FTX founder Sam Bankman-Fried leaves following his arraignment in New York City on December 22, 2022.
Ed Jones | AFP | Getty Images
Of the billions of dollars in customer deposits that disappeared from FTX in a flash, $200 million was used to fund investments in two companies, according to the Securities and Exchange Commission, which charged founder Sam Bankman-Fried with “orchestrating a scheme to defraud equity investors.”
Through its FTX Ventures unit, the crypto firm in March invested $100 million in Dave, a fintech company that had gone public two months earlier through a special purpose acquisition company. At the time, the companies said they would “work together to expand the digital assets ecosystem.”
The other deal the SEC appears to have referenced was a $100 million investment round in September for Mysten Labs, a Web3 company. In total, it was a $300 million funding round that valued Mysten at $2 billion and included participation from Coinbase Ventures, Binance Labs and Andreessen Horowitz’s crypto fund.
While FTX Ventures has done dozens of transactions, according to PitchBook, the Mysten Labs and Dave investments were the only two disclosed investments of $100 million, based on documents published by the Financial Times, which broke down how the company put $5.2 billion to work. FTX Ventures was described as a $2 billion venture fund, in its press release with Dave.
Bankman-Fried, 30, stands accused of committing widespread fraud after FTX, which was valued by private investors at $32 billion earlier this year, sank into bankruptcy in November. A central theme in the charges is how Bankman-Fried diverted funds from FTX to his hedge fund, Alameda Research, which then used that money for risky trades and loans. FTX Ventures was allegedly part of that scheme.
Neither Mysten nor Dave have been linked to any alleged wrongdoing within Bankman-Fried’s empire. But the investmentsappear to bethe first identified examples of customer money being used by FTX and Bankman-Fried for venture funding. As investigators and FTX lawyers attempt to retrace the outflow of FTX funds, these identified investments and others in the $5 billion venture pool will attract heavy scrutiny.
In explicitly linking the two $100 million investments to customer money, the SEC has raised the possibility that they’ll be prospects for clawbacks. If FTX bankruptcy trustees can establish that client money funded Bankman-Fried’s investments, they could pursue recovery of those funds as part of an effort to retrieve customer assets.
A spokesperson for the SEC declined to comment.
Dave CEO Jason Wilk told CNBC that FTX’s investment in Dave is already scheduled to be repaid, with interest, by 2026. FTX’s $100 million investment was through a convertible note, a short-term loan of cash that FTX could convert into shares at a later date. That conversion was never made, leaving Dave with a $101.6 million liability, including interest, to FTX and any successor companies, according to the company’s most recent SEC filings.
Jason Wilk
Source: Jason Wilk
“The note issued to FTX is due for repayment in March 2026,” the company said in a statement. “No terms contained in the note trigger any current obligation by Dave to repay prior to the maturity date.”
Wilk added that, “it is important to state we had no knowledge of FTX or Alameda using customer assets to make investments.”
Bankman-Fried’s investment in Mysten Labs was an equity deal. Because Mysten is a privately held company, there’s no clearly defined process in U.S. bankruptcy code for clawing back those funds.
Mysten declined to comment. Lawyers at Sullivan & Cromwell, which represents FTX, did not respond to requests for comment.
An SEC complaint filed against two of Bankman-Fried’s lieutenants, Caroline Ellison and Gary Wang, specified that “two $100 million investments made by FTX’s affiliated investment vehicle, FTX Ventures Ltd., were funded with FTX customer funds that had been diverted to Alameda.”
Irrespective of what money was being used, FTX’s investments were ill-timed.
Dave shares have plummeted over 97% since the company went public, mirroring the performance of the broader basket of SPACs. In July, the Nasdaq warned Dave that if its share price didn’t improve, it was at risk of being delisted. The stock currently trades for 28 cents and the market cap sits at around $100 million.
Alameda Research had previously made a $15 million investment in Dave in August 2021, before the Nasdaq listing. Dave was founded in 2016 and offers customers a free cash advance on their future income as part of a suite of banking products. Mark Cuban led a $3 million seed round in 2017.
The investment could have been lucrative for FTX if Dave’s share price had improved beyond $10 a share, allowing FTX to convert at a profit.
FTX’s investment in Mysten came in the midst of a crypto meltdown. Bitcoin and ether were down by more than half for the year and numerous hedge funds and lenders had gone bankrupt.
The funds were to be used in Mysten’s effort to “build a blockchain that scales with demand and incentivizes growth,” Mysten CEO Evan Cheng said at the time.
Representatives for Ellison and Wang did not respond to requests for comment. A representative for Bankman-Fried declined to comment.
CEO of Nvidia, Jensen Huang, speaks during the launch of the supercomputer Gefion, where the new AI supercomputer has been established in collaboration with EIFO and NVIDIA at Vilhelm Lauritzen Terminal in Kastrup, Denmark October 23, 2024.
Ritzau Scanpix | Mads Claus Rasmussen | Via Reuters
Nvidia is replacing rival chipmaker Intel in the Dow Jones Industrial Average, a shakeup to the blue-chip index that reflects the boom in artificial intelligence and a major shift in the semiconductor industry.
Intel shares were down 1% in extended trading on Friday. Nvidia shares rose 1%.
Nvidia shares have climbed over 170% so far in 2024 after jumping roughly 240% last year, as investors have rushed to get a piece of the AI chipmaker. Nvidia’s market cap has swelled to $3.3 trillion, second only to Apple among publicly traded companies.
Companies including Microsoft,Meta, Google and Amazon are purchasing Nvidia’s graphics processing units (GPUs), such as the H100, in massive quantities to build clusters of computers for their AI work. Nvidia’s revenue has more than doubled in each of the past five quarters, and has at least tripled in three of them. The company has sginaled that demand for its next-generation AI GPU called Blackwell is “insane.”
With the addition of Nvidia, four of the six trillion-dollar tech companies are now in the index. The two not in the Dow are Alphabet and Meta.
While Nvidia has been soaring, Intel has been slumping. Long the dominant maker of PC chips, Intel has lost market share to Advanced Micro Devices and has made very little headway in AI. Intel shares have fallen by more than half this year as the company struggles with manufacturing challenges and new competition for its central processors.
Intel said in a filing this week that the board’s audit and finance committee approved cost and capital reduction activities, including lowering head count by 16,500 employees and reducing its real estate footprint. The job cuts were originally announced in August.
The Dow contains 30 components and is weighted by the share price of the individual stocks instead of total market value. Nvidia put itself in better position to join the index in May, when the company announced a 10-for-1 stock split. While doing nothing to its market cap, the move slashed the price of each share by 90%, allowing the company to become a part of the Dow without having too heavy a weighting.
The switch is the first change to the index since February, when Amazon replaced Walgreens Boots Alliance. Over the years, the Dow has been playing catchup in gaining exposure to the largest technology companies. The stocks in the index are chosen by a committee from S&P Dow Jones Indices.
Charles Liang, chief executive officer of Super Micro Computer Inc., during the Computex conference in Taipei, Taiwan, on Wednesday, June 5, 2024. The trade show runs through June 7.
Annabelle Chih | Bloomberg | Getty Images
Super Micro investors continued to rush the exits on Friday, pushing the stock down another 9% and bringing this week’s selloff to 44%, after the data center company lost its second auditor in less than two years.
The company’s shares fell as low as $26.23, wiping out all of the gains for 2024. Shares had peaked at $118.81 in March, at which point they were up more than fourfold for the year. Earlier that month, S&P Dow Jones added the stock to the S&P 500, and Wall Street was rallying around the company’s growth, driven by sales of servers packed with Nvidia’sartificial intelligence processors.
Super Micro’s spectacular collapse since March has wiped out roughly $55 billion in market cap and left the company at risk of being delisted from the Nasdaq. On Wednesday, as the stock was in the midst of its second-worst day ever, Super Micro said it will provide a “business update” regarding its latest quarter on Tuesday, which is Election Day in the U.S.
The company’s recent challenges date back to August, when Super Micro said it would not file its annual report on time with the SEC. Noted short seller Hindenburg Research then disclosed a short position in the company and wrote in a report that it identified “fresh evidence of accounting manipulation.” The Wall Street Journal later reported that the Department of Justice was in the early stages of a probe into the company.
Super Micro disclosed on Wednesday that Ernst & Young had resigned as its accounting firm just 17 months after taking over from Deloitte & Touche. The auditor said it was “unwilling to be associated with the financial statements prepared by management.”
A Super Micro spokesperson told CNBC that the company “disagrees with E&Y’s decision to resign, and we are working diligently to select new auditors.” Super Micro does not expect matters raised by Ernst & Young to “result in any restatements of its quarterly financial results for the fiscal year ended June 30, 2024, or for prior fiscal years,” the representative said.
Analysts at Argus Research on Thursday downgraded the stock in the intermediate term to a hold, citing the Hindenburg note, reports of the Justice Department investigation and the departure of Super Micro’s accounting firm, which the analysts called a “serious matter.” Argus’ fears go beyond accounting irregularities, with the firm suggesting that the company may be doing business with problematic entities.
“The DoJ’s concerns, in our view, may be mainly about related-party transactions and about SMCI products ending up in the hands of sanctioned Russian companies,” the analysts wrote.
In September, the month after announcing its filing delay, Super Micro said it had received a notification from the Nasdaq indicating that its late status meant the company wasn’t in compliance with the exchange’s listing rules. Super Micro said the Nasdaq’s rules allowed the company 60 days to file its report or submit a plan to regain compliance. Based on that timeframe, the deadline would be mid-November.
Though Super Micro hasn’t filed financials with the SEC since May, the company said in an August earnings presentation that revenue more than doubled for a third straight quarter. Analysts expect that, for the fiscal first quarter ended September, revenue jumped more than 200% to $6.45 billion, according to LSEG. That’s up from $2.1 billion a year earlier and $1.9 billion in the same fiscal quarter of 2023.
Peopl walk outside Steve Jobs Theater at the Apple Park campus before Apple’s “It’s Glowtime” event in Cupertino, California, on Sept. 9, 2024.
Nic Coury | AFP | Getty Images
Apple will buy Pixelmator, the creator of image editing apps for Apple’s iPhone and Mac platforms, Pixelmator announced Friday in a blog post.
Pixelmator, a Lithuanian company, was founded in 2007, and in recent years has been best known for Pixelmator and Pixelmator Pro, which compete with Adobe Photoshop. It also makes Photomator, a photo editing app.
Apple has highlighted Pixelmator apps over the years in its keynote product launches. In 2018, Apple named Pixelmator Pro its Mac App of the year, citing the company’s enthusiastic embrace of Apple’s machine learning and artificial intelligence capabilities, such as removing distracting objects from photos or making automated color adjustments.
“We’ve been inspired by Apple since day one, crafting our products with the same razor-sharp focus on design, ease of use, and performance,” Pixelmator said in its blog post.
Apple does not acquire as many large companies as its Silicon Valley rivals. It prefers to make smaller acquisitions of companies with products or people that it can use to create Apple features. Neither Pixelmator nor Apple provided a price for the transaction.
Pixelmator said in its blog post that there “will be no material changes to the Pixelmator Pro, Pixelmator for iOS, and Photomator apps at this time.”
Earlier this week, Apple released the first version of Apple Intelligence, a suite of features that includes photo editing abilities such as Clean Up, which can remove people or objects from photos using AI.
Apple has acquired other popular apps that received accolades at the company’s product launches and awards ceremonies.
In 2020, Apple bought Dark Sky, a weather app that eventually became integrated into Apple’s default weather app. In 2017, it bought Workflow, an automation and macro app that eventually became Shortcuts, the iPhone’s scripting app, as well as the groundwork for a more capable Siri assistant.