The week’s news included; FTX collapse rocks crypto markets, Musk’s overhaul of Twitter continues, Meta cuts 11,000 jobs, Octopus Bulb takeover delayed by judicial review.
Below are our top 10 stories that you need to know about. Be sure to check our twitter page, Facebook page and Instagram Page, for regular posts of important headlines. Get all the important stories and insights straight into your inbox by subscribing to our mailing list here.
Opinion articles of the week:
- BBC News – Why is the UK struggling more than any other big country?
- City A.M. – The age of politics by WhatsApp has damaged our trust in transparency
- Retail Gazette – Can Meta survive long enough to achieve the metaverse dream?
- CNBC – From Elon Musk to Sam Bankman-Fried, a bad week for market geniuses, but was it their fault?
1. FTX COLLAPSE
It has been a whirlwind of a week in the crypto world as cryptocurrency exchange FTX has collapsed. FTX was the world’s second largest exchange and was valued at $32 billion in its latest funding round. It had even bought the naming rights for NBA team Miami Heat’s arena. The reason for the meltdown was a dramatic “Lehman style” liquidity problem.
Last week, a cryptocurrency news publisher reported that FTX was propped up by a hedge fund (also owned by FTX’s founder) which held billions of dollars’ worth of FTX’s cryptocurrency. Crucially, this FTX cryptocurrency had been used as collateral in loans. This was a huge problem as the financial stability of the organisation relied too heavily on the performance of FTX. If FTX’s cryptocurrency crashed for any reason, then the hedge fund’s collateral for their loans would be worth significantly less and then the hedge fund would not be able to service its debt. If the hedge fund failed, then FTX would collapse without their funding.
The revelation sparked panic. Competitor exchange Binance reacted to this news and sold off roughly $500 million of its FTX cryptocurrency. The situation then spiralled out of control and investors rushed to sell off their FTX tokens and exchange assets. Around $6 billion worth of FTX tokens were withdrawn in a three-day period, roughly 100 times more than usual. There appeared to be a way out when Binance offered to buy the company. A few days later however, Binance pulled out, claiming there were issues beyond their ability to help. FTX continued to sink, and the wider market crashed in response to the events, with major cryptocurrencies dropping 20%.
Ultimately on Friday, FTX filed for Chapter 11 bankruptcy as it seeks a way to pay back creditors. FTX has over 100,000 creditors who are owed up to $50 billion in assets. Former CEO Sam Bankman-Fried also stepped down. Investors are currently unable to withdraw from or trade in their FTX accounts. The longer-term impact on the crypto space remains to be seen.
2. MUSK’S TWITTER TEETHING PAINS
Twitter has suspended its Blue subscription service that charged users to receive a verification tick. This was due to people using the blue tick to impersonate brands and celebrities. Previously, the blue tick was used to verify that an account was the official account of a famous person or company. Twitter Blue, introduced by Musk just a few days ago, gave everyone access to a blue tick simply by paying for it.
Pranksters used this to impersonate a number of famous people. For example, one person impersonated US pharmaceutical company Eli Lilly and tweeted “we are excited to announce insulin is free now.” It was retweeted thousands of times and even partially led to Eli Lilly’s stock price dropping 4.5%. Although the fall was part of a wider decline in health stocks, Eli Lilly was particularly hit. Twitter confirmed that the Blue subscription service will be suspended due to the issue of impersonation. It looks like it’s back to the drawing board for Musk.
Last week, Elon Musk also ordered all Twitter staff back to the office after two years of remote working. Musk is strongly against remote working and got Tesla staff back to the office soon after lockdown rules lapsed.
3. META JOB CUTS
Meta has announced that it will slash 11000 jobs, its largest job cut in its history. The tech giant blamed the pandemic and the subsequent decline in e-commerce for the decision. These cuts account for roughly 13% of Meta’s global workforce. Founder and CEO Mark Zuckerberg said the cuts are designed to make a “leaner and more efficient company.”
The tech giant is also haemorrhaging money in its investment in the metaverse. Meta has spent £15 billion on developing a virtual reality world that Meta believes will to shape the future of communication, work and play. Currently, their metaverse only has and Meta is reportedly having to force employees to use it. The metaverse in its current form is expensive, impractical and has few use cases. Its main selling point is its novelty, and this quickly wears off. While there is undoubtedly potential in the technology, investors are beginning to question Zuckerberg’s gamble on the metaverse.
4. MADE.COM ADMINISTRATION
Made.com has officially fallen into administration after attempts to find a buyer proved fruitless. The company was forced to call in the administrators and sell off assets to pay off debts. Fashion retailer, Next, subsequently bought Made.com’s brand, intellectual property and domain names for just £3.4 million.
Made.com’s decline has been swift and severe. Just 18 months ago, the retailer celebrated its £775 million IPO. The company was buoyed by a surge in online shopping during the pandemic. Since then however, the cost of living crisis has shattered demand and Made.com found itself unable to pay its debts. In the first half of 2022, Made.com lost £35.5 million. Last week, administrator PwC confirmed that 399 of Made.com’s 573 staff will lose their jobs.
5. UK ECONOMY
The UK economy shrank by 0.2% in the third quarter of 2022 as a recession looms. In September, the economy saw a notable decline due to the additional bank holiday for the Queen’s funeral. The Bank of England has already forecasted that the UK will enter a deep recession for around eight quarters. Although fortunately, the Bank is not anticipating to raise rates to much higher than 5% as it anticipates a fall in inflation in the near future.
Despite this, it has been predicted that the UK economy will be 10% smaller than before Covid after the recession. Jeremy Hunt will make a budget statement this week and is expected to announce a rise in taxes.
6. OCTOPUS BULB TAKEOVER DELAYED
Octopus Energy is pushing for regulatory approval for its takeover of Bulb after competitors have opposed the deal. Three competitors, Centrica (owner of British Gas), EON UK and Scottish Power launched a judicial review against the takeover. There is concern that the deal would “distort competition” and give Octopus potential unfair access to Government funding. There is also a lack of transparency surrounding the profit-sharing arrangement between Octopus and the government along with details on hedging support. The deal was announced in October and will see Octopus take on Bulb’s 1.6 million customers. City A.M. looks closer at the judicial review.
7. BARCLAYS PPI PAY OUT
Barclays will have to pay £1 million in compensation to 1000 of its mortgage customers over Payment Protection Insurance (PPI) breaches. The Competition and Markets Authority found that Barclays failed to send customers annual reminders to review their policies between 2014 and 2017. This meant that customers kept their policies for longer than necessary or did not check for better alternatives. Up to 1306 Barclays mortgage customers did not receive reminders. The CMA ordered Barclays to pay out £1 million to these customers, amounting to roughly £750 per claimant.
This is separate from the huge PPI scandal where the industry was found to have mis-sold PPI for years. The PPI scandal cost the financial services industry a whopping £50 billion.
8. BP TRADER LOSES EMPLOYMENT TRIBUNAL
Jonathan Zarembok, a former oil trader at BP has lost an employment tribunal lawsuit after it was held that he was not entitled to whistle-blower protection. Mr Zarembok was fired from the oil giant for raising concerns about “abnormally large” fees paid to Nigerian oil officials. He thought the company was bribing officials and he was fired from his job after raising complaints. BP said that this was due to the breakdown of trust and confidence between Mr Zarembok and his team that made his position untenable. Zarembok filed a lawsuit against his former employer, alleging they broke whistleblower protection rules.
The employment tribunal held that Zarembok was not entitled to whistleblower protections. The tribunal found that his allegations did not show that any “wrongdoing was likely rather than merely possible”, hence it did not constitute a protected disclosure. Consequently, the tribunal found that BP had reasonable grounds to dismiss Zarembok as he did not constitute a whistleblower and his role became untenable due to his suspicions.
9. ADIDAS CONTINUES YEEZY DESIGN SALES
Adidas has confirmed that it will continue to sell Yeezy products but without the branding after cutting ties with Kanye West. The retailer retained sole ownership of the design rights to the existing products. Adidas said that it will leverage these designs and will launch products with the Yeezy design without the branding as early as 2023. Yeezy’s are a highly popular brand and pull in $2 billion in annual sales. Adidas cut ties with West after a series of controversial rants. The company said it “does not tolerate antisemitism” and called West’s comments as “dangerous and hateful”.
10. DRAKE AND 21 SAVAGE SUED BY VOGUE
Rappers Drake and 21 Savage have been sued by the publisher of Vogue magazine for using their brand name without permission. Conde Nast is seeking at least $4 million for the use of a counterfeit Vogue magazine to promote their new album. The use of Vogue’s magazine design was not authorised, despite claims by the rappers that they had the support of Vogue’s editor, Anna Wintour. Conde Nast will seek $4 million or triple the profits made from their album and “counterfeit” magazine. Drake and 21 Savage have not commented on the lawsuit.