From Goldman’s 1MDB Scandal to Bitcoin, Here’s a Look Ahead at 2019

After the financial crisis, Goldman Sachs sought to expand into Southeast Asia. Unfortunately, that effort was caught up in a scandal at an investment fund in Malaysia.

Goldman raised more than $6 billion for that fund, called 1Malaysia Development Berhad, or 1MDB. The money was supposed to benefit the Malaysian public but ended up enriching Goldman and those close to Najib Razak, who was prime minister. In December, the Malaysian government filed criminal charges against Goldman, accusing the firm of violating securities laws there.

Those charges come on top of a Justice Department investigation of violations of the Foreign Corrupt Practices Act, which bars corporations from bribing foreign officials to gain a business advantage.

One year ago, Bitcoin was minting millionaires as its value surged to nearly $20,000. Now it is worth about $4,000, and many wonder whether it can survive as a viable investment option, regardless of whether it will ever supplant currencies. read more »

Did Free Pens Cause the Opioid Crisis?

What Big Pharma knows about people’s hardwired instinct to reciprocate when given a gift

Early in dopesick, a book examining how Purdue Pharma helped addict an alarming number of Americans to opioids, Beth Macy writes about the army of drug reps who pushed the painkiller OxyContin. In its approach to sales, Macy shows, Purdue was scientific. Using information purchased from a data-mining firm, the company determined which physicians were prescribing the most of its competitors’ painkillers, and dispatched sales reps to their practices. The more likely a doctor was to prescribe, the more often the reps darkened his door. The reps were highly motivated: Their bonuses were pegged to the milligrams of OxyContin a doctor prescribed.

The reps, traditionally known as “detail men”—though since the mid-1990s, when OxyContin was introduced, the field has become more associated with young women—usually arrived bearing gifts. A rep might invite a doctor out to a fine restaurant, or on a junket in a desirable vacation destination. For doctors too busy for such gifts, work-arounds were devised. “Reps began coming by before holidays to drop off a turkey or beef tenderloin that a doctor could take home to the family—even a Christmas tree,” Macy writes. To bend the ear of the most harried physicians, reps would invite them to meet at a nearby gas station, where they would buy the doctors a fill-up and pitch them on their wares as the fuel flowed into the tank. read more »

What causes a flash crash?

Thin trading alone does not explain recent ones

MOST REGULAR flyers will have experienced an “air pocket”, when their plane hits turbulence and suddenly dips, with unwelcome effects on their heart rate and digestive processes. In financial markets these have become known as “flash crashes” after a particularly volatile day for stockmarkets in May 2010.

Thin trading, however, is not an adequate explanation for the scale of recent market moves. The Christmas-holiday period has always been quiet for stockmarkets, but in 2018 America’s experienced both its worst-ever Christmas Eve and its best-ever December 26th. Investors were already jittery. After an unusually quiet 2017, there was a lot more volatility in 2018; the S&P 500 suffered its worst December performance since 1946, according to Jonathan Golub, a strategist at Credit Suisse.

In such circumstances, a sharp move can be exacerbated when computer programs, or algorithms, kick in. The simplest of these are designed to limit losses by selling when prices reach certain levels. If enough algorithms have the same parameters, the decline, or rise, can be amplified. Something similar happened in October 2016 to the pound and in January 2015 when the Swiss National Bank abandoned its attempt to cap the franc. read more »

How the Government Shutdown Is Affecting the Nation’s Securities Regulator

Thousands of workers have been furloughed, trash has piled up in the nation’s capital, and toilets are have overflown in national parks as a result of the U.S. government shutdown.

All “nonessential” functions have been halted as President Donald Trump and congressional leaders try to hash out a deal. The Securities and Exchange Commission isn’t exempt from the stoppage, and that’s having some impact on the financial world.

Only about 285 of the SEC’s 4,436 employees are being kept on duty during the shutdown, according to a planning document posted on the agency’s website.

The SEC “will be unable to process filings, provide interpretive advice, issue no-action letters or conduct any other normal Division and Office activities,” during the shutdown, the document says. read more »

Credit Suisse settles New York state RMBS lawsuit

Credit Suisse has settled a 2012 New York state lawsuit alleging misconduct over residential mortgage-backed securities (RMBS), with a source familiar with the deal saying the bank would pay much less than prosecutors had originally sought.

The settlement, which was made last week, takes Credit Suisse a step closer to wrapping up an expensive chapter linked to the financial crisis a decade ago, although some civil claims remain unresolved. read more »

Ex-Goldman Sachs banker denied bail in Malaysia pending extradition to U.S.

A Malaysian court on Monday refused bail to former Goldman Sachs banker Roger Ng, pending his extradition to the United States where he faces charges related to suspected money laundering of funds siphoned off from state fund 1MDB.

Ng has been detained in Kuala Lumpur since Nov. 1, shortly after the U.S. Department of Justice announced charges against him, another Goldman Sachs official Tim Leissner, and Malaysian financier Low Taek Jho over the alleged theft of billions of dollars from 1Malaysia Development Berhad. read more »

Supreme Court won't review Gilead whistleblower lawsuit

The U.S. Supreme Court on Monday declined to hear Gilead Sciences Inc’s appeal of a ruling that allowed a whistleblower lawsuit alleging it defrauded the government into paying for HIV medications whose main ingredient came from an unregistered Chinese facility to move forward.

Gilead had asked the high court to review a July 2018 ruling by the 9th U.S. Circuit Court of Appeals holding that the two former Gilead employees who filed the lawsuit had raised a plausible claim under the False Claims Act, allowing the litigation to proceed. read more »

What would happen if PG&E sold its gas business or filed for bankruptcy?

California’s largest power company faces an existential crisis as it confronts the looming possibility of tens of billions of dollars in wildfire liability.

Shares of PG&E Corp. — which owns Pacific Gas & Electric Co. — sank 22.3% to $18.95 on Monday after reports that the utility could face at least $30 billion in liability related to fires and has considered filing for bankruptcy protection or unloading its natural gas operations.

The consequences of bankruptcy or an asset sale could ripple far beyond the utility’s shareholders, some experts say, affecting 16 million Californians who depend on PG&E for energy and potentially threatening the state’s ability to meet its climate-change goals. read more »

A well-known cryptocurrency may have just suffered a confidence-breaking attack

Cryptocurrency exchange Coinbase says it suspended movement of ethereum classic after it detected a potential attack on the digital coin's underlying technology.

In essence, Coinbase is saying that a malicious party may have been able to wrest control of more than 50 percent of ethereum classic's network, and therefore was able to dominate decisions about what did and didn't belong on the digital coin's blockchain.

Such a "51 percent attack" can allow someone to falsify transactions and spend the same holding more than once, fundamentally damaging the usefulness of a digital payment system — and people's trust in it. read more »