Tag Archives: Law

China Is Killing its Tech Industry

Major news over the holiday weekend as the Chinese government required all app stores in China to remove the Didi Chuxing app. Didi is the Chinese equivalent to Uber, and dominates shared rides in the country, along with a major presence abroad:

China has ordered app-store operators to remove the app of Didi from their stores, the latest as tension escalates between the nation’s largest ride-hailing giant and local regulators. The app has disappeared from several stores including Apple’s App Store in China, TechCrunch can confirm.

The nation’s cyberspace administration, which unveiled the order on Sunday, said Didi was illegally collecting users’ personal data.

Existing users can continue the use the app for now, but new signups are blocked. This comes just days after Didi raised billions in an IPO in New York, perhaps angering the Chinese government.

The claim of data violations seems specious. Didi’s CEO, Li Min, denies that any data is handled improperly or passed to the US.

This is part of a broader crackdown on China’s technology industry:

  • Alibaba Group fined $2.8 billion shortly after CEO Jack Ma criticizes the Communist Party
  • Fintech giant Ant Group, also founded by Jack Ma, has IPO cancelled
  • Bitcoin miners forced to shut down and are racing to move their servers elsewhere, including the US, as the Chinese government prepares to launch its own competing digital currency
  • A Chinese billionaire, many of whom are in the technology industry, dies every 40 days on average, often in suspicious “accidents” and “suicides.” Some are simply executed.

What is this doing to China’s technology industry? The damage is reflected in a massive decline in the number of “unicorns,” or startups reaching $1 billion valuation, in China. Meanwhile, the number of unicorns in the US is skyrocketing and the tech industry as a whole is hotter than ever.

China’s overall economy has also trended sharply downwards in recent years:

The Communist Party doesn’t want any competing power centers, and the Chinese tech industry, with its wealth and control of information, is perhaps the biggest alternative power center left.

But the industry needs freedom to experiment and exchange ideas, and a stable climate without the constant threat of fines, shutdowns and imprisonment. Entrepreneurs can find that here in the US, along with abundant funding. And I think you’ll see more and more of them making that jump.

More on technology:

7 COMPANIES HAD 3 MINUTES EACH TO PITCH US. THIS IS WHAT HAPPENED.

INSIDE A STARTUP ACCELERATOR DEMO DAY

UNICORNS ARE BEING MINTED FASTER THAN EVER

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AMC on the Threshold List: Strong Evidence of Naked Short Selling

For months, investors in AMC have suspected a conspiracy by hedge funds to drive down the share price via an illegal practice called naked short selling. Strong evidence of this emerged Friday with the listing of AMC on the NYSE’s Threshold Securities list.

Let’s back up: what is naked short selling? In a normal short sale, you borrow the shares and then sell them, agreeing to return them at a later date and hoping the price drops by then, netting you a profit. Naked short selling is selling shares short (betting against the price) that you have not actually borrowed.

Naked short selling is illegal unless it’s a bona fide attempt by a market maker to meet demand. This usually occurs in thinly traded stocks. AMC is the exact opposite, and is often one of the most traded stocks in the market.

Stocks can also wind up on the Threshold List because of fail-to-delivers (trades not being completed) due to administrative errors. But the fail-to-delivers must be substantial: at least 0.5% of all shares outstanding. AMC has been on and off this list for months, along with other meme stocks like GameStop. AMC has high short interest, numerous hedge funds betting against it, and many appearances on the NYSE list. So, I think naked short selling is the likely reason for the fail-to-delivers, not innocent errors.

Naked short selling is illegal because it is a powerful way to push down a stock’s price artificially. If a seller need not even find the shares and borrow them, they can short sell any amount. They could even sell more shares than exist! And no pesky interest to pay on those borrowed shares. Naked short selling is a tool that manipulates stocks and kills investor confidence, the lifeblood of markets that allow companies to raise funds.

So what happens now?

Regulation SHO requires that participants of a registered clearing agency must immediately purchase shares to close out failures to deliver in securities with large and persistent failures to deliver, referred to as “threshold securities,” if the failures to deliver persist for 13 consecutive settlement days.

If hedge funds have to close out their short positions, that involves buying. A lot of it. This could strain the capital of funds that are already nursing wounds from betting against meme stocks, pushing them closer to the edge.

It could also cause another short squeeze, pushing AMC’s price much higher. The stock is up 28-fold so far this year, but it’s possible we ain’t seen nothin’ yet.

More great content on the threshold listing here and here.

More on AMC:

HIGH FREQUENCY TRADERS MAKE BILLIONS ON AMC, MEME STOCKS

HEDGE FUNDS LOSE $12 BILLION ON AMC AND GAMESTOP

HEDGE FUNDS’ AMC DOOMSDAY SCENARIO

Photo: “Naked Cowboy” by moneymakermj is licensed under CC BY-NC-SA 2.0

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Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account. I will also get a fee waiver for 90-365 days, depending on what type of account you open.

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My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. I’ll also get $10.

The Mafia’s Hoboken Fortress

On a narrow street at the edge of town sits a squat brick building. There are no windows. On the street, lookouts watch for unfamiliar faces. The few who do enter are carefully watched.

Inside: the headquarters of the most powerful mafia family in this country.

This is Casella’s Restaurant in Hoboken, NJ. In the 1980’s, it functioned as home to the Genovese crime family. Law enforcement attention had made the Genovese family’s usual haunts in Little Italy uncomfortable, and much of the family decamped to New Jersey to meet.

Casella’s as it once was

Casella’s was owned by Genovese soldier Martin “Mots” Casella, but the real power belonged to Louis “Bobby” Manna, consigliere of the Genovese family. As one of the top leaders, Manna held numerous meetings at this bunker-like restaurant. Another fixture was Hoboken bookie Peter “Petey Cap” Caporino, whose own social club was a few blocks away.

Genovese family consigliere Louis “Bobby” Manna

In 1987, Manna began to plot the murder of Gambino family boss John Gotti. He made those plans where he felt most comfortable: at Casella’s. Gotti had broken mafia rules by killing prior Gambino boss Paul Castellano. The Gambino family was also the Genovese’s biggest rival.

Before the hit could be carried out, the FBI tipped Gotti to the danger, likely saving his life. But how did the FBI know about the plan in the first place?

Shortly before Manna hatched the plot to murder Gotti, the FBI had done what they previously thought impossible: placed a bug inside Casella’s. It gave them the planning of the Gotti hit, the murder of associate Irwin Schiff, and a lot more.

Manna and other top Genovese members were sentenced to lengthy prison terms in a trial that was a who’s who of future political stars: NJ Attorney General Samuel Alito went on to become a Supreme Court Justice, federal prosecutor Michael Chertoff became Secretary of Homeland Security, and the judge happened to be future president Donald Trump’s elder sister.

Casella’s today

After a sale, closures due to code violations, and a fire that destroyed the apartments above, Casella’s was finally demolished at the end of 2020. All that remains of this intriguing piece of history is a vacant lot.

I wish I could visit the old Casella’s and order a plate of pasta…if they’d let me in.

More interesting spots in New Jersey:

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Save Money on Stuff I Use:

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account. I will also get a fee waiver for 90-365 days, depending on what type of account you open.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! I’ll also get 5% of however much you spend, at no cost to you.

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. I’ll also get $10.

Congress Is Investigating Wallstreetbets Over GameStop, But the Law’s On Their Side

Congress is investigating whether traders on Reddit’s Wallstreetbets colluded to drive up the price of GameStop, possibily illegally. But two major legal precedents are on the side of Wallstreetbets:

In the DRW case, the CFTC argued the defendants’ orders for a swap contract were “inherently manipulative” because the defendants “understood and intended that their bids would affect the settlement price” of that contract. As the court summarized, the CFTC’s position was that the defendants “had intent to affect the prices, and because they had intent to affect the prices, that means [the prices] were illegitimate, which means that the prices were artificial.” The court rejected that logic as “circular,” concluding the government’s “theory, which taken to its logical conclusion would effectively bar market participants with open positions from ever making additional bids to pursue future transactions, finds no basis in law.”

More here.

The way I view this is people saying “You should buy GME!” on an online message board are exercising their free speech. Period.

For more on the Wallstreetbets phenomenon, check out these posts:

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Photo: “GameStop” by JeepersMedia is licensed under CC BY 2.0