Connect with us

News

SEC lawsuits escalate Gary Gensler’s assault on crypto markets

Published

on

SEC lawsuits escalate Gary Gensler’s assault on crypto markets

The US securities regulator’s lawsuits against crypto exchanges Binance and Coinbase this week marks its most aggressive legal assault on the digital asset market.

The Securities and Exchange Commission accused Binance and Coinbase, two of the industry’s biggest companies, of violating US securities laws, offering unregistered securities and operating as unregistered venues, among other charges. The duo account for half of global trading in digital assets.

Binance was also accused of mixing billions of dollars of customer cash with a separate trading firm owned by its chief executive and inflating its US platform’s trading volume.

The cases are the most high profile enforcement actions by the agency after repeated warnings from chair Gary Gensler that crypto exchanges and the tokens they were trading were likely falling foul of US federal laws.

After his appointment two years ago, Gensler frequently urged platforms to register with the agency and flagged that most digital tokens qualify as securities. His language hardened in recent months after the failure of the FTX crypto exchange last November.

Advertisement

After two big lawsuits in two days, the former Goldman Sachs banker-turned-regulator, who built a reputation in Washington for a hard-charging approach, was strident.

“We don’t need more digital currency,” Gensler told CNBC on Tuesday. “We already have digital currency. It’s called the US dollar. It’s called the euro or it’s called the yen, they’re all digital right now.”

Critics have bristled at the SEC’s approach, accusing the agency of failing to define the rules for their long-term policy for the crypto industry and instead regulating the market through enforcement actions.

“Regulation by enforcement is not an appropriate way to govern a market,” said Glenn Thompson, chair of the House of Representatives Committee on Agriculture at a hearing on the future of digital assets in Washington on Tuesday.

One of the crypto industry’s biggest complaints has been a perceived lack of clarity from the US regulator over what counts as a security. With the two lawsuits, the SEC laid out a list of more than a dozen coins it considers securities, including popular crypto tokens Solana, Cardano and Polygon.

Advertisement

By naming them, some lawyers think the agency has left the door open to target other crypto trading venues.

“These are complaints that strike to the very heart of the crypto exchange business model,” said Peter Fox, partner at law firm Scoolidge, Peters, Russotti & Fox. “They didn’t choose obscure digital assets that might only be on Binance to make their case, they chose well known, widely traded assets that are likely to be listed on many exchanges.”

But Gensler believes existing rules are sufficiently clear.

“I think there’s been clarity for years,” Gensler told CNBC, adding that investors are protected by securities laws and “crypto should be no different”.

Brian Armstrong, chief executive of Coinbase, said the SEC was relying on an “enforcement-only approach” that was “harming America” and that “the SEC and [Commodity Futures Trading Commission] have made conflicting statements, and don’t even agree on what is a security and what is a commodity”.

Advertisement

He added: “So if we need to avail ourselves of the courts to get clarity, so be it.”

Binance said the SEC’s actions “appear to be part of a rushed effort to claim jurisdictional ground from other regulators — and investors do not appear to be the SEC’s priority”.

Both exchanges have indicated they will fight the SEC’s charges in court. Coinbase has also said it will continue to lobby politicians to pass clearer rules for the crypto market in the US.

Gautam Chhugani, senior analyst of global digital assets at Bernstein, said: “The exchanges are going to dispute this and that dispute can only be resolved by Congress or the judiciary, whichever is earlier.”

But with lawmaking and enforcement cases likely to take years, some observers expect the regulators to file more cases in the meantime.

Advertisement

In recent months, US regulators have embarked on enforcement actions against crypto companies operating in the country including exchange Bittrex and Gemini, the crypto venue founded by the Winklevoss twins.

The SEC claimed Gemini and crypto lender Genesis ran a cryptoasset lending programme that was not registered as a securities offering, while the CFTC, the US derivatives regulator, in March sued Binance, accusing it and its chief executive Changpeng Zhao of operating illegally in the US.

“It is a very clear clampdown on the space and I don’t think the SEC is likely to stop here,” said Mark Palmer, analyst at Berenberg, about the Coinbase and Binance lawsuits. “I don’t know how any crypto exchange could think other than that it could be the next to be tapped.”

Crypto companies argue there is no easy path for them to register with the SEC, and that they find themselves in a precarious position. Gensler on Tuesday compared crypto venues unfavourably to traditional stock markets such as the New York Stock Exchange. The latter does not operate a hedge fund or make markets, he said.

He said: “If there’s real value in the crypto tokens, then compliance will build trust and the business model might change. It’s the hard work of earning the investing public’s trust.”

Advertisement

Fox, at law firm Scoolidge, said that even if crypto exchanges stripped down their services to resemble a traditional exchange “they would still have a massive problem because . . . you can only list classes of securities that are registered under the exchange act.”

“If the [crypto] exchanges registered as exchanges, they wouldn’t be allowed to conduct their business in any form remotely resembling what they do,” he said.

Additional reporting by Scott Chipolina in London

Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

News

Gantz threatens to quit Israeli government if no new war plan by June 8

Published

on

Gantz threatens to quit Israeli government if no new war plan by June 8

Unlock the Editor’s Digest for free

Benny Gantz has threatened to leave Israel’s emergency government if Prime Minister Benjamin Netanyahu did not commit to a new plan for the war with Hamas in Gaza and its aftermath.

In a televised statement on Saturday evening, Gantz, an opposition figure and former general who joined Netanyahu’s coalition in the aftermath of Hamas’s October 7 attack on Israel, said that his centrist National Unity party would leave the government if his demands were not met by June 8.

Gantz’s ultimatum brings to a head months of tensions within Netanyahu’s government over the handling of the war, and comes just days after defence minister Yoav Gallant slammed Netanyahu for the lack of a postwar plan for Gaza, the enclave Hamas has ruled since 2007.

Advertisement

This is a developing story . . .

Continue Reading

News

Six-month-old baby shot repeatedly during Arizona standoff with child’s father

Published

on

Six-month-old baby shot repeatedly during Arizona standoff with child’s father

A six-month-old baby is currently hospitalized after a man allegedly shot the infant several times during an armed home standoff in Surprise, Arizona, about 30 miles north-west of Phoenix.

At about 3am on Friday, the father of the child allegedly broke into the home where the child and mother lived, according to Surprise police. The child’s father did not live in the house, police said, adding that the man held the mother and child hostage for several hours before the mother managed to escape.

According to police, the mother contacted a construction crew and requested that they call 911. They added that she had minor injuries and it remains unclear how she managed to escape.

In a press conference on Friday, Surprise police spokesperson Rick Hernandez said: “She believed the baby was in danger … Officers responded to the residence and, upon arrival, they heard multiple rounds of gunfire coming from inside the residence.”

Hernandez continued: “That was when the officers forced entry. Upon forced entry, our understanding is that officers almost immediately located the injured child, took that injured child and got the child to care.”

Advertisement

“That baby sustained multiple gunshot wounds and was airlifted to a nearby hospital with serious injuries,” he said, adding that the child’s injuries, which were in its lower extremities, were believed to be non-life-threatening.

While police, including multiple Swat teams, were at the scene, the house caught fire as the child’s father was still inside.

Describing the scene to Arizona’s Family, the news outlet’s drone operator, Hector Holguin, said: “Next thing you know, there was smoke. And after the smoke, there’s a huge ball of fire coming from the back of the house and it just spread from the back all the way to the front … It just progressed. It collapsed the roof.”

As the house burned, a number of nearby residents self-evacuated when they were contacted by police while others chose to shelter in place, said Hernandez, adding: “As the incident progressed, many were asked to leave.”

skip past newsletter promotion
Advertisement

Firefighters were able to control the flames by using two ladder trucks to hose down the house as well as the house next door, and were largely able to put out the fire by 4:30pm, Arizona’s Family reports.

It remains unclear how the fire started or what condition the father is in. According to police, an investigation remains under way and the father is not in custody.

“Once the [tactical units] get the clearance to go into that residence, we might have an update on him,” Hernandez said.

Advertisement
Continue Reading

News

Pietro Beccari: ‘There is no household in the world that doesn’t have [contact with] Louis Vuitton’

Published

on

Pietro Beccari: ‘There is no household in the world that doesn’t have [contact with] Louis Vuitton’

It was the image that launched a social media sensation: football superstars Cristiano Ronaldo and Lionel Messi hunched over a chess game set atop Louis Vuitton’s signature luggage. 

That 2022 campaign image broke the record at the time for most likes on Instagram. Now the world’s biggest luxury house, with more than €20bn in annual sales, is looking to capitalise once again on one of the sporting world’s biggest duos in a new campaign featuring rival tennis virtuosos Rafael Nadal and Roger Federer. 

The pairing is a coup for Vuitton chief executive Pietro Beccari. It has been just over a year since he took on one of the luxury sector’s biggest jobs with a mandate to further grow the LVMH-owned brand — which had its origins as a 19th-century luggage-maker — by transforming it into a cultural juggernaut.

“There is no household in the world that doesn’t have [contact with] Louis Vuitton products,” Beccari tells the FT in a video interview from Paris. “There are not a lot of brands that can say they enter the lives of people like we do.”

Beccari is not just talking about sales of handbags and ready-to-wear fashion — though those more than doubled between 2018 and 2022, according to estimates from HSBC. Now, under the guidance of LVMH chief executive Bernard Arnault and Beccari’s leadership, Louis Vuitton is further pushing back luxury’s boundaries in a bid to reach an ever-wider audience.  

Advertisement

“We are in books, in writing, in editing. We are in music,” the 56-year-old Italian executive says. “We are very much in sports . . . so we are very much covering a spectrum of life that interests people. It is like a magnet for them to become attracted to the brand.”

Beccari’s popular approach to the luxury brand was epitomised by his appointment last year of musician and producer Pharrell Williams to design menswear. What Williams lacked in technical design knowledge he made up for in cultural cachet, transforming catwalk shows into entertainment events featuring elaborate stagings and musical guests such as Jay-Z. The appointment has divided the fashion world, however, with critics lamenting what they saw as the triumph of spectacle over craft at LVMH’s flagship brand. 

Pharrell Williams at Louis Vuitton’s autumn/winter 2024 menswear show in Paris © WireImage

For Beccari, however, weaving a deepening web of overlaps between popular culture, entertainment and brand identity is strategic and key to the megabrand’s future: “For every show Pharrell has done so far, we have always had new songs coming out” — the latest of which was produced for Miley Cyrus and played for the first time at Louis Vuitton’s latest autumn/winter 2024 menswear show. 

Within the same season, “Pharrell also launched the cowboy hat and now you’re seeing that in the US just about everywhere. Even Beyoncé has an album supporting cowboy culture [for which Pharrell has also written a few songs]”, says Beccari. “These are examples of our brand in luxury, not just in selling bags, but having an influence on culture.”

However, the increasing ubiquity of Louis Vuitton presents its own challenge as the brand attempts to balance accessibility against losing the veneer of exclusivity that is essential to commanding the prestige and price points of luxury. “We’ll see if I’m good at it or not in two to three years . . . but this is an eternal dilemma,” says Beccari.

Advertisement

One of his bets is on creating limited distribution of entry-level products, such as sunglasses and fragrance, in order to create scarcity. This has seen “incredible success”, he notes. “Normally a successful perfume would be in 80,000 or 90,000 stores. We limit it to around 400.” (Louis Vuitton’s store network is much larger than luxury peers such as Hermès and Chanel).

A classic black-and-white photo portrait of a man in a dark jacket and dark buttoned-up shirt
Louis Vuitton’s CEO Pietro Beccari © Nathaniel Goldberg

Louis Vuitton’s control of its distribution network and policy of never discounting its products are another advantage, according to Beccari. He also points to its care system, which allows customers to bring back products purchased from the brand to be repaired. 

“We need to preserve our desirability despite our visibility and that’s the biggest challenge that we have,” Beccari says. “We are making sure that the levers we put in place will pay off in the long term, and I believe that this campaign [with Nadal and Federer] will help increase the desirability of the brand in the long run.”

Still, taking Louis Vuitton to the next level is being made more challenging due to a sector-wide slowdown in luxury sales following a multi-year boom during the pandemic. Brands with a broader, more aspirational client base such as Louis Vuitton have been hit harder by the slowdown than competitors like Hermès, which cater to the top tier of wealthy clients. 

The darkening outlook in the key Chinese market, which fuelled growth for much of the past decade, also presents a challenge to the sector as a whole. “Beccari comes at a pretty difficult time because the industry is going through quite a bit of a slowdown, and notably the rebound in Chinese consumption is not at the level most industry managers would have hoped for a few months ago,” says Erwan Rambourg, global head of consumer and retail research at HSBC. 

Beccari, however, has a naturally competitive nature, having previously been a professional footballer in Italy’s second division in his early life, as well as a coach. Born in a small town in Italy’s Parma region, Beccari was recruited to LVMH from mass market shampoo-maker Henkel in 2006.

Advertisement

He quickly rose through the ranks at the luxury group, first leading fashion brand Fendi before being appointed CEO of Dior, the group’s second-biggest brand by sales, in 2018. Under his leadership, Dior’s sales quadrupled, according to HSBC estimates, by expanding its market share across women’s and men’s fashion, leather goods, jewellery and homewares. He also oversaw the renovation of Dior’s flagship at 30 Avenue Montaigne in Paris, which includes a museum, restaurant and private suite. 

Beccari has similar ambitions to leverage Louis Vuitton’s pedigree to expand its offering in hospitality. It already operates an airport lounge in Doha and restaurants in Osaka, Chengdu and Seoul. A large-scale project on Paris’s Champs Elysées, still currently under construction, is widely expected to include a Louis Vuitton-branded hotel.

“We have plans in the Champs-Elysées — it is not a secret,” says Beccari. “We are already active in lifestyle and believe that we need to be about much more than just buying bags.”

Two men holding tennis racquets against a snowy mountain backdrop
A behind-the-scenes photo of Roger Federer and Rafael Nadal © Annie Leibovitz

With Federer and Nadal, Beccari is making good on a project he first conceived back in 2007, when he was executive vice-president of marketing and communications at Louis Vuitton, with Antoine Arnault, Bernard Arnault’s eldest son and then-director of communications at Louis Vuitton.

It is a revival of the Core Values campaign that first began in 2007 and ran into the 2010s. The latest iteration shows Federer and Nadal, photographed by Annie Leibovitz, trekking through the jagged peaks of Italy’s Dolomites mountain range, both sporting branded backpacks (Federer in a classic monogram Christopher style and Nadal in a monogram Eclipse version).

Was it difficult getting the two superstars together? “Not at all,” insists Beccari. “They are good friends and see each other privately. It was a rivalry that became a friendship. They are proud of it and I think they set an incredible example.”

Advertisement

“We sell excellence, quality, success and optimism. In a way, the notion of travel and adventure in life is a mirror of that,” Beccari continues, and the driving force behind LVMH’s sponsorship of this summer’s Paris Olympics. 

For the executive, Nadal and Federer epitomise the Olympic spirit. “I think nobody more than them represents this extreme, ferocious competition that becomes friendship, which is exactly what sports should be.”

Find out about our latest stories first — follow @financialtimesfashion on Instagram — and subscribe to our podcast Life & Art wherever you listen

Advertisement
Continue Reading

Trending