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Crypto Crash. Wall Street won.

    While Bitcoin prices have fallen and cryptocurrency start-ups have failed, Wall Street’s biggest banks and their wealthiest clients have barely taken a hit. Some have even managed to make a profit from the collapse. In the great cryptocurrency carnage of 2022, The Times’ Emily Flitter writes, Wall Street wins.

    Unlike in the 2008 crisis, the fortunes of Wall Street and Main Street have diverged. Plunging prices of digital assets have caused some retail investors to suffer significant losses. Lured by the promise of quick returns and astronomical wealth, many individuals bought new digital currencies or stocks in funds that held these assets. That is not the case for most banks, which generally do not own crypto or run funds that invest in it. Nor have they borrowed much from the emerging market for new money. That’s not to say the big banks are without problems: Rising interest rates and falling stock prices have limited the number of companies willing to close deals, leaving bankers inactive. But when it comes to crypto, few see a contagion risk: the chance that losses from digital money markets will undermine banks.

    Wall Street banks wanted to get into cryptobut international regulators wouldn’t allow that. Last year, the Basel Committee on Banking Supervision, which helps establish capital requirements for major banks around the world, proposed giving Bitcoin and other cryptocurrencies the highest possible risk weight. If banks wanted to put those assets on their balance sheets, they had to offset the risk with at least the cash equivalent.

    US regulators also warned banks. That kept Wall Street from participating in the bubble as it did in the previous one — by making loans so people could buy more homes or stocks, or by making it easier to buy and sell the rising assets.

    But the suffering of some individuals who have bought crypto still raises questions for regulators. Jacob Willette, a 40-year-old delivery boy in Mesa, Arizona, kept all his savings in an account with cryptocurrency lender Celsius that promised high returns. When crypto prices started to fall, Willette sought reassurance from Celsius executives that his money was safe, but got none as the company froze more than $8 billion in deposits. “I just don’t see how what they were doing isn’t illegal,” Willette said.

    Black American investors in particular have been hit hard due to higher exposure to digital assets† The Financial Times reports† A survey by Ariel Investments and Charles Schwab found that a quarter of black investors owned crypto investments at the start of the year, compared to 15 percent of white investors.

    Police detain a “person of interest” after a fatal shooting at a Fourth of July parade. Gunshots rained from a rooftop at the parade in Highland Park, Illinois, killing six and injuring dozens. Celebrations were canceled across the region for fear of more violence.

    Airlines cancel more than 1,400 U.S. flights over the holiday weekend. The airlines struggled to keep up with the more than seven million weekend travelers in the US. Adding to the problems was a malfunction in American Airlines’ scheduling system that allowed pilots to drop flights. Southwest, American Airlines and United canceled more than a fifth of their flights on Saturday.

    Germany posts its first monthly trade deficit in 30 years. Exports have suffered as German companies have raised prices to cope with a sharp rise in energy costs caused by Russia’s measures to limit the supply of natural gas and supply chain disruptions. It is the latest sign that Europe’s largest economy is under pressure.

    The Biden administration is reportedly considering cutting federal housing loan premiums. Industry officials are asking the Federal Housing Administration for cuts that would save borrowers $50 to $70 a month, according to The Wall Street Journal. The move comes as house prices are at record levels and inflation is exacerbating homelessness.

    Nuclear power gets a new boost in the US With challenges in meeting clean energy targets and new electricity needs, politicians in both sides are trying to extend the life of nuclear reactors and build new ones. But critics of the nuclear industry say that waste disposal remains a challenge and that repairs for aging facilities are expensive.

    A former employee of Archegos, the investment firm that caused a brief market panic last year when it lost more than $10 billion in just days, is suing the company and its founder, Bill Hwang, plus five former top executives for $550 million. DealBook is the first to report the lawsuit, which was filed today in federal court in Manhattan.

    The case against Archegos: Brendan Sullivan, a technical stock analyst who joined the company in 2014 and resigned shortly after it blew up, said he lost $50 million, which was part of a deferred $500 million compensation plan that evaporated along with Archegos’ other assets when his highly leveraged options strategy failed. The lawsuit is intended to force Hwang and others to cover the workers’ losses. Hwang was charged this year by federal prosecutors with fraud on suspicion of deceptive lenders and market manipulation, and pleaded not guilty to the lawsuit; last week, Archegos lawyers filed motions to dismiss other lawsuits against the company from the Commodity Futures Trading Commission and the SEC

    Fund employees were told that the deferral of payment was guaranteed, the suit says, and that it was invested in highly liquid stocks. Neither claim was true, according to the lawsuit. In addition, employees were forced to contribute at least 25 percent of their annual bonus to the plan and state how much they would defer before knowing the details of the bonus. “The message was crystal clear,” the suit says. “No contribution. No bonus.”

    “Hwang and these executives lied to their employees like they lied to the banks,” Sullivan’s attorney, Michael Bowe of Brown Rudnick, told DealBook. DealBook contacted an attorney for: Hwang and a spokesman for Archegos, neither of whom immediately responded with a comment.

    The fund tried to dissuade employees from quitting, and cast doubt on deferred compensation payments if they did, the suit says. Sullivan, who left anyway, has not received any money from the plan, though the company continued to promise former employees that they would in January this year, according to a letter Archegos saw by DealBook to former employees.

    Archegos was run like a ‘cult’, says the suit. Interviews “revolved around religion and an investigation into the candidate’s religious upbringing,” the lawsuit said. During performance reviews, Hwang, who is a Christian, told employees to “spend more time on their faith.” During corporate retreats, employees were credited for openly expressing gratitude for “God, Hwang and Archegos,” the suit said.

    — Lewis A. Friedland, a radio professor at the University of Wisconsin-Madison, on how strongly conservative radio promotes claims of voter fraudfueling distrust of the results of the coming midterms.

    When a recession is on the way, someone forgot to tell stock analysts. Wall Street analysts, a normally optimistic bunch, seem much more optimistic than investors as a whole.

    Companies will start reporting their second quarter results next week. For now, analysts don’t even expect the start of an earnings recession, with corporate profits falling for at least two consecutive quarters, according to a recent report from FactSet Research. Analysts expect companies in the S&P 500 to report second-quarter profits that are on average 4 percent higher than in the same period a year ago. For the whole of 2022, analysts expect average earnings at S&P 500 companies to rise just over 10 percent.

    Analysts lowered their earnings estimates during the quarter, but only slightly. Economists, on the other hand, have raced in recent months to lower their expectations. Last week, JPMorgan Chase’s top economists more than halved their estimate for second-quarter GDP growth to just 1 percent from 2.5 percent. Combine that with labor shortages and inflation both driving costs up, and you’d expect analysts to be a lot more pessimistic. For now, most of them seem to believe that companies can absorb higher costs by raising prices. At some point, those expectations for continued double-digit earnings growth, at least for the full year, could disappoint investors.

    Amazon and Target have seen their expected earnings growth fall the most. In May, Target reported that many of the items on the shelves didn’t sell as quickly as expected. Overall, retailers have seen the biggest drop in expectations of any industry. So-called consumer durables earnings are expected to fall just over 9 percent in the quarter. Consumers closing their wallets is not a good sign for the economy. But does this mean we are headed for a recession? For now, Wall Street analysts are still saying no.

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    • A new law in California aims to curb the sleep-deprivation epidemic. (Vox)

    • Kraken’s CEO defended his crusade for “libertarian philosophical values” on the crypto exchange. (Protocol)

    • Crosby, Stills & Nash music is back on Spotify. The band had followed Neil Young’s lead by asking for it to be removed to protest the Joe Rogan podcast. (Billboard)

    • A Chilean worker who accidentally got 300 times his normal salary took the money and fled. (Subway UK)

    • Previously unheard of footage offers a chilling insight into Adolf Eichmann, the Nazi official executed in Israel for his role in planning the Holocaust. (NYT)

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