Episode Transcript
[00:00:00] Foreign welcome to the John Lothian Daily Update podcast for December 24, 2024. I am your host, John Lothian. In today's John Lothian Newsletter Update, we'll explore the commutation of Eric Bloom's sentence and why I think that was a bad move. Don't forget to subscribe to the John Lothian Newsletter and Follow us on johnlothianews.com or marketwicky.com, linkedIn, Facebook, Instagram X and threads. Let's dive in. Here are the hits and takes comments from today's JLN I am sure there are many cases among the 1499 sentences commuted by President Joseph Biden that brought forth significant or emotional responses from the affected communities or families impacted by the crimes committed. Let me share with you a statement about the crime committed by Eric A. Bloom and the impact it could have had on the futures industry as a whole, as testified by Robert Wasserman, Chief counsel for the CFTC's Division of Clearing and Risk, his declaration is part of the Government's position paper as to sentencing factors concerning defendant Eric A. Bloom.
[00:01:27] Exhibit C, Declaration of Robert B. Wasserman Mr. Wasserman, the CFTC's chief counsel for its Division of Clearing and Risk, points out that maintaining segregation of funds serves as the commodity customers legal protection against insolvency by fcms and that there is no protection available unlike the protection afforded by the FDIC or to bank deposits or to securities investors by the securities Investor Protection Corporation. As of August 13, 2007, the day bloom announced that Sentinel was halting customer redemptions, Sentinel held approximately 560 million in customer funds deposited by its FCM customers for trading on US exchanges. On August 16, 2007, Bloom agreed to sell the hedge fund Citadel, a portfolio of securities held for the benefit of Sentinel's FCM customers. The sale netted approximately $350 million. A portion of the sale proceeds was distributed to the FCM customers, but for the distribution of the sale proceeds, Sentinel's FCM customers collectively would have been under segregated by approximately $156 million as of August 24, 2007, and approximately 12 of Sentinel's FCM customers had insufficient funds to cover the loss of of customer funds they entrusted to bloom. Those 12 FCMs would have defaulted on their customer fund obligations to their own customers were it not for the Citadel sale and distribution, and would most likely have been placed in bankruptcy. According to Mr. Wasserman, the simultaneous failure of such a substantial number of FCMs would have had a devastating effect on customer confidence and Citadel's violative conduct thus put the entire futures market in jeopardy.
[00:03:54] It was pointed out to me that FCMs were not the only entities to lose money in the Sentinel fraud. Also losing money were hedge funds, pension funds and other similar investment vehicles. One of the funds to lose money was Lakeshore Asset Management, which itself was a fraud. I remember discovering a connection between the two during a search one morning while editing jln, and I believe I was the first to publicly report the connection. Given the magnitude of Bloom's fraud, I would not have put him on my list to get a commuted sentence. End of Presidential term Christmas season or not, Germany has its own Magnificent Seven that has propelled the DAX, the Financial Times reported Germany's DAX index defied economic gloom in 2024, rising 18.7% driven by seven standout companies SAP, Rheinmetall, Siemens, Siemens Energy, Deutsche Telekom alliance and Munich Re. SAP alone accounted for nearly 40% of the index's gains, fueled by its transition to cloud based services and its position as Europe's largest tech company. Siemens Energy surged 329% due to renewable power demand, while Rheinmetall rose 107% on increased European defense spending. The rally reflects a shift in the DAX from heavy industry to financial and tech driven firms.
[00:05:36] The lead story from Vicky Ji Hong of the Wall Street Journal about Justin Sung contained this nugget of information.
[00:05:48] Almost half of all illicit crypto volume occurred on the Tron Block blockchain last year, according to crypto analytics firm TRM Labs.
[00:06:01] This is the network developed by sun who bought the banana art for 6.2 million and allegedly caused CoinDesk top editors to be fired. He also invested $30 million in the Trump family backed crypto project World Liberty Financial in November after it had only raised 2020 million prior, but this allowed the Trumps to get paid. Needless to say, continue to pay attention to Mr. Sun as it seems like it is going to only get more interesting in the coming months.
[00:06:37] Tomorrow is Christmas and we will not be publishing JLN or JLN options during the break between Christmas and New Year's. We will be publishing JLN options only next Monday. We will be publishing JLN on its regular schedule throughout the rest of the year other than New Year's Day.
[00:06:56] Our most read stories from our previous edition of JLN Options Max Payne Largest Bitcoin options expiry in history to conclude a Volatile year from Bitcoin.com News Investment Advisors to supplant hedge funds as top BTC ETF holders in 2025 CF benchmarks from CoinDesk and Bitcoin pair's early loss after weekly drop since Trump won from Bloomberg. Subscribe to the free JLN Options newsletter with a link in today's jln. Here are more stories from the First Read section of today's jln. Here's an interview I Crossroads of Innovation Cathie Wood, Peter Zehan and Jamie Metzl share visionary insights at Miami Summit In a recent interview with John Lothian News, James Putra, vice president and Head of product at TradeStation, discussed key insights from several prominent speakers at the recent Crossroads Summit focused on innovation and economic trends, including investor Cathie woods, author Peter Zehan and Jamie Metz, founder and chair of One Shared World. You can watch this video on johnlothiannews.com Here's a story from abovethelaw.com Prestigious litigation boutique offers eye popping bonuses that blow away the market scale now these are some very generous bonuses.
[00:08:29] Money Stack Big law may seem like the place to be when it comes to high salaries and even higher bonuses, what with Milbanke's generous year end and special bonus scales. But once again, it's time for us to consider elite boutique law firms. We've got another bonus from a boutique that absolutely blows away the current market standard. Sussman Godfrey has entered the scene to wow its associates and the market at large, to be frank, with an astounding bonus scale. We're told these numbers exceed the prevailing market scale, including base and special bonuses. This year the firm is sharing bonuses with associates that reach a median of $260,000 by graduation year.
[00:09:23] The associates at the law firm behind the CME member class action lawsuit are doing quite well.
[00:09:34] Here's the next story, this one from the Financial Times. The headline New York Vows to fill the gaps left Donald Trump's regulation Rollback Heads of states powerful financial regulator could seek new powers to scrutinize banks and crypto groups New York's financial watchdog is ready to fill the gaps left by the incoming Donald Trump administration's planned deregulation spree, its chief has said, by increasing its scrutiny on banks, insurance companies and cryptocurrency groups that transact in the world's commercial capital. Adrian Harris, head of the state's Department of Financial Services, which licenses many of the globe's largest financial institutions, including Goldman Sachs, ICBC and Deutsche bank, told the Financial Times that a rollback of federal regulations would switch certainly increase the volume of consumer protection cases that we may bring on the enforcement side, unquote. My comment the new federal crypto regulation will take care of upstarts like New York's regulators, unquote.
[00:10:52] Here's another story, this one from Bloomberg. The headline Bitcoin Boom validates Wall Streeters who jumped into crypto finance. Veterans who left traditional jobs to work with digital assets have enjoyed the 2024 rally. They went to Ivy League schools. Top Wall street firms recruited them. They grinded out for years and rose up the ranks. And then before it all melted down, they took the plunge into crypto. It was a big career risk and one that not so long ago looked like a bust. FTX collapsed. Bitcoin plummeted below $16,000. Their families, friends and former colleagues seem to arrive at the same conclusion. You made a big mistake.
[00:11:42] Big risk, big reward.
[00:11:44] Bigger risks, no reward.
[00:11:48] It all depends on which side of the virtual coin comes up heads.
[00:11:53] Here are the top three stories from Monday's jln. Our top story Monday was from the White House Fact sheet President Biden announces clemency for nearly 1500Americans. Merry Christmas to those people, I guess. Second was from AP via Yahoo News ex OpenAI engineer who raised legal concerns about this the technology he helped build has died. Third was a looming threat to bitcoin, the risk of a quantum hack from the Wall Street Journal. Happy holidays to all. Here are the top three stories from the lead section of today's jln. The first is from the Wall Street Journal as referenced Justin Sun Wants to Be the Musk of Crypto the Tron Blockchain Entrepreneur Court z attention and Backs the President Elect President Elect Donald Trump's newest ally in the cryptocurrency markets is a Chinese born entrepreneur who has been accused of fraud by US regulators and recently spent $6.2 million on a banana. Justin sun, founder of the Tron blockchain, invested $30 million in the Trump family backed crypto project World Liberty Financial. It's in November Son stepped in when the project appeared to struggle to meet its fundraising targets, imperiling a potential payout for the Trump clan. The Trumps now stand to get paid and Son serves as an advisor to World Liberty. Son could use more friends in Washington. The securities and Exchange Commission sued him and three of his businesses in 2023. The agency alleges he sold unregistered securities, manipulated token prices and paid Lindsay Lohan and other celebrities to promote his schemes.
[00:13:52] Here's another story, this one from Bloomberg. The headline China's wild markets send Hong Kong derivatives to third record year trading of Futures and Options on Cities Borscht jumps 14% equities turnover surged with volatility on China Stimulus For a third year in a row, trading of derivatives in Hong Kong has hit a record more than 377 million futures and options have changed hands on the city's Boris since January, up 14% from 2023, data from Hong Kong Exchanges and Clearing Limited show. That happened as stock volatility gauges hit their highest levels in more than two years in October. China's pledge to revive its economy initially spurred a wave of euphoria among traders, but that quickly waned with the government's slow pace of implementation. Equity gyrations jumped as trading of shares hit levels never seen before, increasing the need to hedge. Some investors use derivatives to bet on the market in a cautious way, according to Society General SA's Frank Benzema.
[00:15:09] Here's one more story, this one from Bloomberg New York Fed's tweak to key repo facility hampered by its design bank to offer second standing repo operation Dec. 30 Jan. 3 late settlement unlikely to ease any potential repo squeeze the Federal Reserve bank of New York's plan to conduct additional liquidity operations through the end of the year will provide needed support at a time when funding markets tend to be volatile, though its current framework will limit the effectiveness of the measures. The standing Repo Facility, or srf, allows eligible banks and primary dealers to borrow funds overnight in exchange for treasury and agency debt at a rate set by the Fed. The goal of having a rate set by the Fed is to contain the overall repo market from pushing outside the central bank's target range. This podcast is brought to you by John Lothian News, the home of Markets Wiki and Markets Wiki Education. Thank you for joining us. If you enjoyed this episode, please leave us a review on your preferred listening platform. Have a great day and stay safe and treat people the same way you want to be treated with respect, equality and justice. This has been John Lothian Goodbye. This podcast has been produced by John Lothian.
