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Technology like surveillance drones and Palantir-style software is now being sold to public safety agencies of all sizes—prompting more questions about its ultimate use.

Recently, Nick Noone, co-founder and CEO of Peregrine, was introduced to Candace Parker, sports broadcaster and retired WNBA star, by mutual friends. They hit it off. The two share a passion for athletics. (Noone was a Stanford gymnast.) And both have an interest in startups. (Parker is an active angel investor.) After Noone described how his startup sells Palantir-esque data analytics software to local police and public safety departments, Parker insisted that he meet someone she knew: Shaquille O’Neal.

“Well, she’s on TV with Shaq,” Noone explained. “And she told me, ‘Shaq loves public safety.’” After she put them in touch, O’Neal and Noone spoke over FaceTime. A few weeks later, Shaq called Noone back. “It was, like, 6 p.m.—I’m out on a date at dinner—and I get a FaceTime from Shaq, and he’s like, ‘Yo, you got to meet the police chief of Baton Rouge: he’s the man,” said Noone, doing a fair Shaq impression.

He was recalling the story from his Baton Rouge hotel room one afternoon last month, having flown to Louisiana to meet the police chief earlier in the morning after O’Neal connected them. They didn’t strike a deal that day, but he left feeling optimistic. “It was a great preliminary conversation,” said Noone, having long honed a slow and steady sweet talk for winning over government bureaucrats, a skill he first developed while working at Palantir.

Noone fully expects the Baton Rouge chief will sign. “In the next, like, three to six months,” he said. He anticipates the chief will put in a call to his peers with the New Orleans Police Department, which already uses Peregrine; such existing customers prize Peregrine’s products for making it easy to search department records and data through simplistic, Google Search–style prompts, among other features. And besides, Noone, 37, can speak with the confidence of someone who has watched his company’s revenue climb more than sevenfold in two years to $75 million in 2025.

“There is just so much money out there for this,” he said.

That’s something of an understatement. America is experiencing a full-on boom in startups developing technology meant to combat crime, track crime, study crime, reduce crime, analyze crime—and many other tasks related to public safety. Venture capitalists are hugely eager, too, and have tossed those companies over $2 billion in the last two years, more than quintuple the amount from the prior two years. In Peregrine’s case, the startup received a roughly $400 million valuation last year—and then a $2.5 billion one in March from a fundraising led by Sequoia Capital.

At least two dozen such companies have joined the burgeoning field, finding willing customers in cities of all sizes across the country—ranging from major metros like Atlanta, Los Angeles, Las Vegas and San Francisco, to midsize cities such as Albuquerque, N.M., and Newark, N.J., to hundreds of small towns.

Drones are some of the most popular products, and news footage of drones in action regularly goes viral on social media as the country adjusts to an eerie new era of increasingly high-tech local police forces.

Many other startups sell software for digitizing parts of public safety that haven’t changed much in recent decades. RapidSOS, for instance, sells AI-powered software for handling 911 calls and other emergencies, while Kodex has a web platform, popular with public safety agencies and private businesses alike, that simplifies how companies track and respond to government subpoenas and other requests for user data and information. Dozens of firms—ranging from Fidelity and AT&T to OpenAI and Coinbase—use it.

Kodex co-founder Matt Donahue, 33, got the idea for the company after several years at the FBI, where he sometimes needed to fax such information requests. “I just got married, and when I was telling my wife’s relatives what I do for work—and I would explain what Kodex is—they’re like, ‘Wait, something like that doesn’t already exist?’” Donahue recalled.

Very few of these businesses sell directly to consumers, and the ones that have tried to do so have found pretty limited demand: Most people want the police and other parts of the government to maintain public safety—they don’t want to pay extra to do so themselves.

Rather, the vast majority of such startups want to do exactly what Palantir did with spies and federal law enforcement agencies and what Anduril did with the military: Win lucrative, recurring local government contracts, wedging themselves into markets Silicon Valley once mostly totally ignored, and take advantage of a culture shift within the technology industry, which no longer looks at purveying goods to the Man with disinterest and distaste.

Think of this period in time as I’ve come to: as the Anduril-ization of crime fighting.

“Palantir and SpaceX had to crawl, so that Anduril could walk, so that these new companies can run,” said David Ulevitch, a general partner at Andreessen Horowitz, which has funded many of these startups (and Anduril, too). Of course, Andreessen Horowitz isn’t alone: Many of the major venture capital outfits have piled in, including Founders Fund and Greycroft.

“There was broad social stigma against supporting the police,” Ulevitch said. “And people just didn’t think these were big markets, and now they’ve realized they’re massive markets.”

While Silicon Valley technologists may be more comfortable with public safety tech, the proliferation of such software and hardware has led to mounting worries that America is turning into a highly digitalized police state in local communities. The shift follows the longstanding adoption of similar technology among federal agencies.

Jay Stanley, a senior policy analyst with the ACLU, fears Silicon Valley is handing local police what amounts to an ecosystem of mass surveillance. “And mass surveillance is not a good thing,” he said. “Law enforcement should not proceed collecting information on everybody all the time: Just because we cando something doesn’t mean we shoulddo something.”

The new technology’s nationwide spread is ironic given how much of it comes from one very specific place: the Bay Area. Indeed, the initial groundswell of interest around it partly stems from the tech elite’s concerns about crime close to home. San Francisco, in particular, has had a very public battle with crime and drug use in recent years, leading to the recall of San Francisco District Attorney Chesa Boudin in 2022 and the election two years later of San Francisco Mayor Daniel Lurie, who has trumpeted his efforts to decrease crime—particularly in neighborhoods like Union Square and the Financial District.

When I spoke to venture capitalist Cyan Banister, who has funded several public safety startups, she described sensing a “vibe shift” among investors and founders toward increased policing in the Bay Area—and investment in public safety startups. “We don’t want to live with prison bars on our windows,” she said.

Sitting in a glass-walled conference room in San Mateo, Calif., Adam Bry was discussing how a technology once mostly associated with warfare—drones—is becoming an important part of police departments’ crime-fighting toolbox when a quadcopter drone whizzed past the window behind him. Very shortly, the drone—made by Skydio, the company Bry, 39, runs—vanished out of sight.

Skydio keeps several hundred of its flagship X10 drones across its campus, with many installed in rooftop charging pods. At any point in the day, a good number of them are cruising around the company’s property as its engineers test new features. When I visited Bry, I found they had a tendency to appear when I was least expecting them.

“Ohhh,” Bry said when I mentioned it. “You get used to it.”

Police in places like New York, San Francisco and smaller cities use the drones to conduct overhead surveillance. (Meanwhile, corporate customers such as utilities and construction firms buy them, too, to examine their facilities from above.) In New York, for instance, police have apprehended subway surfers—people riding atop moving metro cars—after spotting them with a drone. And in San Francisco, officers have relied on drones to follow car thefts as they happen—as well as nab a person who stole $15,000 in goods from the Union Square Burberry store. The X10 drones can fly autonomously, or someone can steer them manually via a device purposefully made to resemble a videogame controller.

These drones represent Skydio’s renewed chance at life. Like several other companies selling public safety tech, Skydio started out as a consumer business. But the company, co-founded by Bry and his MIT classmates Matt Donahoe and Abraham Bachrach in 2014, couldn’t outmuscle its Chinese competitors, especially Shenzhen-based DJI, the leading maker of consumer drones. (Police departments also use DJI’s drones.) So Skydio began to shift its focus to selling drones to public safety agencies and private companies in 2020, ending its consumer business entirely in 2023.

A new Skydio drone, the R10, has been designed to prioritize indoor flight, which allows police to scout an active crime scene without sending in any humans. The R10 will further turn up the company’s rivalry with Seattle-based Brinc, run by Blake Resnick, a 25-year-old former Thiel Fellow, who started the company eight years ago. Brinc’s specialty is its Lemur drone, also specialized to fly indoors. The aircraft can push open a door, break glass and transmit live video, audio and a lidar map of a building.

“So police know exactly what they’re responding to,” Resnick said.

All U.S. drone companies could get a real boost from a relatively little-noticed turn of events in Washington: Starting next week, DJI and another Chinese drone company, Autel Robotics, could face a ban on new sales in the U.S., stemming from a complicated bit of government machinations that involve both the Trump and Biden administrations.

“This will completely change my business,” Resnick said. “It’ll completely change every drone manufacturer’s business.”

Drone footage is just one of many forms of video, text and data that can get sucked into the software made by Nick Noone’s Peregrine.

He initially developed the plan for the startup while spending five years at Palantir. There, he worked within a small group that found itself frequently reassigned based on the company’s current most urgent problem—whether that involved internal budgets or frantic phone calls from a retail client that had discovered human trafficking within a part of its business. (Both were actual issues the unit faced, Noone insists.) After a while, Noone realized Palantir’s complicated and expensive software limited its pool of customers.

“It’s a whale hunt,” he said.

Noone quit Palantir in 2017, figuring he could make simpler but similar software and sell it at a lower price to smaller government agencies that could never afford Palantir—or grasp its software. He was right, and at the moment, Peregrine has been averaging a half-dozen new contracts a week. The typical contract brings in about $250,000 in annual revenue, though some are for as little as $30,000, and usually the deals last three to five years.

Because the software needs to pull in data from all sorts of places, it’s complicated to set up. After a customer signs a deal, a Peregrine employee spends much of the next three months troubleshooting onsite with staff. Those employees generally have a data and software background. Peregrine also employs a number of former cops, who will travel and help their tech-minded colleagues understand what police department customers actually want.

Peregrine’s browser-based software, which relies heavily on AI, can parse both structured data (such as spreadsheets and databases) and unstructured data (images, PDFs, video). It can, for instance, create a 3-D map of a wildfire’s spread that shows where various models suggest it will go next. It can show whether schools are within the blaze’s path and provide a real-time display of ambulances and police cars in the area.

As I mentioned, the software has a powerful search function, too. If an officer searches for “swastika,” say, they will find every mention of the word within the transcripts, records and files uploaded and connected to Peregrine. A search for “swastika tattoo” will turn up both every written instance of the phrase—as well as every image the department has of a swastika tattoo, with the AI identifying the symbol and the fact that it’s a tattoo. Say an officer is looking for someone with a swastika tattoo on their left ankle: A search for “swastika tattoo left ankle” will quickly display every photo the department has of a left ankle with a swastika tattoo on it.

Peregrine’s software resembles the technology I picture in a Hollywood espionage thriller, the kind that would seem too simplistic to exist in real life. So when Noone showed it off to me last week at Peregrine’s Manhattan offices, I gawked at it. And then it gave me a profound sense of the chills. Watching Noone reveal Peregrine’s neat tricks was the same eye-widening experience I’ve gotten from uncovering a new use of ChatGPT—except, of course, Peregrine deals in matters of life and death.

Noone insists Peregrine greatly limits any chance of police misuse because it allows agencies to restrict what data each user can access. A patrol officer, for instance, might be able to see only a fraction of what a homicide detective can. Still, it’s pretty easy to imagine someone accidentally receiving more access than they should have.

Another thought then crossed my mind. If Noone, a person professing his good intentions, could create Peregrine—a much more powerful police AI than I could’ve imagined—then it’s chilling to consider what a person with malicious intentions could assemble, given the tremendous advancements in the underlying AI technology behind Peregrine.

It made me think pretty instantly about “Minority Report,” Steven Spielberg’s cautionary tale of police analytics and efforts to predict crime. I asked Noone whether he could easily make a Peregrine feature that tries to predict someone’s habits or whereabouts based on information fed to it by the police.

“With any one company is the capacity to do a lot of things: Of course we could,” he said. “Do we? No.”

Since Peregrine makes software the public never sees, it has largely escaped backlash from citizens and privacy advocates. The same can’t be said for Flock Safety, an Atlanta-based crime tech startup that has been a consistent magnet for ill feelings.

Flock’s main product is a license-plate–reading camera that it sells to cities, mounting the cameras on poles in public areas such as busy intersections. Since they’re relatively inexpensive—just about $3,000 a year—cities install them en masse. Sometimes Flock sells them to private businesses and groups like homeowners associations that want to monitor passing cars, and sometimes those organizations share their footage with the police.

The cities’ police departments can access the footage through Flock software. Police can use the program to find an image of a specific license plate and set it to alert them in real time when it spots that plate. Officers can also use natural-language prompts within an AI-powered search: For example, “blue F-150 truck” will find footage of blue F-150s. Another AI feature promises to identify possible accomplices in a crime by highlighting vehicles spotted near one police are already tracking.

Just in the past week or so, Flock cameras have attracted negative headlines everywhere from Greenville, Miss., to Cambridge, Mass., to Santa Barbara, Calif., with critics mostly blasting them as an invasion of privacy.

The ACLU’s Jay Stanley thinks the Flock cameras will usher in a period in the U.S. where “anybody living in this country could find themselves in the crosshairs of law enforcement just because some algorithm—about which we know nothing—has decided that your driving patterns are suspicious.”

Flock Safety CEO and founder Garrett Langley, 38, thinks opponents to his technology “enjoy a privilege that I don’t have: which is they get to debate hypotheticals and present no solutions to a known problem”—namely, crime. And he feels the ultimate responsibility for how his tech gets used should fall squarely on local governments.

“That puts the onus on our elected officials,” he said. “That’s why we elected them.”

As OpenAI discusses raising an unprecedented investment round of up to $100 billion, it can crow about some key improvements to how it runs its business. While its total computing costs are still high as a percentage of revenue, it is wringing more revenue out of every dollar it spends to run the servers that power ChatGPT’s subscription business and selling access to models to corporate customers.

The company’s compute margin, its share of revenue after the cost of running AI models for paying users, has jumped to about 70% in October from about 52% at the end of last year and roughly 35% in January 2024, according to a person with knowledge of the company’s financials.

Rival Anthropic, in contrast, had a compute margin of about negative 90% last year, according to The Information’s analysis of its financials. It has been on track to improve that margin to about 53% by the end of this year and has projected a 68% compute margin next year in its most optimistic prediction, according to the analysis.

Overall, though, Anthropic’s projections show it will overtake OpenAI in total server efficiency, including running its AI models for nonpaying users and training its models. OpenAI has hundreds of millions of nonpaying chatbot users it will have to monetize through ads or shopping affiliate fees to make up for that gap. Anthropic has far fewer nonpaying users of its chatbot.

Anthropic this summer projected it will spend as much as $60 billion on overall computing costs, including to develop new AI, next year through 2028. These projections did not include recent deals for server rentals from Google and Microsoft. OpenAI forecasts spending $220 billion on servers through the same period.

OpenAI’s big outlays for servers reflect its leaders’ belief that a shortage of servers is the biggest challenge to the company’s growth and its path to artificial general intelligence, or AI that can automate most economically valuable tasks.

“We cannot do it if we don’t have the compute. We’re so compute constrained,” said CEO Sam Altman in a podcast interview published Thursday. “If we had double the compute, I think we’d double the revenue right now.” Altman didn’t elaborate.

Potential investors in OpenAI will likely be eager to see any margin improvement related to OpenAI’s paying users, as higher margins on paid plans could help subsidize free users. Even so, the 70% compute margin figure remains well below the equivalent margins of publicly traded software companies, which can serve additional users (including free ones) at very low cost.

Another problem involves Google, OpenAI’s biggest chatbot competitor. Google uses custom server chips, tensor processing units, that lower its costs, while OpenAI uses pricey Nvidia server chips. As a result, OpenAI leaders believe Google is running AI much more efficiently, The Information reported. That means Google could be under less pressure to monetize its nonpaying users.

Earlier this year, OpenAI prioritized reducing its server costs to run its AI products, also known as inference. In February, it declared an internal “code red” after the launch of a new model from China’s DeepSeek, said a person with knowledge of the effort. DeepSeek’s developer claimed it cost a lot less to train the model than proprietary models from companies like OpenAI.

OpenAI also improved its compute margins because the cost of renting computing power fell throughout the year, and because it tweaked its AI models to run more efficiently, according to another person with knowledge of its figures. And the company started a higher-priced subscription tier, which brought more revenue from a subset of customers.

New jet engines show results of China’s military self-sufficiency push

China’s share of global arms imports has significantly fallen, dropping it out of the world’s top 10 buyers in recent years.

Beijing is now the world’s fourth-largest arms exporter, trailing only the U.S., France and Russia.

From 2015 to 2024, China’s navy launched 152 ships, compared to 70 launched by the U.S. Navy.

In 2016, Beijing launched a new aerospace conglomerate called Aero Engine Corp. of China. It had a challenging mandate: to develop top-line aircraft engines, a technology China had long struggled to master.

Less than a decade later, Beijing’s newest stealth fighters are entering service with what officials call “Chinese hearts,” or indigenously made engines.

The progress marked a milestone in China’s quest to forge an arms industry worthy of a rising global power. For years, China’s rise obscured a sobering reality: It couldn’t make all its own weapons.

Beijing is now not only producing its own armaments, it is also selling more abroad. In some military technologies, China appears to be matching major arms producers such as Russia and the U.S., or even pulling ahead.

The ability to churn out advanced armaments is a key element in Chinese leader Xi Jinping’s vision of making his country less reliant on the outside world for everything from food and energy to semiconductors. A more self-sufficient China is essential for preventing Western nations from locking it into a strategic stranglehold, Xi has argued.

Two decades ago, China imported more arms than any other country, according to the Stockholm International Peace Research Institute, or Sipri, an independent think tank.

China used to rely on the likes of Russia and France for warplanes, aviation engines and air-defense systems, and even struck deals to buy military hardware from the U.S. in the 1980s, including radar systems and artillery technology.

But China’s share of global arms imports has fallen significantly and the Asian power has dropped out of the world’s top 10 buyers in recent years, according to Sipri data. Analysts say China can now produce most of the military technologies it needs, even if it continues using some foreign hardware for cost or quality reasons.

This strategic success puts China in a stronger position to wage war in the event of a superpower conflict. It reflects Beijing’s efforts to boost scientific research, restructure its state-run arms industry and tap private businesses for defense needs.

China has also closed some technological gaps through espionage and illegally reverse-engineering imported gear, Western officials and analysts say. U.S. officials have disclosed what they describe as Chinese cyberattacks aimed at stealing U.S. secrets in aerospace, maritime and other technologies.

“China used every trick in the book,” said Siemon Wezeman, a senior researcher in Sipri’s arms-transfers program.

Beijing is now the world’s fourth-largest arms exporter, trailing only the U.S., France and Russia, according to Sipri data. Chinese hypersonic missiles, which can travel at least five times the speed of sound and evade most air defenses, exceed Western capabilities.

“China has always adhered to the principles of independence, self-reliance and indigenous innovation in weapons equipment development, relying on its own strength for research, development and production,” the Chinese Defense Ministry said in response to queries. Beijing’s arms programs, it said, are entirely meant for “safeguarding national sovereignty, security, and development interests.”

China’s Communist Party has craved military self-sufficiency since taking power in 1949. Although it developed its own nuclear and ballistic-missile capabilities under Mao Zedong, it remained behind in other modern military technologies.

A Western embargo on arms sales to China after the deadly crackdown on the Tiananmen Square protests in 1989 complicated the task for Beijing.

Subsequent Chinese leaders have stepped up spending to procure foreign technology and support indigenous weapons development.

In the 1990s, China bought Russian Sukhoi-27 fighters and reverse-engineered them to make its own version: the J-11s. Rostec, a Russian state-owned defense conglomerate, later accused China of illegally copying Russian military hardware, including Sukhoi planes.

In 2016, a Chinese aviation executive pleaded guilty in the U.S. to conspiring to hack and steal data from American defense contractors, including information on the C-17 transporter as well as the F-22 and F-35 stealth fighters.

Beijing also reorganized its defense industry, which was dominated by state giants that had struggled with inefficiency and corruption while resisting government efforts to foster collaboration with civilian partners.

Aero Engine—which is also known as AECC, and was sanctioned by the U.S. in 2020 and 2021—was created by pooling top scientists and resources from dozens of aerospace companies and research institutes. Beijing infused the new conglomerate with billions of dollars to compete against the likes of General Electric and Pratt & Whitney. Beijing also merged two state-owned firms to create the world’s largest shipbuilder.

Such moves helped China accelerate its development of homemade aircraft carriers, submarines and warplanes, such as Beijing’s second stealth fighter, the J-35, whose public debut in 2024 meant China was joining the U.S. as the only nations operating more than one model of stealth fighter.

Mastering jet engines was one of the biggest challenges. A top Chinese military test pilot told a Chinese newspaper in 2016 that domestically made engines struggled with insufficient thrust, high fuel consumption rates and poor reliability.

AECC boosted research collaboration with Chinese universities and said it tapped new technologies, including artificial intelligence, to speed up engine design and testing. State media portrayed AECC engineers as inspirational figures helping China break a Western technological monopoly.

The efforts have started to pay off. Newer variants of Chinese jet fighters originally designed with Russian engines—including so-called “fourth generation” fighters like the J-10 and J-11—have been fitted with engines developed and produced by Chinese entities that were brought under AECC.

China’s first fifth-generation stealth fighter, the J-20, was displayed with a Chinese engine for the first time in 2021, roughly five years after the jet’s official unveiling.

The new J-35 stealth fighter, a rough equivalent of the American F-35, is equipped with Chinese-made engines, according to a recent state-television program. Beijing has also displayed a new variant of its Y-20 heavy transporter equipped with Chinese-made engines, replacing Russian models.

AECC-affiliated researchers are pushing to develop advanced propulsion technology, including a class of engine that can transition from low-speed to hypersonic modes, according to procurement documents obtained by researchers at Georgetown University’s Center for Security and Emerging Technology.

Population that grew after 2020 normalisation with Israel has cancelled events and public worship

After the United Arab Emirates normalised ties with Israel in 2020 under Donald Trump’s Abraham Accords, Jewish worshippers in the Arab country were able to celebrate Hanukkah publicly for the first time.

Candle-lighting ceremonies were conducted at hotels, and a Jewish community group even erected a menorah next to Dubai’s Burj Khalifa skyscraper.

One Jewish resident, who moved to the UAE around the time, recalled how locals would even stop outwardly Jewish people and ask to take photos with them.

“Especially among the young generation of Emiratis, being Jewish or Israeli used to be the coolest thing,” said the resident, who like most others interviewed requested her name not be used.

“Since October 7,” she said, “there is much less of that, if at all.”

More than two years since Hamas’s 2023 attack on Israel and the ensuing war in Gaza, which strained ties and provoked outrage across the Arab world, the public visibility enjoyed by the UAE’s burgeoning Jewish community — rare in the region — has suffered a sharp reversal.

Safety and political concerns have resulted in the toning down of overt religious dress and the closing of nearly all public prayer services apart from the official synagogue in Abu Dhabi, according to Marc Sievers, director of the American Jewish Committee in Abu Dhabi, officials and locals.

Public services once held daily in large Dubai hotel halls, including for the Sabbath and major holidays, have been halted — in line with requests from local officialdom, according to several people familiar with the matter. 

“Since the beginning of the Gaza war there has been a general guidance” from Emirati authorities, Sievers said: “‘We are here to protect you and you are welcome, but please lower your profile’.”

All this was before the attack on a Hanukkah festival in Sydney this month, which killed 15 people and led to Jewish communities around the world cancelling events due to security concerns.

For the UAE, which remains arguably Israel’s most important relationship in the Arab world, such moves have been a major departure from recent years.

Though highly contentious in the region, the 2020 normalisation deal — the signature foreign policy achievement of Trump’s first term — helped the UAE and Israel expand business ties, boost trade and jump-start tourism. Bilateral trade reached $3.2bn in 2024, according to Israeli data.

Allowing Jewish worship also bolstered the UAE’s image as a promoter of religious tolerance, and helped solidify the pact as the start of a “warm peace” with Israel, in contrast to the chillier reception by Egypt and Jordan after they established diplomatic relations in previous decades.

Now, however, the only remaining public venue is the massive Abrahamic Family House in Abu Dhabi, a complex housing places of worship for the three monotheistic faiths, all of the same size and with signage in Arabic, English and Hebrew. The synagogue there has remained open, in service to the estimated 600 Jewish people living in the capital.

In Dubai, the UAE’s financial hub, private initiatives organised in individual villas and apartments have sprouted instead. One Israeli involved with Jewish life in Dubai said that while “officially there are no minyans” — the 10-man quorum required for public worship — a local resident or visitor can find a service if they have the right connection within the community.

One concern for UAE officials, well-connected locals surmised, was the fear of public backlash from the region on social media over outward displays of Jewishness and Israeli-ness. “The rest of the region will look at it and ask, ‘Why are you friends with them?’” the Israeli said.

While the UAE’s relations with Benjamin Netanyahu’s far-right government have been fraught at times, Abu Dhabi maintains that diplomatic ties have allowed it to deliver humanitarian aid to Palestinians in Gaza and keep open an important channel of communication.

But another concern for UAE officials is security related. The Abrahamic Family House, according to the one Jewish resident, has been turned into a “fortress”, with security “massively tightened”.

In particular, the brutal murder of Israeli-Moldovan rabbi Zvi Kogan in Dubai last year shocked local Jewish residents and the city’s small Israeli community, which locals estimate to number about 6,000 permanent residents.

Kogan was a well-known emissary locally in the prominent Hasidic Chabad movement, known for its global outreach and far-flung network of Jewish community centres.

Sievers said that in the wake of Kogan’s killing, the message from UAE authorities was that “this was an attack on us as well”. Abu Dhabi charged three Uzbek nationals, who were quickly extradited from Turkey, and sentenced them to death.

The Israeli government earlier this year raised the travel advisory for the UAE, warning of the risk of terror attack by Iranian operatives and other actors.

A UAE official said the country “has an outstanding track record in ensuring the security and safety of its diverse population”, and is “home to more than 200 nationalities, coexisting in peace and harmony”.

Without dismissing the security risks, multiple Israeli and Jewish residents said they still felt quite safe and welcome in the UAE — especially relative to parts of the world that had seen a big increase in anti-Israel and antisemitic incidents since October 7.

In the Muslim and Arab world in particular, the UAE remains an outlier owing to the large and overt presence of Israelis even among countries that have diplomatic ties with Israel, save perhaps for Morocco.

“There’s a travel warning to nearly every location these days,” one Israeli travel agent specialising in package deals to the UAE said, speaking before the Sydney attacks. “It’s safer than Europe and here [Israel].”

The autocratic UAE keeps a tight grip on any political activity, including demonstrations. Israeli and Jewish residents who spoke to the Financial Times cited only a handful of incidents that made them feel insecure since the start of the Gaza war — such as antisemitic comments at a school and a pro-Palestine remark from a passer-by at a mall. Both incidents were dealt with swiftly by the authorities, the local residents added.

“You can be in a hotel pool with Arabs from all over the region, no one will dare say anything,” said the travel agent, who splits his time between Israel and Dubai. 

Indeed, Israelis have continued visiting — as indicated by a cursory look at the hashtag #Dubai on Israeli social media. Some 25 flights have also continued to make the three-hour journey daily on Israeli and Emirati carriers through most of the past two years, even as many international carriers suspended their Tel Aviv services.

There are, by one count, already eight kosher restaurants in Dubai, all still operating, and tour companies catering to religiously observant visitors continue to do a brisk business taking groups into the desert and out to sea.

“It’s all still quite vibrant, but you need to do it intelligently,” says the Israeli involved with Jewish life in Dubai. “The message from the authorities here is, ‘Come, but do us a favour: don’t be too loud’.”

Is Switzerland losing its place in the world?

After a year of tumult, some are warning that a system built on neutrality, consensus and direct democracy is not moving fast enough

It was a remarkably blunt public warning from the top of Switzerland’s biggest bank. UBS chair Colm Kelleher declared last month that Switzerland was “losing its lustre” and had reached a “crossroads with major challenges”.

As evidence, he cited fierce competition in wealth management, US tariffs that have hit pharmaceuticals and other export sectors, and a regulatory environment that he regards as increasingly out of sync with more liberal regimes.

He is not alone. Severin Schwan, the chair of Basel-based pharma giant Roche, warned at a panel discussion this month that Switzerland faces a “critical” moment and should be “very worried — even paranoid” that global investment pressures and slow political decision-making threaten its competitiveness.

In a country that prefers to avoid global headlines, such rebukes from pillars of its corporate establishment are a sign of how uncomfortable this year has been.

For much of the postwar period, Switzerland appeared insulated from many of the pressures affecting its European neighbours. Its decentralised direct democracy produced consensus; the franc was one of the world’s best safe-haven currencies; its industrial and diplomatic foundations were solid and predictable.

The past year has challenged that sense of insulation. “Switzerland has had its crises over the years, but this one feels particularly sharp,” says Walter Thurnherr, a former chancellor and chief of staff of the Swiss Federal Council. “There is an uneasy feeling of being at a schoolyard, bullied by a sixth-grader without a teacher present.”

David Bach, president and geopolitical expert at business school IMD, adds: “The tension has come from multiple directions this year.”

Long-simmering questions about Switzerland’s neutrality and its stalled relationship with the EU, once treated as distant background issues, have become urgent and unavoidable. Both threaten to spill into highly polarising referendum fights. 

UBS, which acquired its rival Credit Suisse in 2023 in a government-directed rescue after the latter’s humiliating near collapse, is now at loggerheads with Bern over capital rules that it says threaten the sector’s competitiveness.

The tariff confrontation with Washington — in which the Trump administration imposed the highest tariff rate of any developed economy — exposed Switzerland’s vulnerability as a small state with no economic bloc behind it.

Investigations surrounding Klaus Schwab, the ousted head of the World Economic Forum, whose annual Davos get-together is a symbol of Swiss convening power, added to the scrutiny. Genève Internationale, the network of international and non-governmental organisations, has meanwhile grappled with shrinking multilateral budgets and renewed questions over neutrality.

A recent headline in the NZZ am Sonntag, one of the country’s most-read business papers, declared: “Finally, Switzerland is no longer boring — a clear indication of an identity crisis.” Its editor-in-chief, Beat Balzli, warned of a “verbal coarsening” of public debate as another symptom of a society suddenly uncertain of its bearings.

More idiosyncratic issues have added to the sense of unease. Nestlé’s chief executive Laurent Freixe and chair Paul Bulcke resigned after the former’s affair with a subordinate became public. Elsewhere this may have been unremarkable, but in a country that prizes discretion and low-drama corporate governance, it has been a jolt. Prominent Swiss private banks such as Julius Baer have been in the spotlight for anti-money laundering and compliance failings.

Traditional Swiss diplomacy was unprepared for the transactional, might-is-right approach of US President Donald Trump. The dispute over tariffs was resolved only after executives from prominent Swiss companies visited the White House and presented Trump with a gold bar and a Rolex clock — an episode that jarred with the country’s understated style.

“For our country, which until the end of the cold war understood foreign policy as the cautious, neutral management of external relations, this is a difficult experience,” says Thurnherr. “For decades, we had been successful with our ‘foreign non-policy’. Suddenly, the happy outcome of this is no longer guaranteed.”

Others argue that the country has faced down such challenges in the past and will do so again. “I see many of these incidents on the economy and business side more as blips that make good headlines, rather than some sort of structural decline,” says the chair of one major Swiss financial institution. 

But domestic controversies, plus the ructions in a global political order that had played to Switzerland’s strengths, contribute to a wider perception that the country’s bearings are shifting.

“You have UBS, you have the tariffs, you have Nestlé, you have WEF, Switzerland’s increasingly divisive debate on the EU. You can see why it is a moment when the Swiss system is being questioned again,” says Bach.

“It feels existential because it goes right to the heart of what the Swiss believe has made them successful in the past.”

The modern Swiss state was created in the mid-19th century, through compromise among cantons with distinct identities. Power was devolved rather than centralised and an unusual system of direct democracy sits at its core.

A coalition cabinet, the Federal Council, oversees key functions, while plebiscites several times a year enforce broad legitimacy and mitigate against sudden changes, creating a culture of incrementalism and predictability. Paired with an export-driven economy and a highly skilled workforce, the system helped produce decades of prosperity and engendered a confidence that now feels unsettled.

Yet Switzerland enters this turbulent period with formidable economic strengths. It remains the world’s leading centre for cross-border wealth management even as rival hubs such as Dubai or Hong Kong grow. Assets under management hit a record last year, according to the Swiss Bankers Association, which says capital continues to flow into the country.

“In spite of Credit Suisse’s collapse, Switzerland remains a destination for capital, which is remarkable. It hasn’t sputtered,” says Michael Pellman Rowland at Baseline Wealth, a Swiss-based independent manager with global clients, who says there has been a surge in interest from clients worldwide looking to move assets to the country.

“Switzerland still has the best brand as a money centre. The Swiss franc’s strength as well as that of the economy plays into that.”

Its innovation ecosystem, anchored by ETH Zürich and other universities, rivals that of much larger economies. Manufacturers tend to specialise in precision and high-margin niches that can absorb high labour costs and help insulate Switzerland’s exports from currency swings. Public services are widely regarded as among the best in the world.

Inflation and unemployment remain low by global standards; the difference in accumulated inflation since 2019 between the US, UK and Eurozone on the one hand and Switzerland on the other exceeds 20 percentage points. The Swiss franc has been the best-performing major currency over multiple horizons. 

The country also has a long record of reinvention. The “quartz crisis” that began in the 1970s forced the country’s watch industry to rebuild; the end of banking secrecy in 2018 spurred a shift towards advisory-led wealth management; rising labour and currency costs pushed exporters into difficult-to-replicate niches.

“At a corporate level and from a business perspective, Switzerland has proven time and time again [that] we can adapt to pressure. We have excellent business leaders and entrepreneurs,” says Philipp Hildebrand, vice-chair of BlackRock and former chair of the Swiss National Bank.

“Just take the currency appreciation — they have been agile in reacting to the pressure of the surging franc and today our exports are still strong and our companies competitive.”

This view — that Switzerland is fundamentally resilient — underpins much of the reaction to the year’s corporate turbulence. UBS’s dispute with the government, though unusually public, is widely expected to be resolved eventually through negotiation and few doubt that UBS will remain central to the country’s financial architecture, despite speculation about a headquarters relocation. 

Scrutiny of the WEF and questions around compliance at private banks such as Julius Baer have been uncomfortable but are not regarded as evidence of systemic erosion. The challenges of Genève Internationale reflect broader pressures on global multilateral institutions.

Direct democracy adds to this sense of institutional ballast. The decisive rejection last month of a punitive 50 per cent inheritance tax proposal from the political left underscored the electorate’s tendency towards pragmatism.

Several referendums have appeared contentious. In 2009, the country voted to ban the construction of minarets on mosques, while a highly anticipated plebiscite next year seeks to cap the population at 10mn. It has much public support despite criticism that such a policy would harm the economy.

“But at the end of the day everyone gets their say, and the Swiss have a strong sense of what is best for the country,” says Peter Maurer, a former Swiss diplomat and past president of the Geneva-based International Committee of the Red Cross. “I am a strong believer in the resilience of our democratic system.”

Still, he notes that such clarity weakens when Switzerland looks outward. “Once we turn to international power politics and stringent defence of national interests, the question is: what happens here, and what do we do to avoid drowning?”

It was in this context that the tariff episode landed with such force. For many in business and government, it demonstrated how quickly external shocks can now penetrate Switzerland’s previously insulated domestic ecosystem and unseat the assumptions that had long underpinned its success.

When Washington imposed a 39 per cent tariff on Swiss goods — from watches to chocolate and machinery — public and private actors moved quickly. Yet the unusually open disagreement over strategy marked a departure from Switzerland’s traditional quiet co-ordination. Export-oriented cantons pressed for closer alignment with Europe; others wanted a more combative approach towards the US. When a compromise to 15 per cent finally emerged — aided by direct lobbying from Swiss-based executives — the country remained split over both the optics and the outcome.

The tariff dispute crystallised a broader point: where Switzerland faces the greatest uncertainty is in external questions it has long deferred, such as neutrality, defence, Europe, immigration and the size of the state. Key decisions on many of these issues are now needed at once.

“The world is in a transition phase . . . You have all these alliances and blocs which are changing, while power and the way the world is governed is shifting,” says Peter Voser, chair of engineering conglomerate ABB. “Switzerland is usually at its best when we can be in the background using our diplomatic position. In a transition period that does not work.”

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Russia’s invasion of Ukraine has placed Switzerland’s prized neutrality under pressure not seen in decades. The Federal Council’s decision to adopt EU and UN sanctions marked a significant shift in position, but left unresolved questions about neutrality’s application in cyber conflict, proxy war and clear breaches of international law. Debate continues over future sanctions policy, re-exports of Swiss-made military hardware and the country’s humanitarian responsibilities.

“I am somewhat ashamed of how Switzerland managed the Ukraine war in the beginning. It was viewed by many outside of our country as a tacit refusal to support the defender,” says Daniel Daeniker, senior partner at Homburger, the Swiss law firm. “But the debate in parliament over the export of materiel, such as getting our tanks to Germany to give to Ukraine, shows that we have adapted over time.”

Parliament this month agreed to ease restrictions on military re-exports, though the detail is vague. A new defence minister has also signalled a desire for closer security co-operation with Europe and Nato. 

The future of Switzerland’s relationship with the EU is another weighty issue. The bilateral system — a patchwork of agreements granting access to the single market but without political integration — has served the country well. But it is becoming harder to sustain as the EU consolidates its regulatory framework. After years of talks, Bern and Brussels this year reached a draft deal, known as Bilateral III, to update Switzerland’s access to the single market.

The agreement touches on many of the same issues that complicated the UK’s departure from the EU, including budget contributions, migration and judicial oversight. It will probably require approval in a referendum, but domestic opinion is sharply divided. Supporters say market access is essential for competitiveness with the bloc, which takes 50 per cent of Swiss exports. Opponents warn deeper alignment risks eroding sovereignty and increasing regulation.

Elisa Cadelli, president of think-tank Foraus, says she is “most concerned” about the public appetite for the deal. “Supporters will have to convince the Swiss public that this matters for employment, for Swiss businesses, for the ability to export . . . yet the debate is already marked by occasionally inaccurate claims,” she says.

The EU pact, says Thomas Jordan, a director of Zurich Insurance and a former SNB chair, is essentially a “trade off between ensuring relatively easy access to the European market on one hand and giving up a lot of sovereignty and accepting — in a dynamic and automatic way — future regulation of the EU on the other”. The long-term impact of this on Switzerland, he adds, “is almost impossible to figure out”.

Alongside the big geopolitical questions, a quieter domestic debate has emerged over the role and size of the state. Switzerland has long prided itself on a lean public sector and a tradition of private provision in areas from housing and pensions to childcare and infrastructure. But rising living costs, labour shortages and demographic pressures have begun to challenge that model. 

Proposals for subsidised day care, expanded parental leave and more active federal involvement in housing have gained traction across parties, reflecting competing visions of what Switzerland’s social contract should look like in a more complex environment.

Many see a focus on shoring up the internal system as more urgent than responding to the external geopolitical environment. “It is sometimes known as the porcupine method. We just need to curl into a ball with our spikes out and ride this out,” said one Swiss financier in Zurich. “People love to periodically call the death of Switzerland — they have not been right so far.”

Thomas Gürber, deputy state secretary at Switzerland’s foreign affairs department, frames the moment as adjustment not decline.

“I do not see us as being on a downward slope. I think we are in a process of reorienting ourselves regarding many challenges,” he says.

The central issue remains whether Switzerland can adjust its unique model to a world that intrudes more quickly than before. Its underlying strengths are considerable, but its room for manoeuvre is growing narrower — and warnings such as UBS chair Kelleher’s about the dangers of complacency resonate with business and political figures alike.

“Switzerland is very uniquely positioned to be successful in this new era,” says Mario Greco, chief executive of Zurich Insurance. “The question is whether it will take advantage of that position.”

Europe’s banks turn to private equity for M&A without tears

Lenders have been snapping up businesses formerly owned by buyout firms at a record rate

How can banks in Europe get mergers done when politicians get so worked up over potential deals? Executives have been grappling with the question after lenders like UniCredit and BBVA ran into roadblocks. One potential answer: find sellers even less popular than the banks themselves.

Private equity, for example. European banks have been snapping up businesses formerly owned by buyout firms at a record rate, according to Lex analysis of Bloomberg data, with more than $15bn of acquisitions this year. Several were lenders that had been cleaned up after coming close to collapse in the aftermath of financial crises in the US and Eurozone.

The trend has brought benefits for both sides. Private equity firms have been under pressure to return cash to their backers after a long period of weak exit volumes; selling in a single swoop to “strategic” buyers — meaning other banks — beats waiting for an IPO and gradual selldown.

The boom is helping offset a slow recovery elsewhere. Financial services, including insurance, accounted for about 20 per cent of the total value of European private equity exits this year, according to data from Preqin, more than twice the average over the past 10 years.

Banks, meanwhile, have plenty of spare cash they’re keen to spend, and private equity-backed companies seem to come with fewer complications. For one thing, negotiating with a handful of institutions is simpler than trying to win over thousands of truculent retail investors. Compare BBVA’s failed bid for Sabadell with ABN Amro’s straightforward $1bn purchase of NIBC from Blackstone.

Nor does the public much care if foreign banks buy local peers that were already in the grip of faraway financiers. Look at the muted reaction when France’s BPCE bought Portuguese lender Novo Banco, versus the clamour caused by UniCredit’s interest in German listed national champion Commerzbank. 

Bank bosses who hope to hit the acquisition trail are, of course, constrained by the limited supply of good-sized lenders in private equity portfolios. Still, there are signs the trend should at least continue into next year. Cerberus-backed Hamburg Commercial Bank is one reportedly considering a multibillion-euro sale. Loosen definitions and options increase — Warburg Pincus and Permira have considered a £2.5bn sale of wealth manager Evelyn Partners, for example. 

Deals of this size won’t provide the sort of transformative changes to the banking sector that consolidation cheerleaders like former central bank chief Mario Draghi hope to see. But they should get the ball rolling. Once investors, regulators and politicians see that banks can successfully manage a few smaller deals, bigger ones ought to follow.

What David Ellison can learn from a hostile bid battle of his father

The saga of Oracle’s PeopleSoft takeover might show what is needed to win Warner Bros Discovery

When Larry Ellison’s Oracle launched a hostile bid for PeopleSoft in the summer of 2003, many on Wall Street thought it was a stunt.

The target’s board rejected the offer, adopted a poison pill defence to deter the bidder, sued Oracle, complained to antitrust regulators and even promised customers eye-watering compensation if the deal ever closed. Eighteen months later, the billionaire founder of Oracle prevailed. PeopleSoft was gone.

That battle, one of the longest and most bruising hostile takeovers in US corporate history, offers a useful guide for Larry’s son David as he attempts his own audacious manoeuvre: a hostile bid for Warner Bros Discovery after the company rebuffed Paramount and embraced Netflix instead.

The parallels are not perfect. But there are some possible lessons. Perhaps the most important one is that hostile does not mean cheap. Oracle won PeopleSoft by paying up. Larry Ellison ultimately raised his offer from $16 a share to $26.50 before PeopleSoft finally capitulated.

That is what makes valuation — not just process — decisive. WBD’s board has made clear that it prefers a proposal by Netflix that values its streaming and studio assets $83bn in cash and stock, against Paramount’s $108bn hostile offer for the whole company. But Paramount argues its all-cash $30-per-share offer for the entire company is superior to Netflix’s $27.75-per-share bid.The dispute centres on how to value what remains: the legacy television networks Netflix would leave behind.

Several shareholders the FT has spoken to say they prefer Paramount’s all-cash offer in principle, but also see an opportunity to extract more value. As one put it: “I want cash so that we can move on. The idea that Ellison is not serious about the deal is a joke.”

Robert Beirig, portfolio manager at Oakmark Fund at Harris Associates, a top ten shareholder in WBD, says he supports the Netflix offer but would be open to Paramount if it proposed better terms. “At this point, the ball is in Paramount’s court,” says.

David Ellison may already be in a stronger position than his father was in 2003. The Paramount bid is all-cash, fully financed and carries a clear headline premium, even if WBD disputes elements of its structure. The political winds in Washington are also far less hostile to consolidation than they were during the Biden administration.

But there was no rival bidder waiting in the wings of PeopleSoft in 2003. Oracle was the only game in town. WBD’s directors, by contrast, can credibly argue they are choosing between two viable outcomes rather than simply digging in.

David Ellison might need to heed another lesson from the PeopleSoft saga — patience. Oracle did not win PeopleSoft by persuading shareholders to tender their shares early. For most of the process, hardly any did. The poison pill — which would have diluted the stake of a bidder above 20 per cent by issuing new shares at a discount to existing shareholders — made that pointless. Instead, Ellison senior used the tender offer as a pressure device, forcing the board to justify its resistance month after month as the share price hovered below the bid.

The campaign reinforced Larry Ellison’s image as an acquirer who does not blink. He was willing to litigate, wait out regulators and make boards uncomfortable for as long as it took. Over time, shareholders assumed that resistance merely delayed the inevitable. Endurance paid off. David Ellison does not yet have that record, although he fought for more than a year against rival suitors to buy Paramount.

The PeopleSoft battle also has lessons for WBD. One is that an aggressive defence can backfire. PeopleSoft’s most notorious tactic was the “Customer Assurance Program”, which promised customers multiples of their licence fees if Oracle cut support after an acquisition. Designed to make the target radioactive, it instead became a symbol of managerial entrenchment and was ended after shareholder complaints. WBD has not gone that far. But its argument that Netflix is the safer buyer regardless of price carries a similar risk. Boards will come under pressure if they disregard a large premium indefinitely without compelling evidence.

If Paramount succeeds, it will not be because WBD shareholders rush to tender against management, but because the board concludes that resisting a clearly superior offer no longer serves its fiduciary duty. History suggests that moment rarely arrives without a higher price. So Ellison junior may need to take note of his father’s experience on this.

Marc Rowan tells investors firm is positioning itself for when ‘something bad happens’

Apollo Global is building up cash, cutting leverage and selling out of riskier corners of debt markets as top executives gird the firm for what they expect to be market turbulence.

The $908bn-in-assets company’s chief executive, Marc Rowan, believes the defensive posture will prepare Apollo for more challenging credit and equity markets and put it in a better position to invest heavily during any turmoil.

Rowan privately told investors this month that his “number one job” was to “have the best balance sheet possible”, to position Apollo to perform well and make money “when something bad happens”.

Rowan’s comments came in private meetings at a Goldman Sachs conference, according to people who attended, and echo his public statements warning of excesses in many fast-growing corners of financial markets.

“We believe that prices are high, that rates — long rates — are not likely to plummet, and that we have enhanced geopolitical risk,” Rowan told investors on the company’s earnings call in November.

“As a firm, we are in risk reduction mode. We preach risk reduction. Our balance sheet is in risk reduction mode.”

At an internal town hall earlier this month, Apollo’s leadership emphasised the defensive posture. “I get the feeling everyone here is on the edge for a next blow-up or something in markets,” said an executive who attended.

Apollo declined to comment.

To prepare for shakier financial markets, Apollo has built liquidity at its insurer Athene with additional purchases of tens of billions of dollars in treasuries and cut bundles of leveraged loans, Rowan told the investors in the private meetings. Athene is in the process of trimming its collateralised loan obligation (CLO) exposure by about half to $20bn, Apollo has said publicly.

Apollo has also been focused on trimming risk in areas vulnerable to looming technological disruption caused by artificial intelligence. The Financial Times reported last week that Apollo has been rapidly reducing its exposure to software loans it believes could face challenges due to AI. 

The shift by the New York-based private investment group, which has been in process for more than a year, is being closely watched across the industry given Apollo’s heft in financial markets. It has been involved in some of the most complicated debt transactions, including novel financings for chipmaker Intel and Elon Musk’s artificial intelligence company xAI.

Rowan has also warned of “contagion risk” in some areas of the insurance marketplace where private capital groups have grown quickly with little regulatory oversight.

He has warned of looming bankruptcies among private capital-backed insurers that have moved their assets to the Cayman Islands, an offshore jurisdiction. 

“What people are doing is they’re taking business offshore to Cayman, where there are fewer rules and fewer capital requirements . . . We’ve now seen three bankruptcies in Cayman. We will see more. I do not believe that Cayman will be a viable US jurisdiction over 24 months,” he said in public comments at the same Goldman conference.

Apollo believes that defaults could be contagious for the insurance industry given that assets moving offshore have been ceded by US insurers who ultimately would be on the hook to cover losses because they have no federal backstop.

He has also said that returns in many debt markets have fallen to the point of being unattractive.

“CLO spreads have completely and totally compressed,” said Rowan at the Goldman conference, referring to bundles of low-rated loans used to finance private equity takeovers.

The company this year increased its hedges against floating interest rate debt, betting that the US Federal Reserve will continue to lower interest rates under pressure from President Donald Trump. The hedges protect the earnings of Athene should short-term interest rates keep dropping, given the unit holds a $50bn portfolio of floating rate debt. The interest it earns on that debt would otherwise rise and fall in tandem with the Fed’s benchmark rate.

The firm has also been running its flagship $23bn private credit fund — known as Apollo Debt Solutions — with lower leverage than rivals, a point Apollo executives have underscored as a sign of their conservative tilt, according to people briefed on the matter. 

The fund reported a net debt-to-equity ratio, a gauge of how much the fund had borrowed to make its investments, of 0.58 in October. That was up marginally from a year prior but down from 0.71 in October 2023 and a ratio just below 1 in October 2022, when it was using almost equal amounts of debt and equity to finance its investing.

Rivals say they have not yet seen Apollo back away from the market, pointing to its decision to provide debt to fund Paramount’s hostile $108bn bid for Warner Bros Discovery.

Binance allowed suspicious accounts to operate even after 2023 US plea agreement

Leaked files show continued activity despite links to terror networks, failed ID checks and other red flags

Binance failed to stop hundreds of millions of dollars of cryptocurrency from flowing through suspicious accounts, even after promising to improve its conduct in a landmark $4.3bn US criminal settlement in 2023.

A Financial Times investigation of leaked internal files detailing thousands of transactions shows such accounts continued trading despite red flags including links to terror financing networks, improbable log-in patterns and failed identity checks.

One user of the world’s largest crypto exchange was the resident of a Venezuelan slum who moved $93mn through his account between 2021 and this year. Some of those funds came from a network later accused by the US of covertly moving money for Iran and Lebanon’s Hizbollah militant group.

Many of the accounts reviewed by the FT continued to trade after Binance’s plea agreement with the US despite behaviour that experts say would normally prompt freezes or investigations at a regulated financial institution.

These include moving eight- or nine-figure sums through their accounts in suspicious patterns, or log-ins that occurred on opposite sides of the world just hours apart.

Details of the transactions come after Donald Trump pardoned Binance founder Changpeng Zhao in October for his role in wilful violations of US anti-money laundering laws. The Trump family subsequently decided to expand its business relationship with Zhao’s exchange this month.

As crypto goes mainstream, the files examined by the FT shine a spotlight on the ability and willingness of the US administration to police the goliath of the new global financial infrastructure.

Jeffrey Simser, a lawyer specialising in anti-money laundering regulations who previously spent three decades at the ministry of the attorney-general in Ontario, Canada, said the FT’s findings about the activities of Binance account holders were “very troubling allegations”.

“I cannot imagine an American bank allowing any of these things to happen without a lot of consternation,” he said.

Binance told the FT that it “maintains strict compliance controls and a zero-tolerance approach to illicit activity on our platform”, adding that it had “robust systems in place to flag and investigate suspicious transactions and take action where appropriate, including restricting accounts in line with our regulatory obligations”.

The exchange is at the forefront of an alternative financial system taking on traditional finance and is used by 300mn people to trade digital tokens and so-called stablecoins pegged to real-world currencies.

It has rebounded since paying a record $4.3bn in 2023 after pleading guilty to criminal charges related to money laundering, violations of banking law and breaching international financial sanctions.

Trump has called himself the “crypto president”, in contrast with the Biden administration’s focus on digital currency risks such as scams, criminal activity and highly volatile speculation. Since his election victory a year ago, crypto assets have soared in value.

As part of its commitments in the November 2023 plea agreement, Binance agreed to tighten compliance, transaction monitoring and sanctions controls.

The internal Binance data reviewed by the FT from 2021 to this year raises questions about the effectiveness of those changes.

The FT obtained access to internal Binance data for a network of 13 suspicious user accounts covering a period from 2021 to this year, including internal logs, know-your-customer documentation, device and IP metadata and transaction-level histories.

They include accounts registered in the names of people from Venezuela, Brazil, Syria, Niger and China. In total, the 13 accounts were involved in transactions totalling $1.7bn, of which $144mn took place after the November 2023 agreement.

Files charting the accounts’ behaviour were verified by cross-referencing wallet flows against public blockchain data and confirming user identities against open-source records including corporate filings and social media accounts.

One of the accounts, registered in the name of a then 25-year-old Venezuelan woman in April 2022, received more than $177mn worth of crypto over the following two years.

She changed the payment bank details attached to the account 647 times in a 14-month period between January 2023 and March 2024, with 496 unique accounts, using Binance to place cash into financial institutions across the Americas. 

“That qualifies as suspicious. What you are looking for on the compliance side is something that doesn’t make any economic sense,” said Stefan Cassella, a former federal prosecutor and author of books on money-laundering and asset forfeiture.

He added: “It looks like someone is acting as a money-transmitting business.”

Binance’s plea agreement included an undertaking to “prevent individuals from accessing or using customer accounts who are not the customer registered with the Company as the account owner”.

The Venezuelan woman’s activity came after a key date in Binance’s rehabilitation.

According to the plea agreement, Binance had already implemented company-wide risk assessments for issues such as money laundering and terrorist financing from November 2022. It also said it improved its “enhanced due diligence” programme to cover, among other things, high-risk users and unusual transaction activity.

But another account in the network was registered to a 30-year-old junior bank employee whose address was in Los Picapiedras, a low-income hillside neighbourhood of Baruta, south-eastern Caracas.

Between 2022 and May this year, the account received deposits of $93mn and paid out a similar amount of cryptocurrency. 

Internal IP logs showed the account was accessed from Caracas at 3.56pm on February 24 2025 and from Osaka, Japan, at 1.30am the next day — a physically impossible sequence.

“That is exactly the kind of thing they [Binance] should be looking into,” said Jessica Feinstein, former co-head of the money laundering and transnational criminal enterprises unit at the Southern District of New York. 

It is unclear whether this glimpse of practices inside Binance represents an aberration at a company making good-faith attempts to follow the law, or indicates indifference to suspicious activity at a group previously found to show disregard for US rules.

The accounts reviewed by the FT all showed markers of suspicious account activity.

They also all had received funds, totalling $29mn in the Tether stablecoin between February 2022 and March 2023, from accounts later frozen by Israel under anti-terrorism law.

Almost all of the funds had been sent from four crypto wallets linked to Tawfiq Al-Law — a Syrian accused of moving illicit money for Hizbollah, the Iran-backed Houthis in Yemen and a company tied to the Assad regime in Syria. The remainder came from a fifth wallet designated as “property of a designated terrorist organisation”.

The four Al-Law accounts were seized by Israel in May 2023, and the US Office of Foreign Assets Control imposed sanctions on Al-Law in March 2024.

Nominis, a crypto asset tracing company, said that it had seen strong evidence that crypto had become increasingly used by US-designated terror groups as a means of moving money across borders.

“Funds often move through networks that span jurisdictions, asset types and intermediaries, exploiting regulatory fragmentation to avoid detection,” Nominis said.

“Criminal/terror networks, shadow finance and weak anti-money laundering and counterterror financing controls are taken advantage of, to launder, move or shelter assets.”

Money for sausages

Interactions in the network of 13 accounts point to a global web of dark money. One was registered in 2021 in the name of a Brazilian man charged the following year for alleged involvement in “a complex criminal organisation specialising in crimes derived from the illegal importation and sale of gold”.

The indictment also named two other members of the same Arabic-speaking family, following an investigation set off when one of them tried to cross into Venezuela carrying $50,000 in cash, telling border guards the money was to buy sausages from a Chinese acquaintance. 

The Binance account had been opened with a battered Brazilian identity card issued two decades earlier. The date of birth was illegible, the picture bore little resemblance to the selfie uploaded to the exchange, and the email address supplied was in the name of a woman. 

Following what the file said was enhanced due diligence, Binance’s customer record showed the wrong date of birth, referred to self-employed monthly income of “7,000”, without specifying the currency, and described the man’s net assets as $400,000. 

The account had received $16mn in crypto, including $5mn from three Al-Law accounts that were later frozen. It converted $4mn into hard currency withdrawn as Brazilian reals and Venezuelan bolívars up to September 2022, after which the account appears to have been dormant but remained open and accessible until this year.

Binance’s commitments

In its 2023 plea agreement, Binance committed to conducting “real-time transaction-monitoring for suspicious or unlawful activity” and “periodic customer reviews for illicit activity, money and sanctions risk” as a “minimum requirement”. 

It also undertook to ensure “properly documented ongoing know your customer and due diligence reviews of existing customers”.

Institutions have discretion over how they implement compliance programmes and assess customer risk, based on their own assessments of dangers to their reputation or potential for regulatory action.

The seizure of a wallet does not itself create an obligation to review historic counterparties, lawyers said. 

But when there are other reasons for suspicion about a client, interactions with sanctioned accounts can be a factor when complying with requirements to identify potential illicit activity. 

“A financial institution does have an obligation to understand the nature of the business and the recipient, their client and the source of funds,” said Carolina Fornos, a former prosecutor and partner at the law firm Pillsbury who specialises in anti-money laundering.

There is no suggestion that Binance breached sanctions law by making or receiving transfers from people or entities after they were officially designated as financially untouchable.

“Any suspicious activity in these accounts would have triggered an investigation,” said Binance’s lawyers at Carter-Ruck.

The law firm added it would be “wholly inappropriate” to clarify whether specific accounts were investigated or subject to further action.

However, the files show many instances of irregular transactions that would be questioned at brand-name banks or other regulated institutions. 

A common automated process at financial institutions is to screen for irregular “pass-through” behaviour, such as when funds deposited into an account are transferred out again within 24 hours in a manner that is potentially suspicious, Fornos said. 

This pattern is evident in daily deposits and transfers in the account of another Venezuelan woman, who was part of the network of 13. 

Tens of millions of dollars flowed in and then out of the young woman’s account in a remarkably symmetrical way. Even after the DoJ plea agreement was signed, the account received $35mn and transferred out the same sum.

Lawyers for Binance at Carter-Ruck said “any suggestion that our client has knowingly facilitated bad actors in criminal conduct is also baseless”.

They added that none of the relevant “wallets had been tagged for terrorist financing at the time the relevant transaction occurred”, none belonged to sanctioned individuals, and that deposits and withdrawals for the wallets received “no sanctioned activity alerts” from leading blockchain analysis providers.

In November 306 family members of victims of the Hamas attacks on Israel on October 7 2023 launched a legal complaint in a federal court accusing Binance of allowing Hamas and Hizbollah to move large amounts of money across its network and facilitating “money laundering on a global scale”.

Binance told the FT that the allegations were false and “grotesquely sensationalist”.

The Trump connection

The US government has a central role in policing the record plea agreement with Binance, one it took on during the Biden administration and which continues under Trump, even as the broader landscape around crypto has changed.

In May 2024 the US Department of Justice and Treasury appointed two independent monitors to assess and oversee Binance’s adherence to the agreement, including ensuring that the company created adequate anti-money-laundering and sanctions compliance systems.

A significant number of the transactions reviewed by the FT occurred after the monitors began their work.

“This reporting raises concerns about how seriously the government takes its responsibilities with respect to white-collar investigations and prosecutions,” said Andrew Weissmann, a former chief of the DoJ’s fraud section and assistant US attorney.

Binance said it “is rigorously licensed and heavily regulated” and that its “clearly stated mission has always been to build a secure, transparent and trusted platform that protects users and advances the future of finance”.

At the time of Binance’s plea agreement, the Treasury said the exchange had failed to report “well over 100,000 suspicious transactions” linked to ransomware attacks, child sexual abuse, large-scale hacks, the narcotics trade and groups including al-Qaeda and Isis.

Today Binance is a critical business partner to World Liberty Financial, a Trump family crypto venture that this month announced a “massive expansion” of the use of its USD1 stablecoin on Binance and said the change “cements USD1 as a core infrastructure asset on the world’s largest exchange”. 

Promoting the news on X, the president’s son Eric Trump said the currency “is on a path to becoming among the largest stablecoins of all time”.

The Trump family’s own crypto empire has already reaped more than $1bn in pre-tax profits over the past year, according to FT reporting.

The White House told the FT that “President Trump exercised his constitutional authority by issuing a pardon for Mr Zhao, who was prosecuted by the Biden administration in their war on cryptocurrency”.

“In their desire to punish the cryptocurrency industry, the Biden administration pursued Mr Zhao despite no allegations of fraud or identifiable victims,” it added.

While Zhao remains barred from executive roles at Binance, his fellow founder and partner Yi He, with whom he has three children, was this month appointed co-chief executive of the exchange. 

Jessica Davis, a former Canadian intelligence official who now specialises in terrorist financing networks, told the FT that Trump’s pardoning of Zhao had loosened the compliance environment around cryptocurrency exchanges, giving the impression “that the US administration doesn’t think money-laundering is very serious”.

“Previously, the incentive was: keep your CEO out of jail. That is the most incentivised piece of compliance we can really offer,” she said.

“Yes, there are fines,” she added, “but part of the problem with the fines is that we’re just talking about so much money being made on these platforms that even a billion-dollar fine becomes fairly meaningless”.