By Pam Martens and Russ Martens: January 10, 2023 ~ Sullivan & Cromwell ranks among the oldest law firms in America. It was founded 144 years ago by Algernon Sydney Sullivan and William Nelson Cromwell in Manhattan’s financial district. During the financial bust in the 1930s, Sullivan & Cromwell garnered its reputation for defending Wall Street firms against shareholder lawsuits and antitrust actions. As Wall Street On Parade previously detailed, the firm’s Senior Chairman, Rodge Cohen, paved the way for the Fed’s unprecedented $29 trillion bailout of Wall Street banks after their corrupt activities collapsed the U.S. economy in 2008. And, of course, there was S&C partner Jay Clayton, who was tapped by President Donald Trump to Chair the SEC – and, in our opinion, left markets mired in the worst corruption since 1929. Against that backdrop, one would think that S&C would be attempting to stay off the radar screen … Continue reading →

By Pam Martens and Russ Martens: January 9, 2023 ~ Making headlines around the world last week was the news that the Attorney General of the U.S. Virgin Islands, Denise George, was fired just days after she filed a federal lawsuit against JPMorgan Chase, charging it with facilitating the sex trafficking of children by Jeffrey Epstein. George was fired by the Governor of the Virgin Islands, Albert Bryan Jr. Unfortunately, those headlines and the mainstream news articles that accompanied them, fail to capture the worst parts of this story, which includes the following: the 30-page lawsuit filed by Attorney General George on December 27 in the Federal District Court for the Southern District of New York includes a “Sealed Document Placed in Vault” according to the Docket Sheet in the case; after the paragraph headlined as “JP Morgan Ignored Obvious Red Flags Relating to Epstein’s Accounts,” large segments of the lawsuit … Continue reading →

By Pam Martens and Russ Martens: January 6, 2023 ~ If you’re looking for the poster child for everything that is toxic about mixing crypto with federally-insured banks, look no further than Silvergate Capital Corporation, parent of federally-insured Silvergate Bank. Yesterday, the company lost 42.73 percent of its market capitalization in one trading session, putting its stock price losses at 91 percent over the past 12 months. The stock has been plunging since April of last year. Then came the jarring news on November 11 that one of its large customers, crypto exchange FTX, was filing for Chapter 11 bankruptcy along with its sister hedge fund, Alameda Research – which, it turns out, had been using (and losing) billions of dollars of FTX customer funds to trade and acquire without the knowledge of customers. More than 100 opaque affiliates of FTX, many headquartered in offshore locations, also filed for bankruptcy. Three … Continue reading →

By Pam Martens and Russ Martens: January 5, 2023 ~ This coming Saturday will mark the 16-month anniversary of former Wall Street Journal reporter Mike Derby setting off a media firestorm with his reporting that the then President of the Dallas Fed, Robert Kaplan, had “made multiple million-dollar-plus stock trades in 2020,” a year in which Kaplan was a voting member of the Fed’s Federal Open Market Committee (FOMC) with access to inside information. While the trading scandal spread to numerous other Fed officials, including Fed Chairman Jerome Powell, the case against Kaplan seemed like a prime candidate for a criminal investigation by the U.S. Department of Justice. Not only was Kaplan sitting on inside information gleaned from the Fed, but he was making market-moving statements himself on television. When Wall Street On Parade obtained Kaplan’s trading records from the Dallas Fed shortly after Derby’s article appeared, it became clear that the stock trading … Continue reading →

By Pam Martens and Russ Martens: January 4, 2023 ~ After multiple federally-insured banks involved with crypto have watched their publicly-traded stocks crater in price over the past year (see above chart); after a former Fed insider blew the whistle on what’s been going down as a result of the Fed’s hands off approach to policing crypto banks; after alleged fraudster operation, FTX, quietly bought a large stake in a federally-insured bank in the state of Washington; and after Senators Elizabeth Warren and Tina Smith sent a blistering demand for answers to the Fed, FDIC, and OCC on December 7 – those three federal agencies issued a new warning to banks yesterday on what life in the crypto lane could mean to their future. The warnings included the following: “The events of the past year have been marked by significant volatility and the exposure of vulnerabilities in the crypto-asset sector. These … Continue reading →

By Pam Martens and Russ Martens: January 3, 2023 ~ Thus far, they are the “untouchables.” The law firms that were at the side of Sam Bankman-Fried every step of the way as he built the FTX crypto exchange — an enterprise that Justice Department prosecutor Damian Williams calls “one of the biggest financial frauds in American history.” Bankman-Fried, the former co-founder and CEO of FTX, has been indicted on eight criminal counts and is wearing a monitoring device as he awaits trial. Caroline Ellison, the former CEO of Bankman-Fried’s now bankrupt hedge fund, Alameda Research, which prosecutors say looted FTX customers’ money, has pleaded guilty to a 7-count criminal indictment. Gary Wang, the former Chief Technology Officer of FTX Trading Ltd., has pleaded guilty to four criminal counts. What’s happening to the lawyers and the law firms that played pivotal roles in putting this house of cards together? Attorneys at … Continue reading →

By Pam Martens and Russ Martens: December 22, 2022 ~ During testimony before the House Financial Services Committee on December 13, John Ray III, the newly appointed CEO of bankrupt crypto exchange FTX, told members of Congress that FTX U.S. had 2.7 million user accounts while FTX International had 7.6 million user accounts. That’s a total of 10.3 million potential customers of FTX that may have been bilked out of some or all of their funds by the alleged mastermind, Sam Bankman-Fried, and his co-conspirators. That’s more than 250 times the defrauded customers of Ponzi mastermind Bernie Madoff. While Ray acknowledged that some FTX users had multiple accounts, even if you cut the 10.3 million user accounts by as much as two-thirds, 3.4 million accounts is still 85 times the number of Madoff victims. If you throw into the mix that Madoff acquired his victims over more than four decades and … Continue reading →

Editor’s Update: Two days after Wall Street On Parade published this article, Judge Abrams decided to recuse herself from this case, writing as follows: “It has come to the Court’s attention that the law firm of Davis Polk & Wardwell LLP, at which my husband is a partner, advised FTX in 2021, as well as represented parties that may be adverse to FTX and Defendant Bankman-Fried in other proceedings (or potential proceedings). My husband has had no involvement in any of these representations. These matters are confidential and their substance is unknown to the Court. Nonetheless, to avoid any possible conflict, or the appearance of one, the Court hereby recuses itself from this action. See 28 U.S.C. § 455. SO ORDERED. Dated: December 23, 2022 New York, New York.” Clearly, not all of these matters were “confidential,” as Judge Abrams states above. The BlockFi deal appeared on the Davis Polk … Continue reading →

By Pam Martens and Russ Martens: December 20, 2022 ~ The Chairman of the Securities and Exchange Commission, Gary Gensler, announced in June that he was going to tackle the structure of the U.S. stock market – ostensibly to make it fairer to the little guy. His plans were released last Wednesday in a mountain of paper that even Wall Street veterans are having difficulty digesting. (See here, here, here, here, and here.) While the overall thrust of the proposed changes appears to be to provide more transparency to order execution, the proposals fail to address key structural issues that have allowed the U.S. stock market to operate as an institutionalized wealth transfer system — moving vast sums of money from the pockets of average Americans to the richest one percent. Both Congress and the SEC were put on notice on March 30, 2014 that the U.S. stock market is rigged. … Continue reading →

By Pam Martens and Russ Martens: December 19, 2022 ~ There’s a dangerous and growing threat to financial stability that is being fueled by crypto money pouring into the coffers of Republicans in Congress – particularly those members who sit on the House Financial Services Committee where crypto devotee Patrick McHenry (R-NC) will take over as Chair in January. Last month, American Prospect’s David Dayen revealed that earlier this year when the crypto exchange FTX and other crypto firms were receiving inquiries from the SEC, Congressman Tom Emmer (R-MN) (the newly-elected Majority Whip) was the lead signatory to a March letter to SEC Chair Gary Gensler signed by four House Republicans and four House Democrats, effectively telling the SEC to back off. The letter also demanded answers to 13 questions, some of which had the appearance of simply trying to burden the SEC with nonsensical paperwork. For example, one question asked: … Continue reading →