I was the guest on Hard Money's Million Dollar Podcast discussing FB and DWAC; How a China-based dealmaker got shell company for Trump's deal off the ground; Tesla Sued by California Agency for Alleged Racial Discrimination, Harassment; Business Rapper Was Bad at Bitcoin Laundering; Moulin Rouge on Broadway

1) My colleagues Enrique Abeyta and Gabe Marshank invited me to be their guest on the latest episode of their Hard Money's Million Dollar Podcast, in which they are trying to turn $10,000 into $1 million – or go broke trying. Since they launched a year ago, they're up to $92,096, which is a pretty stunning performance any way you look at it.

Their podcast episodes often focus on levered crypto trades, which isn't for me (I'll acknowledge, however, that it's one of the few ways to quickly make 100 times your money – though you're far more likely to lose all of it).

Instead, we spent the entire 76 minutes discussing only two investments:

• Buying shares of Meta Platforms (FB), which we all agreed is a slam-dunk/no-brainer (though we did discuss the bear case).
• Betting against the Trump SPAC, Digital World Acquisition (DWAC), which I think is one of the worst stocks I've seen in my career.

I think there's a 75% chance that the SEC blocks the merger transaction between DWAC and the Trump Media and Technology Group ("TMTG"), in which case DWAC's stock, which closed yesterday at $83.40, will instantly trade to its cash value of around $10.

Enrique, however, thinks the odds are much lower – only 7.5% – so he's not as bearish as I am.

You can listen to the podcast episode by clicking here.

2) This breaking story from Reuters furthers my view that the SEC will block the DWAC/TMTG merger: How a China-based dealmaker got shell company for Trump's deal off the ground. Excerpt:

A China-based financier, once reprimanded by U.S. regulators and barred from taking his company public, played a bigger role than is publicly known in the shell company that agreed to merge with former President Donald Trump's new social media venture, Reuters has learned.

Little has been disclosed about the involvement of the financier, Abraham Cinta, and the Shanghai-based investment bank he leads, ARC Group, in the shell company's regulatory filings...

Cinta's early forays into public markets struggled. A former official at Mexico's Ministry of Welfare, Cinta and several ARC colleagues were reprimanded by the SEC in 2017 for misrepresenting businesses they tried to take public and making false statements about their affiliation with them. In a rare move, the SEC stopped them from taking those companies public at the time.

3) After sharing this article in Tuesday's e-mail, Black Workers Say Racism Is Rampant Inside Tesla. Now California Could Sue, it didn't surprise me to see that the California Department of Fair Employment and Housing ("DFEH") filed an official complaint yesterday against Tesla (TSLA). Here's an article in today's Wall Street Journal about it: Tesla Sued by California Agency for Alleged Racial Discrimination, Harassment. Excerpt:

"After receiving hundreds of complaints from workers, DFEH found evidence that Tesla's Fremont factory is a racially segregated workplace where Black workers are subjected to racial slurs and discriminated against in job assignments, discipline, pay, and promotion creating a hostile work environment," Kevin Kish, the agency's director, said in a statement...

The Department of Fair Employment and Housing said Black workers routinely heard Tesla supervisors and managers using racial slurs and were confronted with racist graffiti in the factory. One Black worker heard racial slurs as often as 50 to 100 times a day, the agency said.

Black workers also reported being assigned to more physically demanding roles, being subjected to more severe discipline and being passed over for professional opportunities, the agency said. Black workers were severely underrepresented in managerial and other professional roles, the agency said. Tesla said in a 2020 diversity report that Black employees made up 10% of its U.S. workforce and 4% of people in leadership roles.

Before you dismiss this complaint as a few isolated incidents being blown out of proportion by an overly "woke" regulator run amok, consider the last high-profile case the DFEH filed, against Activision Blizzard (ATVI), which we now know was exactly right. Here's the summary from Wikipedia of what happened:

California Department of Fair Employment and Housing v. Activision Blizzard is a current lawsuit filed by the DFEH against video game developer Activision Blizzard in July 2021. The lawsuit asserts that management of Activision Blizzard allowed and at times encouraged sexual misconduct towards female employees, that the company maintained a "frat boy" culture, and that the company's hiring and employment practices were discriminatory against women.

After Activision Blizzard dismissed the claims in the lawsuit as false, more than 2,600 of the company's 9,500 staff signed an open letter demanding the company take the allegations seriously and make changes. While Activision CEO Bobby Kotick later promised the company would internally review the allegations, employees were not satisfied by the response.

Employees walked out on July 28, 2021, joined virtually by other developers and players across the industry. DFEH's lawsuit triggered a separate class action lawsuit by Activision Blizzard's shareholders at the federal level, asserting the company failed to meet its fiduciary duties under the Securities Exchange Act. A later investigative report by the Wall Street Journal published in November 2021 claimed that Kotick had known about the allegations of misconduct for years but failed to take action, leading employees to stage a second walk-off, and they and other voices in the gaming industry called for Kotick to step down.

4) Two of the world's dumbest criminals, Heather Morgan and her husband Ilya Lichtenstein, were just arrested for stealing bitcoin now worth approximately $5.3 billion in a 2016 hack of the Bitfinex currency exchange. The $4.2 billion recovered by the government so far is the largest financial seizure ever.

In his column yesterday, Business Rapper Was Bad at Bitcoin Laundering, Bloomberg's Matt Levine tells the hilarious story of how they tried, with little success, to launder their ill-gotten bitcoins into money they could actually spend:

Here is how the Justice Department summarizes the laundering here:

The criminal complaint alleges that Lichtenstein and Morgan employed numerous sophisticated laundering techniques, including using fictitious identities to set up online accounts; utilizing computer programs to automate transactions, a laundering technique that allows for many transactions to take place in a short period of time; depositing the stolen funds into accounts at a variety of virtual currency exchanges and darknet markets and then withdrawing the funds, which obfuscates the trail of the transaction history by breaking up the fund flow; converting bitcoin to other forms of virtual currency, including anonymity-enhanced virtual currency ("AEC"), in a practice known as "chain hopping"; and using U.S.-based business accounts to legitimize their banking activity.

"In a methodical and calculated scheme, the defendants allegedly laundered and disguised their vast fortune," said Chief Jim Lee of IRS-Criminal Investigation (IRS-CI).

But if you read the complaint, what is striking is how little of the money actually got laundered. Certainly a lot of effort seems to have gone into laundering. But the thing is that if you are a TikTok rapper and you walk into a bank and say "hello I'd like to open an account in which to deposit the proceeds of my TikTok rapping" and the bank says "sure okay" and you say "here is my first deposit of $4.5 billion" you'll be in jail that afternoon. You gotta launder slow...

These people are charged with money-laundering conspiracy, but their real tragedy is that they allegedly did a lot of conspiring without a whole lot of laundering. They were allegedly billionaires in ill-gotten Bitcoin, and they couldn't spend it...

There is a strange debate about crypto and money laundering. Crypto skeptics will often say "Bitcoin is mostly useful for money laundering"; crypto proponents will occasionally say "what of it, money laundering is fine, freedom, man," but mostly they will instead say "no, Bitcoin is useless for money laundering because it creates a permanent public record of all transactions and why would you want to launder money that way."

You might think that a federal criminal indictment for $4.5 billion of Bitcoin money laundering would be vindication of the "Bitcoin is for money launderers" side, but I want to tell you: No it is not! What allegedly happened here is that hackers stole $4.5 billion of Bitcoin from a crypto exchange (and stealing from exchanges absolutely is a major function of crypto), and then they had a horrible time laundering it. They managed to extract only a relatively small portion of the money for actual spending, and each time they got money out the feds were able to trace it from the hack all the way to legitimate accounts with their names on it. The laundering efforts were small-scale, and they are also how they got caught.

If you rob a bank and steal a sack of money and the bills are sequentially numbered and a dye pack explodes in the sack and you drive directly to another bank and hand them the dye-stained sack and say "I'd like to make a deposit please" you will totally get arrested, and you will probably get charged with money laundering, but in no meaningful sense did you launder the money. It still has the dye on it! That happened here.

This video of Morgan attempting to rap is classic!

5) After reading this recent New York Times article about how Broadway is suffering, Private Data Shows Broadway's Hits and Misses After Reopening ("there are currently only 19 shows in the 41 theaters, which is lower than it has been for years"), Susan and I bought tickets to a few shows...

We saw Clyde's (now closed), David Byrne's American Utopia (excellent), and Susan is going to see Hugh Jackman in The Music Man on Saturday (I'm out of town, sadly), which is getting rave reviews.

But our favorite so far was seeing the matinee yesterday of the musical Moulin Rouge, which has also gotten rave reviews. It's a love story told via popular songs from the past two decades, all of which we knew. It was great fun, so if you're in NYC, we highly recommend it!

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.