Music Appreciation

Off-topic a bit – an appreciation.

When I first heard the theme for the TV actor’s (Clint Eastwood) first feature, a “Spaghetti Western,” it blew me away. Composer Ennio Morricone had a way to break new ground in film music composition.

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Unlike any of the lush orchestrations of Bernard Hermann or Elmer Bernstein, this one, for “A Fist Full of Dollars,” used an occarina and choral voices.

Combined with squinty-eyed close ups and “real life” violence, holy cow, what an experience.

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Crowdfunding A Cure

With the rush to find a drug treatment for Covid19, a crowdfunded Swedish pharmaceutical company in clinical trials has perhaps paved a new path.

Vince Hamilton, a Canadian oil and gas engineer who was dying of neuroendocrine cancer (the one that got Steve Jobs), wrote a check for $1 million to get the research going into a genetically modified “oncolytic virus” that, theoretically could find cancer cells, infect and kill them.

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The crowdfunding campaign website was posted, noting this donation and another ~$0.7 million rolled in (thanks also to a Financial Times article noting that it would be a “gift for the person who already had everything.”)

That kicked started the research project that is now in clinical trials.

Unfortunately, it was too late for Mr. Hamilton, who died in 2014.

But the company that received the funding has donated 5% of its equity to the foundation that started it all.

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Financial Sleight Of Hand?

How do you make $2 Billion disappear?

Perhaps by the money never being there in the first place?

That’s the mystery of Wirecard, a German payment processor, that in mid-June was valued at $14 Billion and on June 25th filed for the German equivalent of bankruptcy.

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The company claimed that the money, which, according to the Wall Street Journal, represented virtually all of its historical profits, was in two Phillipino banks, but a special audit could not confirm that.

Thereafter, the company stated that the money probably never existed at all.

The theory being probed by investigators is that Wirecard used unlicensed, independent third party payment processors in Asia that created fictional revenue that was “deposited” into fictional bank accounts and reported back to Wirecard which put it on their financial statements.

Needless to say both the CEO and his deputy have been arrested.$2billion-11593703379

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Crowdfunding Somebody

Can you crowdfund money for an unknown, eventual candidate?

Apparently, you can. Witness the crowdfunding effort in Maine against Senator Susan Collins.

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Starting with the fight to put Brett Kavanaugh onto the Supreme Court, RollCall notes that “Be a Hero, Maine People’s Alliance and Mainers for Accountable Leadership spearheaded the campaign to raise money for Collins’ challenger if she voted to confirm Kavanaugh.”

Up to that point, Collins was a shoe-in for re-election, having won her prior election by 37 points.

But her support of Kavanaugh and his known anti-choice stance mobilized #donors to raise ~$4 Million. More money has come in since the latest Supreme Court case that struck down the Louisiana “hospital privileges” law because Kavanaugh wrote a dissent that would have let the law stand.

While Collins called the money campaign “bribery,” a former Federal Elections Commissioner said it was legal.

Notwithstanding, RealClearPolitics still gives Collins a 14 point lead over the presumptive Democrat, Sara Gideon.

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Grams Are Securities

The long running battle between the Securities and Exchange Commission and Telegram has been settled.

Back in 2019, the SEC filed suit against Telegram alleging that it had raised capital to finance the development of a blockchain named the Telegram Open Network, or TON, by selling approximately 2.9 billion Grams to 171 initial purchasers worldwide without registering the Grams as “securities.”

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Telegram at first fought the government claiming that the Commission “has engaged in improper ‘regulation by enforcement’ in this nascent area of the law, failed to provide clear guidance and fair notice of its views as to what conduct constitutes a violation of the federal securities laws, and has now adopted an ad hoc legal position that is contrary to judicial precedent and the publicly expressed views of its own high-ranking officials.”

The parties have now settled with Telegram disgorging ~$1.2 Billion and paying an $18.5 Million civil penalty.

An expensive experiment.

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Crowdfunded Covid-19 Mask Also Translates

The neat thing about living in this “technology age” is that there’s seems to be someone out there always thinking about how to improve things.

That’s why there’s tremendous hope that a Covid-19 vaccine will be available sooner than ever thought possible.

With the help of a crowdfunding campaign that raised ~$260,000, Japanese tech company Donut has invented and manufactured the “c-mask.”

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Per the Daily Mail, the c-mask not only protects you from the corona virus, but “can also covert a person’s speech into text and then translate it into eight different languages through a smartphone app.” The company plans on having about 5,000 c-masks available by September.

It will be great for traveling when we can all travel again.

(No endorsement implied).

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Credit Unions Can Finance Hemp

Hemp is not marijuana.

In fact, hemp was “legalized” by the 2018 Farm Bill assuming that the farmer meets the U.S. Department of Agriculture’s requirements to get a license to grow the plan with minimal THC levels.

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The National Credit Union Administration regulates credit unions in the U.S. just like the Comptroller of the Currency regulates banks.

The NCUA just issued new guidelines that permits credit unions to lend to members in the hemp industry.

This continues to build on the move by the U.S. government’s financial crimes enforcement network to eliminate the need to file suspicious activity reports on companies engaged in hemp (unless there is cannabis also involved).

The new NCUA guidelines indicate that credit unions may continue to service the hemp industry as long as they do their diligence in confirming that their customers are in compliance with all federal, state and tribal laws and perform their standard credit analysis on the borrower.

More incremental progress for an historical business.

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First Movie Starring Actual Robot

Here’s something else to make this a very bad year for talent agents (not to mention the continuing legal battle with the Writers’ Guild).

The newest lead actress in the movie titled “b” won’t be a woman.

It will be Erica, an artificially intelligent robot.

Unlike “Alita Battle Angel” who was a product of motion capture and CGI, this actress is actually a skin-and-bones, err, metal and motor robot.

She looks amazingly human and of Japanese ethnicity, which makes sense since her (its?) inventors are Japanese scientists Hiroshi Ishiguro and Kohei Ogawa. They have taught Erica to act by, according to the Hollywood Reporter, “applying the principles of method acting to artificial intelligence.”

Move over Lee Strasberg.

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Watch Out For Your Hedge Fund

If you have your money with a private fund adviser (and new rules will permit your 401K to indulge), then you should be aware of the risks recently determined by the SEC.

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Basically, the report says that you’re getting screwed in ways not described to you.

Those risks included:

  • that private fund advisers gave preference on certain “good” investment opportunities to new clients, higher fee-paying clients, or proprietary accounts;
  • inadequate disclosure to clients investing in different capital levels (ie, debt preferences to equity);
  • failure to disclose conflicts of interests between the advisers and certain of their investors to the detriment of “outside” investors;
  • certain investors were given “side letters” giving them special liquidity terms (their money out first) over outside investors;
  • some advisers contracted with affiliates without telling investors about their relationships; and
  • some advisers established the price at which securities would be transferred between client accounts in a way that disadvantaged either the selling or purchasing client but without providing adequate disclosure to its clients.

Click to access Private%20Fund%20Risk%20Alert_0.pdf

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Supreme Court OK’s Disgorgement For Misleading Investors

The U.S. Supreme Court decided that the Securities and Exchange Commission can force an issuer to cough up misappropriated funds.

In the case SEC v. Liu, Mr. Liu and his wife raised $27 million from Chinese nationals under the Federal EB-5 program that provides a fast path to a Green Card for foreign investors.

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The Lius provided the investors with a private placement offering memorandum that stated that most of the money would be used to build a cancer treatment center and only a small portion would be used for administrative expenses. In fact, the SEC investigation determined that about $20 Million was spent on “on ostensible marketing expenses and salaries, an amount far more than what the offering memorandum permitted and far in excess of the administrative fees collected.” The SEC sued the Liu’s the lower court ordered the Liu’s to disgorge the misappropriated funds. The Supreme Court noted that disgorgement is an appropriate equitable relief but sent the case back to the lower court to determine whether the amount of the remedy should have deducted their legitimate expenses.

Lesson: Your PPM must reflect what you will actually do with the money you raise from investors.

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