Trump world tries to nook crypto | USAEMALL.com

One scoop to start: Citadel Securities’ profits jumped nearly 70 per cent in the first quarter to $1.7bn, as the high-speed trading firm benefited from a surge of volatility across financial markets as Donald Trump retook office.

Another scoop: McKinsey has cut more than 10 per cent of its staff in the past 18 months, reversing a big expansion plan that peaked during the coronavirus pandemic when consulting services were in high demand and the firm increased its workforce by almost two-thirds.

And a third: Private equity groups TPG and Blackstone made an approach to take Hologic private, offering to purchase the US medical technology group for more than $16bn, according to people familiar with the matter.

In today’s newsletter:

Spacs, Trump and crypto converge in Vegas

Trump world is in Las Vegas this week for the self-proclaimed world’s biggest Bitcoin conference. 

To create sufficient hype for the confab, as if there wasn’t enough already, the crypto crowd has revealed a series of deals in recent days that further yoke Donald Trump and his acolytes to the asset class. 

But before we get into those deals, let’s first go over who will be in Vegas. 

Members of Trump’s inner circle in DC, including vice-president JD Vance and White House crypto tsar David Sacks, are both supposed to attend, and so will the president’s sons Donald Trump Jr and Eric Trump. 

And there will, of course, also be high-profile figures who sit just outside the bounds of Trump’s inner circle but who have undeniably close ties to the administration, such as Brandon Lutnick, the chair of Cantor Fitzgerald.

In Vegas, the US government will give its full-throated blessing of an asset class that’s been treated as second-tier and outright speculative. 

The president has already put his money where his mouth is. 

While you were perhaps out on a boat for Memorial Day, DD’s Antoine Gara and a team from the FT scooped that Trump’s family media company planned to raise billions to buy cryptocurrencies such as bitcoin.

It was a clear sign that Trump Media & Technology Group was betting on the digital assets repeatedly championed by the president’s administration. It follows a series of crypto plays such as a Lutnick-backed blank cheque vehicle called Twenty One Capital aiming to replicate the ferocious bitcoin buyer MicroStrategy, now known as Strategy.

TMTG said in a statement on Monday afternoon that “apparently the Financial Times has dumb writers listening to even dumber sources”. On Tuesday morning, the deal was officially announced.

Then there was another deal unveiled on Tuesday by Vivek Ramaswamy’s Strive Asset Management and Nasdaq-listed investment group Asset Entities.

The two firms, which announced a proposed merger earlier this month, said they hoped to raise as much as $1.5bn to support a “first wave of bitcoin acquisitions” targeting ailing biotech companies trading below their cash value. 

The concept, of course: exit the biotech operations and plough the cash into crypto.

How do you make half a billion dollars disappear? 

For the roster of blue-chip investors in Builder.ai, which has collapsed in a suspected revenue inflation scandal, the answer is painfully simple: entrust it to a firm that employs a “chief wizard”.

A little more than a year ago, Sachin Dev Duggal, the charismatic founder and chief wizard of artificial intelligence start-up Builder.ai, was feted at the World Economic Forum in Davos as a visionary genius. 

He was lauded for seizing on the burgeoning potential of AI technology years before ChatGPT was a twinkle in Sam Altman’s eye.

Now the company he founded is on the verge of insolvency, with the more than $500mn invested by the likes of the Qatar Investment Authority, Insight Partners and SoftBank expected to be flushed away.

(Note that $75mn of this was invested mere months ago in a bid to rescue the company as it faced dwindling cash balances and mounting debt).

Even OpenAI’s principal backer Microsoft got in on the action with a strategic partnership and equity investment in Builder.ai in 2023.

If you’re new to the Builder.ai story, there’s a lot of FT reporting to catch up on. 

DD’s Alexandra Heal led a series of probing investigations into Duggal and his company last year. She revealed that he was named by authorities in India in relation to a high-profile criminal probe and had been dogged by legal disputes during a meteoric business career. (Duggal has denied wrongdoing in all cases).

Then last week came the big reveal. The FT reported that prior to its collapse, an internal investigation at Builder.ai found evidence of potentially bogus sales and indicated that there might have been a concerted effort to inflate revenues.

But don’t count out Builder.ai’s fallen chief wizard just yet: the FT also broke news last week that Duggal had sounded out investors on a potential deal to buy the failed UK software company out of insolvency.

Gone are the days when Builder.ai boasted of centimillion dollar funding rounds. Duggal conveyed to one potential investor that his bold gambit required less than $10mn in initial funding. 

Litigation finance funds mega payouts

Since insurers are in the business of covering clients against unexpected losses, they don’t usually get much sympathy when they face big claims. 

But the sector has been increasingly annoyed at the chunky payouts they’ve faced from US lawsuits. Americans have always loved to take things to court, but insurers say legal payouts are getting costlier in a trend fuelled by litigation funding.

(They also blame “negative societal attitudes with anti-corporate sentiments, distrust in institutions and general dissatisfaction”.)

The fight turned public when the boss of the world’s biggest publicly traded litigation funder told the FT that recent remarks from Chubb chief executive Evan Greenberg had amounted to “an inappropriate use of corporate power” and could be anti-competitive.

Burford Capital chief executive Chris Bogart was referring to comments Greenberg made at a trade conference in Chicago earlier this month, during which he urged brokers and insurers to cut ties with the litigation funding industry.

Greenberg added that Chubb would sever ties with lawyers, bankers or asset managers if they continued working with funders.

Big companies such as Microsoft and Amazon have been hit with eye-popping damage awards by US juries, and Aon, the world’s second-largest broker, last year stopped offering insurance cover for litigation funders.

The broker said litigation funding had created “an unsustainable marketplace for our corporate and insurance clients”.

But insurers aren’t ready to cut ties with litigation funders just yet, since several have developed lucrative products tailored to the sector.

Assets held in insurance “wrappers”, which can cover losses above a set threshold on pools of uncorrelated legal investments, are one such product that has grown.

They’ve become so prevalent that private credit funds such as Mubadala-backed Fortress Investment Group have lent money against litigation funding portfolios with insurance wrappers, one market participant said.

Job moves

• Chinese billionaire Li Zhenguo has stepped back from the day-to-day management of the solar group Longi as the industry faces turmoil with falling profits and factory overcapacity undermining years of rapid growth.

• JPMorgan Chase has hired Lyndon Park as managing director for shareholder M&A capital markets. He previously worked as managing partner for global ESG advisory and shareholder activism at ICR. 

• Bow River Capital has tapped Mark Hantho as executive chair. He was most recently vice-chair of banking, capital markets and advisory at Citi.

• Mayer Brown has hired Aideen Brennan as partner for the firm’s global corporate and securities practice in New York. She joins from Sidley Austin. 

Smart reads

Losing streak The Luxembourg start-up founded by Reform UK treasurer Nick Candy lost millions of pounds over a decade, the FT reports.

Public spat Rating agencies remain essential gatekeepers in the financial ecosystem, Lex writes. Bickering between them is a healthy sign for the private credit industry.

Reconsidering America The US was once a haven for foreign investors, with Asia ploughing trillions of dollars into the country, Bloomberg reports. That bet is starting to unravel. 

News round-up

AI boom adds €150bn to value of four of Europe’s oldest industrial groups (FT)

BBVA-Sabadell deal to face scrutiny by Spanish cabinet (FT)

Shareholders back 7-Eleven owner’s management amid $50bn takeover battle (FT)

US Supreme Court clears way for Rio Tinto’s Resolution copper mine (FT)

Grosvenor’s profits increase sharply due to fast-rising rents (FT)

US government will not renew Chevron’s Venezuela oil licence (FT)

EU investigates Pornhub and other porn sites over child safety (FT)