Morning Coffee: The worst thing to say when you're head of compliance. Time to leave capital intensive trading jobs in big banks?
When Noah Perlman, Morgan Stanley's former long-serving head of financial crimes, joined Binance as its new head of compliance in January 2023, he declared that his job was one of the “most challenging opportunities in compliance.”
Five months later, that looks like an understatement. And Perlman's predecessor hasn't made matters any easier for him.
Yesterday, the SEC published a 136-page document detailing all the ways in which it says Binance broke its securities rules. The key accusations include the fact that Binance was allegedly operating as an unregistered securities exchange and that it broke the laws relating to know your customer (KYC).
Binance has promptly issued a riposte stating that it intends to defend its platform "vigorously." It says the SEC's decision to go about "unilaterally labeling certain tokens and services as securities," which enabled the accusation that it was operating an unregistered securities exchange, lacked the "thoughtful, nuanced approach," necessary when dealing with [delicate] crypto products.
It's not clear whether Perlman had a hand in writing the unattributed Binance rebuttal, but as the current head of compliance he presumably wasn't too far removed. There are many reasons in the SEC's long document to suggest that Perlman will have a role in helping to fight the regulator's case; chief among them is the fact that Perlman's predecessor dropped the exchange directly in it.
In 2018, Binance's then chief of compliance, unnamed in the document, is said to have stated to another unnamed Binance compliance colleague (seemingly in delight): “We are operating as a fking unlicensed securities exchange in the USA bro.” It's not the ideal thing to say when you're head of compliance at an organization claiming that, "dedication to compliance is a core pillar of our culture and operations."
Perlman and his 750-person strong team now need to prove that compliance really was a Binance 'pillar', which might also be difficult in light of various internal emails about the advantages of encouraging US clients to use VPNs in order to disguise their locations. For a man who's 'crypto journey' reportedly began when he sat on a committee at Morgan Stanley to evaluate crypto opportunities, it's a new and awkward kink in the road.
Separately, if you're a trader who drank the Daniel Pinto Kool-Aid last week and were subsequently taken by the notion that market share is accumulating in big banks because only big banks have the big money to spend on big trading platforms, you might want to dial back a bit.
The Wall Street Journal reported yesterday that big US banks could soon see a 20% increase in their capital requirements, and that the banks with big trading businesses will be most susceptible to the rise.
This doesn't bode well if you're trading capital intensive fixed income products at, say, a JPMorgan. Now might be the time to join a much smaller bank instead - the new rules may apply to any bank with over $100m in assets.
Meanwhile...
“While Zhao and Binance publicly claimed that Binance.US was created as a separate, independent trading platform for U.S. investors, Zhao and Binance secretly controlled the Binance.US platform’s operations behind the scenes.” (Bloomberg)
UBS wants to keep hundreds of bankers in Asia and has been proposing compensation targets to the MDs it intends to retain there. That number doesn't include China. (Bloomberg)
Another resignation from Barclays' US M&A team: Steven Markovich, head of software banking, left for Centerview. (Yahoo)
Hedge fund Marshall Wace hired Todd Builione, a partner and global head of private wealth at KKR in New York to run its US business. (Financial Times)
The debt backing Elon Musk’s $44 billion takeover of Twitter still hasn’t been sold, while other financing from earlier in 2022 is being sold only at heavy discounts. (Bloomberg)
Jamie Dimon doesn't want to be president and is "very happy in his current role.” (Reuters)
People who have less than two hours of free time per day are less happy. (So are those who spend more than five hours daily on unproductive leisure pursuits, like scrolling Instagram.) (WSJ)
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