—— Coinbase Fined $500M Over Lax Compliance; Software Giant Salesforce Cuts 10% of Workforce; Chicago Spends Millions to Attract Big Business; U.S. Manufacturing Index Hits New Low; FTX Hands Over $450M in Robinhood Shares; S&P 500 May Drop Another 16%; Payments Firm ACI Mulls Sale
1. Coinbase Fined $500M Over Lax Compliance
Today, the New York State Department of Financial Services (DFS) announced that cryptocurrency exchange Coinbase will pay a total fine of $500 million for failing to implement a compliant anti-money laundering system. In addition, Coinbase will invest another $500 million to upgrade its AML controls.
The DFS stated that Coinbase’s anti-money laundering policies and compliance system were immature, posing significant criminal and financial risk.
Last month, Senator Elizabeth Warren said cryptocurrencies have become a preferred method for terrorists and drug traffickers, and that many governments are using them for money laundering.
Coinbase’s Chief Legal Officer Paul Grewal stated the company will do everything it can to address the compliance gaps and aims to become a benchmark for the industry.
Coinbase, one of the earliest crypto exchanges, hopes to set an industry example.
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2. Software Giant Salesforce Cuts 10% of Workforce
Today, enterprise software giant Salesforce announced it will lay off around 10% of its employees and reduce office space due to overhiring and expansion during the pandemic.
Salesforce currently employs 80,000 people and aims to complete the cost reduction plan by the end of fiscal year 2024, expecting savings between $1.4 billion and $2.1 billion.
CEO Marc Benioff wrote in a letter to employees today that the economic environment remains challenging, with customers becoming more cautious. While revenues surged during the pandemic, the current staffing levels are too high.
Over the past four years, Salesforce—America’s largest private employer—nearly tripled its workforce, with many hires coming from acquisitions. From January 2020 to October last year, over 30,000 employees were added.
Salesforce expects its revenue growth this quarter to hit a record low.
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3. Chicago Spends Millions to Attract Big Business
Last year, major firms such as hedge fund Citadel, Boeing, and machinery giant Caterpillar moved out of Chicago.
In response, Mayor Lori Lightfoot and other county officials announced today that the city will invest $1 million over the next three years to promote its transportation network, diverse population, and world-class research institutions.
In recent years, crime rates have surged in many U.S. cities including Chicago. Last year, McDonald’s CEO Chris Kempczinski said rising violence made hiring more difficult.
However, 159 companies either moved into or expanded operations in Chicago last year.
High crime and unfavorable weather have prompted many major firms to leave Chicago.
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4. U.S. Manufacturing Index Hits New Low
According to newly released data, the U.S. manufacturing index (ISM) fell from 49 in November to 48.4 in December—the lowest since May 2020. An index below 50 indicates contraction.
In 2022, the ISM index fell a total of 10.4 points, marking the largest annual drop since the Great Depression.
Last month, both new orders and production sub-indices hit their lowest levels since May 2020, and import-export data also declined.
The data showed production declines in 13 sectors, including wood, chemicals, and paper products. Only steel and oil sectors posted output increases.
U.S. manufacturing activity has now declined for two consecutive months.
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5. FTX Hands Over $450M in Robinhood Shares
Today, James Bromley, lead attorney for the FTX bankruptcy case, revealed that the U.S. government is seizing $450 million worth of Robinhood shares held by FTX.
U.S. Department of Justice attorney Seth Shapiro stated during a virtual hearing that a future hearing will determine the final ownership of these shares and other FTX-held assets.
The specific handling of the shares will be determined in an upcoming court hearing.
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6. S&P 500 May Drop Another 16%
Michael Kantrowitz, equity strategist at Piper Sandler & Co. and ranked third in last year’s institutional investor survey, forecasts that the S&P 500 may fall another 16% to 3,225 points in 2023.
If his prediction is accurate, it would mark the first time since 2002 that the S&P 500 posted two consecutive annual declines.
Kantrowitz believes corporate earnings will continue to be severely impacted by Fed rate hikes this year. Unlike previous cycles, the Fed is now committed to curbing inflation by any means.
According to Bloomberg surveys, most analysts expect U.S. stocks to bottom by mid-2023, with a full-year average gain of around 6%.
Kantrowitz predicts the S&P 500 will retreat to 3,225 by the end of 2023.
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7. Payments Firm ACI Mulls Sale
Sources say payments software company ACI Worldwide is in talks with multiple private equity firms about a potential sale.
The Florida-based company is working with financial advisors to evaluate offers. However, market instability may prevent a deal from materializing.
ACI shares have dropped 35% over the past year but jumped as much as 14% today, bringing its market value to $2.9 billion.
Private equity firms consider ACI a viable acquisition target due to its relatively small size and ongoing consolidation efforts.
ACI provides payment solutions and in-store transaction platforms for banks, merchants, and other clients.
ACI operates in 34 countries and employs more than 4,000 people.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.