Levine on Wall Street: Bank Hacks and Cyber Dust

Today we have Mark Cuban being fantastically rude about the SEC, though not as rude as Carl Icahn is about boxer-clad Jefferies CEO Rich Handler.  

There was another bank hack that no one noticed.

I was wondering why my Chase checking account statements showed so many ATM withdrawals in Donetsk and now I know:

Russian hackers attacked JPMorgan Chase & Co. and at least four other banks this month in a coordinated assault that resulted in the loss of gigabytes of customer data, according to two people familiar with the investigation.

Super! I always wonder how seriously to take these stories, because they usually come from "security consultants" talking their books, and are sometimes overstated or just outright fake. But this one was caught by law enforcement, not private consultants, and there was apparently "theft of account information that could be used to drain funds." No funds were drained though (yet?). Here I guess I am being naive but: Why not? "Hahaha, we have all your credit card information, but ... actually there's nothing we want to buy, we're good, just gonna hang on to these numbers for now"? "The absence of fraud would lend support to the theory that the hack had a political motive, the government official said." But why not spend the money anyway?

There will be an Allergan/Valeant/Pershing trial in Delaware.

The amazing ability of this deal to generate work for lawyers continues. Allergan has called a special meeting for December, but the Delaware Chancery Court will hold a trial in October about whether it should hold the meeting in November. Because what would they do with themselves for the next four months if they weren't suing each other? The Valeant/Pershing worry seems to be that if Allergan has four months to think about stuff it will find new ways to thwart their takeover bid -- finding a company to buy, say, or convincing a California federal court that Pershing Square insider traded when buying its shares -- so they want to move things along briskly.

Snapchat for insider traders.

We've talked about the fact that successful insider trading requires (1) a partner and (2) some sort of untraceable communications medium, like writing stock tips on Post-it notes that you then eat. Obviously Snapchat, the ephemeral messaging service, has potential insider trading applications, though there are no recorded cases of it being used for insider trading (perhaps a good sign!). But if you don't want to insider trade over Snapchat, because you associate it with teens or sexting or whatever, consider using Cyber Dust, another ephemeral messaging service that has the distinction of having been created by a man accused of insider trading. That would be Mark Cuban, who created Cyber Dust because he didn't like the experience of having the Securities and Exchange Commission read his emails:

"I had my little fun with the SEC, and what happened was, every message I sent, everything that I wrote, they decided to create their own context," he said Wednesday. "If I said, 'The sky was blue,' they said, 'You didn't really mean that. You were just trying to fool us.' When I said, 'I hate to lose,' in reference to Mavericks games, they said, 'So, you hate to lose. You're not willing to take a loss on a share trade.' I mean, it was just ridiculous. And so it made me realize, along with just other experiences, when you hit 'send' on a text, you lose ownership of that. Not only do you lose ownership, you retain responsibility for that text." ...

"Look, 99.999 percent of traders don't have inside information. It's just a better way to communicate," he said. "But if I want it to be private between us, and if for some reason the SEC goes bonkers like they always do and decide to assign some sort of nefarious action to you, they can't do it."

Cuban (quite properly!) won his insider trading case, and has since taken on the mission of annoying the SEC, including now by helping you send messages that the SEC can't review. (Or so he thinks.) For whatever purposes you want to send those messages for. Enjoy! Not anything advice.

Big hedge funds are raising a lot of money.

Hutchin Hill has doubled its assets this year on strong performance, but everyone's growing, deserved or not: "While firms like Hutchin Hill are beginning to climb the ranks of multibillion-dollar managers, the domination of the biggest funds in raising assets hasn’t slowed, even when they report bad news or post mediocre returns." One theory you might have is that capital allocation is a long chain of principal-agent problems: A worker's money is run by a pension fund which is controlled by a politically appointed board which is advised by a consultant which hires a hedge-fund allocator which allocates it to hedge funds which invest it in companies which use it to pay executives. At any stage of this, "maximize performance" is a goal, but there are other goals -- maintain relationships, do the mainstream thing, avoid career risk -- that might cut other ways.

What's up with Fannie Mae?

One problem in financial blogging is that posts about Fannie Mae and Freddie Mac are very hard to illustrate -- there are no interesting pictures of mortgages -- so the default picture tends to be Fannie's weirdly picturesque headquarters. Now Fannie is getting rid of that headquarters, so financial blogging is doomed. Elsewhere I chuckled at this story that Fannie Mae is trying to hire a lawyer to "provide advice and counsel on corporate governance and securities law matters, including Federal Housing Finance Agency, ‘34 Act, (and) ‘NYSE listing requirements.’" Is Fannie -- which is controlled by the government, which takes the position that its common shares are worthless -- looking to re-list those worthless shares on the New York Stock Exchange? Ha no of course not -- they need someone to advise on director independence, which for boring reasons is a NYSE rule -- but it is perhaps an awkward job listing.

Carl Icahn is great at Twitter.

Jefferies chief executive officer Rich Handler had an idea. "I'm gonna challenge Carl Icahn to the ALS ice bucket challenge," he thought. "Maybe I'll make a little joke, like saying 'there are a lot of people who want to throw ice on top of him.' It's all in good fun. A little free press, a little gentle ribbing, what could possibly go wrong?"

Two things went wrong:

  1. That water was cold! Rich Handler's departure from his tub full of cold water in this video is not to be missed.
  2. Here is Carl Icahn's response:
To Rich Handler, will get back to you shortly on #ALSChallenge, but right now too busy working on BIG deal with another investment banker.

The lesson to America's CEOs, which they keep failing to learn, is: Never mess with Carl Icahn.

Things happen.

Deutsche Bank improperly reported 29.4 million buy transactions as sell transactions, or vice versa, oops. It's okay not to tweet. Clarient will help banks keep track of their customers. The Fed will help swaps participants move away from Libor. Burger King's ketchup clause. Ikea's Simulacrum, and Stock returns over the FOMC cycle. "It has nothing to do with the second world war or whatever." New York gets "probably the only Denny's in the world that has craft cocktails." Man corners market in 1964 Curt Flood Topps card.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

    To contact the author on this story:
    Matthew S Levine at mlevine51@bloomberg.net

    To contact the editor on this story:
    Toby Harshaw at tharshaw@bloomberg.net

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