Sam Bankman-Fried found guilty

This is an audio transcript of the FT News Briefing podcast episode: ‘Sam Bankman-Fried found guilty’

Marc Filippino
Good morning from the Financial Times. Today is Friday, November 3rd, and this is your FT News Briefing.

The founder of FTX has been found guilty. Israel’s ground offensive is closing in on a major stronghold for Hamas. And central banks are hitting pause on interest rate increases. Plus, the European private equity group CVC Capital Partners is postponing its long-anticipated initial public offering. We’ll tell you why. I’m Marc Filippino and here’s the news you need to start your day.

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It looks like Sam Bankman-Fried is going to prison. A New York jury found the crypto tycoon guilty late last night and only took a few hours of deliberation. Bankman-Fried is going to appeal the verdict, but it basically wraps up the highest-profile crypto case so far. FTX had an $8bn hole in its balance sheet before the exchange collapsed last year. Bankman-Fried is facing years in prison over wire fraud charges and conspiracy to commit money laundering. He’ll be sentenced on March 28th.

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Israel is entering Gaza’s biggest city and trying to encircle it. Israel’s top military commander described the push into Gaza City as the next phase of the military’s ground offensive. But allies are calling for a break in the attacks against Hamas. US president Joe Biden said a pause in the fighting would help free the hostages being held in Gaza. US secretary of state Antony Blinken is visiting Israel today. He’s expected to relay that message to the country’s leaders during his trip.

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There’s been a lot of central bank activity recently, and most of the central banks had the same message overall: do not rock the boat. The Federal Reserve, the Bank of England and the European Central Bank all kept interest rates on hold. And we saw rallies in equities and government bonds on both sides of the Atlantic. Here to unpack what’s going on in global monetary policy is the FT’s new economics editor, Sam Fleming. Hey, Sam.

Sam Fleming
Hi.

Marc Filippino
All right. So like I said, the Bank of England, the ECB and the Fed all decided to hold interest rates steady. It’s the second consecutive month for the Fed and the BoE. Is this the end of rate hikes?

Sam Fleming
And not only actually those three, but also the Bank of Canada last week. So yeah, we’ve seen a real trend towards monetary policy on hold at the moment. And the natural conclusion that investors are coming to is that at least for some of these central banks, rates have indeed probably peaked and they’re becoming more confident that inflationary pressures are subsiding. Now, none of the central banks were anywhere near declaring victory in their battle after all the succession of interest rate rises. But I think you certainly saw, I think, within the ECB a little bit more confidence that inflationary pressures are now peaking than in the Federal Reserve, where the economic backdrop is a lot more buoyant. And then the Bank of England, it’s a complex picture because you have a weakening economy, but also quite persistent inflation.

Marc Filippino
OK. So investors think that the rate hikes are done, at least for now. But just last week, the US reported third-quarter GDP of 5 per cent, which is really high and inflation is still not at the Fed’s 2 per cent target. What do you make of that, Sam?

Sam Fleming
There’s quite differing pictures, and I think it’s important to stress this in this discussion between the different economies. As you said, the GDP numbers in the US were extremely strong. The picture in the eurozone is much weaker. The Bank of England’s forecasts on Thursday pointed to basically a flatlining economy alongside more persistent high inflation than it previously anticipated. The Federal Reserve seemed inclined to think that although there’s a strong labour market, part of that is actually an increase in the labour supply. So that could imply that inflationary pressures aren’t gonna be ignited as much as you’d might otherwise expect. Having said that, all three are very much retaining the option of further rate hikes and that very much at pains to stress to the markets that they’re not declaring victory over inflation. They retain the option to further tighten monetary policy if they want. And finally, monetary policy will remain on hold and restrictive for some time to come.

Marc Filippino
So Sam, what do you make of the market reaction? We saw government bond yields fall drastically and we saw equities shoot up.

Sam Fleming
Well, I think on the Fed’s side, part of the reason the markets are not pricing further or less likely to be pricing further hikes at the moment is because Jay Powell didn’t go out of his way to try and prepare the ground for further hikes. He seemed instead to be, again, retaining this as an option, but not strongly signalling that it was going to happen. And the thing is, markets will always pivot. And right now they’re pivoting to the view that if central banks aren’t preparing the ground for further hikes, the debate has to shift to when the first cut is going to be. And that is what central banks are trying to weigh against. And that is why, again, they’re retaining this option, at least in terms of their rhetoric, to further increase rates. And they are emphasising the battle against high inflation is not over and that they’re prepared to keep policy restrictive for a long time to come.

Marc Filippino
Sam Fleming is the FT's economics editor. Thanks, Sam.

Sam Fleming
Thank you.

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Marc Filippino
European private equity group CVC Capital Partners says it’s gonna delay its plan to list until next year. That’s what sources told the FT. And it says a lot about what’s going on in the IPO market right now. The FT’s private capital correspondent Will Louch broke the story and he joins me now. Hi, Will.

Will Louch
Hi, Marc.

Marc Filippino
So you spoke to people who know about the decision process here. What did they say about why CVC delayed its IPO?

Will Louch
So I think the reason why CVC delayed its IPO is that the market’s in a very tricky place right now and the IPO market itself has really slumped. And I think bankers had expectations of their revival earlier this year, that was in very closely watched public offerings of companies including chip designer Arm and sandal maker Birkenstock in September, which haven’t performed as well as people maybe thought they would be. What sources tell us about why CVC delayed its IPO is because they looked at some of their peers, Blackstone, EQT, for example, who posted quarterly earnings within the last couple of weeks, and they’ve basically seen asset share prices fall. I think it’s one of those things with CVC that business is performing maybe better than some of its peers. But yeah, it’s just very much a case of like, why now? Let’s revisit next year when conditions are improved.

Marc Filippino
So how big of a blow was postponing the listing for CVC? Was it even a big blow?

Will Louch
CVC’s business is actually performing very strongly. Earlier this year they raised €26bn for the largest private equity fund that’s ever been raised in history. And this is the time when lots of other firms are struggling to get investors to give them money. I mean, CVC’s like one of the world’s most powerful private equity groups, You know, it’s owned assets like Formula One, Lipton Tea. And it’s the most significant decision the firm’s really made since it spun out of Citibank around 30 years ago. The firm’s been gearing up for this for over two years. It’s already postponed it once. It postponed it last year after Russia invaded Ukraine. But as sources have told us all along, I mean, they’ve waited quite a substantial period of time already. So maybe next year.

Marc Filippino
So then, Will, is CVC’s postponement sort of like a sign of what’s to come for the wider industry? I mean, what is the state of private equity right now?

Will Louch
So I think if you look at the private equity industry, it’s been one of the biggest beneficiaries in global finance, really of the low interest rates that we’ve had for the past decade or so. Firms have been able to strike literally trillions worth of deals and raised trillions of dollars of funds for investors to do these deals. And I think a lot of this has been predicated on cheap debt and the availability of that. And now obviously we’re in a different market environment. This has all become a lot more difficult. I think IPOs in Europe are tracking at their worst in a decade. And until things pick up, then private equities is gonna have a tough time.

Marc Filippino
Will Louch is the FT’s private capital correspondent. Thanks, Will.

Will Louch
Thanks very much.

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Marc Filippino
Before we go, earlier this week, we told you about an artificial intelligence summit that’s going on in the UK. Well, it looks like something big came out of it. Companies are going to let governments test AI models for national security and other risks before those models go out to consumers. These are leading companies like OpenAI and Anthropic. The governments include the EU, the UK, the US and a few others, but not China. Something else that came out of the summit: a panel of experts will send out an annual report on the evolving risks of AI.

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You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back next week for the latest business news.

The FT News Briefing is produced by Kasia Broussalian, Sonja Hutson, Fiona Symon and me, Marc Filippino. Our engineer is Monica Lopez. We’d help this week from Sam Giovinco, David da Silva, Michael Lello, Peter Barber and Gavin Kallmann. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of audio. And our theme song is by Metaphor Music.

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