Good morning! Just days ago, FTX’s CEO tweeted that everything was fine at the crypto exchange. Things were ... definitely not fine. This morning, we're digging into what happened. Also, breaking just now is the news that Meta is laying off 11,000 people. More on that below.
Can you explain this, Sam?
Binance’s shock announcement yesterday of a plan to rescue archrival FTX by acquiring it — after days of open feuding by the companies’ CEOs on Twitter — has rattled an industry still reeling from a dramatic crash and growing regulatory scrutiny, Protocol’s Ben Pimentel writes.
How did FTX get here? The brouhaha began with a report that raised serious questions about FTX and Alameda Research, the trading house owned by FTX CEO Sam Bankman-Fried.
- A CoinDesk report based on a leaked balance sheet for Alameda found that much of its reserves were based on FTT, “FTX’s own centrally controlled and printed-out-of-thin-air token,” Swan Bitcoin CEO Cory Klippsten told CoinDesk.
- FTX uses FTT as a reward currency for trading discounts, but it’s thinly traded, and its price began to wobble Sunday after Binance CEO Changpeng “CZ” Zhao said his company planned to sell its FTT holdings, which dated back to an early investment by Binance in FTX. The price of FTT plummeted by another 75% yesterday after CZ revealed his takeover plan.
- It was a stunning turnabout for a company that seemed to be one of the winners of crypto winter.
This is bad news for crypto. Whether or not the Binance-FTX merger happens, the way the drama unfolded is bound to shake confidence in crypto as a whole.
- Coinbase, crypto’s second largest marketplace, saw its stock plunge 14% yesterday. Robinhood’s stock also tumbled 19%, likely due to worries about SBF’s nearly 8% stake in the online trading app, which has a strong crypto focus.
- Coinbase CEO Brian Armstrong said, “It's stressful any time there is potential for customer loss.”
- Outgoing Kraken CEO Jesse Powell said the deal is sure to draw “significant scrutiny” given the “allegations flying around” and the prospect of customer losses. The government might scrutinize a merger, he added.
The FTX crisis unfolded the way crypto meltdowns typically hit: suddenly and opaquely. And the drama is far from over. Cathy Yoon, chief legal officer at MPCH, is also “fearful of how U.S. policymakers and regulators will see this event” and its impact on the progress the industry has made “from a policy perspective.” “I’m afraid this will set us back a bit,” she told Ben.
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Amazon's HQ2 is stuck in the past
Amazon’s HQ2 has become a test case for what happens when your timing just couldn’t be worse. The company planned for millions of square feet of office space before one incredible, unimaginable event made new offices the least convenient thing you could build, Protocol's Anna Kramer writes.
There was an allure to Amazon's narrative in 2017: When it launched the HQ2 contest,here was a tech company that could heal economic wounds and propel a city into the future. But the assumptions that underlie the financial incentive agreement between Amazon and the eventual winner Arlington illustrate the hubris of the time.
- The deal calls for Arlington to pay Amazon an estimated $23 million by 2035 in return for Amazon eventually occupying more than 6 million square feet of space. The approximate $23 million projection was based on anticipated hotel revenue resulting from the tech giant’s presence.
But the economic upside hasn't materialized. The hoped-for hotel visitors haven’t turned up, and so far, Arlington hasn’t had to pay Amazon any of that money. And despite Amazon meeting its commitments on hiring and office usage, neither has the rest of the vibrancy that Arlington envisioned.
- Budget planning documents and meetings for the 2022 and 2023 fiscal years describe ongoing constraints from unexpectedly low revenues and office vacancies.
- "There is a lot of uncertainty moving forward,” Katie Cristol, Arlington’s county board chair, said in her state of the county address in June 2022. “It's true that we are not the same Arlington that we were four years ago, and after all we have endured, there is no going back to the way we used to be.”
The plan of constructing beautiful office towers and filling them with highly paid tech workers in hopes that they alone can juice the tax base and energize the vibe of a place may no longer be a viable option, if it ever really was.
How to make a climate plan
Way back in March, the Protocol Climate team offered some tips for writing a climate plan that doesn’t suck. And now the U.N. has, too, Protocol’s Brian Kahn reports.
- It’s well worth a read, whether you're a CSO looking to improve your company’s climate plan or a Big Tech watchdog who wants to make sure companies are doing the right thing. And a few of the 10 recommendations jump out.
One big recommendation is about the role of carbon credits and how they should play into a net zero plan.The suggestion is that they need to be high quality and show both additionality (cutting emissions that otherwise wouldn’t have happened) and permanence (storing said emissions for a long period of time).
- For the tech industry, which is increasingly turning to carbon credits and offsets to “prove” it’s serious about net zero, the recommendation — along with a slew of reporting on carbon markets’ failures — should be a wake-up call.
Another is about phasing out fossil fuels. While Big Tech isn’t directly drilling oil wells, it is actively aiding the industry.
- “All net zero pledges should include specific targets aimed at ending the use of and/or support for fossil fuels,” the report says. That’s a clear invitation for companies like Microsoft, Amazon, and others providing computing to sunset their support for Big Oil.
Big Tech is already doing some things right. The industry is better at setting climate goals than other sectors of the Fortune 500.
- Workers have pushed leadership to strengthen those plans. (A key recommendation is getting workers involved, so head-pat to some CEOs.)
- Yet the industry is also starting to hemorrhage talent for not turning net zero plans into action fast enough or setting interim targets (another key recommendation from the report).
The new report makes clear exactly what work tech companies still need to do if they want to get on track. Now it's time do it.
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People are talking
Microsoft President and vice chair Brad Smith told Protocol that businesses, governments, and nonprofits “need to come together” to make progress fighting climate change:
- “The market and companies cannot solve this problem by themselves. I also think it’s important to recognize that governments cannot solve it by themselves either.”
Jack Dorsey said Twitter’s verification program has been a problem “from day one”:
- “I'm happy it's getting a reboot and current plan will address a lot (and inform next moves most importantly).”
Making moves
Meta is laying off more than 11,000 people. Mark Zuckerberg said he wanted "to take accountability" for the situation the company finds itself in, explaining that his decision to significantly increase investments based on pandemic-related business successes was "wrong." Affected employees will receive at least four months of salary as severance, as well as restricted stock units that are due to vest Nov. 15.
Salesforce is preparing for a major round of layoffs that could affect as many as 2,500 workers across the software vendor.
Cloud software provider HungerRush made several senior-level promotions and hires: Olivier Thierry was promoted to chief revenue officer; Dean Thompson to chief sales officer; and Shannon Chirone to senior VP of marketing.
TSMC plans to build another new chip plant in Arizona, according to the WSJ, alongside another it committed to building in 2020.
In other news
Twilio is struggling. Its stock reached pre-pandemic lows last week. While it’s still a growing company and macroeconomic factors are partially to blame, the company told Protocol that it made a number of internal missteps.
TikTok slashed its revenue target for 2022 by $2 billion, the Financial Times reports. "Staff were blamed for not driving enough sales in both advertising and ecommerce," the newspaper added.
Elon Musk sold another $4 billion worth of Tesla shares. He's sold almost $20 billion worth since he launched his bid to acquire Twitter earlier this year.
A check mark fix for a check mark problem? The head of the Twitter Blue initiative, Esther Crawford, tweeted that “government accounts, commercial companies, business partners, major media outlets, publishers and some public figures” will receive an “official” label, complete with an official-looking gray check mark.
EU regulators launched a full-scale investigation into Microsoft’s acquisition of Activision Blizzard after a preliminary investigation found that the purchase could “significantly reduce competition.”
Tesla is recalling more than 40,000 Model S and Model X vehicles from 2017 to 2021 after firmware released in October caused some cars to lose power steering when going over potholes.
Netflix is considering offering live sports if it can do so affordably, according to the WSJ.
The EU is on a clean energy spending spree at COP 27. European Commission President Ursula von der Leyen has "struck deals to lock in supplies of rare and vital minerals or hydrogen" at the climate talks, POLITICO reporters.
@elonjet lives
The Twitter account tracking Elon Musk’s private jet around the world has been shadowbanned for months, @elonjet creator Jack Sweeny told Protocol’s Veronica Irwin. Though it’s hard to confirm whether that’s true, sites that track shadowbans back him up.
But even Musk himself says @elonjet isn’t going anywhere. “My commitment to free speech extends even to not banning the account following my plane, even though that is a direct personal safety risk,” Musk tweeted. Despite not mentioning the account directly, that tweet brought @elonjet between 4,000 and 5,000 more followers.
Sweeney says he supports Musk’s Twitter acquisition as well as the billionaire’s views on free speech. But if Musk ever changes his mind and accepts Sweeny’s terms to take down @elonjet — $50,000 and an internship at SpaceX — Sweeney says he’s still open to talking. “Or, if he wants to talk about an internship at Twitter — I also think that would be pretty cool,” he added.
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