entrance to NATO last year, citing what he said were ties to Kurdish militant groups including the Kurdistan Workers’ Party, or PKK, which is considered a terrorist group by the U.S. and the European Union. Members of the PKK’s Syrian branch are part of a U.S.-led military coalition fighting Islamic State, and the Kurdish group also has some support among Kurdish communities in Europe.

Turkey signed an agreement with Finland and Sweden in June, a deal intended to resolve the dispute through a security dialogue. The two countries also dropped barriers to arms sales to Turkey, and Sweden in November amended its constitution to make it easier to pass counterterrorism laws.

NATO Secretary-General Jens Stoltenberg has said that Finland and Sweden have upheld their obligations under the June agreement, but Turkish officials say they want more concrete action from Sweden, citing a protest earlier this week in which demonstrators in Stockholm hanged an effigy of Mr. Erdogan. Turkish officials also say they want more suspected Kurdish militants extradited by Sweden.

“We are not in a rush here, they are in a rush to join NATO,” said Mr. Kalin.

Mr. Erdogan has played a role as a go-between between Russia and Ukraine since the Kremlin launched its invasion last year, helping to broker talks over a deal that included the resumption of Ukrainian grain via key Black Sea ports, prisoner exchanges and other issues. The Turkish president has sought to leverage his role in the crisis to expand his international influence and improve his standing within Turkey and internationally.

The Turkish official’s comments come as the Biden administration prepares to seek congressional approval for a $20 billion sale of a new fleet of F-16 warplanes to Turkey. Administration officials intend the prospect of the sale to prod Turkey to sign off on Finland and Sweden’s accession to NATO, The Wall Street Journal reported on Friday.

Mr. Kalin said that congressional approval of the F-16 deal would depend on whether the Biden administration would pressure members of Congress such as Senate Foreign Relations Committee Chairman Bob Menendez, who has vowed to oppose the sale on human-rights grounds. He said congressional opponents of Turkey seemed to have an “endless” list of demands for Ankara.

“They will continue to oppose whatever comes from Turkey,” Mr. Kalin said of Turkey’s critics in the U.S. Congress.

“I hope they don’t go down that way, so the F-16 thing does not become hostage to Sweden and Finland joining NATO or other demands. This has been going on for too long already,” he said.

The Biden administration’s plans to seek congressional approval for the F-16 deal coincides with a visit to Washington next week by Turkish Foreign Minister Mevlut Cavusoglu, where he is expected to discuss NATO expansion and a range of other issues with U.S. officials.