A range of U.S. data suggests U.S. economic activity picked up in recent weeks. Many Wall Street analysts expect the Labor Department on Friday to report large job gains in February and a further decline in unemployment.

These developments suggest that the U.S. is in a position to withstand the economic shock that might emanate from battlegrounds in Ukraine. Those effects could push U.S. inflation higher from already elevated levels, but the economic expansion appears to be on solid ground.

Of course, if you happen to be Russian, things economic are very much not standard, to the extent that they are operating or there is a procedure of any kind. For while Moscow is doing its damnedest to keep its people from knowing just how bloodily pear-shaped the Ukrainian invasion—not that it would use any of those words or agree with that sentiment!—has gone, it’s being pretty transparent on this front, at least by Putin standards, not that it has much of a choice.

"Russia's economy is experiencing serious blows," Kremlin spokesman Dmitry Peskov said in a call with foreign journalists. "But there is a certain margin of safety, there is potential, there are some plans, work is underway…."

The government has ordered exporters to exchange 80% of their foreign currency revenues for rubles, and banned Russian residents from making bank transfers outside the country.

On Tuesday, the government said Putin was working on a decree that would prevent foreign companies exiting their Russian assets — a bid to prevent an exodus that has gathered pace this week. Putin also signed a decree banning people from taking more than $10,000 or equivalent in foreign currency from the country, state news agencies TASS and RIA reported.

Russia's central bank kept stock market trading on the Moscow Exchange suspended for a third day in a row on Wednesday….

Well, in spite of the above assurances, those bits are causing a wee bit of bother to a rather specific set of Americans.

VanEck Russia ETF, a nearly $700 million fund, plans to modify the usual process by which funds create and redeem shares, using a special basket of securities. BlackRock Inc. suspended the creation of new shares of its iShares MSCI Russia ETF, a roughly $105 million fund. Direxion Funds will liquidate and close its leveraged Russia ETF, Direxion Daily Russia Bull 2x Shares, on March 11…. “Even if the [Russian] stock market remains closed for a period of time, we’re likely to see the leading ETFs as good proxies for where the market is headed,” Mr. Rosenbluth said. “The same thing happened in Greece in 2015.”

Speaking of proxies for how things are going:

Shares of Russia’s Sberbank plunged 95% on the London Stock Exchange on Wednesday to trade as low as a penny after the bank announced that it was pulling out of the European market.

And if you happen to be the sort of person who wonders how, in such an environment, Russia might pay its bills, well, it probably won’t. Not that you’ll be able to protect yourself from or otherwise make any money on the increasingly likely default.

International sanctions placed on the country in response to President Vladimir Putin’s invasion of Ukraine may both trigger credit-default swaps and also prevent the underlying bonds from being used for settlement, according to strategists and investors at Citigroup Inc., CreditSights Inc. and Vanguard Asset Management…. A potential ban on secondary trading of Russian sovereign bonds could create an orphaning event similar to Novo Banco’s, whereby the derivatives become worthless because there’s no underlying debt to insure, Citi said.

In such a bleak and unforgiving world, where, then, can the desperate turn? Oh, no. Please, no. Not that.

Bitcoin has been trading at a premium against the Ukrainian hryvnia on a number of exchanges, both globally and locally, a sign of high demand…. On Binance, there has been a surge in trading volume of bitcoin in exchange for rubles since just before Russia’s invasion began. Between Feb. 20 and 28, about 1,792 bitcoins exchanged hands in the ruble/bitcoin trading pair, compared with only 522 in the nine days before that, according to data on Binance…. Crypto exchanges largely demurred from enacting any voluntary restrictions in Russia.

Well, I mean, you can certainly understand the appeal.

As crypto transforms into an increasingly mainstream industry, even the ostensibly legitimate actors — start-up founders, engineers and investors — insist on anonymity. A growing number of crypto entrepreneurs, many of whom control hundreds of millions of dollars in investor funds, conduct business via mysterious internet avatars scrubbed of identifying information. Some venture capital firms are backing founders without ever learning their real names.

Just don’t put a “Dmitri” in your handle and you can just forget about sanctions. At least, that’s the worry of those who’d probably like to put an end to the whole ugly experiment in the first place.

“Given the need to ensure the efficacy and integrity of our sanctions program against Russia and other adversaries, we are seeking information on the steps Treasury is taking to enforce sanctions compliance by the cryptocurrency industry,” wrote the lawmakers, all members of the Senate Banking Committee…. “These reports are even more troubling because of analyses that suggest that the cryptocurrency industry may not be fulfilling its responsibility to comply with U.S. sanctions,” the senators wrote.

Well, we might not be tracking all of the digital money flowing in and out of rogue states at the moment, but thanks to Elon Musk’s teenage bête noir, we can track where the sanctioned are going.

[Jack] Sweeney, 19 years old, said that he made the new Twitter bots—@RUOligarchJets and @Putinjet—over the weekend after Russia invaded Ukraine…. His new Twitter bots focused on Russia use the same technology as the one that tracks the jet Mr. Sweeney believes is owned by Mr. Musk, he said.

U.S. Positioned to Withstand Economic Shock From Ukraine Crisis [WSJ]
Russia says its economy is taking 'serious blows' as isolation grows [CNN Business]
Moscow Exchange won't resume stock trading on Wednesday – cenbank [Reuters]
Russian ETFs Offer Hint of Where the Moscow Exchange Is Headed [WSJ]
Russia’s Sberbank collapses 95% on London stock exchange as it exits Europe [CNBC]
Sanctions significantly increase chance of Russia international debt default, analysts warn [Reuters]
Russia Sanctions Put $41 Billion of Default Insurance at Risk [Bloomberg]
Bitcoin Price Jumps as Demand in Ukraine and Russia Booms [WSJ]
Millions for Crypto Start-Ups, No Real Names Necessary [NYT]
Senators want to know if Russia can use cryptocurrencies to skirt sanctions. [NYT]
Teen Who Tracks Elon Musk’s Private Jet Is Now Monitoring Russian Oligarchs, Vladimir Putin [WSJ]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

The U.S. Securities and Exchange Commission rejected Intercontinental Exchange’s NYSE Arca proposal for a Bitcoin exchange-traded fund from Anthony Scaramucci’s Skybridge Capital.

The filing did not meet "the requirement that the rules of a national securities exchange be 'designed to prevent fraudulent and manipulative acts and practices' and 'to protect investors and the public interest,'" the SEC said Thursday in a filing.

Whatever would make Gary Gensler & co. think that the Mooch wasn’t up to protecting people from scams? Not that it really seems to matter who’s proposing these things.

The regulator used similar arguments to deny proposals from Valkyrie Investments and Kryptoin in December. 

And now @Fidelity is on the chopping block. Their denial letter will come next week on or before Thursday (1/27/22). Still most interested in the final decision letter on Teucrium's #Bitcoin Futures ETF filing which will come by ~4/8/22 https://t.co/1aTnF2l9wB pic.twitter.com/lNvj4yaKXI

— James Seyffart (@JSeyff) January 20, 2022

SEC Rejects Bitcoin ETF Plan From Anthony Scaramucci’s Skybridge Capital [Bloomberg]
The SEC has blocked Anthony Scaramucci's Bitcoin ETF [Reuters via CNN Business]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Deputy Attorney General Lisa Monaco on Thursday said prosecutors would consider all prior wrongdoing by corporations when deciding how to resolve a new investigation. Previously, prosecutors were allowed to only review cases whose facts were similar to the claims in the latest probe.

Corporations also won’t qualify for leniency programs unless they provide information on all employees or executives believed to have participated in crimes such as fraud or bribery, Ms. Monaco said…. Ms. Monaco, the department’s second-in-command, said prosecutors would also consider the outcome of civil regulatory investigations…. Prosecutors are also reviewing whether companies are living up to the terms of their probationary or nonprosecution deals, Ms. Monaco said.

Indeed, it seems, global regulators are generally weighing their charges in the balance and finding them wanting. Especially if they deal in cryptocurrencies.

The [U.K. Financial Reporting Council] asked 15 companies—up from 14 the previous year—to make a change to a significant aspect of their reporting, potentially due to errors or omissions of relevant information…. The regulator also found other areas of financial statements for some companies lacking detail. Companies should make disclosures about critical accounting estimates that are specific to their business and not just repeat accounting rules, the FRC said.

The [Financial Action Task Force] called on governments to broaden regulatory oversight of crypto firms and force more of them to take measures such as checking the identities of their customers and reporting suspicious transactions to regulators…. The guidelines take aim at DeFi projects such as decentralized exchanges, in which crypto traders can swap assets with each other, typically on an anonymous basis. The task force said the people or companies that own or operate such decentralized platforms could be considered virtual asset service providers, or VASPs, a designation that would force them to check users’ identities and take other measures against money laundering.

Rostin Behnam, the CFTC’s acting chairman, noted that the agency has settled two enforcement actions against cryptocurrency companies totaling $140 million. “But this is the tip of the iceberg,” he said in a confirmation hearing before the Senate Agriculture Committee.

The SEC indicated it wants to limit new bitcoin-related products to those that provide unleveraged exposure to bitcoin futures contracts…. Valkyrie Investments on Tuesday proposed to launch a fund that sought to amplify the daily returns of a portfolio of bitcoin derivatives, including futures contracts and options, by using 1.25 times leverage, or borrowed money. Valkyrie was asked to pull its proposal….

Anyway, in the interests of balance, here’s a counterpoint from a guy with no power who’ll be retiring before he gets any back.

[Sen. Pat] Toomey’s bill would prevent the SEC from instituting an outright ban on payment for order flow, an idea [SEC Chairman Gary] Gensler has said he’s considering as part of his broader efforts to reform the practice…. The odds Toomey’s bill becomes law anytime soon appear slim in a Congress controlled by Democrats. Gensler, nominated to lead the SEC by President Joe Biden, has been encouraged by progressive lawmakers to step up regulatory oversight.

Justice Department Vows Tougher Action Against White-Collar Crime [WSJ]
U.K. Audit Regulator Says Companies Need to Improve Disclosure on Revenue, Cash Flows [WSJ]
Global Regulators Back Tougher Rules to Prevent Criminals From Using Crypto [WSJ]
CFTC Chief Says Recent Crypto Cases Are ‘Tip of the Iceberg’ [WSJ]
SEC Won’t Approve Leveraged Bitcoin Fund [WSJ]
GOP Senator Toomey debuts bill to protect broker revenues, payment for order flow [CNBC]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

“2021 will be remembered for this milestone,” said Michael Sapir, the C.E.O. of ProShares.

That’s right: Move over, coup attempts! Forget about the pandemic and miraculous vaccine! Ignore the ignominious end of America’s 20-year misadventure in Afghanistan! For tomorrow, the first bitcoin exchange-traded fund is at long last upon us.

Well, sort of.

The much-anticipated ETF from ProShares, which will track the bitcoin futures market, will begin trading Tuesday on the NYSE under the ticker “BITO,” the company confirmed…. Investing in a futures-based ETF would not be the same thing as investing directly in bitcoin…. A futures-based ETF tracks cash-settled futures contracts, not the price of the asset itself.

It is a distinction that appears not to matter much to investors.

The price of bitcoin climbed more than 2% on Monday to $62,041.84, according to Coin Metrics. Many investors are watching to see if bitcoin will jump above $64,800 this week to reach a new all-time high.

And, you know, really, why should it?

Tether Ltd., the largest stablecoin issuer, agreed to pay a federal regulator a $41 million penalty Friday…. The CFTC said that from at least mid-2016 to Feb. 25, 2019, Tether “misrepresented to customers and the market” that it held U.S. dollar reserves in bank accounts for all of its stablecoins, dubbed USDTs, in circulation. In reality, Tether held equivalent dollar reserves in its accounts “for only 27.6% of the days in a 26-month sample time period,” the CFTC said.

First bitcoin futures ETF to make its debut Tuesday on the NYSE, ProShares says [CNBC]
Bitcoin Comes to the Big Board [DealBook]
Stablecoin Giant Tether Hit With $41 Million Fine in Latest Crypto Crackdown [WSJ]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

“At the height of the market, we were managing just over $200 million,” [Raees] Cajee said…. Mr. Cajee said he and Ameer Cajee are in hiding because they have received death threats….

“We dealt with a lot of high-level South Africans, a lot of politicians, a lot of high-level businessmen within South Africa, as well as celebrities,” Raees Cajee said in the interview. “Some particularly very, very dangerous people—that we had not actually known were clients—have started to come out of the cracks.”

And, hey, we have even better news, albeit not for the brothers Cajee. You haven’t lost even that $200 million. By the standards of bitcoin breaches, you’ve lost the equivalent of nothing at all, although in real-world terms it’s still quite substantial.

He added that no more than $5 million is unaccounted for.

And maybe you’ll even see it someday.

Raees Cajee said that he and his brother plan to return to South Africa to attend a July 19 court date tied to the liquidation proceedings for Africrypt.

Obviously, good news like this should reassure the institutions and trigger a rally (in a way bad news never seems to do the opposite), and so it has!

Bitcoin prices rose for the second straight day in part due to news Morgan Stanley bought 28,289 shares of Grayscale Bitcoin Trust through its Europe Opportunity Fund…. Additionally, noted stock picker Cathie Wood's ARK Invest is entering the Bitcoin ETF race….

And, hey, wouldn’t you know that the Fed’s number two has something to say touching on that, although he uses it to draw a conclusion arguably favorable to the cryptoverse.

Citing America’s “susceptibility to boosterism and the fear of missing out,” Mr. Quarles warned that the nation has a habit of falling victim to a “mass suspension of our critical thinking and to occasionally impetuous, deluded crazes or fads.”

This man was appointed by Donald Trump.

He invoked the parachute pants of the 1980s as a parallel to the current currency craze, noting that sometimes fads are just silly…. Mr. Quarles said he does not want to prejudge the process, but he thinks there’s a “high bar” for central bank-issued digital money….

“In my judgment, we do not need to fear stablecoins,” Mr. Quarles said. He argued that the Fed has a history of fostering private sector innovation and “a global U.S. dollar stablecoin network could encourage use of the dollar by making cross-border payments faster and cheaper. And it potentially could be deployed much faster and with fewer downsides” than a central bank version.

Raees Cajee, Blamed by Investors for Billions of Dollars in Crypto Losses, Says Fraction Is Missing [WSJ]
Bitcoin price pierces $35,000, ETF race heats up [Fox Business]
A top Fed official says digital currency may be the money equivalent of parachute pants. [NYT]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

“We crossed a lot of red lines that had not been crossed before,” Powell said Friday during an online event hosted by Princeton University’s Griswold Center for Economic Policy Studies. “I’m very confident that this is the situation where you do that and then you figure it out….”

Who knew he and his erstwhile patron and antagonist had so much in common?

The Fed chair responded to questions about one of its most complex and riskiest programs intended to support the economy -- the Main Street facility -- which has been slow to launch. Powell said the central bank is “days away” from getting it up and running.

Speaking of risky bailout programs….

Of the Fed’s $1.3 billion in ETF holdings as of May 19, around 17% were in funds that invest primarily in junk debt…. The Fed owned $100 million in iShares iBoxx High Yield Corporate Bond ETF, which as of Thursday included small holdings of bonds issued by rental car company Hertz Global Holdings Inc., which filed for bankruptcy protection on May 22. It also included small holdings of retailers J.C. Penney Co. and Neiman Marcus Group Inc. and oil-shale driller Whiting Petroleum Corp., all of which filed for bankruptcy in recent weeks.

Unfortunately, the terms of the Secondary Market Corporate Credit Facility currently do not allow the Fed to get in on this apparently can’t-miss opportunity.

The U.S. Global Jets ETF held around $33 million in assets in early March, according to FactSet, but now holds about $950 million. The fund has had net inflows for 62 consecutive trading days, according to FactSet, despite its price falling sharply during that period…. “It is certainly the type of investment you make knowing that the consensus is against you, at least it was at the time we were buying in,” said Keith DeGreen, CEO of Scottsdale, Ariz.-based DeGreen Capital Management LLC.

Powell Says Fed Crossed Red Lines When Virus Demanded Action [Bloomberg]
Federal Reserve Discloses Holdings of $1.3 Billion in Exchange-Traded Funds [WSJ]
This ETF Booms as Investors Bet on Airlines [WSJ]

But stealing the entire ETF? Not just misappropriating some shares, but taking control of a whole ETF complex and misappropriating tens of millions in fees from them? That is also possible, and takes a special kind of daring, especially when you’re stealing the ETF from the very exchange on which said ETF is listed. That, however, is exactly what a judge says ETF Managers Group did.

In October 2017, Nasdaq sued the firm, saying it “fabricated frivolous legal claims” to take control of HACK and several other funds, depriving Nasdaq of millions of dollars of profits. At the time Nasdaq said HACK was generating profits of more than $300,000 a month through collecting fees from investors….

ETF Managers Group was to handle back-office operations for several ETFs that had been conceived by a third firm, PureShares LLC, which does business as PureFunds.

Nasdaq acquired ISE in 2016, inheriting its ETF business.

Nasdaq accused ETF Managers Group of unlawfully seizing control over the funds. ETF Managers Group said it acted lawfully and took profits from HACK to compensate for funds that Nasdaq owed it for a separate contract.

“We took this thing that you didn’t own to make up for some other thing you owe is money for” is a curious-sounding legal strategy to this non-lawyer’s mind, but ETF Managers is sticking to it, and will appeal the $80.6 million verdict.

Nasdaq Prevails in Lawsuit Over Alleged ETF Theft [WSJ]

Traders have pulled more money from hedge funds than they’ve added for the past four quarters….

This has some hedge funders looking for the next big thing, one of whom is Nancy Davis. Davis is familiar with pivoting with the times, having launched her Quadratic Capital Management after Paul Volcker said she and everyone else weren’t allowed to proprietarily trade at banks anymore. And that hot new thing, that mind-bending product that is setting all hearts aflutter, is, uh, exchange-traded funds, somehow?

“We really want to ETF the whole business,” said Davis, whose fund oversaw $171 million at the end of March. “I see this as a better technology to deliver the exact same strategy to our clients.”

It’s a propitious time to make the move, with hedge fund closures outnumbering startups for the fourth year running, according to data provided by Eurekahedge. ETF issuers meanwhile are projected to hold more than $7 trillion by 2021, according to PricewaterhouseCoopers….

Shares are expected to cost $25 each, with a fee of 0.99% after a waiver -- a far cry from the hedge fund version, which carried a minimum investment of $1 million.

Ex-Goldman Star Trader Pivots From Hedge Funds to the Red-Hot ETF Industry [Bloomberg]

We now have the highest wealth inequality in the history of this country. We’ve got literally half the country that can’t raise $1,000 for a family emergency. We have got -- 35% of the wealth used to be owned by the lowest 90% of the population -- the lowest -- bottom 90% of the population in 1985. Today the bottom 90% of the population owns 23% of the wealth. So they have lost a third. And that 12% has gone to the top 1%. So we’ve got a system that I think we all could agree on the wrong track…. We have got a mania going on in buybacks and a mania going on in terms of shareholder primacy. It wasn’t always that way…. Things have been different and can be different again. And if they’re not, I’m really nervous about what the ultimate social consequences are in this country.

How to avoid such a catastrophic eventuality for the people of Belle Haven and their ilk in gated communities and billionaire bunkers around the country? Why, it’s simple: Just invest with Bob Geldof, or in Paul Tudor Jones’ new ETF, and that should solve the problem nicely. Best of all: It isn’t even entirely philanthropic!

We have this big disconnect of what the American public thinks and what corporate boardrooms, the C-suite, are actually doing. The interesting thing is there’s a way to bridge that gap where everyone wins. So what JUST Capital does is we rank the Russell 1000 companies 1 to 1,000 every year according to those metrics…. I don’t know if I want to see a legislative outcome for this. I’d love to see this happen organically…. The reason that we started JUST is so that we wouldn’t get to this point, right? If I think about the taxes, it is the most inefficient way to allocate resources within an economy. So that’s why I think JUST Capital is so important. I’d like to find an organic solution and that means a complete cultural, social, intellectual shift of the way that we think about our companies and what their responsibilities are.

We created an ETF…. It outperforms stock prices better. It outperforms the Just index. It outperforms the Russell 1,000. On average those companies create jobs that are 27% faster rate. Has a 3% higher return on equity. Recycles waste nine times the average. I could go on and on.

Tudor Jones: We have a mania going on in buybacks [CNBC]

It certainly looked like the SEC’s staff had gotten the message being loudly telegraphed from the White House: Anything goes. A quadruple-levered S&P 500 exchange-traded fund unconstrained by mutual fund regulations with the added efficiency of no independent board of directors? Why not? How else are you going to turn the tragicomedy at 1600 Pennsylvania Avenue from a 2% drop into an 8% loss? Not everyone can get a margin account, you know.

Unfortunately, new SEC chief Jay Clayton is giving President-for-now Trump ample reason for second thoughts by living up to his promise to do his job. So for now, you’ll just have to settle for losing money three times as fast as the market generally allows.

The commission’s decision means the earlier approval—given by the SEC’s staff, not the politically appointed commissioners—has been put on hold and doesn’t allow the ForceShares Daily 4X US Market Futures Long Fund and Short Fund to begin trading, the people said…. The ForceShares quadruple-leveraged funds would be the first to move beyond triple leverage….

The review requires the SEC to consider a new round of comments from the public, which means the application may get more notice this time from competing ETF sponsors as well as some of the consumer groups and Wall Street watchdogs that typically weigh in about new, complex products.

Quadruple-Levered ETF? SEC Hits Pause on Its Approval of an Exotic Investment [WSJ]
Wall Street sells off as investors fret about Trump [Reuters]