(Bloomberg) — The former chief financial officer of a Brazilian reinsurer was charged with fraud for allegedly spreading false stories that Warren Buffett’s Berkshire Hathaway Inc. had bought a stake in the company.
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A federal judge in Iowa on Monday unsealed an indictment against Fernando Passos, former CFO of IRB Brasil Resseguros S.A., saying he knowingly promoted the fake story in the press to push up the company’s stock price. Passos was also sued by the Securities and Exchange Commission in federal court in New York on Monday.
According to prosecutors, Passos planted false stories in the press, created phony documents and fabricated an an email exchange with a Berkshire executive to back up his claim that Buffett’s company was an IRB investor.
In a text to a colleague, Passos allegedly said Berkshire had “significantly increased its shares in IRB,” adding that “this info is confidential, but if we could send to a journalist we trust in the economic area who would publish without citing IRB as the source [that] would be excellent.”
Berkshire Denial
Passos, 39, lives in Brazil and isn’t in U.S. custody, the Justice Department said. A lawyer for the former executive couldn’t immediately be identified.
Press reports that Berkshire owned a stake in IRB and was considering expanding its holdings prompted Buffett’s company to issue a statement in March 2020 denying any investment in the Brazilian company. IRB shares promptly tumbled more than 41%.
When Passos learned of Berkshire’s denial from IRB’s director of investor relations, he responded “Damn!” and “We’re [expletive]!” according to prosecutors.
Passos and the company’s chief executive officer, Jose Carlos Cardoso, resigned shortly after Berkshire issued its denial. IRB Chairman Ivan Monteiro had already stepped down a few days earlier. Neither Monteiro nor Cardoso have been accused of wrongdoing.
An assistant to Buffett didn’t immediately respond to a request for comment on the cases against Passos.
Short-Seller Questions
Passo began spreading the fake story after a short-seller publicly questioned the company’s financial results, causing the stock to drop, according to the government. The stock rose 6% on the reported Berkshire stake.
Passos faces up to 20 years in prison if convicted on the criminal charges. The SEC wants to bar Passos from acting as an officer or director of a public company and is seeking unspecified money penalties.
The criminal case is U.S. v. Passos, 21-cr-00028, U.S. District Court, Southern District of Iowa. The SEC case is U.S. Securities and Exchange Commission v. Passos, 22-cv-03156, U.S. District Court, Southern District of New York (Manhattan).
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
