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Richard Leon, who scrutinized 2011 Comcast-NBCUniversal merger, is known by lawyers as ’demanding fact-finder’

In 2011, U.S. District Judge Richard J. Leon nearly torpedoed a settlement between the Justice Department and Comcast Corp. over the company’s takeover of NBCUniversal.

Six years later, Judge Leon is set to play a starring role in a higher-stakes sequel: AT&T Inc.’s proposed merger with Time Warner Inc. Last week, the Trump administration’s lawsuit seeking to block the deal was assigned to the blunt-spoken and unpredictable bowtied-clad jurist. Judge Leon did not respond to requests for comment.

If his handling of the Comcast/NBCUniversal situation is any guide, neither side in the new case—shaping up to be the biggest antitrust battle in nearly two decades—can count on having an ally at the bench.

The government didn’t sue to block the Comcast/NBCUniversal merger, but got a promise from the cable company that it wouldn’t try to leverage its market power by charging online rivals like Netflix Inc. higher prices for NBC programming.

Judge Leon refused to rubber-stamp the deal, and was wary that the parties would abide by the terms intended to protect online companies from unfair competition.

“I’m giving you fair notice I’m not sure I’m going to sign this,” Judge Leon told the parties at a July 2011 hearing.

Ultimately, after the sides agreed to subject the terms to extra judicial monitoring, Judge Leon blessed the deal. But the aftermath of the Comcast merger and the effectiveness of the settlement’s remedies now loom over the AT&T case, according to New York University School of Law antitrust professor Scott Hemphill.

“He has a very firm grasp of competition law and the economics that drives it,” said Jonathan L. Rubin, a Washington lawyer at MoginRubin LLP who represents the independently operated ATM industry in an antitrust suit against Visa and Mastercard.

To justify a halt to the AT&T merger, the government will try to show how AT&T’s acquisition of Time Warner will hurt consumers by leading to higher prices and fewer options for cable and satellite television and online video.

The job of assessing claims about the market effects falls to Judge Leon. Mr. Rubin described the 67-year-old judge as a demanding fact-finder who can be expected to take the Justice Department’s “theories and evidence seriously.”

Judge Leon, who was confirmed to the bench in 2002 as a nominee of President George W. Bush, has acquired a reputation for his assertive and often brusque approach that cuts across ideological lines.

Among the standouts was a 2008 order that required the release of five Algerians from the U.S. military prison at Guantanamo Bay. Judge Leon said the government had failed to show the men were enemy combatants.

In 2013, he made national headlines again when he pronounced the National Security Agency’s bulk collection of phone data “almost-Orwellian” and ”almost certainly” unconstitutional.

On Wednesday, the judge returned to the issue of surveillance.

He released an opinion that took credit for stirring the debate over antiterrorism policy and privacy, saying his 2013 ruling had “unleashed a firestorm of press and public discussion” that led Congress to require more targeted searches of phone records. That legislation rendered the surveillance litigation moot, he ruled.

Judge Leon has crossed swords with the executive branch in other areas.

In 2015, he blasted a deferred prosecution agreement between the government and a Dutch company accused of violating Iran sanctions as “grossly” lenient. His second-guessing of prosecutors got him a rebuke from a federal appeals court, which said he had “significantly overstepped” his authority.

Other notable opinions include a 2016 ruling against the District of Columbia’s restrictions on concealed-carry gun permits. Judge Leon wrote that the city’s “overly zealous desire” to limit who can carry a firearm ran afoul of the Second Amendment.

Before joining the federal court, the Massachusetts native was a litigator at Vorys, Sater, Seymour and Pease LLP in charge of the firm’s white-collar crime and congressional investigation practice in Washington.

He has drawn on his experience with legislative probes as an adjunct scholar at Georgetown University Law School, where he co-teaches a graduate seminar on congressional oversight of the executive branch with Hillary Clinton’s 2016 campaign chairman, John Podesta.

Bitcoin’s Trading Star Is Chicago High-Speed Firm That Nods to the Grateful Dead

DRW’s Cumberland unit jumped in shortly after the digital currency’s plunge in 2014, putting it far ahead of Wall Street banks

One of Chicago’s largest high-speed traders has taken a central role in the bitcoin market, stepping into the vacuum created by Wall Street’s hesitant response to the booming investor interest in digital currencies.

DRW Holdings LLC uses quantitative models to buy and sell bitcoin, for its own account and for use as a market maker—firms that grease the wheels of finance by buying, selling and quoting prices. Cumberland, DRW’s digital-currency unit, says it has traded more than $20 billion worth of bitcoin, ethereum and other cryptocurrencies in the past year. That makes it one of the top market makers in the sector, traders said.

Bitcoin, invented less than a decade ago, is up more than 900% this year and recently surpassed $9,000 for the first time. It was trading at $9,338.20 late Sunday. The value of all the bitcoins in existence is about $157 billion, more than the market capitalization of Caterpillar Inc.

Despite those gains, the market for bitcoin is plagued by extreme volatility and an uncertain regulatory status, factors that have limited the interest of many Wall Street firms. DRW started its bitcoin desk more than three years ago, but banking giants such as Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. are just now considering how they will handle bitcoin trading.

“They were very early adopters, and they’ve got a massive lead over everyone else,” said Brian Kelly, founder of BKCM Digital Asset Fund, a crypto hedge fund that trades regularly with Cumberland.

Founded in 1992, DRW employs more than 800 people and trades on exchanges around the world. About a quarter of its business involves high-frequency trading—running automated strategies over ultrafast network connections—although other strategies can involve trades that last for months or even years.

A trader at DRW prefers to sit on one of the many exercise balls in DRW's office instead of the provided chairs, to improve posture.

A trader at DRW prefers to sit on one of the many exercise balls in DRW's office instead of the provided chairs, to improve posture. Photo: David Kasnic for The Wall Street Journal

Based in a sleek Chicago skyscraper, DRW’s offices feel more like those of a Silicon Valley tech company than a Wall Street bank, with a casual dress code and weekly visits from a meditation teacher.

As a nonbank firm that doesn’t manage money for outside investors, DRW is less subject to the regulatory questions looming over bitcoin than Goldman and other major banks.

Donald Wilson Jr., the firm’s founder and chief executive, has clashed with regulators over civil allegations that DRW manipulated an interest-rate contract in 2011. The Commodity Futures Trading Commission sued him and his company over the allegations, in a case that went to trial last year.

Mr. Wilson and DRW have rejected the allegations, saying their trading strategy was lawful and slamming the agency’s legal arguments as flawed. Unlike most traders facing a CFTC manipulation case, they refused to settle. The judge has yet to reveal his verdict.

DRW doesn’t report financial results, and it declined to say how much money its crypto unit makes. Mike Komaransky, a former partner who helped build Cumberland, retired from the company in June at age 38. He drew attention in August when he put his Florida mansion on sale for $6.5 million and offered to accept payment in bitcoin. The house is still on sale, Mr. Komaransky said.

DRW set up Cumberland in 2014, the same year a theft of more than $470 million worth of bitcoin from Mt. Gox, once the world’s largest bitcoin exchange, and other troubles caused the digital currency to lose more than half its value.

Cumberland was among the biggest buyers of bitcoins seized from Ross Ulbricht, founder of the underground online drug bazaar Silk Road, who is now serving a life sentence after being convicted of narcotics trafficking, conspiracy to launder money and other crimes. The unit bought about 70,000 such bitcoins in auctions conducted by U.S. and overseas authorities, it says.

Mr. Wilson thinks bitcoin’s reputation as a tool for criminals is undeserved. “A lot of shady people have done a lot of bad things with dollars,” he said in an interview.

Initially, DRW considered focusing on bitcoin mining, a process in which computers solve complex math problems to generate new bitcoins. That led the firm to call its crypto unit Cumberland Mining & Materials LLC—a name borrowed from the Grateful Dead song “Cumberland Blues,” about a hardworking miner.

Cumberland mines Zcash, an upstart digital currency whose backers say it has better privacy protections than bitcoin. Cumberland is tight-lipped about its mining operation, saying only that it is located in the U.S. near a low-cost source of hydroelectric power. Cheap electricity is essential for cryptocurrency mining to be profitable.

The unit also runs automated trading “bots” that try to eke out profits from differences between the prices of digital currencies on different exchanges.

But Cumberland’s fastest-growing business is market-making, especially in big-ticket trades of at least $100,000 and ranging into the millions of dollars. Its team of 15 in Chicago, London and Singapore receive inquiries around the clock from crypto funds, wealthy bitcoin investors and other clients seeking to buy or sell digital currencies.

Mr. Wilson, who started his career in the CME’s eurodollar options pit in 1989, acknowledges that bitcoin is a risky business. Unlike many crypto enthusiasts, he says the jury’s still out on whether bitcoin will succeed.

“Even now, I look at it as an experimental thing,” Mr. Wilson said. “Who knows if it will become a viable currency?”

FT : South Africa survives Moody’s downgrade to face a bigger threat

Low borrowing costs give Pretoria the veneer of resilience

South Africa dodged a bullet on Friday when Moody’s Investors Service, the credit rating agency, opted to put the country’s local and foreign currency bonds on review for a downgrade but not to join its peers, S&P and Fitch, in outright dropping the country’s rating into junk.

S&P’s removal of South Africa’s investment grades on Friday was enough to expel its local currency bonds from the Barclays Capital Global Aggregate Bond Index, tracked by about $2bn of foreign capital. But Moody’s saved the country from expulsion from the Citi World Government Bond Index, tracked by $8bn. This has sparked indignation in some analysts. “How can you have places like Argentina and Ukraine, with reform programmes in place, seven or eight notches below South Africa?” asks Simon Quijano-Evans, of Legal and General Investment Management. “What signal does that send to the government?”

Others say the yields on South African bonds already reflect the assumption that a downgrade by Moody’s is on its way. Yields — which rise when prices fall — have moved sharply upwards since October, when the government slashed its growth forecasts. Yet bond yields have recovered some ground from a peak earlier this month. The rand, too, has come back since then. On Monday, it quickly sprang back from Friday’s fall against the US dollar. It has almost recovered all its losses since the shock in October.

We have seen this before. Back in March, South African bonds and the rand took a battering when president Jacob Zuma toyed with and then fired Pravin Gordhan, the last finance minister to care much about reform or credit ratings. Both asset classes recovered within a few months.

Investors and the government in Pretoria may conclude that nothing really matters. Global liquidity and the search for yield mean that South Africa’s borrowing costs as a share of GDP are manageable, whatever happens to hopes for reform. Some investors see Moody’s decision to put South Africa on review as a buying opportunity. Yet that action has also put a cloud of uncertainty over South African markets for months to come. The weak dollar has helped the South African rand this year. Should US monetary policy turn hawkish, South Africa will be among the emerging markets at greatest risk.

Supreme Court appears divided on patent reviews via US Patent and Trademark Office (rather than through courts) - press 

- The Supreme Court heard arguments today in a challenge against the patent review system that allows the US Patent and Trademark Office to challenge patents rather than going through a review by the courts. The system was put in place by Congress in 2011 as a lower cost alternative to lawsuits.

Proposed tax changes could shift incentives for private equity, changing how deal making is done in the U.S.

Tax reform has scrambled the deal calculus for corporate buyouts, potentially adding risk to some deals and higher returns to others at a time when private-equity firms are sitting on a record amount of cash they are under pressure to deploy.

The tax bill that passed the House of Representatives and will be taken up by the Senate this week would change the game for buyouts in two important ways. On the negative side, the bills penalize companies that take on lots of debt by reducing their ability to deduct interest payments. That is offset by lower overall corporate tax rates.

If the bills pass with the proposed corporate tax cut—to 20% from 35% in the House bill—intact, the returns on buyouts would likely go up, even after scaling back the interest deduction. Analysts at Goldman Sachs and Morgan Stanley both calculate that the tax overhaul package would have a net positive impact on internal rates of return—the key measure of profitability for private-equity investments—of more than 1 percentage point a year.

But the calculus will be different for each deal. The House bill would cap the amount of interest expenses that companies can deduct from their taxes at 30% of earnings before interest, tax, depreciation and amortization. This presents a challenge to the private-equity playbook of levering up acquired companies to boost returns.

Assuming a 6% cost of debt, a company could lever up to five times Ebitda and still stay under the deduction limit, notes Goldman Sachs analyst Alexander Blostein. Recent leveraged buyouts have typically featured interest rates of around 5% to 7%, and leverage of four to six times Ebitda, says Adam Benson, managing director of the tax practice at consulting firm Alvarez & Marsal.

If rates move higher, more deals would breach the 30% threshold. More important, companies could be caught in a tax vise if Ebitda declined since interest expenses would stay the same, generating a higher tax bill, notes Mr. Benson.

To stay out of the vise, private-equity companies may steer clear highly cyclical companies. Some may focus on small, domestic companies that currently face high tax rates and would benefit most from the overall cuts.

There still could be changes to the tax reform package. The current Senate proposal is less generous, capping the interest deduction at 30% of earnings before interest and tax, but not depreciation and amortization. This would make capital intensive businesses much less attractive to private-equity buyers. With fewer potential targets, the remaining buyout candidates could become more expensive, potentially lowering future returns.

There is some urgency for the firms to figure this out. Private-equity firms in North America were sitting on more than $500 billion in dry powder at the end of March, according to research firm Preqin. Meanwhile, there has been just $8.3 billion of private-equity-related deals in the U.S. in November, compared with a monthly average of nearly $27 billion for the rest of the year, according to Dealogic. Shares of the big listed private-equity firms are down around 4% this month compared with a roughly 1% gain for the S&P 500.

Tax reform may ultimately benefit buyout firms, but they need to adapt quickly.

The ECB had previously bought the bonds under its corporate sector purchase programme (CSPP), in which the central bank purchases the debt of investment-grade companies as part of its quantitative easing programme.

The ECB sold the bonds as the commodities house in September moved the domicile of its bond-issuing entity from Luxembourg to Jersey, taking it outside the euro-area and making it ineligible for the programme.

While the ECB has previously announced that it would not be forced to sell bonds if a company’s rating fell below investment grade, it has not previously commented on what would happen if a company changed its domicile.

“The Eurosystem decided to sell its Glencore holdings purchased under the CSPP because these bonds had lost their (CSPP and collateral) eligibility due to the re-domiciliation of the issuer to a non-euro area country,” a spokesman from the ECB told the FT on Monday.

While the ECB does not disclose the size of its holdings of debt from different companies, every week the central bank publishes a list of ISINs – unique identifiers for different bonds – that it holds. While the list for the week ending November 17 showed that the ECB held five different Glencore bonds, the data from the week ending November 24 contains no Glencore securities.