In the beginning, there was the promise that blockchain-supported smart-contracts could disintermediate the powers that be and replace them with a self-organising decentralised system where every contract entered into could be depended upon to perform as expected, with risk and costs entirely eliminated.
Furthermore, it was thought, both human and state involvement could be taken out of the process too. Instead, we’d achieve an autonomous financial utopia within which capital flowed from each according to his ability, to each according to his needs — guided only by faceless protocols and algorithms.
Yet, from the beginning, there was an inconvenient truth buried in the promises being made by blockchain advocates. Read more
As opening paragraphs go in English court cases involving subprime lending — they surely don’t come more sublime than this (hat-tip PreachyPreach).
In 2011, the first two claimants (“Mr Shearer” and “Mr Dawes”) were enjoying large country houses and expensive London flats while bogus solicitors were attempting to collect money due on high interest loans on behalf of their money-lending business, Logbook Loans. They could hardly have imagined that, in 2013, they would be asking real solicitors to invoke equity on their behalf to escape the burden of interest rates on their own debts which are at a level which Logbook Loans’ erstwhile customers might have thought modest…
And there’s much more in Shearer & Others v Spring Capital Ltd & Others: Read more
On 16 November 2009 Sergei Magnitsky died in prison in Russia. Shortly before his arrest and imprisonment he had been investigating a substantial tax fraud committed against the Russian Federation by a criminal gang. I shall refer to this tax fraud as the Hermitage Fund fraud.
Beyond this short summary, many of the facts in issue between the parties are unknown or controversial, and are subject to stark divisions of opinion…
So began Mr Justice Simon’s judgment in Pavel Karpov v William Felix Browder & Hermitage Capital Management Limited & others on Monday. And the rest is very much worth reading. Read more
Now here’s a sign of the times…
The Network aims to promote collaboration in international financial matters to help facilitate cost-effective resolution of disputes and avoidance of duplicative and inconsistent adjudication of the same matters in different jurisdictions, thus increasing the likelihood of resolving financial disputes in a way that all market participants will find to be substantively and procedurally fair… Read more
Sometimes, the courts of England and Wales taketh away when it comes to the law on restructuring bonds and getting debtors out of holes. And other times they giveth.
A landmark decision by the England and Wales Court of Appeal on Monday falls under the latter… Read more
Some light reading late on Wednesday… the United States Supreme Court’s ruling in Kiobel v Royal Dutch Petroleum.
That is Royal Dutch Shell, whom the court ultimately found for in a strong 9-0 decision (while split on the reasoning). It’s quite a case. Read more
Quite a victory for open justice on Thursday — senior Barclays bankers involved in the first major test litigation over Libor will be publicly named in court after all, after a High Court judge threw out their application for anonymity.
Full FT story here. (The FT joined other media organisations in challenging the anonymity.) Read more
Big props to Bloomberg for putting this little-known case on the radar (don’t worry, we’ll explain):
We qualify ‘new’. This paper is a full 30-year history of the special-purpose entity in banking, from Mike Milken to the Abacus CDO, via Bistro — up to the denouement of FAS 167.
Penned by William Bratton and Credit Slips blogger Adam Levitin, it also points out that corporate law continues to lag the accountancy profession in understanding the implications of SPEs. That weakness is important when the original purpose of many SPEs — for banks to replace equity with contracts as a means of controlling assets taken off-balance sheet, in order to gain relief from regulatory capital — is as relevant as ever. Read more
Loads has already been written about last week’s judgement by The Hon Mr Justice Briggs against Anglo Irish, taking a hammer to ‘exit consents’, a key bit of legal engineering in debt restructurings for banks and, sometimes, sovereigns. (There’s a great take by Credit Slips here for instance.)
It was that kind of case. Read more
Many in the market are now thinking through the consequences of any one country (or all 17 member states) changing currencies on departing the euro. Gilles Thieffry, a Partner at GTLaw, Geneva, has perhaps been thinking it through earlier than most. He started in 1998. We are pleased to present his analysis of the “redenomination risk” confronting markets in 2011.
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AIG’s former chief executive sued the US government for $25bn on Monday, alleging that the Treasury illegally appropriated the insurer from shareholders in 2008 and used it “to covertly funnel billions of dollars to foreign entities”, the FT reported. Maurice “Hank” Greenberg, who left as chief executive in 2005 but remained a large shareholder, said the government acted unconstitutionally when it took 80 per cent of AIG’s equity in return for a rescue. The suit against the US and the Federal Reserve Bank of New York has been filed on behalf of Starr International and other AIG shareholders. According to the Wall Street Journal, Starr is seeking damages for itself and other shareholders of at least $25bn. AIG is listed as a nominal defendant in the suits, which also seek damages for the company. A spokesman for the company declined to comment. In a complaint filed at the US Court of Federal Claims, Starr International, a company controlled by Mr Greenberg, said: “The government is not empowered to trample shareholder and property rights even in the midst of a financial emergency.
Microsoft has lost a high-profile appeal to the US Supreme Court that will force it to pay $290m in damages and could tilt the balance in other patent cases against deep-pocketed defendants, the FT reports. The country’s top court upheld lower court decisions that Microsoft’s widely used Word software had contravened a patent held by I4i, a small Canadian software company. The case had become a lightning rod for the debate over whether big companies were being held hostage by so-called ‘patent trolls’, accused of using a lax patent system to extract large payments. Microsoft said it would continue to advocate for changes to laws regarding patents.
Breaking on Tuesday (flashes via Reuters):
Today 14:30 – U.S. FILES CIVIL MORTGAGE FRAUD LAWSUIT AGAINST DEUTSCHE BANK AG DBKGn.DE, MORTGAGE IT INC – COURT FILING Read more
Blink and you would’ve missed it, but JP Morgan Securities has just changed its legal status, and name.
From the Federal Reserve’s primary dealers update: Read more
Goldman Sachs has revealed the counterparties it used in hedging risk associated with a potential failure of American International Group. According to sources cited by Bloomberg, the bank provided a list of names to US investigators as requested by panels reviewing the beneficiaries of New York-based AIG’s $182.3bn government bailout. Goldman Sachs, which received $12.9bn after the 2008 rescue tied to contracts with the insurer, has always said it would not have suffered in the event AIG’s failure because it was hedged.
Leading international law firms took only a small hit to profits last year as a good performance in emerging economies helped them stave off growing troubles of some smaller practices since the financial crisis, reports the FT. Linklaters, Freshfields Bruckhaus Deringer and Allen & Overy are all reporting flat or only slightly reduced pre-tax profits for last year, when many firms saw a big drop in corporate transactional work and culled partners and more junior lawyers.
Google is likely to face a co-ordinated inquiry from multiple US states into its collection of data from unsecured wireless networks, adding to a litany of probes that include actions by authorities in Germany, New Zealand as well as a pan-European group of privacy officials. The FT reports that the attorneys-general of the states of Connecticut, Illinois and Massachusetts have all sent letters to Google demanding more information about how the data were assembled from 2007 until this year and what has been done with them.
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Huang Guangyu, once China’s richest man, was sentenced to 14 years in jail on Tuesday and given a record fine of Rmb600m ($88m) for insider trading, bribery and illegal dealing, the FT said. The Chinese subsidiary of Hong Kong-listed Gome Electrical Appliances Holding, which said the ruling “eliminated most of the uncertainties” surrounding it, was fined Rmb5m. It was unclear, however, what role Huang, still the company’s largest shareholder, would play in Gome’s future, the FT added.
A Shanghai court rejected appeals by three former Rio Tinto employees of convictions for commercial crimes, the WSJ reported. The widely expected rejection marks an end to the legal process in a case that raised concerns among foreign businesses in China, the newspaper said. The Shanghai Municipal High People’s Court on Monday upheld a lower court’s decision in March to convict Liu Caikui, Ge Minqiang and Wang Yong of accepting bribes and taking commercial secrets. The Chinese nationals were sentenced to prison terms of seven, eight and 14 years, respectively, plus fines.
From Philip Marcovici chief executive officer of LawInContext, who is presenting at the CFA Institute 2010 Annual Conference, which begins on Sunday in Boston…
Investment professionals are under increasing pressure to produce investment returns of more than 5 percent or 10 percent, at best, without exposing investors to significant risk. The globalization of investment portfolios requires that investors have a thorough understanding of how legal issues can affect returns. Read more
Here’s an interesting tidbit, or two, or three (or four) from the ‘Legal Proceedings’ part of Goldman Sachs’ filing to the Securities and Exchange Commission, published on Monday:
We are involved in a number of judicial, regulatory and arbitration proceedings (including those described below) concerning matters arising in connection with the conduct of our businesses…
A gender discrimination lawsuit against Wal-Mart stores has been affirmed as a class action case by a federal appeals court, creating one of the largest such suits in history, the WSJ reports.
The company’s defence attorney said that an appeal to the Supreme Court would be launched. Wal-Mart, the largest corporate employer in the country, has much to lose from the decision, the Journal adds. Class action suits aggregate legal costs, allowing many more claimants to bring suits than would occur individually.
Goldman wasn’t the only bank underwriting toxic synthetic CDOs back in 2007. FT Alphaville has a league table… Read more
The weekend produced a veritable Eyjafjallajökull ash cloud of blogging and bloviating on the SEC’s filing on Friday against Goldman Sachs and its structured products trader Fabrice Tourre. Here’s a compilation of the best read by FT Alphaville. Read more
It’s the case all foreign investors into China should be watching: Rio Tinto v China.
After nine months of very little news but much sabre rattling, the pace has stepped up noticeably. As Bloomberg reported on Monday: Read more