🪙 Multi-billion crypto fraud case closed

PLUS: Spotify and UMG beefing with TikTok, Josh Kushner is back.

This week’s market performance 🏆️ 

S&P 500: +0.23% 📈 
Nasdaq: -0.05% 📉 
Dow 30: +0.08% 📈 
Russell 2000: +1.26% 📈 

TOP STORY
💼 Sam Bankman-Fried sentenced to 25 years in multi-billion dollar crypto fraud

📸 Eduardo Munoz/Reuters

In 2021, FTX was one of the largest cryptocurrency exchanges in the world, handling tens of billions of dollars in trading volume each day and having well over 1 million users.

Today, the company is entirely bankrupt, and its founder, Sam Bankman-Fried (SBF), has just been sentenced to 25 years in prison for defrauding investors.

And… he was ordered to repay more than $11 billion as part of his sentence.

1️⃣ In 2022, just months before FTX’s collapse, Fortune called SBF “the next Warren Buffet” (we’re not joking).

“30-year-old billionaire Sam Bankman-Fried has been called the next Warren Buffett. His counterintuitive investment strategy will either build him an empire—or end in disaster.“ (📸 Fortune)

So, how did we get here?

FTX combined the money from its regular customers with the money from its sister hedge fund, Alameda Research, and used the combined funds to make risky investments and loans.

When the crypto market went to sh*t in late 2022, many customers rushed to take their money out simultaneously.

But it was too little too late; FTX didn't have enough cash to reimburse clients, causing a run on the bank and a subsequent collapse.

Finally, after 16 months, Bankman-Fried was prosecuted for defrauding investors of $1.7 billion, Alameda Research lenders out of $1.3 billion, and FTX customers out of $8 billion. 

And… his lack of a genuine apology to investors certainly didn't help his case.

2️⃣ SBF's 25-year sentence for his role in FTX is between Bernie Madoff's 150-year sentence for his Ponzi scheme and Elizabeth Holmes' 11-year sentence for her involvement in Theranos.

ENTERTAINMENT
🎵 Universal Music Group Inks a Partnership with Spotify… Continues Its Fight with TikTok

📸 Lachlan Hodson

In late January 2024, Universal Music Group ($UMG) — the world’s largest music label — decided to opt out of its licensing agreement with TikTok.

To illustrate the impact of this:

“Songs that trend on TikTok often end up charting on the Billboard 100 or Spotify Viral 50. And 67% of the app's users are more likely to seek out songs on music-streaming services after hearing them on TikTok, according to a November 2021 study conducted for TikTok by the music-analytics company MRC Data. “ Business Insider (full article)

Why did Universal Music Group (UMG) do this? There are 2 main reasons:

  1. UMG was unsatisfied with TikTok's low royalty rates, feeling that they didn't properly value UMG's extensive music catalog — more buck for their bang!

  2. TikTok continues to support the use of AI in music, with increasing investments in AI-generated music, which only hurts established artists represented by UMG.

What does this have to do with Spotify, though?

1️⃣ Universal Music Group ($UMG) is up 10.07% this year.

2️⃣ Spotify ($SPOT) is up 39.78% this year.

 

Starting soon… Spotify ($SPOT) will roll out new features, such as allowing UMG artists to share pre-release teasers, pre-save tracks, and host music videos directly on Spotify in the U.S.

The partnership will make it easier for people to find new artists and help those artists promote themselves without depending on TikTok's algorithm.

Over the past couple of years, TikTok has become the top platform for music discovery and promotion. However, if this collaboration goes well, Spotify will help reduce artists' reliance on TikTok and give the UMG roster more leverage.

3️⃣ Universal Music Group ($UMG) holds contracts with music giants like Taylor Swift, Drake, Ariana Grande, and others.

This week’s sector performance 🏆️

Semiconductors ($SOXX): +0.78% 📈
Bonds ($TLT): +0.46% 📈
Technology ($QQQ): -0.31% 📉
Dividends ($SCHD): +0.83% 📈 
Emerging Markets ($EEM): +0.46% 📈 
Energy ($XLE): +1.95% 📈 
Financials ($XLF): +0.50% 📈
Gold ($GLD): +2.19% 📈 
Industrials ($VPU): +2.31% 📈
Cybersecurity ($CIBR): -0.83% 📉 

MEDIA
🎬️ Josh Kushner and Karlie Kloss Are Reviving Iconic “LIFE” Magazine

📸 Yahoo

Bedford Media, owned by Karlie Kloss and Josh Kushner, will bring LIFE Magazine back to print and digital distribution. Karlie Kloss will serve as CEO, and Kushner will serve as publisher.

Talk about a power couple. And while it may seem like an unusual move for a tech-centric investor, rescuing companies is one of Kushner's specialties.

  • Late 2022: Stripe (now a ~$65B company) faced financial struggles due to high expenses, slowing sales, and declining tech valuations. 

  • Early 2023: Kushner, already an early investor in Stripe, capitalized on the opportunity to increase his stake in Stripe at a reduced price. His firm, Thrive Capital, invested $1.8 billion, securing a 7% stake in the company.

  • When OpenAI, led by Sam Altman, faced challenges in April 2023, Altman reached out to Kushner for support. Kushner’s “Thrive Capital” decided to help out by investing $130 million in OpenAI.

What a nice guy.

Here’s what else you might’ve missed…

Microsoft ($MSFT) and OpenAI are building a $100B AI data center

AT&T ($T) says that the personal data of 7.6M current customers and 65.4M former customers were leaked on the dark web.

Home Depot ($HD) is set to acquire SRS Distribution in its biggest acquisition ever.

Amazon’s ($AMZN) MGM Studios inked a deal with Ryan Gosling and Jessie Henderson’s new production company.

Warner Bros. ($WBD) has entered a multi-year deal with Dune star Timothée Chalamet.

Xiaomi ($XIACF) released an EV for $4,000 cheaper than the Tesla ($TSLA) Model 3.

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