SBF’s biggest threat: his FT-eX

One scoop to start: Infrastructure investor I Squared Capital is near a deal to buy Deutsche Bahn’s international transport business Arriva, one of the biggest operators of red London buses and train services in the UK, according to people briefed on the matter.

And one more thing: The Adani Group, the politically connected conglomerate that dominates large parts of India’s economy, appears to have imported billions of dollars of coal at prices well above market value, according to customs records reviewed by the FT.

We’ll be hosting a special panel on Adani Group and its battle against short seller Hindenburg Research with our top reporters at our flagship annual event, DD Live, Tuesday October 17 at London’s Biltmore Mayfair. DD subscribers get a special discount.

In today’s newsletter:

Caroline Ellison vs SBF

Never mix business with pleasure, as the adage goes.

Sam Bankman-Fried may have just found out the hard way. The FTX founder’s legal team is preparing its defence against testimony given over the course of this week by Caroline Ellison, the former boss of SBF’s trading firm Alameda Research who was also his “on-again, off-again” romantic partner.

Thursday heralded more accusations, following Ellison’s earlier testimony that SBF had directed her and her ex-colleagues to steal roughly $10bn of customer deposits from the exchange to fund risky investments and repay loans.

The most recent testimony included audio recordings of an FTX employee meeting during its final days — among the most keenly anticipated evidence in the trial — in which, according to prosecutors, Ellison could be heard telling her staff that SBF had authorised a raid on FTX customer funds to cover shortfalls at Alameda.

Prosecutors hope the tape will show the jury that Ellison has been telling the same story of the alleged fraud since before she pleaded guilty and began co-operating with the government. SBF, who faces decades in prison if convicted, maintains his innocence.

Ellison also spent much of her third consecutive day in court under cross-examination by SBF’s lawyer Mark Cohen, who looked to paint a different picture of SBF as a misguided founder left trying to mop up the messes of his underlings.

And in case you missed it, here are some of the most damning details from earlier this week:

• Ellison said SBF had in June 2022 directed her to create seven “alternative” balance sheets for Alameda, some of which she said disguised billions of dollars of kickbacks to FTX executives.

• A version of Alameda’s accounts that made its “assets look larger” was provided to crypto lenders including Genesis, Ellison testified.

• In 2021, according to Ellison, SBF ordered $150mn to be paid to officials to release roughly $1bn in funds held on two Chinese crypto exchanges, which had been frozen as part of an investigation into money laundering. Ellison said the move was taken after attempts to limit the damage by trading using accounts in the name of “Thai prostitutes” failed.

The court appearances have been a tough reckoning with reality for Ellison, who first met SBF while they were working at Wall Street trading firm Jane Street. The pair reportedly bonded over effective altruism — a favourite philosophical movement in Silicon Valley centred on maximising the impact of philanthropy.

By the time SBF convinced her to jump ship with him to become one of the first traders at Alameda in 2018, the reported Harry Potter fan had cast herself as a fledgling hero in the former cryptocurrency tycoon’s idealistic vision for the world — or at least the one he championed in public.

“The year is 2020. Your heroine is working for a digital currency exchange that allows citizens of repressive regimes to move money anywhere in the world,” she wrote in a since-deleted Tumblr post several months into the coronavirus pandemic, New York Magazine reported last year.

It will now be up to the jury to decide who goes down as the villain.

The haunting of Jes Staley

It has been nearly two years since Jes Staley stepped down as chief executive of Barclays following a regulatory investigation into the way he described his relationship with deceased sex offender Jeffrey Epstein.

But newer revelations concerning the pair’s relationship, including those described by a lawsuit filed by the US Virgin Islands against Staley’s former employer JPMorgan Chase, have shown that the ghost of Epstein’s past continues to linger.

On Thursday, the UK Financial Conduct Authority said it would ban Staley from holding senior positions in financial services, and fine him £1.8mn, for “recklessly approving . . . two misleading statements about the nature of his relationship” with Epstein.

That penalty is just a fraction of the financial pain to come. In light of the FCA decision, Barclays said Staley would have to forfeit as much as £17.8mn in deferred bonuses that it had frozen.

The FCA’s ruling comes after Staley agreed a settlement with JPMorgan, resolving claims by the bank that he had failed to fully disclose the extent of his relationship with Epstein — allegations Staley described as “slanderous” and “baseless but serious”. 

Staley said he was “disappointed” by the FCA decision and that he would appeal against it. He has referred the case to the Upper Tribunal, which is overseen by an independent judge and hears challenges to FCA penalties. 

“If I had known who Jeffrey Epstein really was, there is absolutely no doubt that I wouldn’t be in the position I am in today,” Staley said in a statement. “Prior to undertaking my former role, it was known that I had had a relationship with Epstein.”

DD readers may remember in November 2021 when, shortly after Staley stepped down from the helm of Barclays, the FT reported that he had exchanged 1,200 emails with Epstein between 2008 to 2012 while working at JPMorgan’s private bank.

Their correspondences included unexplained terms, such as “snow white” and “Beauty and the Beast”, while others would eventually be shown to contain what the US Virgin Islands lawsuit describes as “photos of young women in seductive poses”.

The USVI lawsuit against JPMorgan later revealed the full text of the emails in February of this year, in which Staley told Epstein: “I deeply appreciate our friendship. I have few so profound.”

Not all friendships last for ever, it turns out.

Apollo dines on the UK market

After failed talks to buy a range of UK public companies from education group Pearson to Matthew Moulding’s THG, US private equity giant Apollo Global Management finally looks like it might bag a British bargain.

The firm said on Thursday that it had reached an agreement to buy Wagamama owner The Restaurant Group in a deal valuing the company’s equity at £506mn, a 34 per cent premium to the stock’s last closing price. 

Along with Japanese restaurant chain Wagamama, TRG also owns pub chain Brunning & Price and an airport concessions business. All three units need capital to grow, with Wagamama, in particular, eyeing expansion overseas.

Apollo’s bid has received the backing of TRG’s biggest shareholders including activist funds Oasis Management and Irenic Capital who had been pushing for a shake-up or sale of TRG’s restaurant assets.

Apollo is often quick to point to its laser focus on not overpaying for assets. So it is not unfair to conclude the firm thinks it is getting a good deal. Whether other bidders emerge remains to be seen but deals in the space are not for the faint-hearted.

Private equity has a chequered record backing UK casual dining chains. Apollo itself has been burnt before. It backed US chain Chuck E. Cheese, which filed for bankruptcy in June 2020, a casualty of the pandemic.

“You have to be quite long-sighted and brave to buy a restaurant business in this market,” one person involved in the talks said.

Job moves

• Swiss private bank Julius Baer is overhauling its executive board in a shake-up that will see UBS private banker Sonia Gössi, currently on garden leave, replace Yves Robert-Charrue as head of Switzerland and Europe among other changes.

Smart reads

Cracking down on the cloud Regulators looking to take on cloud competition face a difficult choice, writes the FT’s Richard Waters: attempting to micromanage tech giants, or inputting stricter rules.

Friends to foes Archegos founder Bill Hwang fostered connections at the highest rungs of Nomura’s management before the hedge fund’s implosion left it with a $3bn loss, Bloomberg reports.

Mario Kart and M&A The FT’s Leo Lewis makes a thought-provoking argument as to why Japan should part with its crown jewel, Nintendo. 

News round-up

PGA Tour to weigh outside investors as talks over Saudi tie-up continue (FT)

AMC boss Adam Aron was victim of blackmail attempt in catfish scam (FT)

Sculptor sticks with Rithm deal after sweetened offer for hedge fund (FT)

KPMG fined a record £21mn over ‘textbook’ failures in Carillion collapse (FT)

Antares Capital weighs deal for private credit rival Hayfin (Bloomberg) 

California AG says he may sue to stop Kroger from buying Albertsons (Reuters)

Paul Weiss set to move into Twitter’s UK headquarters in Soho (Financial News)