FT : H2O: the FT investigation’s big finale

Crastes finds himself under the financial guillotine 
Back when he was still riding high, Bruno Crastes was happy to hit out at regulation.

When the tanned and silver-haired chief executive of H2O Asset Management picked up an award for his market-beating returns in 2018, the Frenchman used his acceptance speech to assert that his industry had become “corrupted by all this regulation and all this risk management”.

Now, four years later, Crastes is facing the prospect of being banned from the investment industry by his home country’s financial regulator for a decade.

On Friday, France’s Autorité des Marchés Financiers recommended a record €75mn fine for H2O, alongside a €15mn fine on Crastes and a €3mn penalty for the firm’s chief investment officer, Vincent Chailley. It’s also seeking to ban Crastes from managing funds or an investment firm for a decade.

What prompted the downfall of Crastes and H2O, which at its peak managed more than €30bn and was widely feted as one of the top- performing asset managers in Europe?

It all started when the FT decided to carry out a little due diligence.

Back in 2019, DD’s Rob Smith and Cynthia O’Murchu from the FT’s investigations desk pored over H2O’s fund filings and made a startling discovery: the firm had well over €1bn invested in illiquid bonds linked to Lars Windhorst, a German financier with a chequered past that included a criminal conviction.

The reaction was immediate: investors yanked €8bn from H2O’s funds, while billions of euros were wiped off the market value of French bank Natixis, which first seeded the firm back in 2010.

Yet, while H2O withstood the initial fallout — during which Crastes even publicly praised Windhorst as “extremely talented” — the French regulator on Friday laid bare a series of “grave” rule breaches at the firm. An official from the AMF argued at a public hearing in Paris that H2O wasn’t even authorised to hold such illiquid bonds in retail funds in the first place.


Lars Windhorst, a flamboyant financier, made his name in the mid-1990s as a teenage entrepreneur © AP
Despite continued revelations in the FT in the three years since its initial exposé, H2O still managed north of €12bn at the last count. Those loyal clients now face a decision.

On Monday, H2O sought to reassure them that the regulator hadn’t accused it of committing fraud, describing the alleged infractions as concerning “essentially technical matters” in a letter to clients. We’ll discover just how technical the matter was when the AMF finalises its penalties in the coming weeks.

Whatever the outcome, the episode is another reminder of the importance of this newsletter’s namesake: due diligence.

During Friday’s hearing, Crastes said that H2O didn’t uncover any information about Windhorst’s criminal conviction in research it carried out before first investing in bonds linked to the financier.

DD would recommend that all of our readers incorporate a simple Google search into their due diligence process to avoid similar mishaps.

FT : BlockFi/FTX: further collapse suggests ecosystem is unsustainable

BlockFi/FTX: further collapse suggests ecosystem is unsustainable
The two companies’ complicated relationship has exposed the crypto industry’s sheer interconnectedness

Cryptocurrency has a bright future, the digital asset lender BlockFi implied on Monday. The problem was that the company said so in a filing with a US bankruptcy court.

BlockFi was one of the crypto businesses most exposed to Sam Bankman-Fried’s FTX. It quickly halted withdrawals from its platform after FTX went under this month. In its own bankruptcy filing on Monday, BlockFi valiantly attempted to distance its move to seek protection from creditors from the same move at FTX.

BlockFi argued that it could simply reorganise in the following weeks and come out the other side revitalised.

The company may not have been spectacularly mismanaged as FTX was. But the sheer interconnectedness of the crypto industry suggests the ecosystem is now inherently unstable for all participants.

According to court papers, BlockFi has up to $10bn in liabilities which include customer accounts and settlement payments it owes the US Securities and Exchange Commission. Its complicated relationship with FTX, however, is the most interesting detail.

FTX rescued BlockFi during the first wave of crypto distress in the spring when the terra-luna stablecoin collapsed. BlockFi secured an emergency credit line of $400mn which also gave FTX a cheap option to buy BlockFi outright.

At the same time, the trading arm of FTX, Alameda Research, itself had borrowed nearly $700mn from BlockFi. BlockFi cryptocurrency is also currently stuck on the FTX platform. The Financial Times reported on Monday that BlockFi was suing Bankman-Fried to seize his shares of internet stockbroker Robinhood. BlockFi alleged he had pledged them to secure borrowings made by his FTX empire.

BlockFi’s sunny outlook seems unrealistic for two reasons. First, it requires that the FTX case, with which it is intertwined, be resolved quickly. Given the messiness of the case, that is unlikely. Second, it is not obvious that the cryptocurrency sector is stable and healthy enough for a reorganisation to succeed. BlockFi only survived the spring when the then mighty FTX arrived with a bailout.

A rough few months in crypto have felled the likes of Three Arrows Capital, Voyager Digital, Celsius Network, FTX and now BlockFi, with others likely teetering. There are tactical reasons for BlockFi and its lawyers to put on a brave face. But there is little reason to imagine that the crypto ecosystem can become stable or sustainable in its current form.

>>> What to look at today - 29th of November 2022

A gauge of global shares climbed, led by a rebound in Chinese stocks as nationwide unrest over Covid curbs eased. The dollar fell amid improved sentiment for risk taking. European and US equities futures advanced after the S&P 500 pared its monthly gain during the Wall Street session as investors continued to parse comments from Federal Reserve officials. Shares rallied in Hong Kong and on the mainland as some investors speculated that the protests may hasten a shift away from Covid-Zero policies.  China’s National Health Commission issued a statement saying vaccinations would be sped up for people aged above 80. That came as traders awaited a regular briefing by government officials for any more adjustments in Covid policies, although the forum has rarely been used to announce large changes. Of broad significance for global markets, Fed Bank of St. Louis President James Bullard warned that investors may be underestimating the chances of higher rates. His New York counterpart John Williams noted policymakers have more work to do to curb inflation, and Fed Vice Chair Lael Brainard said the string of supply shocks is keeping inflation risks elevated.  A gauge of the dollar fell following two days of gains. The euro and Japanese yen rose, as did an index of emerging-markets currencies. A gauge of the dollar fell following two days of gains. The euro and Japanese yen rose, as did an index of emerging-markets currencies.  oil extended a rebound from the lowest level in almost a year on speculation that the Organization of Petroleum Exporting Countries and its allies will deepen supply cuts to respond to weakening global demand. US After Hours NUS +5.2% on joining S&P SmallCap 600, NXST +4.8% on joining S&P MidCap 400, BIGC +3.9% on GMV jump during Black Friday; AZEK -7.1% on earnings, UNH -0.7% on guidance

Nikkei -0.48% Hang Seng +3.68% CSI +2.90% Shanghai +2.20% Shenzen +11.99%

Eur$ .0370 CNH 7.807 CNY 7.721 JPY 138.61 GBP .1989 CHF 0.9486 RUB 61.1894 TRY 18.6371 WTI$ 78.32 +1.39% Gold 1,752 +0.60% BTC 16,480 +1.75% ETH 1,208 +3%

S&P +0.6% Nasdaq +0.55% EuroStoxx +0.48% FTSE +0.20% SMI +0.9%


Macro :
- Morgan Stanley Sees 27% Upside For Stocks Showing ESG Progress
- Fed Stresses More Hikes Coming; Williams Flags Path to Cuts
- BofA Sees S&P Ending 2023 Roughly Where It Is Now, Around 4,000

Keep an eye on :
- ADJ GY : Adler Group Maintains FY FFO I Forecast
- ALD FP : SocGen’s ALD to Raise €1.2b in Capital to Fund LeasePlan Deal
- AT1 GY : Aroundtown Maintains FY FFO I Forecast (1)
- ASM NA : ASMI Boosts 4Q Revenue Forecast, Beats Estimates
- ASM NA : ASM Says US Rules on China Exports to Have Less Harsh Impact
- ATL IM : Atlantia Tender Offer Final Results Same as Provisional Results
- BNP FP : BNP Paribas Considers Move Into Private Credit: Financial News
- BOSN SW :
- BNR GY : Brenntag Slumps After Confirming Potential Univar Tie-Up
- BPT LN : Bridgepoint Group Confirms Evaluating Strategic Opportunities
- CNE LN : Capricorn Activist Palliser Positioned to Call Shareholder Vote
- CG US : Carlyle Plans to Raise $8.5 Billion for New Illiquid Credit Fund
- ENGI FP : Mexico’s CFE, Engie Sign Deal to Expand Gas Pipeline in Yucatan
- EXO NA : Juventus Board of Directors, Chairman Agnelli Resign
- HNSA SS : Hansa Biopharma Says Topline Data From Phase 2 Study ‘Positive’
- JUVE IM : Juventus’s Agnelli, Entire Board Resign on Accounts Probe
- NESN SW : Nestle Sets EPS Targets, Starts Review of Peanut Allergy Unit
- ROG SW : Roche Withdraws US Tecentriq Indication for Some Patient Use
- SU FP : Schneider Electric Sees Huge Mexico Growth Due to ‘Nearshoring’
- SHEL LN : Shell Buys Nature Energy in $2 Billion Push Into Biogas
- TCM DC : TCM Group CFO Pedersen to Step Down
- TE FP : Technip Energies Gets Total Sustainable Aviation Fuels Contract

>>> Europe : Brokers Upgrades & Downgrades - 29th of November 2022

>>> Up
* Airtel Africa Raised to Buy at HSBC; PT 150 pence
* Kone Raised to Buy at ABG; PT 56 euros
* LondonMetric Raised to Hold at Berenberg With Bad News Priced In
* Rotork Raised to Buy at UBS

>>> Down
* Acciona Energia Cut to Equal-Weight at Morgan Stanley
* Atlas Copco Cut to Hold at ABG; PT 140 kronor
* Brenntag Cut to Neutral at Citi; PT 65 euros
* Forbo Cut to Hold at Stifel; PT 1,200 Swiss francs
* IMI Cut to Sell at UBS
* IMI Cut to Hold at HSBC; PT 1,510 pence
* Jyske Cut to Hold at Nordea
* Sitowise Group Cut to Accumulate at Inderes; PT 5.50 euros

>>> Initiation
* Sage Rated New Sell at Goodbody; PT 701 pence

>>> Call
* BofA Strategists Prefer Small Cap Stocks Over Big Caps in 2023
* BofA Sees S&P Ending 2023 Roughly Where It Is Now, Around 4,000
* Boohoo ‘Fighting on All Fronts,’ Berenberg Downgrades to Hold
* Citi Strategists Say Equities Rally Could Spark Short Squeeze
* LSL Property Downgraded as Peel Hunt Sees ‘Tougher Backdrop’
* Solvay Double-Downgraded at CS as Volumes Seen Normalizing

>>> US After Hours Summary: NUS +5.2% on joining S&P SmallCap 600, NXST +4.8% on joining S&P MidCap 400, BIGC +3.9% on GMV jump during Black Friday; AZEK -7.1% on earnings, UNH -0.7% on guidance


After Hours Summary: NUS +5.2% on joining S&P SmallCap 600, NXST +4.8% on joining S&P MidCap 400, BIGC +3.9% on GMV jump during Black Friday; AZEK -7.1% on earnings, UNH -0.7% on guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: MCHP +0.6% (reiterates guidance)

Companies trading higher in after hours in reaction to news: NUS +5.2% (replacing PBF in the S&P SmallCap 600), NXST +4.8% (replacing SABR in S&P MidCap 400), BIGC +3.9% (merchant GMV increased 31% on Black Friday), IVA +3.7% (USPTO grants patent covering use of lanifibranor), IMMP +3.4% (enters into second clinical trial collaboration agreement with MRK and PFE, according to ASX), SABR +2.9% (replacing FBC in S&P SmallCap 600), BNGO +2% (to acquire Purigen Biosystems), CNI +0.5% (names new COO), RTX +0.3% (awarded $398 mln U.S. Navy modification contract), ENFN +0.2% (CFO to resign; reiterates Q4 guidance), MTN +0.1% (appoints new CFO), AAPL +0.1% (reportedly threatened to block Twitter app from App Store, according to Bloomberg Law)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: AZEK -7.1%, ARWR -1.3% (reports FY22 results), UNH -0.7% (FY22 and FY23 guidance)

Companies trading lower in after hours in reaction to news: PBF -2.4% (replacing NUS in the S&P MidCap 400), SF -1.5% (reports October operating results), AMR -0.2% (announces 2023 operational outlook)

TechCrunch : WhatsApp rolls out a feature that makes it easier to message yourse

WhatsApp rolls out a feature that makes it easier to message yourself

WhatsApp has started rolling out a feature to let you chat with yourself. Sending messages to your own account can be a way to keep a piece of information easily accessible, right next to your other WhatsApp conversations.

Called ‘Message Yourself’, the feature lets users send notes, reminders and shopping lists to themselves on WhatsApp.

On Monday, the Meta-owned instant messaging app announced the rollout of the new messaging feature that will reach all its Android and iPhone users in the coming weeks. It was initially tested with some beta testers, WhatsApp beta tracker WABetaInfo reported in late October. The company has confirmed to TechCrunch that the feature has begun rolling out globally.

Users will see their contact at the top of the contacts list on WhatsApp when they create a new chat. Tapping that contact will take them to the chat screen they can use to send messages to themselves.

Although the native feature to message yourself is new on WhatsApp, some users have already been using a workaround for some time. You could already send messages to yourself using the app’s ‘click to chat’ feature. Nonetheless, the new offering removes the additional steps that users needed to self-chat using the wa.me URL.

Users can also pin their self-chat messages to the top of the conversation list if they don’t want to search them in their widely polluted chats list.

WhatsApp rival Signal has a feature named Note to Self that addresses the same use case — it lets you create messages for personal use. However, unlike WhatsApp’s newly launched feature that is accessible from the top of the contact list on the app, Signal doesn’t suggest your own profile at the top of the recipient list. Users need to search and select the contact entry ‘Note to Self’ to use the feature.

Similarly, community platform Slack has a dedicated space titled “Jot Something Down” to let users send notes to themselves.

Telegram also offers a similar feature called Saved Messages that lets users bookmark any important messages as well as save their notes and reminders that can be accessed in the future. Messages once saved can be accessed from the top of the chats screen. However, Telegram users initially need to access the feature by tapping the hamburger menu on Android or through the settings menu on iOS.

>>> US Close Dow -1,45% S&P -1,54% Nasdaq -1,58% Russell -2,05%

Closing Stock Market Summary

Today's trade was distinctly negative after a big run so far this month. Heading into today, the Nasdaq Composite and S&P 500 were up 8.5% and 8.2%, respectively, since November 3. This move had the S&P 500 flirting with a key technical resistance level, the 200-day moving average at 4,054. 

Coming off the sizable rally, market participants took some money off the table today ahead of Fed Chair Powell's speech on Wednesday and worries that a slew of economic data releases this week could reflect a need to mark down earnings even further. The data lineup includes the November Consumer Confidence, October Personal Income and Spending, November ISM Manufacturing Index, and November Employment Situation reports.

Growth concerns connected to China were also in play today following reports of social unrest over the government's zero-COVID policy. 

The ensuing sell off was broad based with declining issues leading advancing issues by a greater than 3-to-1 margin at the NYSE and a greater than 2-to-1 margin at the Nasdaq. All 11 S&P 500 sectors closed in the red with losses ranging from 0.3% (consumer discretionary) to 2.8% (real estate). 

The communication services (-1.6%), financial (-1.8%), and information technology (-2.1%) sectors were influential laggards. The most heavily-weighted info tech sector was weighed down by Apple (AAPL 144.22, -3.89, -2.6%), which sold off on a Bloomberg report that the company could lose 6 million iPhone Pro models from events at the Foxconn plant.

There was an impressive intraday reversal for WTI crude oil futures, which fell to $73.60/bbl earlier on growth concerns connected to China. By the close of the cash session, WTI crude oil futures rose 0.7% to $77.17/bbl, helped presumably by some short covering activity and speculation that OPEC+ could consider a production cut at next week's meeting.

The U.S. Dollar Index also saw an impressive reversal today, down to 105.36 earlier but reached 106.69 by the close of the stock market.

The inversion along the yield curve deepened slightly today, reflecting the market's ongoing growth concerns, but the movement was modest in size. The 10-yr Treasury note yield rose one basis point to 3.70% and the 2-yr note yield fell 2 basis points to 4.46%. 

Separately, New York Fed President Williams (FOMC voter) and St. Louis Fed President Bullard (FOMC voter) ostensibly aided the consolidation effort with the former saying "inflation is far too high" and the latter indicating that the Fed may be more aggressive and pursue rate hikes into 2023.

There was no U.S. economic data of note today. 

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

  • 9:00 a.m. ET: September FHFA Housing Price Index (prior -0.7%)
  • 9:00 a.m. ET: September S&P Case-Shiller Home Price Index ( consensus 10.7%; prior 13.1%)
  • 10:00 a.m. ET: November Consumer Confidence (consensus 100.0; prior 102.5)
  • Dow Jones Industrial Average: -3.0% YTD
  • S&P Midcap 400: -5.3% YTD
  • Russell 2000: -18.5% YTD
  • S&P 500: -13.7% YTD
  • Nasdaq Composite: -28.7% YTD

WSJ : Russia Cancels Arms-Control Talks, U.S. Says

Russia Cancels Arms-Control Talks, U.S. Says
Washington had hoped the Cairo meeting would lead to the resumption of inspections under the New START treaty

WASHINGTON—Russia has postponed arms-control talks scheduled for this week, U.S. officials said, a fresh setback to efforts to shore up the last major nuclear-weapons treaty between Washington and Moscow.

U.S. officials had hoped that the meeting, which had been scheduled for Tuesday in Cairo, would lead to the resumption of inspections under the New START treaty, which cuts long-range U.S. and Russian nuclear arms.

Those inspections have been paused since 2020 because of the Covid-19 pandemic, though both sides have been adhering to the limits in the accord. U.S. officials said that Russia postponed the meeting without explanation while saying it would propose new dates.

A State Department spokesman said the U.S. is ready to reschedule the meeting “at the earliest possible date as resuming inspections is a priority for sustaining the treaty as an instrument of stability.” The Russian foreign ministry didn’t immediately respond to a request for comment.

Russia’s state media TASS reported Monday that the talks would no longer take place as previously indicated, citing the foreign ministry. No explanation was given for the delay.

A senior White House official told reporters on Monday that the administration hasn’t “received a real solid answer from the Russians as to why they postponed this.”

“We’re going to be working through the embassy to try to figure out what happened here and we’d like to see it get back on the schedule as soon as possible because it’s important,” said National Security Council coordinator for strategic communications John Kirby. “It’s not just important for our two nations; it’s important for the rest of the world.”

Arms-control experts expressed concern about the postponement, which comes at a time of heightened tensions between the two sides over the Russian invasion of Ukraine.

“It is disappointing and unprofessional that Russia has suddenly canceled a meeting it said it wanted,” said Daryl Kimball, the executive director of the Arms Control Association, a nonpartisan organization that supports arms-control accords. “It is incumbent upon Russia to show seriousness and reschedule the meeting to facilitate the resumption of New START inspections.”

President Biden backed a five-year extension of the New START treaty during his first month in office, which was agreed to by Moscow. The agreement caps the number of nuclear warheads and bombs at 1,550 and includes provisions for on-site inspections to verify its limits.

The treaty is due to expire in early 2026. However, since the invasion of Ukraine, Russian and American arms control officials haven’t met to discuss what future arms-control arrangements might take its place.

A more immediate objective for the U.S., however, has been to resume the 18 on-site inspections that each side is allowed to carry out each year under the treaty.

When the U.S. pressed to resume those inspections in August, Russia’s foreign ministry said that U.S.-driven international restrictions precluded Russian aircraft from flying Russian inspectors to American territory. American officials expressed frustration that the inspections were being delayed and said that any technical issues on how to carry out the inspections could be resolved.

The meeting Russia postponed is a session of the New START treaty’s Bilateral Consultative Commission, which was established to discuss implementation of the accord. Those meetings are generally not announced in advance, but The Wall Street Journal reported earlier this month that it was to be held in Egypt in late November.

While the U.S. had planned to use the meeting to push for the resumption of New START inspections, Moscow has long had its own concerns, including its claims that the American procedures don’t enable Russia to confirm that some U.S. bombers have been converted to nonnuclear use.

“The fact that a [Bilateral Consultative Commission] meeting—normally a pretty low-key technical event—got so much media attention tells you a lot about how bad U.S.-Russian relations in the nuclear sphere got,” Andrey Baklitskiy, an arms control expert at the United Nations Institute for Disarmament Research, wrote in a tweet. “There are no other bilateral formats to talk about nuclear arms control left.”

Business Of Fashion : Kim Kardashian ‘Re-Evaluating’ Balenciaga Deal After Bonda

Kim Kardashian ‘Re-Evaluating’ Balenciaga Deal After Bondage Ad Crisis
The brand later said it was “closely revising its organisation” as it continues to face widespread backlash over a campaign featuring children modelling BDSM-inspired products.

Kim Kardashian said she is “re-evaluating” her sponsorship deal with Kering’s Balenciaga, breaking her silence after an advertising campaign featuring children modelling BDSM-inspired products sparked a major public relations crisis.

”As a mother of four, I have been shaken by the disturbing images,” Kardashian said in a post on Instagram Sunday, explaining she had remained silent regarding Balenciaga’s controversial campaign images because she wanted to give the brand a chance to explain to her what had happened.

Balenciaga withdrew its holiday gifting campaign last week amid accusations that it was promoting the sexualisation of children. The brand’s teddy bear accessories, wearing BDSM harnesses, were a buzzy hit at its spring-summer 2023 show, but Balenciaga was widely condemned when it featured the items on children in intimate settings including on a bed. The brand apologised for the campaign and pulled the images, saying it “strongly condemn[s] abuse of children in any form.” But the move failed to diffuse the uproar.

Backlash to the problematic campaign sparked netizens to unearth supposed pedophilic messages embedded in the background of another Balenciaga campaign, its spring-summer 2023 spots featuring actress Isabelle Huppert. The controversy landed Balenciaga a segment on Tucker Carlson’s conservative Fox News program, further fuelling public anger. On the other side of the political spectrum, Instagram account Diet Prada called the campaign “disturbing and wrong af.”

In a statement Monday, the brand further addressed the issue citing “grievous errors for which Balenciaga takes responsibility.” “Our plush bear bags and the Gift collection should not have been featured with children. This was a wrong choice by Balenciaga, combined with our failure in assessing and validating images,” the company said.

Regarding the campaign featuring Huppert, the brand said that the office setting had been staged by a third party, and that the inclusion of real documents citing a Supreme Court decision about child pornography was the result of “reckless negligence for which Balenciaga has filed a complaint.” The brand nonetheless said it takes “accountability for our lack of oversight and control.”

Under creative director Demna, Balenciaga has regularly used edgy stunts — such as marketing leather trash bags, destroyed sneakers and bedazzled platform Crocs — to fuel social media debate. In recent months, however, the brand has waded into riskier waters — provoking outrage with its choice to have rapper Ye (formerly Kanye West) open its spring-summer 2023 runway show even as the entertainer was facing criticism for incendiary statements.

The brand has since cut ties with the entertainer and asked to have images of his participation in the show scrubbed from fashion news outlets. In recent days, the brand also became fashion’s first major player to leave Twitter amid concerns that changes to content moderation by new owner Elon Musk would unleash hate speech on the platform.

Kardashian, alongside other celebrity spokespeople like Justin Bieber and Huppert, has been key to boosting awareness of Balenciaga among US consumers, who have growth for the luxury industry since the pandemic. The TV personality and Skims-founder, who divorced Ye earlier this year, has worn the brand to a string of high-profile events as well as fronting their campaigns.

The star posted on Instagram Sunday that she believes Balenciaga “understands the seriousness of the issue and will take the necessary measures for this to never happen again.””I am re-evaluating my relationship with the brand basing it off their willingness to accept accountability for something that never should have happened to begin with — and the actions I am expecting to see them take to protect children,” she wrote.

In Balenciaga’s statement Monday, the company said it was “closely revising our organisation and collective ways of working...reinforcing the structures around our creative processes and validation… [and] laying the groundwork with organisations who specialise in child protection.”

”We want to learn from our mistakes and identify ways we can contribute,” the brand said.