JPMorgan’s Jeffrey Epstein problem

One thing to start: When US short seller Nathan Anderson decided to take on Indian conglomerate Adani Group, he faced the ultimate challenge for someone in his line of business: India’s anti short selling rules. DD’s Ortenca Aliaj and Antoine Gara dug into how his firm Hindenburg Research pulled off the short.

Hindenburg Research founder Nathan Anderson
Hindenburg Research founder Nathan Anderson © Casey Steffens/New York Times/Redux/eyevine

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In today’s newsletter:

A bad client comes back to haunt JPMorgan

In November 2021, the FT revealed there had been more than 1,000 email exchanges between former Barclays chief Jes Staley and Jeffrey Epstein, the convicted paedophile.

But one term piqued people’s interest in particular: the use of “Snow White”. Now more context has come to light about its use as well as Staley’s relationship with Epstein, as part of a lawsuit brought by the government of the Virgin Islands, which claims the exchange was referring to young women and girls Epstein was providing.

Staley messaged Epstein in July 2010 saying: “Maybe they’re tracking u? That was fun. Say hi to Snow White.” Epstein then asked: “[W]hat character would you like next?” to which Staley replied “Beauty and the Beast”.

Jeffrey Epstein associate Ghislaine Maxwell in an undated photo provided by federal prosecutors in New York
Jeffrey Epstein, right, and associate Ghislaine Maxwell in an undated photo provided by federal prosecutors in New York © PA

Staley’s lawyer, Kathleen Harris, told the FT in 2021 “code words were never used by Mr Staley in any communications with Mr Epstein, ever”.

The emails have been made public as part of a lawsuit against Staley’s former employer, JPMorgan Chase. They paint a different picture of the banker’s association with his client, which he has always maintained was professional. In another exchange, Staley messaged Epstein saying, “I deeply appreciate our friendship. I have few so profound.”

According to the Virgin Islands, the emails “suggest that Staley may have been involved in Epstein’s sex-trafficking operation”. The emails from Epstein to Staley’s work account also included photos of young women, according to the suit.

Staley himself is not a defendant in the lawsuit and has consistently denied knowledge of Epstein’s sexual abuse.

The filing also sheds an unflattering light on JPMorgan. It comes more than a year after Staley resigned from Barclays after seeing preliminary conclusions of an investigation by the UK regulator.

The bank kept Epstein as a client until 2013, despite his conviction in 2008 of soliciting sex from a minor, which resulted in a 13-month prison sentence. The FT revealed last year that Staley, who left his role as head of JPMorgan’s investment bank in January 2013, had pressed the lender to keep Epstein as a client. Staley declined to comment on the FT’s report at the time.

JPMorgan’s decision to do so will add pressure to the bank, which the Virgin Islands says is liable for facilitating Epstein’s sexual abuse by failing to spot and act on red flags.

The newly released emails show JPMorgan employees raised concerns about Epstein on various occasions and suggest he was under review at the highest level of the bank, including chief executive Jamie Dimon.

In one email, a member of the bank’s risk management division flags the child trafficking allegations against Epstein and asks: “are you still comfortable with this client who is now a registered sex offender?”

‘Mr K-Pop’: a music showdown heats up in South Korea

The battle for control of K-pop juggernaut SM Entertainment is getting uglier by the day.

SM, founded by septuagenarian impresario Lee Soo-man, is being fought over by South Korean entertainment behemoth Hybe and the entertainment subsidiary of local tech giant Kakao.

Hybe, which represents K-pop sensation BTS, said last week that it would buy a 14.8 per cent stake from Lee and offered to buy another 25 per cent from minority shareholders for a total of Won1.14tn ($900mn). That came just days after its rival’s subsidiary Kakao Entertainment agreed to buy a 9.05 per cent stake.

K-Pop band BTS
K-Pop band BTS © Reuters

Analysts see the bidding war intensifying, with more suitors likely to emerge and Kakao expected to come up with a counter offer.

On Thursday, Hybe proposed seven new candidates for SM’s board of directors, amid longstanding shareholder concerns about Lee Soo-man’s influence over the K-pop agency.

That has angered activist investors and SM’s management, who are engaged in their own struggle to free the company from the founder’s grip. They accuse Hybe of colluding with “Mr K-Pop”, who owns 18.4 per cent of SM but holds no formal position within the company.

On Thursday afternoon, SM’s co-chief executive Lee Sung-su — the nephew of Lee Soo-man’s late wife — accused the founder of forcing artists to preach about environmental sustainability while he avoided taxes through an undeclared Hong Kong-based company.

Lee Soo-man has said the allegations made his “heart hurt” as he had watched his wife’s nephew grow up, but has not responded to them directly. Hybe says it is committed to improving the company’s governance.

Park Seong-guk, an analyst at Kyobo Securities, said that SM’s stable of artists would help Hybe as it contends with life without BTS, who are on hiatus while the idols complete their compulsory military service.

Job moves 

  • YouTube chief executive Susan Wojcicki is stepping down, after overseeing the video hosting site’s growth into an entertainment juggernaut over nearly a decade.

  • Schneider Electric’s Jean-Pascal Tricoire is set to step down as chief executive after nearly 20 years at the helm.

  • Bank of America is planning job cuts within its investment bank, per Bloomberg.

  • David Malpass, the president of the World Bank who was appointed by former US president Donald Trump, is quitting. Rajiv Shah, the head of the Rockefeller Foundation, is in the running to replace him, per The Guardian.

Smart reads

Better call Neel Private equity lawyer Neel Sachdev has a reputation for going above and beyond to help his clients. But some of his methods, like influencing which law firms he comes up against in deal negotiations, have come under scrutiny as the era of easy money ends, Bloomberg reports.

Notes on private capital Private market funds have been accused of “volatility laundering” their valuations. Private capital academic and adviser Cyril Demaria argues those concerns are overblown, but that more data and financial transparency are needed, in this Alphaville post.

Raising the stakes Sports network operator Diamond Sports Group’s missed $140mn interest payment has kicked off a race to find a solution before a bankruptcy could throw basketball, hockey and baseball games into TV limbo, The New York Times reports.

News round-up

Citigroup senior executive and dealmaker Verme dies (FT)

Adani halts $847mn acquisition of coal-fired power plant in India (FT)

StanChart chief vows to succeed alone after Abu Dhabi takeover interest (FT + Lex)

PwC probed over collapsed property group Intu (FT)

China’s top tech dealmaker Bao Fan goes missing (FT)

The Restaurant Group rejects Oasis push for board seat (FT)

Credit Suisse exits distressed-debt trading in risk pullback (Bloomberg)

Legal & General sues Glencore in latest corruption fallout (FT)

Goldman Sachs steps back from bidding for new credit card programs (Wall Street Journal)

Saudi Arabia-backed group to invest $265mn in Chinese esports company VSPO (FT)

US M&A: primary care dealmaking is in rude health (Lex)

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