$1.35 Billion Settlement by Banks in Stanford Financial Litigation Avoids Trial Next Week

TD, other banks reach $1.35 bln settlements to end Stanford litigation

Three banks agreed to pay $1.35 billion to resolve litigation by former Allen Stanford investors who accused them of contributing to the imprisoned financier’s massive Ponzi scheme.

Canada’s Toronto-Dominion Bank will pay $1.205 billion, HSBC Holdings Plc (HSBA.L) will pay $40 million and Independent Bank Group Inc (IBTX.O) , formerly Bank of Houston, will pay $100 million.

Money will go to a court-appointed receiver who is repaying victims of Stanford’s $7.2 billion fraud, which was uncovered in Feb. 2009, two months after the arrest of Bernard Madoff.

Stanford’s Ponzi scheme was at the time considered the largest other than Madoff’s.

The settlements require a judge’s approval.

They avert a trial that had been scheduled for Monday in Houston federal court, where TD, HSBC and Independent Bank were the last remaining defendants.

Robinhood Subpoenaed by SEC Over Brokerage’s Crypto Business

Robinhood Markets Inc. said the Securities and Exchange Commission was probing its cryptocurrency business, in the latest signal that the regulator is drilling deeper into virtual asset platforms.

The brokerage received an investigative subpoena in December related to its cryptocurrency listings and custody, among other topics, Menlo Park, California-based Robinhood said Monday in a filing. The SEC inquiry came shortly after crypto exchange FTX filed for bankruptcy, spurring a wave of regulatory action.

Gary Gensler on Meeting With SBF and His Crypto CrackdownThe new Congress is looking again at crypto-specific legislation, but Gensler believes that the SEC has all of the legal tools that it needs. Over the course of our discussion, he articulated a straightforward view of the agency’s reach — that pretty much every sort of crypto transaction already falls under the SEC’s jurisdiction except spot transactions in bitcoin itself and the actual purchase or sale of goods or services with cryptocurrencies.“Everything other than bitcoin,” Gensler told me, “you can find a website, you can find a group of entrepreneurs, they might set up their legal entities in a tax haven offshore, they might have a foundation, they might lawyer it up to try to arbitrage and make it hard jurisdictionally or so forth….”***“They might drop their tokens overseas at first and contend or pretend that it’s going to take six months before they come back to the U.S.,” he continued. “But at the core,” he argued, “these tokens are securities because there’s a group in the middle and the public is anticipating profits based on that group.” The claim that crypto investors are hoping to profit based on the efforts of those intermediaries — in much the same way that stockholders in public companies hope to see their investments appreciate over time — is central to Gensler’s position that, as a legal matter, these are actually transactions in securities that fall within the SEC’s jurisdiction.

SPAC Era Ends as Companies That IPO’d StruggleInternet service provider Starry Group Holdings Inc. on Feb. 20 became the latest to seek protection from creditors, bringing the count of failed SPAC offspring to at least eight since June 2022. The trend is likely to be just getting started. Almost 100 companies that listed this way don’t have enough money on hand to fund their current level of spending over the next year, data compiled by Bloomberg show. That’s on top of the 73 companies that currently trade below $1 a share, risking a potential delisting from major exchanges such as the New York Stock Exchange and Nasdaq. Since the baseline share price of most SPACs before a merger is $10, a price below $1 also means that an investor who bought into the shell company in anticipation of a deal and held on for the full ride lost at least 90%.

“The value destruction has been spectacular,” says Dan Zwirn, co-founder of Arena Investors LP, a debt-focused investment firm. The way Zwirn sees it, troubled SPACs are usually one of two types: totally speculative businesses or reasonable ones that were grossly overvalued. The former will go bankrupt or be quietly wound down, while the latter can be sold for low prices, he says. So far, at least 12 companies that did SPAC mergers have agreed to buyouts for less than they were worth when they listed, according to data compiled by Bloomberg.

Elizabeth Holmes gives birth to second child while seeking to extend freedom

Theranos founder Elizabeth Holmes has given birth to a second child as she seeks to delay her impending imprisonment for felony fraud, according to a court filing this week.

Holmes, 39, had a first child — a son — in July 2021, as she awaited trial on charges of defrauding investors and patients in connection with her now-defunct Palo Alto blood-testing startup.

Between her conviction in January 2022 for defrauding investors out of more than $144 million, and her sentencing 10 months later to more than 11 years in prison, Holmes became pregnant again, according to a court filing. Judge Edward Davila, in passing sentence, delayed her incarceration until April 27, with legal experts saying he likely imposed the delay so Holmes could give birth before imprisonment. Holmes has appealed her conviction and sentence.

Wall Street Banks Are Cracking Down on AI-Powered ChatGPT

Bank of America Corp., Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc. and Wells Fargo & Co. are among lenders that have recently banned usage of the new tool, with Bank of America telling employees that ChatGPT and openAI are prohibited from business use, according to people with knowledge of the matter.

In a regular, routine reminder of unauthorized apps including WhatsApp, BofA added a reference to ChatGPT specifically, and has repeated in internal meetings that new technology must be vetted before it can be used in business communications, the people said.

At Deutsche Bank, staff aren’t allowed to use Chat GPT anymore and access to it has been disabled, a spokesperson for the lender said.