Morning Brew Daily - SBF Gets 25 Years for Crypto Fraud & Who Pays for Baltimore Bridge Collapse?

Episode Date: March 29, 2024

Episode 290: Neal and Toby discuss Sam Bankman-Fried being sentenced to 25 years and the judge's reasoning for the term length. Then, a really old maritime law complicates the issue of who’s paying for the damages from the Baltimore bridge collapse. Next, the stock market is off to its hottest start for Q1, led by, you guessed it, AI. However, it’s not all pretty roses for all companies. Also, Biden calls on his old friends to put together a supersized fundraiser against Trump, who’s selling his own version of the bible. Meanwhile, Ice Cube makes an offer Caitlin Clark can’t refuse to join his BIG3 league. Lastly, Beyoncé’s highly anticipated country album is here!! Use code MORNINGBREW50 to get 50% OFF your first Factor box at https://bit.ly/3UUZGG0 00:00 - Intro 2:30 - SBF gets 25 years 7:00 - Who’s paying for the bridge collapse? 11:00 - Q1 hot & cold stocks 1500 - Former presidential tag-team 18:15 - Caitlin Clark to BIG3? 21:45 -’ Cowboy Carter’ drops Get your Morning Brew Daily Merch HERE: https://shop.morningbrew.com/products/morning-brew-daily-sweatshirt?utm_medium=multimedia&utm_source=podcast&utm_campaign=mbd&utm_content=shownotes Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

Marketers, tell us if this sounds familiar. You invest in something that seems incredible like millions of views, but then don't see any revenue. Instead, invest in what looks good to your CFO. LinkedIn Ads generates the highest row ads of all major ad networks. Spend $250 on your first campaign on LinkedIn ads and get a $250 credit. Just go to LinkedIn.com slash MBD. That's LinkedIn.com slash MBD.

Terms and conditions apply. Good morning, Brew Daily Show. I'm Neil Fryman. And I'm Toby Hell. Today, convicted fraudster Sam Bakedon-Fried learned just how long he'll spend in prison. Then Ice Cube offered Caitlin Clark $5 million to play in his 3V3 basketball league. It's Friday, March 29th.

Let's ride. Today, March 29th marks one year since Evan Gershkovich, a 32-year-old American Wall Street Journal reporter, was unjustly detained in Russia on accusations of espionage, charges that the paper and the U.S. government say are bogus. Russia's foreign ministry has said it would be open to a prisoner swap, but not until a verdict is reached in his trial, which has not been scheduled yet, and who knows when that will happen. His attention has been extended for five times now with the latest extension coming last

week. People across the media industry are calling on leaders to get Evan home as quickly as possible, saying doing journalism is not a crime. Yeah, his friends and family have been keeping in touch with him. says that they're keeping him up to date on his favorite Premier League team. He's a big Arsenal fan, which is having a fantastic season, which might help bolster his spirits a little bit. They're also chatting with him about developments in AI because he said that he wants to be current when he comes back to the States. His sister even asked him if she could see Dune too because she felt bad that she would go to see it while he currently can't.

But still, obviously, it's very hard to be in this almost fake reality where you don't know when or if you're going to be coming home soon. But hopefully that homecoming trip is soon. rather than later. Before you hear today's news, we have a quick word from our friends over at Factor. Neil, we've made it to the end of our Factor journey. The flavors were magical. The Factor truck sightings were frequent, and Neri a dish was cleaned along the way. It may be the end of our Factor sponsorship, but I will always remember the chicken and cauliflower rice I ate along the way. I hope you had as much fun and got as much nourishment out of Factor as we did this past month, but the beautiful thing is your Factor journey doesn't have to end here.

Yeah, while we're being all Debbie Downer about it, you can keep on eating chef-prepared, dietitian-approved, and fresh, never-frozen meals by doing what, Neil? By heading to factormeals.com slash morning brew 50, then using code morning brew 50 to get 50% off. One last time, that's factormeals.com

slash morning brew 50, then use code morning brew 50 to snag that tasty 50% discount. It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices. guaranteed on propane grills starting at $179, like the next grill three-burner gas grill, or get $50 off to select Weber Spirit grill and bring big flavor to your backyard. Then set the scene with Hampton Bay string lights that bring it all together.

Shop spring backyard days for seven days at the Home Depot. Now through May 6th, Exclusion supplies to homedipo.com slash price match for details. 25 years. That's how long FDX founder Sam Bakeman-Fried was sentenced to, prison yesterday for perpetrating one of the biggest financial frauds in U.S. history. And handing down the sentence, Judge Lewis Kaplan said he considered the brazenness of SBF's actions, his lack of remorse, and the possibility he would commit crimes going forward. There is a risk that this man will be in a position to do something very bad in the future,

and it's not a trivial risk at all, Kaplan declared. In the courtroom, SBF said he was sorry about what happened at every stage. At the end of the day, he said, I failed everyone I cared about. This sentencing is the final chapter in what was one of the most rapid rise and falls in finance history. SBF founded the crypto exchange FTX in 2019, and not long after, he became one of the youngest billionaires on the planet and was hobnobbing with the world's elite, Tom Brady, Bill Clinton, Larry David. But everything fell apart and they fell apart quickly. When it was found, he had stolen $8 billion in customer funds to fund a lavish lifestyle and risky investments at a separate hedge fund. Toby, what's your takeaway from this SBF saga?

I'm kind of going to steal one of your takes, Neil, because it is just truly remarkable how symmetrical SBF's rise and fall was. Just as fast as he burst onto the scene in Rose to Promise, it felt like he matched that exact same pace on the way down. In math terms, you told me yesterday offhandedly, you said it looks kind of like a Y equals negative 10x squared graph, which I can confirm tastes this very steep parabola up and down. So my takeaway is the one that you kind of uttered in my ear yesterday. But I think this time period, this sentencing that the judge passed down was kind of where people expected. SBF's team wanted just six and a half years while the prosecutors wanted as high as 40 to 50 years. If he serves this full sentence, he'll get out when he's 57 years old.

But potentially he will be able to get out earlier on good service. So I think that it came in right around that area where people were expecting. Yeah, let's talk about SBF sentence as it relates to other high-proseph. profile white-collar criminals. The judge did not think that he was, he, his, his crimes were as bad as Bernie Madoff, who ran that Ponzi scheme that unraveled during the 2008 financial crisis. Madoff received a 150-year sentence in 2009, but he died 12 years later. And then the other one that comes to mind is Elizabeth Holmes, uh, who defrauded investors through her Theranos, a biotech startup. She was sentenced to 11 years and three months back in 2020.

So the best comp here might actually be Enron's CEO, Jeffrey Skilling, because he was sentenced to 24 years, that he ended up serving only 12. So that's a pretty good comp, 25 years of 24, SBF and Enron. Not a great comp if you're SVF, yeah. One of the goals of SBF's team was to kind of paint the picture that he was not Bernie Madoff. That was a almost stated goal going in. They tried to say that he doesn't make decisions with malice in his heart. He makes decisions with the math in his head. The math wasn't math in his head by the end of his journey, though.

One big difference is that FTCS depositors have been promised that they will be made whole. There is an asterisk to that made whole, though, because they'll get the value of their deposit crypto in dollars. It will be equivalent to their holdings as of November 2022. The issue is that in the interim period, crypto has absolutely gone on this massive bull run. Bitcoin hit an all-time high. So you're losing out on all the potential gains that that money would have been a those gains that would have been accruing.

And technically, you're being made whole, but it just doesn't feel like you're made whole because you miss it on all the gains. Yeah, this was just a huge black eye in that whole era of crypto, the Wild West. I think SBF wasn't really interested in crypto. He started a, he was trading stocks and bonds and then went into crypto when he realized how much money you could be made, and that maybe that's because the rules were so gray. And I think it just represents this very sort of Wild West, no rules barred era of crypto that the industry is trying to move past and SBF sort of represented just the chaos and the frenzy

around that time in the crypto industry. Absolutely. And SBF has a vowed to appeal his conviction, but he did say after the sentencing, at the end of the day, my useful life is probably over now. So he knows where he currently is. We are now three days removed from the cargo ship ramming a major bridge in Baltimore leading to its collapse in the deaths of six construction workers. But while the bridge went down in mere seconds, figuring out who is going to pay for the damage and who should be held liable is going to take a lot longer. There are so many companies and owners involved, not to mention obscure maritime loss that predate even the Titanic, forming this complex web that is almost as tangled as the bridge itself laying in the Baltimore Harbor. To start peeling back the layers, the ship is owned by a Singapore-based company that is insured by a member of an international insurance consortium that, that provides 90% of the marine liability coverage for ocean freight.

These insurers pool together their liability claims to reduce the risk individual companies have to take on, kind of like agreeing to split the bill via Venmo before a dinner with friends. That consortium also buys an extensive reinsurance program, which further spreads out any potential losses. So even though this insurance bill will be massive, some analysts thinks it will be in the $2 to $4 billion range. No one company is going to go bankrupt. But that's just the tip of the iceberg here, Neil.

Yeah, we got deep into marine insurance and marine losses yesterday. That three to four billion dollar range, we should say in terms of insurance claims, that is the single, that would be the largest single marine insurance loss ever. There was a cruise ship in Italy that capsized in 2012, and that led to $1.5 billion in losses. So if this bill comes out to $3 billion, which it is expected to, then it would be the largest. single marine loss ever by a factor of two. Yeah, and I do want to dig into some of these, we keep referencing this obscure maritime law. The ship's owner will be able to actually cap how much it is liable for in this case, because there's a statute that dates back to 1851. It caps the

owner's liability at how much the vessel is worse after the crash plus any earnings it collected from carrying freight on board. That law literally predates the Titanic and was passed to prevent shipping giants from suffering these huge, insurmountable losses from the inevitable disasters that happened on sea. It was literally to encourage sea exploration back in the day. So that law will come into play here and cap some of the liability that the Singaporean company will be on the hook for. And the Titanic owners did invoke that law famously in 1912 after that ship went down. I think the good thing, the good news here, according to experts, is that both the ship and the bridge, the two huge structures that were involved in this collision were insured.

So that is kind of like two cars crashing on the road, but it's not like a natural disaster where if a hurricane comes into Florida, there's a lot of uninsured people and homes and things like that. So the fact that both of these structures are insured could spread out the risk and spread out the sort of the damage claims, but still going to be a ton of money. One issue is that some businesses will be left out to dry. For instance, there's this domino sugar refinery right next to the bridge that uses the bridge all the time. It's going to suffer significant losses to their business and it won't really be able. There's no recourse for them losing access to the harbor. So that is one person or one aspect of this kind of big insurance pie

that might get left out to dry, the businesses that are suffering from this catastrophic loss. Yeah, I mean, so as all of this litigation gets through in court with reference to the ship and the bridge, that is going to take possibly decades. But the most immediate concern is for the people who are working in conjunction with the port, which handled $80 billion of cargo there. The most pressing issue right now is the 2,400 members of the Maryland Longshoremen Union who are working at the Port of Baltimore. And that port is closed indefinitely because there is wreckage blocking the entrance to the port.

They have no idea what they're going to do for jobs. so the government might need to go and step in and help them. Meanwhile, President Biden has pledged that the federal government is going to pay for the bridge's repair. But that Congress is not in session now, but you have representatives already casting doubt on whether that will be able to pass. So we're going to see a lot of fights in litigation and a lot of wrangling in Congress over the next few weeks and years. Okay, if you can believe it, the first quarter of 2024 ends today. Actually, on Wall Street, it ended yesterday because the markets are closed today for, Good Friday. So cue up Little Wonders by Rob Thomas because it's time to run through all the

memories from Q1 on the stock market. Toby here has already started crying and it has to be happy tears because stocks had an incredible quarter. The S&P ended more than 10% higher. Good for its best Q1 gain in four years. The index has closed at a record 21 times so far this year. And it wasn't only stocks going up into the right. Everything from Bitcoin to gold hit record highs in the first quarter. Oil has also gained for three months straight, and I don't want to jinx it, but everything seems to be in a pretty good place right now. The economy is humming. Inflation has dropped close to normal levels. The Fed is on track to lower interest rates this year.

And corporate profits hit a record in the final quarter of 2023, raking in $2.8 trillion. Toby, first of all, here's a Kleenex. No, you're emotional. Second of all, I want you to hand out some game balls from Q1. What are some stocks you want to highlight? I would like to hand out a game ball to pretty much. everyone. I do want to start on a broad levels

to begin with. The S&P is on track to end a second straight quarter with a return of more than 10%. That's the first time that's happened in over a decade. It's only happened seven times going back to 1945. Even the Dow showed signs of life. It's on pace to finish quarter up more than 5%.

Disney put the team on its back on the Dow and the Blue Chip Index, 35% higher in the quarter, and then you got Caterpillars, American Express, Merck, Travelers. They all were up over 20%. In total, 82 stocks in S&P 500 hit new 52 week highs yesterday. So you're right. I have no more game balls left to give because I just tossed them out left and right. I was very, I was very generous with my game balls.

Well, let's talk about AI because AI had sort of driven the stock rally over the past year. The so-called magnificent seven stocks were propping up the stock market. Thinking Q1 and the reason you gave out so many game balls is because the Magnificent 7 were not all that magnificent in Q1, and the stock market still did really well. I mean, there's kind of a bifurcation happening now among the Magnificent 7, which are these massive tech giants. There's really magnificent two. And the Magnificent 2 now are Nvidia and Meadow, which have ballooned recently thanks to their investments in AI. Then you have maybe the middling two, which are Microsoft and Amazon. They've done okay. But there are a few companies that are not doing well,

And that is Apple, which was down 11% last quarter. And then Tesla, which was the worst performing stock on the S&P 500, which was down 29% thanks to really sagging demand in China. So Tesla, according to analysis, is in a really rough spot. And I don't know if it belongs in the Magnificent 7 because it doesn't have a lot of AI stuff going on anyway. It could turn around, though, because we are going to get first quarter production and delivery numbers on April 2nd, which is coming up next week. Just to put a bow on everything, consumer sent.

also jumped in March. It's at its best level in nearly three years. There's optimism about economic outlet, about the rate cuts. So you're right. Stocks in crypto have surged to record high. Mem stocks are back again. So there is just this feeling of buoyancy in the market right now. A lot of it is kind of propelled by the eventual rate cuts that we see on the horizon. So that's still the question mark looming, but it looks like we're going to see them based off comments that we've heard out of Jerome Powell. Up next, Biden threw a big old political fundraiser and Caitlin Clark got an offer she might not be able to refuse.

We're the Hartford with decades of experience ensuring millions of unique small businesses when it comes to your small business insurance one size absolutely does not fit all. Get a quote or find an agent today at the harthford.com slash small business. You said this place was steps from the water.

We just haven't found the steps yet. How much did we save? Enough. Enough to get lost. Or you could book a stay with Hilton. Welcome to your oceanfront room. Just steps from the water. The Hilton sale is on now.

Book on Hilton.com or the Hilton app and save up to 20% to get the stay you expected. When you want savings, not surprises. It matters where you stay. Hilton for the stay. President Biden got the gang back together last night to throw a fundraising party to end all fundraising parties. Put together in part by Condé Nass, Anna Wintour. The shindig featured a conversation between the big three of Biden, Bill Clinton, and Barack Obama, moderated by Stephen Colbert. A smattering of other celebrities like Ben Platt, Leah, Michelle, Lizzo, and Queen Latifah, along with 5,000 other guests crammed into the Radio City Music Hall in New York.

Why is this particular event of note? Well, the Biden team confirmed that the party raised a staggering $25 million, which is likely the largest fundraising hall from a single event in American politics history, according to the Biden campaign. On the other side of the aisle, Trump is also looking to bolster his coffers as his legal troubles have bled his campaign dry. But it's a bit less of a pretty picture. As of March 1st, Trump's campaign only had $42 million in the bank compared with Biden's $155 million, according to the Hill. Neil, this party is only going to help Biden extend his already significant fundraising

lead heading into the election. And it's kind of interesting to note the contrasting fundraising strategies at play here. Well, let's talk about how you raised 25. million dollars from a single event, and that's by selling really expensive tickets. The tickets were priced from $225, so you could get in for basically a Nix ticket. Or if you want to pay a half a million dollars, you could do that too and get more access to those three, the three past Democratic presidents. A photo with all three of them cost you $100,000, a donation of $250,000, get you access to one reception last night, and then a half a mill gets you even into a more exclusive gathering.

So there were these tears that were going on that helped Biden raise $25 million in over the span of three hours. Yeah, $25 million is huge because they threw Obama and Biden through a joint fundraiser back in December. That raised $3 million. So this is exponentially larger. And yeah, this one party is expected to bring in $5 million more than Trump raised during the entire month of February. And we also mentioned that fundraising gap that already exists. On the Trump side of things, it had, I said the. contrasting fundraising strategy because Trump has been slinging the $60,

God bless the USA Bibles on his true social platform. That is not actually a fundraising effort. He's not affiliated. The company is not affiliated with the Trump organization, but it is just going to show that here's how he is approaching it. It's a much more like grassroots, like connection with his audience. But he's getting a share of the profits. It's a classic licensing deal that Trump does consistently.

But he's aiming to do a $33 million fundraiser next week with a bunch of hedge fund billionaires. So we'll see if that can top the record that was set last night. Meanwhile, Trump has billions of dollars locked up in true social, which went public this week and has shot up 60% over the course of its time on the public market, which is just a few days. It's very unclear, as you mentioned, a bunch of times on the show, how he will get access to that money because it is tied up in a bunch of stock. It's not really liquid right now. And he does have some massive bills to pay. He has that $175 million bond that he has to put up with. in 10 days, even though that was reduced from a lot more.

So, yeah, there are a lot of interesting fundraising things going on right now between the two presidential candidates and obviously money is so important to build your campaign infrastructure to pay for ads and things like that as you gear up to try to win the White House. Moving on, Toby, I want you to put yourself in Caitlin Clark's shoes, your basketball's biggest phenom, the all-time leading score in D1 history, the projected number one pick in the WMBA draft next year, and you're about to play a sweet 16 game to tomorrow against Colorado. But this week, you hear that the rapper Ice Cube has made you an offer to play in his

3V3 basketball league called the Big Three. And the salary, $5 million to play 10 games. That's far than you're going to make. That's far more than you're going to make in the WMBA, where workies typically earn under $80,000 a year and play a lot more than 10 games. Just to be clear, this all actually happened this week. TMZ reported the $5 million offer to Caitlin Clark, and Ice Cube confirmed it on social media. calling the offer Historic and Caitlin a generational athlete who could transform his league,

which he started in 2017 and has never had a woman player. All right, Toby slash Caitlin Clark, how you're responding to Ice Cube? Sorry, I'm still just marinating the fact of what it would feel like to be able to actually shoot and make three-pointers. That's never a feeling that I've had in my entire life. So I think that this is a very real offer. This is not a, I mean, it is a publicity sun because there is publicity coming. but I do think Ice Cube very much meant this as a real offer.

He said that he didn't even want it to go public. It accidentally leaked to TMZ. And another thing is that Ice Cube pointed out the fact that two female coaches have actually won the league. There's a former college standout, Nancy Lieberman, won the big three championship in her first year. Lisa Leslie came in and won it as a coach in her second year. So I don't think Ice Cube's just paying lip service to women's basketball. He genuinely believes that this is an opportunity to put it on a big stage, put Caitlin Clark against some men too, which, I mean, who wouldn't want to see that in this very unique format?

It's a three-on-three basketball league, so it's not the typical five-on-five. So I would love to see this happen. Yeah. And what Ice Cube was mentioning when he described this offer was that a lot of WNBA athletes have to play overseas because they don't make a ton of money relative, I mean, not even close relative to the men. The highest salary in the W-MBA last year was just over $200,000, I think. So Caitlin Clark, who's made $3.5 million in NIL endorsements from her time in college, it's going to make a lot less in the WNBA just playing basketball.

So a lot of WNBA starts have to go overseas to places like Russia and Asia and Europe to make more money. And that is one reason why Brittany Griner was in Russia and was detained there for 10 months on drug charges. And she was only gone back home due to a prisoner swap. So Ice Cube identified the fact that WMBA players have to play overseas. and he doesn't want that to happen to, I mean, obviously, Kate and Clark, but other women players as well. Right. Not to splash cold water on things, but there are definitely multiple scheduling conflicts because the seasons are going on at the same time. Also, the big three is reportedly not on great terms with the NBA, which also owns the WNBA. There is this DOJ investigation to see if the NBA violated antitrust law when it was dealing with the big three.

So who knows if it's going to happen. The one thing that I do think could propel it to getting this deal across the finish line is that CBS, broadcast both the big three and the WMBA. So it's in their best interest to get more eyeballs there. So that is something, a tail one that could perhaps get this thing across the finish line. Meanwhile, Caitlin Clark tomorrow versus Colorado,

could set up a potential rematch with LSU. I'm pumped about that. Neil, if I am looking a little blurry-eyed to you right now, it's because I stayed up till midnight last night, waiting for Beyonce's new album to drop, and I have to say it, totally worth it. Cowboy Carter is based first album,

length foray into the country music world, and frankly it slaps. Some hidden gems that we didn't know till release. The album features a cover of Dolly Parton's Jolene. It also features a cover of the Beatles classic Blackbird, which Paul McCartney originally wrote as a tribute to Little Rock Nine, the first African-American students who enrolled in Arkansas High School in 1957 to desegregate it. A who's-who of country music stars pop up in various features, including Dolly Parton, Willie Nelson and Linda Martel. And more contemporary stars include Miley Cyrus and Post Malone.

Unfortunately for us all, Taylor Swift does not appear on Cowboy Carter, despite rumors suggesting otherwise. Neil, country music, Beyonce, Cowboy Carter, it's all happening right now. I mean, this is obviously going to be the soundtrack to a lot of people's weekends and maybe even the summer.

I don't know. It's, we're getting to April. But yeah, this is the second part of a three-part project that Beyonce released 2021 called the Renaissance. Well, her first album was Renaissance, and this project aims to sort of pay tribute to the black roots of various musical genres. That first album Renaissance went back to disco and house music. And then in this one, country era, Beyonce wants to sort of explore the black origins of country music. I find it very interesting how musicians right now are building mythologies around certain eras.

Obviously, we've seen Taylor Swift do it with complete outfit changes and complete vibe changes. based on different eras of their career and the different genres they explore. I think Beyonce has done that so well in her marketing for this album and the various teases that she did leading up to it. I mean, everyone was watching her Grammy outfit, where she wore a Western-style garb. So, you know, the way that musicians are building their discography and going through various eras and building mythologies around that, it was a very interesting transition or emerging trend in the music business.

I couldn't agree more. and I just love this album in general, too, because I do think non-country stars dabbling in the country music gives it such a different feel and a different sound to it. So I really have enjoyed listening to it so far. One thing that I also loved is that Dolly Parton jumps in. She introduces the track where they're covering Jolene by referencing that Hussey with a good hair, which is itself a reference to Beyonce's 2016 song, Sorry, where she called out Becky with the Good. hair. So you kind of have this cross genre, cross generation, referencing the same themes here of like your significant other cheating on you. So I just love that. All of these, all these different things are being mixed into the same pot and it comes out tasting very delicious.

All right. We have to wrap it up there on that beautiful phrasing. Have a great weekend and a very happy Easter to everyone celebrating on Sunday. As always, please write in with any feedback to Morning Brew Daily at Morningbrew.com. Toby is a long plane ride ahead of him. and he loves reading your emails. Let's roll the credits. Emily Milliron is our executive producer. Raymond Liu is our producer. Olivia Graham is our associate producer. Yuchinawa Ogu is our technical director.

Billy Minino is on audio. Hair and makeup is binging cowboy Carter and does not want to be interrupted. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great Saturday, Neil. I wish you well. Yamava Resort and Casino at San Manuel

is California's number one entertainment destination for today's superstar. Catch the Jonas Brothers return to the Yamava Theater stage on April 30th, the powerful vocals of Demi Lovato on May 17th, and the signature Southern Country Rock of Eric Church on July 19th. Tickets on sale now at yamavaitheter.com, only at Yamava Resort and Casino, celebrating its 40th anniversary.

UN must be 21 to enter.