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Bankruptcy courts had made limited progress reorganizing crypto firms before FTX filed for chapter 11

The U.S. bankruptcy system will hash out the largest-ever collapse of a cryptocurrency exchange through a legal process that has barely begun to answer how holders of digital currencies will fare in an insolvency.

Bankruptcy courts haven’t had the chance to decide complex legal questions around crypto ownership when an exchange or lender goes bust. As FTX’s chapter 11 case gets under way, the question of who even owns digital currencies—the exchanges or the customers who made the deposit—remains unsettled.

FTX collapsed into chapter 11 Friday with no strategy for restructuring and without including basic disclosures about its customers, assets and liabilities. The exchange, led by new management after the sudden resignation of founder Sam Bankman-Fried, also lacks a clear precedent to follow for finding out how much customers are owed and settling those debts.

While chapter 11 is an established process, it has never successfully reorganized a major U.S. crypto firm. Celsius Network LLC and Voyager Digital Inc. tumbled into bankruptcy earlier this year and have yet to unfreeze their customers’ money or secure a restructuring that would unlock users’ assets.

Bankruptcy courts have only had those cases since July, not enough time to clarify crypto customers’ legal rights in an insolvency. Many of the same questions are expected to be put forth in FTX’s chapter 11 case still in its infancy.

That means it will likely be some time before customers of FTX have a clear picture of their likely recoveries and what, if any, legal recourse they may have against Mr. Bankman-Fried and others that reportedly knew of the use of FTX customer funds by sister firm Alameda Research.

“We haven’t seen a similar bankruptcy that has gone through to customers getting payment,” said Timothy Karcher, a restructuring lawyer at Proskauer & Rose LLP. “All of that stuff has yet to be worked out. We don’t have a good model yet with what happens with customer deposits.”

Policy makers and academics have recognized that customers of unregulated crypto companies lack the safety nets that kick in when banks and brokerages go under. Earlier this year, a bipartisan duo of U.S. senators introduced a bill that would aim to protect investors in the event that a cryptocurrency exchange files for bankruptcy by ensuring that their digital assets are held separately from the firm’s own assets.

But such legislation has scant chances of passing in a closely divided Congress, according to crypto industry experts. The task of cleaning up after crypto failures has largely fallen to the nation’s bankruptcy courts, which haven’t had sufficient time to decide key legal questions about crypto and chapter 11 before FTX’s filing.

Celsius, a crypto lender, has argued in court papers that most of the customer assets deposited into its flagship yield-earning program are property of the firm, rather than of the customers. If so, customer assets could be pooled into a bankruptcy estate and distributed to satisfy all company debts in a chapter 11 plan. Those could include the sizable bankruptcy legal fees and administrative expenses, followed by other secured or priority debts, leaving a potentially bleak recovery for these depositors.

A bankruptcy judge is expected to decide whether Celsius or its customers own the cryptocurrencies deposited into its flagship Earn program. Also up for debate are the rights of Voyager and Celsius preferred stockholders.

Celsius also has asked for a ruling on whether crypto posted by customers as collateral for loans now belongs to the chapter 11 estate. Another key question is whether Celsius could claw back customer withdrawals or loan liquidations completed in the 90 days before it filed for bankruptcy.

Terms of service for Celsius told users that if it went bankrupt, crypto deposited into its flagship yield-earning program “may not be recoverable, and you may not have any legal remedies or rights in connection with Celsius’ obligations to you” other than as an unsecured creditor. Voyager returned $270 million in cash held in custody accounts to depositors, but the company said the most of customers’ $1.3 billion of digital coins belong to the chapter 11 estate.

FTX’s terms of service appear to go further than other crypto exchanges in clarifying that it doesn’t acquire title to customer assets in its user accounts and doesn’t treat customer property as its own. The Wall Street Journal has reported that FTX lent billions of dollars worth of customer assets to its affiliated trading firm, Alameda Research LLC, and that senior FTX officers were aware of it.

Celsius and Voyager both filed for chapter 11 in New York, while FTX chose another popular bankruptcy hub in Wilmington, Del. Decisions from the court in Delaware aren’t binding on the court in New York, raising the possibility that crypto bankruptcies could unfold differently depending on venue.

Another issue that lawyers are disputing is whether customer claims’ should be valued based on prices at the beginning or the end of the chapter 11 process. If customers of a troubled firm eventually regain access to their funds, they still could suffer big losses if the market turns against them while the bankruptcy plays out.

It isn’t clear if chapter 11 can offer an effective solution for crypto failures. Bankruptcy is expensive, no matter the outcome for customers, and patching up the firms and taking them out of chapter 11 is no easy feat. It also remains unclear who may be willing to make a bet on the future of these firms, or whether their intangible assets still hold value after subjecting their customers to a bankruptcy.

If any of these firms exit bankruptcy on their own, they face the risk that customers will simply withdraw their crypto as soon as they can, bringing back the danger of the kinds of massive withdrawals that led them to file for bankruptcy in the first place.

Even though customers’ money remains frozen and Celsius has curtailed its lending operations, the costs of navigating the chapter 11 process are adding up as it racks up legal fees and pumps money into a startup bitcoin mining operation. The firm’s lawyers said in court papers Friday that it faces another possible cash crunch in early 2023.

Customers of Voyager Digital, meanwhile, must now wait longer for a resolution to its chapter 11 case after its deal to be acquired by FTX fell apart.

‘I have not in my 40 years with the Fed seen a time of this kind of tightening that you didn’t get some painful outcomes,’ Kansas City Fed President Esther George says

KANSAS CITY, Mo.— Inflation is at risk of growing entrenched in the economy due to an overheated job market, and that will make it increasingly difficult for the Federal Reserve to bring inflation down without a recession, a central bank official said in an interview.

“I’m looking at a labor market that is so tight, I don’t know how you continue to bring this level of inflation down without having some real slowing, and maybe we even have contraction in the economy to get there,” said Kansas City Fed President Esther George, who is set to retire in January.

Some of Ms. George’s colleagues have recently said that they still see a way for the Fed to bring inflation down without a serious downturn, but Ms. George was more circumspect in an interview Tuesday.

“I would love if there was that path, and I’ve seen people paint that path,” she said. “I have not in my 40 years with the Fed seen a time of this kind of tightening that you didn’t get some painful outcomes.”

Officials are raising rates at the most aggressive pace since the early 1980s to combat inflation that is at a 40-year high. The Fed on Nov. 2 approved its fourth consecutive rate increase of 0.75 percentage point, raising the benchmark federal-funds rate to a range between 3.75% and 4%.

The Fed combats inflation by slowing the economy through tighter financial conditions—such as higher borrowing costs—that can curb demand.

The pandemic and disrupted supply chains were a major contributor to the initial surge in price pressures last year, said Ms. George. But she said the economy’s capacity to supply workers and produce goods and services—the so-called supply side of the economy—has been slower to heal, which has kept inflation at higher levels for longer than many policy makers anticipated.

The upshot is that the Fed will need to continue raising interest rates, even if it dials down the pace of increase at its Dec. 13-14 meeting, as many officials including Ms. George have supported.

“Seeing that we’re not going to get help in the supply side, we have a lot of work to do,” said Ms. George. “When I think about inflation today, we’ve kind of turned the tide of supply-chain, production-side shortages. Now, we’re really looking at labor as the driver here.”

Ms. George called recent reports of inflation decelerating a good start because they revealed prices for goods and services in interest-rate sensitive sectors of the economy, such as housing, were cooling.

But she said it was very premature to be looking ahead to when the Fed would stop raising rates because she was troubled by strong price pressures in labor-intensive service sectors. Those prices tend to be stickier, meaning they tend to slow very little or not at all outside of a recession.

Ms. George, who became president of the Kansas City Fed in 2011 and began her career as a bank examiner there in 1982, has been a leading voice for slowing down the pace of rate increases so that the central bank has more time to see how its policies are rippling through the economy over time.

At the same time, Ms. George has suggested that interest rates might have to rise to higher levels to slow the economy because households exited the pandemic in a better financial position thanks to government relief funds and deferred spending.

Ms. George said that it would make sense for the Fed to slow the pace of rate increases next year to a more traditional quarter-percentage-point increment. But she said “the real challenge” for policy makers centers on the dangers of prematurely ending rate rises.

“For me, the more important question for this committee, looking out over next year, is being careful not to stop too soon,” she said. “This was the lesson of the 1970s and ’80s, is thinking, ‘Oh, we’ve got it now, we can stop,’ and then you find that inflation really reemerges in some way.”

Markets rallied last week after the Labor Department reported that core prices, which exclude volatile food and energy items, rose 0.3% in October from September, the smallest monthly gain in a year. Core prices rose 6.3% in October from a year earlier, while overall prices rose 7.7%. Investors and policy makers watch core readings closely as a reflection of broad price pressures and as a predictor of future inflation.

Investors’ exuberance over better economic data could undermine the Fed’s efforts to maintain tighter financial conditions, which officials see as critical to their strategy of slowing economic activity. Ms. George said such behavior made it more important for the central bank to communicate clearly about its plans to hold rates at a higher level for longer.

She suggested officials could use their quarterly Summary of Economic Projections, or SEP, which includes policy makers’ individual interest-rate projections, at their next meeting to underscore their intention to raise rates higher and hold them at those levels for longer.

“It puts a premium on clear communication and being clear about your strategy, about where you’re going,” she said. “And of course, we’ll get some help, I’m guessing, with an SEP that’s coming at the next meeting…. And I hope that helps.”

Ms. George said it was too soon to say how her forecast of the peak or so-called terminal rate had evolved, but she said her own view had been on the “high end” relative to her colleagues given how persistent inflation has been.

Moves are latest sign of slowing sales growth in world’s biggest electric car market

Mercedes-Benz has cut the price of some of its electric models in China, following market leader Tesla, which last month slashed prices in the latest sign of softening demand in the world’s largest EV market.

The starter prices for the EQE model, the EQS model and its luxury edition — the AMG EQS 53 model — sold in China will be reduced by Rmb50,000 ($7,000), Rmb204,600 and Rmb198,600, respectively, the German carmaker said.

“We aim to flexibly adjust operational strategies in response to shifting market demands,” the company said in a statement.

Although China’s sales of new energy vehicles, including pure electric, plug-in hybrid and hydrogen-powered models, jumped 81.7 per cent year on year to 714,000 units in October, it is the slowest pace of growth since April, according to data from the China Association of Automobile Manufacturers.

Tesla cut prices for its Model 3 and Model Y saloons in China in October. Days after Tesla’s move, Ford Motor’s EV arm and Aito, a Huawei-backed EV brand, followed suit.

Western carmakers are racing to create EVs with longer driving ranges, allowing drivers to travel between cities without charging.

Given China’s size, its drivers are more likely to drive in urban settings and opt for luxury features such as spacious passenger seating.

Mercedes’ EQS model, which has a long range, has a more compressed back compared with other models by the carmaker, which is preparing to launch a sport utility vehicle version.

Local rivals are also becoming increasingly competitive in the space of electric and digital transformation, Hubertus Troska, responsible for China activities at Mercedes, told the China International Import Expo this month, state media reported.

China has quickly grown to become the world’s largest market for EVs, and homegrown brands such as BYD are looking to take over on European turf.

Analysts warned of a price war in the country’s increasingly crowded EV sector.

“This price-cut strategy would generate overall negative sentiment,” Citigroup analyst Jeff Chung wrote in a research note, citing stalling EV sales growth because of economic headwinds and zero-Covid controls in China.

Chung added that Tesla’s move would put pressure on other high-end electric carmakers including XPeng, Volkswagen and BYD.

Chinese technology group reports second straight revenue drop after regulatory crackdown on sector

Chinese tech group Tencent on Wednesday said it would “distribute” the majority of its $22bn stake in Meituan, a food delivery company, in dividend, as it works to reduce its holdings in the country’s tech sector.

Tencent’s quarterly revenue fell for a second quarter, underscoring the toll of Beijing’s bruising regulatory crackdown on the country’s internet sector and the impact of slowing economic growth in the world’s second-largest economy.

The tech group posted quarterly revenue of Rmb140bn ($19.7bn) in the three months ending September 30, down 2 per cent from the same period last year and slightly missing analyst forecasts of Rmb141.4bn. Tencent’s net profit increased by 2 per cent to Rmb32.3bn.

“Our resilient businesses, diversified cash flows, sizeable cash balance and substantial investment portfolio enable us to invest in strategic growth areas and innovation, while at the same time returning capital to shareholders,” said Pony Ma, Tencent’s chair, on Wednesday.

“We will distribute the large majority of our Meituan shareholding, which has generated significant returns, both strategically and financially.”

Tencent has accelerated share repurchases this year, returning cash to shareholders as its stock price hovers at a four-year low. Tencent’s Hong Kong-listed shares closed 2.2 per cent higher on Thursday.

Analysts say Tencent’s share buyback programme has prevented further share price slides. A recent rally in Chinese equities due to Beijing loosening its strict zero-Covid policy and offering support to the property sector has bolstered sentiment.

“A lean, optimised operation combined with potential revenue acceleration ahead — driven by top down factors such as macro and regulations — is a good set-up that investors will like,” said Charlie Chai, an analyst at Shanghai-based 86 Research.

Tencent is battling the twin challenges of weak consumer confidence following successive rounds of pandemic lockdowns in China and a wave of new regulations that loosened the grip of its tech empire.

The owner of the ubiquitous messaging app WeChat has scaled back its once-aggressive pursuit of Chinese internet companies and is divesting large chunks of its portfolio, sending reverberations through the country’s tech industry.

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Revenue from online advertising fell by 5 per cent to Rmb21.5bn as companies slashed marketing budgets.

Analysts suggest that officials may be taking a softer approach to the gaming sector after regulators restricted children’s playing time and halted approvals for new game titles last summer.

In September Tencent won its first licence for a new gaming title since June 2021, easing investor concerns about the dearth of approvals granted to Chinese internet groups.

Tencent said it had become “fully compliant” with Chinese regulations on gaming for minors and that the time spent by children on its games plummeted 92 per cent in the third quarter compared with the same period last year.

In a sign that Beijing’s crackdown may be easing, the People’s Daily, China’s state media, on Wednesday published an opinion piece saying that the gaming industry can “support the development of advanced technologies” and “play a more important role in enhancing the global influence of Chinese culture”.

This stands in marked contrast to an article on a news site owned by the state news agency Xinhua last year, which lambasted online video games as a form of “spiritual opium worth hundreds of billions”.

Chai said investors had “a greater peace of mind as the overall political agenda moves away from regulation to pro-growth policies”.

Co-CEO Martin Hoffmann told WWD the brand was “here for the long term.”

On Holding is still feeling that running high.

The 12-year-old company — founded around a premium sneaker touted as giving the wearer the feeling of “running on clouds” — defied inflation, the threat of recession and the laws of retail gravity, posting continued gains in the third quarter.

And Martin Hoffmann, co-chief executive officer and chief financial officer, told WWD the company is methodically chasing its potential — in running, in other sports, in apparel and beyond.

“Having a core in running, but taking that running culture into basically everyday life opens up a much bigger market segment,” Hoffmann said.

Sales for the three months increased 50.4 percent to 328 million Swiss francs, or about $348 million. That included slightly slower gains in direct-to-consumer sales, which rose 40.7 percent to 106.6 million Swiss francs.

Net income for the quarter ended Sept. 30 increased 58 percent to 20.6 million Swiss francs, while adjusted earnings before interest, taxes, depreciation and amortization advanced 48.5 percent to 56.3 million Swiss francs.

“Running has a moment where it also becomes really culturally relevant, so it just doesn’t become a sport for nerds, for people who just like to spend time alone running,” Hoffmann said.

He pointed to run clubs popping up in New York and other key cities around the world.

“Running does so much good for your body, but even more for your mind,” Hoffmann said.

On started with running shoes, but has branched out recently with apparel, which Hoffmann said was still a “small category for us” but one with potential.

The company also has room to expand into more sports, he said, and has already made forays into tennis and outdoor activities, like hiking.

In a world that’s gone d-to-c crazy, On has built a growing business with wholesale accounts and Hoffmann doesn’t expect the company’s own distribution to take over.

The firm has a handful of flagships — with outposts in New York, Tokyo, Zurich and Los Angeles — and 12 stores in China.

But it is also growing with others, through shops-in-shop in Nordstrom and active footwear retailers.

“In the end, what we want to do is we want to be where our customers are shopping,” Hoffmann said. “Clearly if you look at where the runners are shopping, they’re running along the Hudson River [in New York]. They’re shopping Dick’s [Sporting Goods], they’re shopping at Fleet Feet and many of them are also shopping on brand pages like Running.com.”

Wholesale has helped the brand go big.

“It allowed us in the past to reach many more customers globally, but then at the same time, by having our own e-commerce page and really focusing on that it allowed us to build a strong connection to the consumer,” the co-CEO said. “Both are equally good for us.”

On — which is based in Zurich, but went public in New York 14 months ago — has seen its shares lose some ground as the market weakened over the past year. Its stock closed up 2.7 percent to $20.16 on Tuesday, below its $24 initial public offering price.

But the company still has a market capitalization of $6.4 billion and growth on its side.

And while that’s still a long way off from Nike Inc. and its $167 billion valuation, in comparison with most of its consumer IPO cohort last year — On is still flying high. (Sustainable sneaker competitor Allbirds Inc., for instance, closed at $2.98, well below its IPO price of $15).

On sees itself continuing to push higher this year.

The company nudged up its annual sales outlook by 25 million Swiss francs to 1.125 billion Swiss francs, representing growth of about 55 percent from the prior year.

While On expects currency translations to continue to pressure margins, it raised its full-year target for adjusted EBITDA to 148 million Swiss francs, an increase of 3 million Swiss francs from the forecast in August.

“We’re here for the long term and we want to build something in the long term,” Hoffmann said. “We are not chasing short-term growth because building a premium brand also requires a certain level of scarcity.”

He said some wholesale accounts would like to expand more with On, but that the brand is taking its time. “We want to maintain scarcity and we want to build the brand and grow the brand over the years to come,” Hoffmann said. “It allows us to drive profitability.”

“We believe that running is a very resilient category in sports because, in the end, it’s the cheapest way to do sports, we feel we’re well positioned there,” he added. “At the same time, we have just recently launched product, especially in the running category, that is at the lower end of what our price range is.”

That’s running shoes at the $140 price point, rather than $160 or $170 — a still premium price point that could help bring more customers into the brand in tougher economic times.

Ermenegildo Zegna Group and Marcolin SpA will enter long-term license agreements for Tom Ford fashion and Tom Ford eyewear, respectively.

It’s official: The Estée Lauder Cos. is the new owner of Tom Ford, marking the beauty giant’s first venture into the fashion world and its biggest deal ever.

Paying $2.3 billion to acquire the luxury fashion, beauty and eyewear brand, Lauder outbid rival Kering, which was reported earlier this month to be a front-runner for the company.

Ermenegildo Zegna Group and Marcolin SpA will enter long-term license agreements for Tom Ford fashion and Tom Ford eyewear, respectively. Marcolin has been the eyewear licensee since 2005, while Zegna has had the license for Tom Ford menswear since around 2006. Now, it will be responsible for all of Tom Ford’s fashion business.

The deal values the total enterprise of Tom Ford at $2.8 billion. The amount to be paid by Lauder for the acquisition is approximately $2.3 billion, net of a $250 million payment to Lauder at closing from Marcolin SpA.

The acquisition is Lauder’s biggest to date, following the company’s agreement to pay $2.2 billion for a majority position in Deciem in 2021.

Under the agreement, Tom Ford, founder and chief executive officer of Tom Ford, will continue to serve as the brand’s creative visionary after closing and through the end of calendar 2023. Domenico De Sole, chairman of Tom Ford International, will stay on as a consultant through that period, too.

“We are incredibly proud of the success Tom Ford Beauty has achieved in luxury fragrance and makeup and its dedication to creating desirable, high-quality products for discerning consumers around the world,” said Fabrizio Freda, president and CEO of Lauder, in a statement. “As an owned brand, this strategic acquisition will unlock new opportunities and fortify our growth plans for Tom Ford Beauty. It will also further help to propel our momentum in the promising category of luxury beauty for the long term, while reaffirming our commitment to being the leading pure player in global prestige beauty.”

Tom Ford said, “I could not be happier with this acquisition as the Estée Lauder Companies is the ideal home for the brand. They have been an extraordinary partner from the first day of my creation of the company and I am thrilled to see them become the luxury stewards in this next chapter of the Tom Ford brand. Ermenegildo Zegna and Marcolin have been spectacular long-standing partners as well and I am happy to see the preservation of the great relationship that we have built over the past 16 years. With their full commitment, I trust they will continue the brand’s future as a luxury company that strives to produce only the highest-quality fashion and eyewear.”

For its part in the deal, Ermenegildo “Gildo” Zegna, CEO of Ermenegildo Zegna Group, which owns Thom Browne, described Tom Ford as one of the most “iconic and distinctive ultra-luxury brands in the world” and said this next step together perfectly aligns with its strategy. “We have been partners and shareholders of the Tom Ford fashion business since its inception and I have worked with Tom for many years and consider him an esteemed friend,” he added. “This transaction is our first since our listing on the New York Stock Exchange in December 2021, and confirms our commitment to leverage our platform to create value for all of our stakeholders.”

While such a deal marks the cosmetics giant’s first foray into fashion, it has had a licensing partnership with Tom Ford Beauty since around 2005.

At a Deutsche Bank conference earlier this year in Paris, executive vice president and chief financial officer Tracey Travis said: “Tom Ford and Jo Malone are two of our largest midsized brands that are knocking on the door of being over that $1 billion threshold to be large brands over the next couple of years.”

But not all parts of the beauty arm have been performing equally well. Lauder revealed earlier this month in its first-quarter fiscal-year earnings that Tom Ford Beauty makeup was negatively impacted by the decline in retail traffic and travel due to the COVID-19-related restrictions, but on the positive side, Tom Ford Beauty fragrance net sales grew by strong double digits, powered by launches such as Noir Extreme Parfum and Ébène Fumé.

Barclays analyst Lauren R. Lieberman added that although Lauder’s recent M&A track record has been mixed, an acquisition of Tom Ford would be different as it would be acquiring the full profit stream for a business it is already operating across the value chain.

“Longer-term, we do wonder if an acquisition of Tom Ford would trigger conversation around the strategic direction of the company and if broader participation in luxury could be in the cards. From our seat, we do not believe this would be the case, as the company’s heritage and core competency is in prestige beauty, and here we’d note the very recent addition of the Balmain license,” she said.

Lauder recently slashed its full-year forecast as COVID-19-related lockdowns in China, record high inflation and currency fluctuations weigh on the beauty giant.

It reported that full-year net sales are projected to decrease between 6 and 8 percent in the 2023 financial year, down from its previous forecast of growth of 3 to 5 percent. Adjusted diluted earnings per common share are expected to fall between 19 and 21 percent, versus prior expectations for growth of between 5 and 7 percent.

At the time, Freda said: “Since we spoke in mid-August, the headwinds of COVID-19 restrictions in China, high inflation globally, and a strong U.S. dollar intensified significantly.”

Former operations head bought shares in lithium producer based on knowledge carmaker had supply agreement

The former head of Tesla’s Australian operations has pleaded guilty to insider trading after buying shares in a lithium producer based on knowledge that the electric carmaker had a supply agreement with them, according to the country’s securities regulator.

The Australian Securities & Investments Commission said on Wednesday that Kurt Schlosser, the former Australia director for Tesla, acquired 86,478 shares in Piedmont Lithium after receiving inside information about a supply agreement between the two groups.

Schlosser subsequently sold shares in Piedmont for a net profit of A$28,884 ($19,583) after the lithium producer’s share price shot up when news of the supply agreement with Tesla was made public.

Schlosser also shared the information with a friend who would be likely to buy shares in the now North Carolina-based mining group, the watchdog said.

Piedmont Lithium announced in September 2020 that it had entered a binding five-year agreement to supply Tesla with a third of its planned 160,000 tonnes per year production of spodumene concentrate, a hard rock ore product that is converted into battery-grade lithium chemicals. The deal sent its shares six times higher.

The agreement was one of the many that carmakers have signed directly with mining groups. For carmakers, it helps to secure access to raw materials, bring down procurement costs and have greater oversight over the environmental and social impact of their supply chain.

For early-stage mining groups such as Piedmont, the backing of a global car manufacturer can help to unlock financing from lenders and transform their fortunes.

The US mining group had aimed to deliver the concentrate between July 2022 and July 2023 for Tesla to process at a refinery it is building. However, last year it postponed deliveries to Tesla indefinitely because of delays in the permitting process for its mine in North Carolina.

Piedmont Lithium is dual-listed in Australia and the US. The company redomiciled from Australia to the US and changed its primary listing to New York last year.

Tesla and Piedmont Lithium did not respond to requests for comment.

Schlosser is yet to be sentenced and will appear at Sydney District Court on December 16. The ASIC said that the maximum penalty for insider trading violations was 15 years in prison.

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